International Online Purchases

Should we have the freedom to purchase things directly from someone outside our society? Should such items be considered as a need or a want? We will discuss these aspects and their consequences in the section "It is a Freedom - not a Need".

Any international online purchase is really an import. There are consequences of it being an import and these are discussed in the section "Imports and Import Duty".

When someone purchases something from some retailer in another society, what sort of product identifier is recorded in the purchaser's inventory? What else is recorded in the inventory? How does all this impact the computation of the person's current total wealth? These questions are answered in the section "ProductId and Inventory".

When does a buyer of something purchased from an international online retailer actually become the owner of the purchased item? The short answer is: "upon delivery". This is discussed in the section "Ownership Transfer" along with the ramifications for the seller.

The freedom to engage in international online purchases is not absolute. There are limits and restrictions. We will discuss these in the section "Restrictions and Limits"

When one starts thinking about the ideas discussed in these sections, one invariably comes up with more questions. Many times, such questions are about details and nuances; they are about the "how"; they are not about the "what" and the "why". These questions are briefly answered in the section "Other Requirements".

It is a Freedom - not a Need

We live in a digital age and purchasing something online is a trivial thing to do. Most of the things that we desire can be purchased from sellers within our society. Occasionally, we may desire something so esoteric that it is not available within our society. But that item may be available in some other society and some organization in that society may be selling it in an online store.

Considering the fact that currently we can purchase goods from sellers situated in some other society and when thinking about a Utopian society, this same freedom should continue to exist. But, saying "a Utopian society should have some feature just because our current society has it" is a bad argument. If we were to adopt such a line of reasoning, then we will continue doing every bad thing that we do today.

Is there a better reason to justify international online purchases? There is.

One could attempt to argue that importers could import all kinds of goods, both normal and esoteric, and make them available in our society and thus obviate the need to even allow international online purchases. For esoteric goods, the demand for them is low and it also varies over time. From the perspective of importers, these goods lack assured demand and economies of scale. Importers engage in the import business to make profit and these esoteric goods may not be profitable for importers. When thinking about a Utopian society, we should neither force importers nor subsidize them to import anything. Thus, everything that everyone desires is unlikely to be obtained by importers and made available to us in our society. Thus, if we want us to have the ability to enjoy such esoteric things, we need the freedom to buy them from someone outside our society.

Thus, it seems reasonable that we should have the freedom to purchase goods directly from a seller situated in another society.

A Utopian society does not want to arbitrarily restrict its own citizens from satisfying their needs and wants. If such needs and wants can be satisfied by procuring the item from some other society, then just like citizens have the freedom to procure them locally, they ought to have the freedom to procure them from some other society.

There could be well-justified but weak reasons to object to citizens buying directly from someone outside our society. We could handle such objections to allowing international online purchases, by imposing restrictions and limits. In fact, there are restrictions and limits that are intended to handle precisely such weaker forms of objections.

So, unless a strong reason is presented against having the freedom to engage in international online purchases, we should have the freedom.

From a society's perspective, every individual purchase across society boundaries is still a want - not a need.

Why? Because if it was the need of even a significant minority, then it would be profitable for some importer to import it and make it available within the society. In such cases, importers will be greatly motivated in procuring such items, productize such items, and make them available locally for purchase. Since citizens are in charge of classifying products as need or wants, and since they can only do that for locally available products, a product available in some other society cannot ever be classified as a need.

Thus a society cannot justify any potential item that an individual citizen may want to purchase from some foreign society as a general need of the citizens of the society.

Since such international online purchases cannot be considered as a need, these purchases cannot be considered as an "essential". Hence, neither the Utopian Payment Model nor Social Credit can be used to make such purchases. The citizen either needs to have the money to make the purchase or the citizen needs to have collective credit.

Imports and Import Duty

When a citizen of one society purchases something from an online store in a second society, it is an import in the first society and an export from the second society. Goods flow from the seller's society to the buyer's society and money flows from the buyer's society to the seller's society. An international online purchase is a single instance of a foreign trade transaction.

As discussed in the chapter Foreign Trade in Building Utopia book,

Payments for imports must be in the form of gold.
Societies will levy an import duty when their imports exceed their exports.
The import duty, if any, must also be paid in gold.

At any point in time, a society may or may not levy import duty. It depends on the balance of imports and exports.

An international online purchase is a retail transaction; it is not an "official" import-export transaction. In such a transaction, there is a consumer and there is a retailer and they both deal with their local currencies only.

The Financial infrastructures of societies cooperate to let retailers and consumers have the freedom to transact across society boundaries, keep this transaction grounded to their local currencies, and still ensure that payments are made in gold and import duties are collected. Both these financial infrastructures are involved in keeping the transaction simple for the retailer and the consumer and also fulfilling the following:

Retailers quote prices in their local currency.
Consumers see the prices in their local currency.
Consumers pay for goods purchased in their local currency.
Consumers pay the import duty (if any) in their local currency.
Retailers receive payment for goods sold in their local currency.
Payment for goods exported and imported between societies are accounted for and settled by the financial infrastructures in gold.
Payment of import duty is converted to gold and deposited in the appropriate account.
The transfer of ownership of the purchased goods is accomplished jointly by both financial infrastructures. This includes the due consideration for shipping related time delay.

The above points are the software requirements on a transaction of the kind international online purchases. With these requirements we are freeing the retailers and consumers from dealing with gold and yet keeping gold involved. In such a transaction there are four parties involved; the consumer, the retailer and the financial infrastructures of the two societies. Note that unlike money transfer, the financial infrastructures are actually involved in this kind of transaction because they have to settle their mutual gold accounts.

Details and nuances involved in such transactions are mentioned in the section "Other Requirements".

What about the shipping cost? Does it have to be paid in gold? Does the consumer have to pay an import duty on the shipping cost?

When a consumer buys some item from some foreign online retailer, the retailer is required to deliver that item to the consumer. While the retailer may use the services of an organization specializing in shipping and delivery across society boundaries, the retailer is ultimately responsible for delivering the item to the consumer. These retailers either charge the consumers separately for the delivery or may include the delivery charges in the cost of the item. Thus, directly or indirectly, the consumer pays for the cost of shipping and delivery.

Shipping is a service and in case of international online purchases this service is provided by some organization in the exporting society. Thus in the buyer's society it is a service that was imported.

When a consumer pays for international online purchases, the consumer is actually paying for the cost of goods and shipping. These payments go to the retailer in the other society. Thus in effect, the importing society pays for the cost of shipping in gold. The consumer also pays the import duty, if any, on the cost of shipping. In all this the consumer deals with local currency and the consumer's financial infrastructure deals with the gold equivalent of the local currency with the retailer's financial infrastructure.

ProductId and Inventory

Our account books contain an inventory of our personal belongings. We add to this inventory when we purchase things. We can browse the inventory of our items and get meaningful information about it. As time passes, most things in our inventory depreciate and eventually lose value. Based on this inventory, our financial infrastructure can account for the current value of all our personal belongings and hence our total wealth.

Even with something purchased from some other society, these activities should be possible. They are, and in this section we will outline them at a conceptual level.

When a consumer buys some goods in-person from a physical retail store and has the money to pay for it (that is collective credit or social credit is not involved), the following changes occur to the account books of the consumer and the retailer:

The consumer's money decreases.
The retailer's money increases.
The consumer's inventory of items increases.
The retailer's inventory of items decreases.

The same changes occur in international online purchases. But, due to shipping delays, there are differences in when exactly these changes occur.

From the consumer's perspective, for each new purchase, the consumer's inventory database gets a new record that contains the following:

ProductId. This is the ProductId in the other society's database.
Serial Number. This field may not have a value if the thing that we purchased is not individually identifiable.
Quantity of items. This value is 1 if the thing we bought has a serial number. It may be greater than 1 when we buy many things of the same kind and when each one of those things is not uniquely identifiable (like a dozen cans of soup).
Acquire date.
Purchase cost.
Depreciation period.
Depreciation type.
Current value. At the time of buying, this is the same as purchase cost. It changes every day.

When we buy goods from some other society, the goods that we buy have product entries in the product registry of that other society. This product entry has a ProductId and also many kinds of useful information like name, description, detailed specifications of the product, and depreciation period. The ProductId contains a society code. Whenever our financial infrastructure needs to access information about the product, it can access the database of the society in which the product was created. In fact, at the time of purchase, our financial infrastructure accesses this record to copy the depreciation period and depreciation type and place it in our inventory record.

When we are browsing through our own inventory of our personal belongings, our financial infrastructure uses ProductId to access the product record from the other society's database and uses the name, description, etc. kind of data in that product record to show us meaningful information about our own possessions.

When our financial infrastructure does the End-of-Day processing, it uses the depreciation period and type of depreciation stored in our inventory records to calculate the current value of all our inventory of items, account for our liabilities and obtain our current total wealth.

Thus, we can browse the inventory of our items and get meaningful information about it and our financial infrastructure can account for the current value of all our personal belongings regardless of whether they were purchased locally or internationally.

In the above discussion, we implied that our financial infrastructure does not copy any information about the product from the other society's product registry into our own society's product registry. Conceptually, that is true. In practice, our financial infrastructure may cache some records for improving performance and other operational conveniences.

Note that during the computation of our current total wealth, our financial infrastructure does not need to access any product information for our personal belongings. This is because the depreciation period, depreciation type and current value are all known from our inventory records and that is all that matters for the computation.

In the above conceptual discussion we did not account for the time delay in us obtaining possession due to shipping time. In actual implementation this will need to be accounted for.

In the above conceptual discussion we did not account for the possibility that some of these shipped items may get lost in transit. In the actual implementation this will need to be accounted for.

Ownership Transfer

In a Utopian society, in general, possession does not imply ownership. Ownership is indicated by a record of ownership. All the things that a citizen owns are listed in the account book of the citizen. This is conceptually referred to as the "inventory database" of the citizen. In actual implementation, most likely, this will be just a bunch of tables containing the inventory information.

Before we can consider the ownership transfer of international online purchases, let us review what actually happens when we visit a local physical retail store, pick an item and pay for it at the checkout counter. When we pay for that thing, we also take possession of that thing. It is a single transaction fully implemented by our financial infrastructure. This single transaction transfers money from our account to the retailer's account and it also transfers the ownership of the purchased item from the retailer's account to our account.

Unlike the case of a local physical retail purchase, in an international online purchase, the retailer and customer are in different societies. Thus two financial infrastructures are involved and hence changing ownership of an item from the retailer to the customer cannot be accomplished in a single transaction that involves only a single database. This complicates the implementation of this change of ownership.

In case of an international online purchase, a customer can buy something and pay for it, but because there is shipping involved, there is some time lag between the time when the order is placed to the time when the customer gets possession of the purchased item. In this situation, the customer becomes the owner of the purchased item only when the customer takes possession of the item.

Unlike the case of a local physical retail purchase, an international online purchase is a multitude of sub-transactions. The first of such sub-transaction occurs when the customer confirms and authorizes the order. At this point the customer pays the money and the retailer receives the money. At this point, the customer has an expectation to become the owner of the purchased item, but is not yet the owner. The last such sub-transaction happens when the customer confirms that the customer has possession of the ordered item and it is only then that the customer becomes the owner of the item. In between these two are the shipping, shipment tracking and attempted-delivery transactions. There are at least two major handoffs: one from retailer to shipper and one from shipper to customer. Each such handoff is accompanied with its own accounting that deals with some kinds of receivable and deliverable accounts. Each one of these sub-transaction may fail to complete and there will be rules associated with "what to do with these failures". All these sub-transactions need to succeed in order for the entire transaction of the international online purchase to succeed.

From a customer's perspective, when the customer buys something, the customer pays for it and hence the customer's money account reduces. At the same time the customer's "goods receivable" account increases by exactly the same amount. This increase is for the total amount including the import duty paid. The customer's current wealth does not change because the customer's one asset account reduces (the money account) and another asset account increases by exactly the same account (the goods receivable account).

There can be a significant time gap between the customer paying for the item and eventually becoming the owner of the item. During this time, the customer's total wealth does not change because of the purchase.

Some time after the order is placed, the retailer ships the item. The item's possession changes from the retailer to the shipper; but the owner is still the retailer. The shipper eventually delivers the item to the customer. This delivery must be accompanied with a confirmation from the customer that the customer is in possession of the item. At this point in time, the customer's "goods receivable" account is reduced by the total amount paid for the item and the inventory is increased. This is the point when the customer becomes the owner of the purchased item. This is a simple description; in practice, there are a lot of accounting sub-transactions ranging from order placement, payment, shipping manifest, shipment tracking, delivery confirmation, ownership changes, paying import duty, etc.

The confirmation of possession is required because if there is a dispute about possession of the item, then that dispute will require dispute resolution and because the transaction is between parties belonging to different societies, the jurisdiction of settling the dispute will be much more complicated. To avoid the possibility of dispute regarding possession, a confirmation is required.

Note that in a local online purchase, since the consumer and retailer are within the same society, only one society is involved in resolving such disputes and hence such items do not require a physical handoff of possession. That is, the delivery of such items can happen in absentia of the customer and such items can be left in front of the door and yet it is deemed to be a transfer of possession and transfer of ownership.

If there are any warranties associated with the goods purchased, they come into effect at the time the customer becomes the owner.

Starting from the time the customer becomes the owner, the item starts depreciating in value as indicated by the depreciation information we discussed earlier. It is starting from this time that the customer's current wealth starts changing because of the purchase.

From a retailer's perspective, when a customer buys something, the retailer's money account increases by the amount of the goods purchased and associated shipping charges. At the same time, the retailer's "goods deliverable" account increases by exactly the same amount. The retailer gains an asset (the money account) and the retailer's liabilities increase with exactly the same amount (goods deliverable account). The retailer's book value does not change just because the retailer received an order and got paid for it.

Since the retailer is the current owner of the item, the retailer is responsible for the shipping and delivery of that item and till such time that the item is not delivered, the retailer continues to be the owner of the item.

When the retailer ships the item, the retailer hands over the possession of that item to the shipper. Now the shipper is responsible to provide the retailer the service of delivering the item to the customer. Eventually this happens and the customer confirms the receipt of the item. At this time, in the retailer's account books, the "goods deliverable" account is reduced by the amount it was originally credited with and the inventory is reduced to reflect that the retailer is no longer the owner of the item.

The retailer can record a "sale" only when the ownership transfer has occurred. This also implies that the profit associated with the sale can be booked on when the ownership transfer has occurred. This is different from current accounting practices; it is actually an accurate representation of the ownership information and hence its accounting and hence the account books.

In this section, we discuss the core concepts in the transfer of ownership of items purchased by means of international online purchases. There are other nuances and we will discuss them in the "Other Requirements" section.

Restrictions and Limits

The freedom to engage in international online purchases is not absolute. We do not want citizens, organizations and self-owning entities to be using their direct import freedom to the detriment of the society. Thus, there are limits and restrictions to ensure that all these entities, in making their purchasing decisions, favor their own society over other societies.

Only the products that are classified as "Personal Belongings" can be purchased online from another society. Specifically, anything that is classified as a standard investment, non-standard investment or real estate cannot be purchased using the mechanism of international online purchases. Why? Because investments are significantly different from personal belongings and the chapter "International Investments" discusses the mechanism for making international investments. Real estate cannot be purchased because it cannot be "delivered". Besides, real estate is more like an investment than it is like a personal belonging; it is also discussed in the chapter on "International Investments".

There will be restrictions on buying some kinds of things across country boundaries. Typically materials that are dangerous to ship on a retail scale fall in this category. There could be other product categories as well. The restrictions could be for imports as well as exports. If a transaction associated with such a restricted item is initiated, then the financial infrastructure of either society will reject the transaction because it violates some restrictions that the financial infrastructure knows about.

Who creates and maintains this list of prohibited items or item categories? The short answer is: "Citizens. But the responsibility could be delegated to their representatives". The long answer will be provided in a separate book which deals with matters related to citizens' decision making power; which includes voting on various kinds of issues including selecting their representatives for specific purposes.

The next two restrictions are based on policy parameters. For any entity (who is not an official importer), to buy something from some retailer from another country and get it shipped across the country boundary it must have a depreciation period that is at least a minimum chosen by citizens. Similarly, such products must have a depreciation period that is no more than a maximum chosen by citizens. These minimum and maximum numbers are policy parameters. Reasonable initial values for these parameters could be 3 months and 6 years respectively.

Why these restrictions? These restrictions are a standard mechanism for all citizens to express their opinion about the kind of durability an item should have in order to qualify for direct import. If indeed the above two values are chosen, then it means citizens reject directly importing perishable goods (like vegetables) and extremely durable goods (like gemstones).

In laying down these kinds of restrictions, citizens are nudging importers to take on the responsibility and task of officially importing such kinds of goods (if they are needed by the society).

Citizens can delegate the setting of these specific parameters to their representatives. Further, if a society deems that such restrictions are unreasonable, then it can set them to 1 day and 1000 years.

Policy parameter based restrictions allows cooperating societies to use the same software and yet enables individual societies to express and enforce their specific view about direct imports. Unlike the list-based restriction discussed earlier, this kind of restriction applies to future products as well.

Just like there are two policy parameter based restrictions for direct imports by consumers, there are two policy parameter based restrictions for direct exports by retailers (who are not official exporters). These parameters have the same kind of reasoning for their existence and the same delegation model for setting them.

For citizens, there are limits on a per citizen basis and those limits are proportional to the citizen's typical wealth. Limitations are regarding the total monetary value that a single citizen can import in a calendar year. The limits on this are the same as limits on one-way transfer of money to someone outside the society. Thus, this limit is set at 10% of a citizen's typical wealth in a single calendar year and it is a policy parameter.

For organizations and self-owning entities, the limit on how much they can purchase using their freedom to engage in international online purchases is 10% of their typical wealth. Just like we can compute the current wealth of a citizen, the same can be done for organizations and self-owning entities. An organization's current "book value" represents the current total wealth of the organization. Note that book value is different from market capitalization; market capitalization represents how others value the organization. To know the "typical wealth" of an organization, we simply find the average of the daily book value of the organization for every day in the past year. Same can be done for self-owning entities. This places organizations and self-owning entities on par with citizens in their freedom to engage in international online purchases.

An organization, in order to run their operations and make a profit, may have a need to buy far more than their book value. The 10% limit may seem insufficient for some organizations. So, let us address this issue. Organizations are expected to buy things locally; even the imported stuff. Official importers import goods and make them available locally and importers are not limited by 10% of their book value because importing goods is their business. Thus, organizations should find an importer who is willing to import the stuff that they need for their organization's operations. Organizations will always be able to find such an importer because importers can make a profit in providing the service of importing goods by fulfilling all regulations associated with imports. If some organization cannot find suitable importers, then this organization has an operational challenge and it needs to meet that challenge within the extent of its freedoms and responsibilities.

There is one important restriction on sellers; that is the retailers. There are no "backlogged orders" for international online purchases. A retailer can only take the order from someone outside their society if the retailer has unencumbered inventory of the ordered item. Why? Because international online orders is a form of trade; specifically it is retail trade. It is not "manufacturing on demand". The financial infrastructures of both societies are not interested in providing software that takes into account the situation that retailers don't even have the item in-stock at the time of receiving the order. The rule for the retailer can be summarized as "if you have it then only you can sell it internationally".

The seller's financial infrastructure must enforce this requirement at the time when a foreign customer places the order. Note that financial infrastructures have visibility into the inventory because they make the transfer of ownership happen within their own society.

Note that the citizens of a society are ultimately responsible for creating these limits and restrictions. Citizens can choose to drop them for some other society as long as the other society does the same.

When several neighboring societies drop these limits and restrictions between themselves, they form a trade union. The European Union is an example of such a trade union. Also note that the European Union is much more than just a trade union between neighboring countries.

Other Requirements

When one starts thinking about any of the ideas mentioned in previous sections, one invariably comes up with questions. Many times, such questions are about details and nuances; they are about "how"; they are not about "what" and "why". The following paragraphs give short answers to such questions. Everything in this section should be considered as the high level requirements for the implementers of this system. Lower level requirements and design follow from these high level requirements.

Just like we would conduct all transactions within our society with authentication and authorization completed with our phone, the same holds true across society boundaries. We may use a computer to visit the foreign retailer's online store, but the phone is involved. At a minimum, the phone is involved in the following:

Authenticating the identity of the online retailer in the other society to the customer.
Authenticating the identity of the customer to the online retailer in the other society.
Presenting the entire intended order and confirming it with the customer.

An international online purchase is a conceptual transaction that spans two societies. The financial infrastructures of both these societies are involved in coordinating this transaction. Validating the proposed transaction is part of this involvement. Besides the basics of validation (like does the customer have the money to buy), the validation considers all things mentioned in the "Restrictions and Limits" section and if there are any violations the proposed transaction is rejected.

Since this is an international transaction, the software that presents this transaction to the customer as well as the retailer needs to be aware of the international nature of the transaction and it should show to the buyer the money values in both the foreign currency and the local currency. The concept of exchange rate comes into play here.

There is a need to account for import duty (if any). The user interface should show the import duty (if any) as part of the transaction and show it as part of the total payment.

In the standard export-import channel, the exporters and importers deal with payments and receipts in gold. An international online purchase is an export-import in principle and hence some gold is owed by the importing society to the exporting society. However, an international online purchase is a convenience for both retailers and their customers. The customer pays in local currency - not in gold. The retailer receives in local currency - not in gold.

Financial infrastructures of the two societies account for the gold owed resulting from international online purchases, accumulate these accounts for some period and settle those accounts in bulk on a predetermined schedule. Such settlement may involve a physical transfer of gold at a yet another predetermined schedule. Societies may consolidate together the standard and convenience export-import channels when settling their mutual gold obligations.

If a customer never gets the shipment associated with an international online purchase, then the money and item ownership parts of the entire transaction will need to be reversed. Possibly, the retailer will treat the item as "lost" and write it off. Possibly, the customer lodges a complaint with the financial infrastructure and gets the "pending" international online purchase nullified and associated money refunded in its entirety.

If a retailer does not ship the item associated with international online purchases within a reasonable amount of time, the retailer's society's financial infrastructure will deal with the retailer's tardiness. Repeated tardiness in shipping purchased items may imply that retailers will lose their privilege to have international customers. After all, a Utopian society cares about its reputation and would not want to spoil it due to incompetent retailers.

There is a possibility that the item could not be delivered due to unavailability of the customer. It is also possible that the customer may never pick up the item within a reasonable amount of time. What happens in these cases? Similar to the retailer, should the customer get penalized? This is something to think about.

There is a possibility that customers may want the convenience of the item being dropped off in front of the house and hence are willing to skip an in-person delivery of the item from the courier and the associated benefits. If we choose to implement this, what are its associated consequences when disputes arise?