While collect-on-delivery (COD) services in international shipping offer cash flow advantages for shippers, they carry significant risks that businesses must carefully manage. The fundamental vulnerability lies in the disconnect between payment responsibility and control of goods, compounded by customs policies and account verification gaps in cross-border operations.
The Core Risks and Trigger Points
The primary challenge of international COD shipping stems from ambiguous liability structures. Most carriers' terms stipulate that shipping fees revert to the shipper if recipients refuse delivery or maintain invalid payment accounts—a scenario particularly prevalent in regions with complex customs procedures.
Customs-related issues frequently trigger payment failures. Goods detained for undervaluation or category restrictions often lead recipients to reject payment obligations. Furthermore, carriers' account verification systems typically only authenticate local accounts without cross-border balance confirmation capabilities.
Even with valid accounts, delayed signatures or deliberate avoidance tactics can result in failed collections. Market fluctuations may also cause recipients to abandon shipments mid-transit, leaving shippers liable for both transportation costs and potential return logistics expenses.
A Three-Tiered Risk Management Framework
Effective risk mitigation requires comprehensive safeguards across contractual agreements, payment verification, and trade term selection:
- Contractual Protections: Prior to shipment, execute written agreements clearly defining liability for refused payments. Negotiate exception cost-sharing terms with logistics providers to enhance operational flexibility during disruptions.
- Payment Security Measures: Prioritize global prepaid accounts requiring mandatory balances with real-time status monitoring. Implement rigorous verification of recipient account status across all relevant parties to prevent financial losses.
- Strategic Trade Term Selection: EXW (Ex Works) terms shift full transportation liability to recipients. For high-value shipments, consider third-party payment escrow services where funds release only upon confirmed delivery.
Businesses should also monitor shipping rate fluctuations through comparison platforms to anticipate cost variations from policy changes or carrier adjustments.
Conclusion
International COD shipping ultimately represents a credit management challenge requiring multilayered protections. Through deliberate contract design, payment system selection, and risk mitigation tools, businesses can significantly reduce operational uncertainties in global collect-on-delivery transactions.