Key information on the Philippines
6-steps to cross-border shipping to the Philippines
Customs clearance in the Philippines
Payment preferences in the Philippines
The Philippines e-commerce market is definitely worth entering. At present, while its current e-commerce landscape is only 1.5% of its retail market, that market value is at US$840 million. This number is expected to grow to US$1.3 billion by 2022.
But before we dive into how to ship overseas to the Philippines, it helps to have a bit of background on the country.
Comprising more than 7,000 islands, the Philippines is home to 107 million people, and the population is expected to grow by 2 million every year.
Even though the country has slow internet speeds, averaging at 3.6 Mbps, many Filipino customers are becoming increasingly savvy in the digital space.
Most online purchases take place in Metropolitan Manila, also known as the National Capital Region. International shipments primarily enter the Philippines via Ninoy Aquino International Airport (MNL). It is then distributed via domestic air freight and road networks to reach your customer’s doorstep.
The Philippines’ infrastructural networks are underdeveloped, so expect longer shipping times caused by things such as traffic congestion. Other factors such as weather disruptions and limited cargo capacity at domestic airports could also cause delays.
To help you navigate the possible issues you might face when shipping to the Philippines, here are some steps you can take to ensure a smooth delivery experience.
If you’re looking to start shipping to the Philippines, the steps that you’ll generally follow are:
Finding the right shipping partner
Packaging your goods
Choosing the right level of service
Providing shipping details
Printing the shipping labels and documents and attaching them to your package
Passing the shipments to the carriers
In any form of cross-border shipping, carriers tend to follow a few stages:
First mile delivery – The shipment moves from the merchant’s warehouse to the airport or port.
Customs clearance at country of origin – Clearing goods to export from origin country.
Freight – The shipment is transported, either by air or sea, from the origin country’s airport or port to the destination airport or port.
Customs clearance at destination country – Clearing goods for import in the destination country.
Distribution – The shipment is sent from the port or the airport to the domestic distribution centre to be sorted and assigned to trucks for the last mile delivery stage. For shipments to more cities or rural areas outside of Metropolitan Manila, a second domestic flight might be required to transport the items from MNL to a second domestic airport before being sent to a distribution center nearer to the customers location.
Last mile delivery – The shipment moves from the distribution centre to the customer’s doorstep.
As an example, a Malaysian merchant could have their goods shipped via truck from their premises in Kuala Lumpur to Kuala Lumpur International Airport (KUL) where it is cleared for export. Then, it is transported via air freight to reach Ninoy Aquino International Airport (MNL) and goes through customs clearance.
After that, it gets transported via domestic air freight to Mactan-Cebu International Airport (CEB), from there to a local distribution facility and then the last mile domestic delivery truck or motorcycle to your customer’s home or office in Cebu City.
One way to save money on shipping is to use multiple smaller shipping partners at different stages of the delivery, but this may prove hard to manage, especially when there are so many choices spread out over 7,000 islands. On the other hand, there are end-to-end 4PL couriers with wide networks of shipping partners which provide great coverage in the Philippines who can manage these logistics partners for you at a similarly competitive rate.
With regard to international freight, you generally have two options to ship goods to the Philippines:
For many e-commerce merchants, air freight is the transportation of choice for fast and reliable deliveries. International shipments usually enter the Philippines via Ninoy Aquino International Airport in Manila (MNL).
Sea freight is cheaper but much slower than air freight. Consider your delivery deadlines and shipping model before picking this option. The Philippines’ primary port is the Port of Manila (PHMNL).
To support the other 7,000 islands, the Philippines relies on domestic air freight and their road networks. However, the Philippines logistics infrastructure is underdeveloped. Metro Manila frequently has issues with traffic congestion, with the 3rd worst traffic in Southeast Asia according to the Boston Consulting Group. Bearing this in mind, we can expect this to lead to long shipping times.
Some local airports in the country only cater to domestic flights and smaller planes. These smaller planes have limited cargo capacity, which limits the amount of goods that can move between airports. If the amount of cargo exceeds the plane’s carrying capacity, you will need to wait for another flight that will go to the specific province to transport the excess goods. To mitigate this, you could give a realistic estimate on your delivery dates to avoid disappointing your customers.
However, the current administration is addressing this by investing PHP 9 trillion into infrastructure development projects. More than half of the 75 planned infrastructure projects are scheduled to be ready by 2022, and these include railways, toll roads, and airports.
Aside from underdeveloped infrastructure, deliveries are also subject to weather disruptions in the rainy season from June to October each year. On average, the islands experience 20 typhoons a year, causing delays in shipments.
Sundays and public holidays may delay shipments, so you may have to plan around when the Philippines have any major holidays. Different regions also have specific holidays, such as Manila Day and Davao City Day, affecting only the respective cities. Check in with your shipping partner to see how deliveries might be affected by these dates.
In light of all this, finding a logistics partner with local expertise is vital. Be sure to also keep tabs on weather disruptions and any conditions that could affect your deliveries, and ensure that you communicate with your customers about any delays that could happen.
Appropriately packaging your products with the right packing materials is important in cross-border shipping. Packages may be subject to rough handling during its cross-border shipment to the Philippines, so including additional packing materials like bubble wrap or packing peanuts helps prevent your products from bouncing around within the package during shipment. These practices help prevent damage to your product when shipping and can save you money on replacing damaged goods.
Carriers usually offer multiple tiers of service in shipping. These delivery options mainly differ in their offered features, such as:
Real-time tracking & tracing
Free pick-up at origin address
Compensation in the event of loss of shipment
On-call customer service
Typically, the more features offered, the higher the shipping fee is. Choose one that best suits your budget and shipping needs. When planning your shipment, you can consult your shipping partner for recommended steps in packaging your goods for transport.
Carriers will need merchants to provide shipping details to generate the documentation required by the Philippine’s customs. The type of information most carriers require are:
Sender’s details and address
Recipient’s details and address
Country of manufacture
Declared value and the currency in US$
Harmonised System (HS) Code of Item
Item weight and dimensions
This information will be entered into a Customs Declaration form and shipping label by either you or the shipping partner if they offer this service. Always check that this information has been entered accurately. Incomplete documentation may trap your goods in customs. Additional shipping charges could arise if the shipping company returns the packages to you. Under-declaring the value of the items of your shipments on the commercial invoice could result in fines if the custom clearance agencies correctly suspect it. The courier may also charge you additional fees for undervaluing your goods.
Print and paste the shipping label, which contains the information you’ve entered in the previous step, securely onto the parcel. The addresses and bar-codes on the shipping label must be in clear view for identification and customs inspection. Ensure the shipping documents can be found on the package. One way to do this is to place all supporting documents inside a clear plastic pocket and tape it onto the package. Do note that some of these documents, such as the customs declaration and commercial invoice, will require the sender’s signature.
Depending on the delivery option you select and service level the carrier offers, the carrier will collect the packages from you either at the sender address you specified or at one of their drop-off points in your origin country. If your selected service level includes track and trace, you’ll receive a tracking code for your package after your carrier receives the package. Your customer can also use this tracking code to find out where the package currently is.
The Philippines has a dynamic customs environment. Navigating through this may be challenging, but getting the right logistics partner who can manage relations with local customs can help mitigate potential problems and save you time and money.
Customs clearance requires you to have the right documentation at hand to avoid delays. Depending on the value of your shipments, you may have to pay customs taxes and duties.
Philippine Customs require extensive documentation prior to clearing goods for import. For this, most carriers engage with experienced customs brokers who are accustomed to the procedures and required format of documentation. Minimally, the carrier must present the following to the relevant agencies:
Commercial and pro-forma invoice
If you are planning on shipping without a logistics partner who can clear customs on your behalf, you’ll need the following:
Airway bill/ bill of lading (whichever is applicable)
Receipt of payment of import duty and import-related taxes
Other relevant permits, licenses, and certificates
If your shipment value is lower than the Philippines’s de minimis value of US$200, you won’t be charged duties and taxes for your shipment. A de minimis value is a threshold where any shipment whose value is above it will be charged duties and taxes at customs. This is to encourage consumption in the country.
If your shipment is valued above US$200, you will have to cover the following duties and taxes:
Import duties also vary depending on the type of goods being imported. To identify the type of goods entering the country, the Philippines follows an internationally agreed upon method of classifying goods called the Harmonized System Classification of Goods (HS Codes). You can use this tariff finder on the official website to see how much duties your shipment will be charged based on its HS Code.
Once again, to ensure that your package doesn’t get stuck in customs, it is important to work with a logistics provider who is well-versed with the latest developments in customs regulations to better navigate the ever-changing landscape of customs processes.
80% of online merchants offer Cash-on-delivery (COD) as a payment option for their e-commerce business. This is because 98% of the Filipino population does not have a credit card. Choosing to offer COD is a worthwhile option to consider when thinking of breaking into the Philippine e-commerce market.
However, not every logistics provider supports COD because of the additional payments infrastructure and processes needed to offer the payment method. Should you decide to offer this payment option on your e-commerce site after weighing the pros and cons, you will need to find a logistic partner that is able to facilitate it.
With high growth potential in its e-commerce landscape, a young and increasingly digitally savvy population, the Philippines is a viable market to break into to expand your international e-commerce business.
All the steps involved in cross-border shipping to the Philippines may sound complicated but having the right shipping partners can greatly simplify things. By engaging with reliable and proficient shipping partners at every step, or even a single partner who can handle every step, you’ll be on your way to seamless cross-border shipping to the Philippines.
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If you’d like to find out more about how we can solve your SEA e-commerce cross-border delivery needs, come and have a conversation with us.
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