On the 19th of August 2019, the Jordanian Government issued a significant change to the customs regulation tariffs on personal package imports.

The Government's actions are said to stem from a need to equalize opportunities between e-commerce websites and traditional retailers. We understand the need for such equalization, however, we believe that there are more modern alternatives and processes to prove to the industry and public that the actions and approach taken by the government are justified and fair to all.

The new regulation hurts e-commerce in Jordan beyond the goal of equalizing it with traditional retailers. In protest, we decided to stop accepting orders from customers in Jordan for the time being. We aspire to be a part of a professional, data-driven, transparent and trust-worthy digital economy in Jordan. We do not only worry about the effort and sacrifices we have spent in making CashBasha the customer-centric company that it is, but we also worry about Jordan’s global positioning and reputation in the eyes of our peers. At a minimum, we kindly expect that the government also take a customer-centric approach to serving their citizens and growing industries.

Furthermore, we decided to take an active role and highlight in specific what the issues are, and what some alternatives would be, which you will find below.

1. The Customs Online Platform

The Problems

• The online platform does not consider many use-cases, for example:
  • Online shoppers often do not know how items in their orders are going to be split by the e-commerce fulfillment operations amongst packages. (i.e. The number of packages arriving is often unbeknown to the customer.)
  • The customer often does not know what shipping company an e-commerce seller uses to deliver packages to their address, and e-commerce business often rotate between partners at random.
  • The seller sometimes does not provide tracking information to the customer, or the non-tech savvy customer does not know how to locate this information.
  • Customers who do not speak Arabic will not be able to use the platform, since the only supported language is Arabic.
  • Customers that are not residents of Jordan (e.g. visitors) will not be able to sign up.
  • Recipients might not be aware a package is being sent to them (e.g. in case of a gift), or might not know all of its details.
• In light of public reports by early users, the user experience on the new customs portal is designed in a way that is not-self explanatory and we believe that the customs department has not taken the full measures to design public service announcements to support the process.
• For the sake of a seamless shopping experience, there is no way for an e-commerce website today to connect to the online platform provided by the government. The current model does not allow e-commerce providers to seamlessly log the necessary information on behalf of the customer. This would be possible, for example, by designing a platform where the customer could link their account on the customs online platform with e-commerce websites (through OAuth).

Our Suggestions

• Apply the new regulation without the online platform.
• If the concern is linking packages to individuals, this can be done when the package arrives, for example, during delivery.
• If the online platform is seen as a must, cooperate with the private sector to design an online platform that is more suitable, for example, by employing globally transparent standards with Electronic Data Interchange (EDI) linkages between the shopping websites, shipping companies and customs department.

2. Lack of Predictability and Visibility

Even Prior to The New Regulation

• The Jordanian customs code is complex. However, with the data we observe, it appears that the revenue generated from customs follows the Pareto principle: a few categories contribute to most of the revenue, and most categories only contribute a small fraction of the revenue. There is room to simplify the customs code.
• Our data shows frequent inconsistencies in applying the customs code: we have many cases in which two packages around the same time, containing the same item, but different customs are applied to them.
• The calculation of customs is perceived as a black box from the point of view of the customers; there are a lot of factors involved, some of which are even hard to explain or defend (e.g. weight is a factor).
• Such a complex customs code makes it hard for e-commerce websites to provide landed final prices that are accurate. Customers expect a final price on a website, and with predictions being very hard, either the e-commerce company will suffer (i.e. predict the customs, and take a loss if it is incorrect), or the customer experience will suffer (i.e. ask the customer to pay for the difference between the prediction and the real customs value).

The Problems

• Now that all items will always have customs applied to them, the problem is severely exacerbated.
• With the new regulation, the maximum allowance (of 500 JOD) becomes another important variable in estimating customs on an item. However, since e-commerce platforms do not have access to the customer's history, it is impossible to know if they are above or below their allowance.

Our Suggestions

• Design a simpler customs code that does not affect the revenues much, for example, the categories that generate most of the revenue remain unchanged, and all other categories have X% customs always (e.g. 10%).
• Remove the allowance, or bring it back to a higher value.
• If neither of these are possible, at least allow e-commerce platforms to integrate with the online platform to get visibility into the history of a customer, or at least, whether or not they have reached their allowance.

3. Mechanism of Applying The Regulation

The Problems

• New regulation was applied very fast, the time between announcing it and applying it was just 48 hours.
• This meant that the regulation will be applied to packages that arrive, even though at the time the customer ordered them, the regulation was not known to the e-commerce company. This will cause either companies to cover a lot of expenses it was not aware of, or it will cause a bad customer experience by asking its customers to pay them.
• The staff at the customs was not trained properly, resulting in a halt of shipments and delays.
• No time was given for alternatives and suggestions to be discussed, and there was no proper consultations with the private sector (especially to understand if they have any suggestions or objections regarding the form of the new regulation).
• Lack of proper studies and trust-worthy data around the size of the market and realistic effect that e-commerce has had in comparison to traditional channels of trade or how e-commerce has contributed to the digital economy through employment, trade activity, customer service level or overall shopper satisfaction.
• Absence of public studies or simulations illustrating the relationship between customs alterations and their effect on the Jordanian economy and e-commerce incumbents.
• Lack of a publicly announced incremental roll out of the new customs regulation and evaluation criteria.

Our Suggestions

• Delay the application of the new regulation until the necessary, fair and comprehensive studies have been carried out and informed to the public and private sectors with proper headway.
• Consider the input from the private sector for a solution that serves the goals of the government but doesn't stop the e-commerce companies dead in their tracks.

4. The Tiered System

The Problem

• The new regulation contains a tiered system for 4 categories (if the item is between 0 and 50 JOD, the customer pays 5 JOD, and if it is between 50 and 100 JODs, the customer pays 10 JOD). This creates two issues:
  • Unreasonably high fees for very cheap items (below 5 JOD). For example, importing an item of value 1 JOD would result in 500% in fees.
  • A discontinuity at the border of tiers, e.g. at JOD 50. For example, an item of value of 49 JOD will have roughly 10% in fees, but an item of value of 51 JOD will have roughly 20% in fees.

Our Suggestions

• A simpler customs code (as per our suggestions above) would solve the problem.
• Alternatively, remove the tiers and replace them with a percentage (e.g. 10%).
• If the worry is that processing the items takes some effort and therefore there must be a minimum for the fees, the fees can be structured as: 1 JOD + 10% of the item.