Here’s a riddle. Yael and Shira each order merchandise from the Asos clothing website. Yael orders hers sent by regular mail, while Shira requests express delivery that is offered as a perk on the website. Both are touted as free of charge. Which package will arrive first and which recipient will have to pay an additional fee when picking it up?
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The two women couldn’t figure out the riddle either and contacted TheMarker with receipts, one from the Israeli post office and the other from the GCX courier service which, by the way, took a week longer to deliver the goods than the Israeli postal company. Each package contained about 135 British pounds of merchandise, the equivalent of 840 shekels or about $210.
Each of the two women knew that they would owe about 150 shekels in Israeli value added tax, but they discovered unexpectedly that they owed additional delivery charges. Yael was charged 130 shekels by the Israeli post office, while Shira was told that she owed GCX an additional 212 shekels on her 840 shekel order. Both companies provided home delivery and customs clearance of the merchandise but they were described differently in the documentation.
Israelis order an estimated 1.35 billion shekels a year in merchandise from websites abroad — a burgeoning phenomenon in recent years. There was about a 90% increase between 2009 and 2013 in the volume of mail received from overseas, according to the findings of an official panel on postal rates. But the sector is not without its problems.
The customs service, for example, delays shipment by randomly sampling 5% of the incoming packages, but it assumes no responsibility for additional charges that the shipping services then charge as a result. Customers questioning the additional fees are referred to the customs service website, where there is barely an explanation.
Tax concessions haven't kicked in
It is thought that about 40% of packages that the major shipping companies in Israel deliver are for merchandise ordered directly from abroad by individual consumers, but the delivery firms have not even started courting the individual customer in this country. The postal service is the only one that provides detailed fee information on delivery services for individuals, and even Israel Post provides a hodgepodge of numbers, some of which include value added tax and some which don’t.
None of the delivery service representatives contacted could explain customs procedures. At about half the companies, we were transferred to other staff people to provide an explanation, in some instances after we were insistently told that there was no set fee schedule for consumers. Only DHL’s representative took the initiative to explain that there was a chance our package would have to be individually cleared through customs, at a fairly hefty fee. Only two companies, GCX and TNT Express, provided fee information that included VAT, as the law requires.
There was information that was only procured because we are journalists, enabling us to bypass the customer service department and talk directly to management staff. When we spoke to a customer service representative at GCX whom we asked about the fees involved if a package had to be individually cleared through custom, we were told: “The person who handles that isn’t here, today, so I don’t have the details.”
The prevailing situation may be a convenient one for those in the business. In most instances, consumers are not the ones to choose which company ships their merchandise. Instead, it’s the merchant who chooses and notifies the customer after it’s too late to change, but the consumer still bears the consequences. The lack of transparency prevents individuals from weighing all of the implications before placing an order and also prevents them from enforcing their rights after the fact.
The problem mainly lies at the doorstep of the Finance Ministry. A month ago, with great fanfare, the ministry announced that Finance Minister Yair Lapid, who has since been dismissed from office by Prime Minister Benjamin Netanyahu, had signed off on an order raising custom exemptions to merchandise worth up to $500. The following day, however, TheMarker published an analysis that showed that the numbers of people who could actually benefit from the exemption were rather negligible. It applies only to merchandise on which there were duties owed in the first place (mostly clothing and shoes) and only benefits consumers who tended to buy high-priced products.
Five shirts and you're an "importer''
Finance Minister Lapid’s commitment was seen as that much more modest when one takes into consideration the surprises that consumers may encounter in ordering online, and more expensive orders may mean more expensive surprises. A source at one delivery company recounts that a customer who bought five identical shirts online from a foreign website was erroneously flagged by the customs service as a commercial importer. By law, Hebrew labeling is required on imported shirts that are offered for commercial sale in Israel. When the shirts are found to lack the labels, they are transferred to a sewing workshop and the delay can cost the consumer up to 500 shekels.
And that does not include the 18% value added tax that applies on all imports worth more than $75. The consumer has yet to be provided with one location at which all of the relevant information is spelled out. When that is the case, it is no wonder that eased terms that went into effect two years ago for the import of merchandise by individuals have not yet accomplished their objective. They are not serving as an effective means to lower local consumer prices through the competition that they are expected to create, and as a result, are not lowering the overall cost of living significantly. And price disparities between the cost of international brands here and abroad—from clothing to technology and vitamins—are still large.
Maybe in six months?
There is more encouraging news coming out of all this in that the problems in the expedited shipping sector have not escaped the notice of regulatory authorities. A recent report by a panel headed by Economy Ministry director general Amit Lang, which had examined how competition could be increased in the import sector, devoted an entire chapter to imports by consumers.
Some of the proposals relate to lifting bureaucratic obstacles that consumers face. The changes are expected to make the shipping process more efficient and curb expenses related to unnecessary delays in delivery. Other changes proposed by the committee are designed to educate the public. For example, the finance and economy ministries will work to set up a computer system that will provide a way for consumers to get all of the necessary approvals to have merchandise released from customs. The system will include all of the information that the consumer requires to carry out purchases from abroad, including an explanation of the procedure involved.
Another provision will require the delivery firms to publish their fees and to make it clear on their bills which expenses are charged by the government and which are pocketed by the companies themselves as part of their customs clearance service. “In light of the fact that the consumer cannot usually choose the delivery company and is a kind of captive customer, the finance and economy ministries will look into ways to verify that the delivery companies’ fees do not reflect unreasonable profits and to not create barriers to commerce,” the author of the report, Oz Katz, writes.
Finally the committee suggests that the economy minister designate a point person who will coordinate oversight of imports by individuals and the development of uniform rules on various shipments. The staffer would also serve as an intermediary between consumers and regulators. All of the panel’s recommendations were approved by the cabinet in April and are now being worked on at various stages. Staff at the Economy Ministry expect that the consumer information will be fully accessible within six months.
In the meantime, here are some tips for avoiding unexpected charges:
1. Always use regular mail: Although expedited service is tempting, it frequently increases the costs. And there are other advantages. For example, delivery from abroad of vitamins (less than 2 kilograms) by regular mail does not require a customs declaration, but express delivery does, delaying shipment and increasing costs. EMS express service from the U.S. Postal Service, by the way, is not deemed regular mail.
2. Contact the shipping company before you get the package to provide any information it may require.
3. Compute your shipping costs using a virtual address: Websites that provide you with a virtual American address provide calculators for shipping through popular sites such as Amazon.com.
4. Make sure the shipping charges are detailed on the receipt: If shipping charges are separately listed, they are not subject to customs duties if the price of the merchandise itself is under $75.
5. Complain: If the customs clearing charges are disproportionate to the price of the merchandise that you ordered, contact the shipping company and ask for a fee adjustment. It’s acceptable and sometimes works.