Compliance

Product Compliance: Ecommerce Guide for Expanding to Global Markets

June 20, 2024 
|  Passport

Selling products internationally online requires a clear understanding of each country’s regulations to identify potential import challenges. Although direct-to-consumer shipments often face fewer rules than commercial ones, adhering to compliance requirements is essential for successfully getting your products to consumers across borders. In this article, we’ll highlight three key areas to focus on and provide real examples to help brands navigate product compliance across various countries.

Product Compliance for International Shipments     

Entering global markets presents ecommerce brands with a critical decision: sell through local retailers and wholesalers (B2B) or directly to consumers (DTC).

Selling B2B involves shipping to local retailers and wholesalers, putting products on store shelves, and allowing customers to see and purchase them in person. This approach can build brand presence but requires navigating complex and costly regulatory requirements, including full licensing and registration.
For instance, when selling products locally in the EU, companies need to:

  • Hire a local representative
  • Test ingredients and review formulas
  • Substantiate marketing claims
  • Re-label products and packaging in all 24 local languages
  • Submit market notifications and product information files to regulatory authorities
  • Maintain records and present periodic reports

Compliance can take several months and cost thousands per SKU, plus additional expenses for re-labeling and packaging.

Shipping directly to customers offers an efficient way to test foreign demand without all the regulatory hurdles of traditional retail. While full compliance is ideal, it can be expensive and often unnecessary for DTC brands. Personal use exemptions allow individuals to import limited quantities of goods without the strict regulations applied to B2B shipments. These exceptions cover items intended for personal consumption and not for resale, with specific rules varying by country. This makes international shipping more manageable, allowing ecommerce businesses to gauge market interest and adapt strategies accordingly. By leveraging this flexibility and lower regulatory barriers, brands can effectively build a global customer base.

When expanding globally, DTC brands should focus on three key areas of product compliance:

  • Product Classification – Determine how your products are categorized in target regions. Knowing the classification helps in understanding the applicable regulations and requirements.
  • Ingredient Prohibitions & Restrictions – Make sure that none of your product’s ingredients are prohibited or exceed allowable concentrations in the destination market. Regulations on ingredients vary by country.
  • Identifying Dangerous Goods – Know if your products are considered dangerous goods due to their chemical or physical properties. These require special handling and documentation to ensure safe and legal shipping.

By addressing these aspects of product compliance, companies can avoid costly customs issues and delays, ensuring smooth operations and a positive delivery experience for international customers. In the following sections, we’ll review each of these areas in more detail.

Understanding Product Classification    

Product classification involves identifying and categorizing goods based on their nature, composition, and intended use. This includes both product category determination and Harmonized System (HS) classification, each serving different purposes.

  • Product Category Determination – Local regulatory authorities classify products based on their intended use and composition, affecting how they are regulated and taxed. Each country has its own import rules that can vary widely depending on the product.
  • HS Classification – HS codes are standardized numerical codes used globally for customs purposes to determine the duties and taxes owed. These codes facilitate international trade by providing a universal classification system.

To demonstrate the distinction between the two, let’s consider how sunscreen is classified: Sunscreens can be considered cosmetics, natural health products, or non-prescription drugs, depending on the market, active ingredients, and claims. This categorization affects local regulation and taxation. Despite this, the HS code for sunscreen will usually classify it as a cosmetic for customs purposes.

Incorrect classification can result in shipments being held up at customs or rejected, potentially causing delays and fines. Due to the complexity of certain product categories, professional guidance is often necessary, especially when detailed HS codes beyond the six-digit level are required. Only licensed customs brokers are authorized to classify products at these detailed levels.

Prohibited & Restricted Ingredients Explained

While personal use exemptions allow for the importation of certain products without full compliance, prohibited and restricted ingredients must still meet health and safety regulations. This means brands need to ensure all product components comply with local guidelines by checking for prohibited substances and limiting any specified ingredient concentrations. This is especially important for cosmetics, supplements, and food & beverage, which are directly applied to or ingested by consumers and often subject to more stringent rules.

There are several chemicals commonly found in the US either completely banned or restricted in other countries based on concentration limits. As an example, hydrogen peroxide is allowed up to 14% in the US, but the EU and UK prohibit direct-to-consumer sales of concentrations above 0.1%. It’s crucial to make sure your products adhere to each destination’s prohibitions and restrictions.

Shipping Dangerous Goods

Shipping dangerous goods internationally involves following specific regulations to ensure safety during transit. Common items like batteries, perfumes, nail polish, hand sanitizer, and aerosol sprays are classified as dangerous goods and may require special labeling, quantity restrictions, and documentation. Consulting with compliance experts can help you determine which products you can ship and verify that all necessary requirements are met.

International Product Compliance Examples

For a closer look at what product compliance can entail when shipping internationally, let’s review some regulations in leading global markets.

Product Compliance Requirements in Top Global Markets

Canada (CA)
Cosmetics – Canada has stricter regulations on certain cosmetic ingredients compared to the US. For instance, formaldehyde is currently not banned in the US, but the FDA is proposing restrictions, while Canada already enforces limits on its use in cosmetics. Health Canada maintains a Cosmetic Ingredient Hotlist that details prohibited and restricted ingredients.
Health Products – Most supplements and vitamins in Canada are exempt from registration if they are for personal use and under a 90-day supply. However, certain ingredients like Ephedra, Yohimbine, and DMAA can reclassify the product as a drug, making it subject to Health Canada regulations.
Food & Beverage – Consumer packaged goods (CPG) food products are typically eligible for a personal use exemption in Canada if they are not resold commercially and the quantity is below 20 liters or 20 kilograms. The Canadian Food Inspection Agency provides comprehensive guidelines, commonly prohibiting or restricting items such as meat and animal products, fresh fruits and vegetables, certain dairy products, and alcoholic beverages.
European Union (EU)
Cosmetics – The EU has some of the strictest cosmetic regulations in the world, with 2,528 chemicals banned and 770 more restricted by use and concentration (the US only bans or restricts 11 chemicals in cosmetics). It's also important to note that each member state may have additional requirements to follow. While EU compliance can be challenging, it opens up access to 27 countries and many other global markets view their standards as a stamp of approval.
Health Products – Most items categorized as nutritional supplements in the EU are regulated as foods, meaning they are subject to personal import limits. They also prohibit or restrict the use of certain substances in dietary supplements, particularly those marketed for weight loss and sexual wellness. Ingredients like Ephedra, Kava Kava, Yohimbe, and Aristolochia species are banned. Additionally, the EU imposes limits on the levels of vitamins and minerals and controls the use of unapproved novel ingredients and GMOs.
Food & Beverage – Generally, food and beverage items can be imported for personal use into the EU if they adhere to specific import limits and rules, which can vary by country. Common prohibited or restricted items include meat, milk, and their products, alcohol and perishable items, and certain animal and plant products.
United Kingdom (UK)
Cosmetics – The UK maintains stringent regulations for cosmetics, similar to the EU, and continues to regulate them under the Cosmetic Products Enforcement Regulations 2013, with additional updates to align with EU standards following Brexit.
Health Products – Much like the EU, most supplements in the UK are regulated as foods and subject to personal import limits, with similar prohibitions and restrictions on certain ingredients. For example, while melatonin is widely available in the US as a sleep aid, it’s classified as a prescription medication in the UK and cannot be sold over the counter.
Food & Beverage – Food and beverage items can generally be imported for personal use into the UK if they adhere to import limits and restrictions, typically 2kg for most products. The UK mirrors the EU's regulations, applying similar regulations.
Australia (AU)
Cosmetics – In Australia, imports of cosmetics are allowed if they are commercially manufactured and packaged for personal use, with a limit of 10 kilograms or 10 liters. Common restrictions apply to certain chemicals like formaldehyde, which are regulated under the Australian Industrial Chemicals Introduction Scheme (AICIS).
Health Products – Nutritional supplements are categorized as complementary medicines in Australia and are regulated as non-prescription drugs. However, for DTC shipments, an import license is usually not necessary if the products are for personal use, the quantity is limited to a three-month supply, and the items are commercially prepared and packaged. While many common ingredients found in US products are permitted, substances such as Hoodia, Yohimbe, and DHEA are prohibited.
Food & Beverage – Commercially prepared and packaged food and beverage items can generally be imported for personal use into Australia as long as they adhere to specific guidelines. Restrictions apply to certain items, including meat, dairy products, fresh fruits and vegetables, and alcohol.

Common Challenges in Product Compliance

Selling products internationally can present notable compliance challenges for ecommerce brands:

  • HS Classification – Properly identifying and categorizing goods using Harmonized System codes can be complex and requires accuracy.
  • Regulatory Variations – Each country has unique compliance standards. Understanding and keeping up with evolving regulations can be difficult and time-consuming.
  • Ingredient & Chemical Restrictions – Global markets often have different restrictions and permissible levels than the US for certain substances, adding complexity.

Overcoming these international barriers requires a proactive approach to compliance and staying informed about regulatory updates. Leveraging industry expertise can ease the process and accelerate access to new markets.

International Product Compliance Solutions

Partnering with an international solutions provider like Passport simplifies the complexities of product compliance and gaining access to global markets. With best-in-class shipping services and an in-house team of licensed customs brokers and global trade experts, Passport ensures a seamless delivery experience for both brands and their customers. We offer comprehensive support from HS classification to detailed regulatory assessments and ingredient reviews to help you understand any country-level requirements that apply to your products.

Looking to grow your international sales? Passport Global makes international expansion effortless for DTC brands. This all-in-one solution blends personalized expertise with technology-driven strategies, offering a full suite of compliance services, localization options, and growth advisory. With Passport Global, navigating the complexities of international ecommerce becomes effortless, allowing you to focus on your core business operations.

Reach out to our team today to see how Passport can take compliance off your plate and enhance your global strategy.

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