Merchants based in Malaysia can always use its geographic advantage in Southeast Asia to tap on to some of the world’s up-and-coming economies. Among the eCommerce markets in Southeast Asia, the Philippines, with its 4.54 billion internet users in 2020, among which 76% of them have shopped online is definitely worth looking into.1
Currently, at USD 1 billion in 2020, the Philippines’ eCommerce market is forecasted to grow to USD 1.4 billion at a Compound Annual Growth Rate (CAGR) of 7.9%.2 If you’d like to learn more about the Philippines market and consumers, we’ve covered the Philippines’ market information extensively on our Philippines country guide.
In terms of eCommerce activity in the Philippines, most eCommerce orders will be taking place in the Metro Manila region. This region consists of 16 cities including Manila, Quezon City, Makati, Taguig, and more. This region also has a population of 13 million people, making it the most populous area in the Philippines.3
Some of the top product verticals that do well in Philippines’ eCommerce scene include consumer electronics, fashion, and personal care. To get a deep dive on this, check out our article on Philippines’ top product categories.
With the dynamic situation caused by the COVID-19 pandemic however, flights have been limited in an attempt to fight the virus. This would have implications on your deliveries to your eCommerce consumers, so it helps to stay on top of regulatory changes within the region so that you can prepare your supply chain accordingly.
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Cross border shipping from Malaysia to the Philippines may vary from business to business, but they generally fall into these 4 steps. This example will assume that the merchant and consignee are based where there is the most eCommerce activity, with the merchant based in Malaysia’s Klang Valley and the consignee’s address in the Philippines’ Metro Manila.
First mile delivery in international shipping refers to the first stage of the logistics supply chain, where it leaves the origin address. The origin address can be a storefront, office, or warehouse. Before your goods can leave this address, the product must be packaged and labelled appropriately to facilitate smooth cross border shipping.
While transporting your goods, your packages may go through bumpy rides from events like turbulence. To prevent your goods from getting damaged during shipping it’s recommended to have extra padding like bubble wrap and packing peanuts. If you’d like to learn more about the best practices in packaging your goods, we’ve covered them in our packaging 101 article.
On top of that, your shipping labels and customs documents need to be labelled clearly and must be accessible for customs inspection. Check out the best practices in labelling your shipments along with our other B2C shipping tips, too.
Once your shipment is ready to be handed over to your delivery partner, you can choose to have it picked up from your address or drop off your shipment at your shipping partner’s drop-off point. Most shipping partners would have a cut-off time for submitting orders so that they can optimise their route.
B2C parcels would be consolidated at a transportation hub with other packages that are going to the same destination country prior to customs clearance. Meanwhile, B2B shipments can be transported directly to the origin warehouse for customs clearance since they already have a larger weight and volume than individual B2C shipments.
When your parcel arrives at the customs warehouse at the origin customs warehouse, Malaysian customs officers will inspect the shipment, including its shipping label and customs documents, to determine if it can be cleared for export from Malaysia. To check if your B2B parcels require any special permits for export, check out Malaysia’s Customs website.4
After your shipments are cleared for export, your options for freight would be to ship to the Philippines via air freight or sea freight.
Outside of the current COVID-19 situation, air freight is the preferred option for B2C shipments, especially if you don’t have a consistent order volume and need your parcels to be sent to the destination country quickly. Shipments sent via air freight typically leave from Kuala Lumpur International Airport (KUL) and land at The Philippines’ Ninoy Aquino International Airport (MNL).
However, the COVID-19 situation has caused flights to be limited, causing the price for air freight to increase from the lack of cargo space. The flight limitations may also lead to delays in delivery speeds. In this case, sea freight can also be considered as an alternative for even B2C deliveries.
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If you’re looking to ship in bulk, sea freight is the most cost-effective option. It is slightly slower than air freight, so you’ll need to plan out your supply chain and take note of your inventory.
If you’re shipping from Malaysia to the Philippines, sea freight shipments enter the Philippines via the Port of Manila from Port Klang. This is the preferred mode of transport if you’re planning to set up a local distribution centre to expand your presence aggressively.
Sea freight shipments can be in full container load (FCL) or less than container load (LCL). Shipping with FCL means that an entire container is used solely for your shipment to the Philippines, whereas LCL means your shipments are consolidated with others and you’re paying for a part of the container.
After your shipment arrives at the airport or port in the Philippines, it will be transferred to a customs warehouse for clearance. This is where Philippine customs officers will inspect your shipment and shipping documents to determine if your product is allowed to enter the country.
To gain import clearance into the Philippines, you or your shipping partner would generally need to provide the following documents:
If your goods are below the Philippines’ de minimis value of PHP 10,000, you don’t need to pay for import duties and taxes on your shipment.
The de minimis rate refers to a price threshold where fewer or no duties and taxes are charged if the shipment’s customs value is below that point. In the Philippines, customs valuation is calculated using the CIF (cost, insurance, and freight) method. A shipment’s CIF value includes the good’s price, shipping fee, and insurance costs if any.5 However, this exemption only applies to shipments sent via air freight. Thus, if you’re sending your goods with sea freight into the Philippines, you still need to pay import duties and taxes.
If your goods exceed this de minimis threshold in the Philippines, you’ll have to pay import duties ranging from 0% to 20% and a value-added tax (VAT) of 12%. The import duties’ rate is determined by your product’s harmonised systems code (HS Code). You may find out the percentage of import duties for your specific goods in this Tariff Finder.6
If you’re shipping a B2C parcel, you can choose to either pay for the import duties and taxes yourself or let your customers pay for the import duties and taxes. This is determined from the incoterms you choose with your logistics partner, which is either Delivered Duties Unpaid (DDU) or Delivered Duties Paid (DDP). While we strongly encourage you to opt for DDP to keep your B2C shipping experience smooth, it helps to know what these arrangements mean.
After clearing customs, your shipment will enter the distribution stage. If the consignee is within the island of Luzon where Metro Manila is located, your B2B shipments can be delivered directly to the end address. B2C shipments on the other hand have to go through sorting at a transportation hub before it can enter the last mile delivery stage. However, if the address is in an area that can’t be reached with a van or truck, your shipment will go through an additional domestic flight or ship before it can be sorted and sent for last mile delivery.
Last mile delivery refers to the stage where your shipment is delivered from the destination warehouse to your consignee’s address. This final stage of the delivery is done via vans in the Philippines. In this stage, your shipping provider will ensure that your shipment is received by the consignee. This is typically done through multiple delivery attempts and notifications to your consignee.
In light of COVID-19, the Enhanced Community Quarantine (ECQ) and General Community Quarantine (GCQ) have been put in place to try to curb its spread. Thus, last mile delivery throughout the Philippines may be delayed. It helps to set expectations with your customers and consignees on these delays, and to plan your supply chain accordingly.
With this knowledge of the full shipping process from Malaysia to the Philippines on hand, you’re in a better position to find a suitable logistics partner. While it’s good to find one who can cover the entire logistics supply chain from first mile to last mile, having a flexible logistics partner who can fit into your existing logistics supply chain will help, especially if it’s complex. When choosing a logistics service provider, it helps to consider the cost, speed, and delivery experience before committing to a shipping solution.
If you’re considering expanding your online presence into the Philippines, it’s important to consider the entire eCommerce experience, including timely eCommerce delivery. Thus, having a reliable shipping partner that takes care of the logistics process will help you wow your customers so they come back for more. That way, you’ll be way ahead of your competitors as you grow your regional presence within Southeast Asia.
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We have other guides on how to ship from Malaysia to Southeast Asian destinations here:
For more information on Malaysia as a destination, we also have these guide here:
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