International Online Purchases

This chapter explores various aspects related to International Online Purchases. Specifically, it discusses what can be purchased, how payments are made, applicable tariffs, ownership records of purchased items, purchase limits, and other restrictions.

Overview

Within our society, we can purchase almost anything by visiting a physical store or an online store. Purchasing from an online store in another society means importing goods into our society. Such items are exported from the other society.

Should we have the freedom to purchase things directly from someone outside our society? Yes, we should have that freedom. Should such items be considered a need or a want? Purchasing these items is a want, not a need. These aspects and their consequences are discussed in the "It is Freedom but Not a Need" section.

The section "It is Retail Trade - Not Bulk Trade" expands on the intuitive idea that international online purchases are essentially retail trade in which individuals and organizations buy something from a foreign online store. In summary, this section limits the scope of discussion to the purchase of goods and services by consumers. It notes that the method of payment and the associated tariff have already been discussed, so further discussion is unnecessary. Finally, it explains why this book does not further discuss bulk foreign trade.

An international online purchase is a monetary transaction between two societies. The UFIs of both societies coordinate this overall transaction. Broadly, the overall transaction has the following steps:

Authentication and authorization of both the online retailer and the customer, and letting both parties know each other's identity.
Presentation of the proposed transaction, followed by customer confirmation. This includes item details, item cost, shipping charges, tariffs (including shipping-related tariffs). Customer views all costs in both local and foreign currencies.
Validation of the proposed transaction: Is the item allowed for export? Does the customer have sufficient funds? Does the transaction comply with all the requirements for export and import?
Facilitation of the monetary exchange associated with the transaction. This comprises the collection of the money associated with the costs and applicable tariff from the buyer, money transfer, and payment to the seller. The collected import tariff is deposited into the appropriate account within the importer's society's UFI.
Facilitation of shipment tracking and transfer of ownership of purchased items from seller to buyer. This includes the due consideration for shipping-related time delays.

When someone purchases an item from a retailer in another society, what type of product identifier is recorded in the purchaser's inventory? Additionally, what other information is recorded? How does all this impact the computation of the person's current total wealth? These questions are answered in the "ProductID and Inventory" section.

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

The freedom to make international online purchases is not unlimited; rather, there are limits and restrictions. These are discussed in the "Restrictions and Limits" section.

Thinking about the ideas discussed in these sections inevitably leads to more questions. Often, such questions focus on details, implications, and nuances. These questions are briefly answered in the "Other Requirements" section.

It is Freedom but Not a Need

We live in a digital age. Purchasing items online is simple. Most items 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. However, that item may be available in another society, where an organization may be selling it online.

Since we currently purchase goods from sellers in other societies, a Utopian society ought to have this freedom as well. However, stating that "a Utopian society should have a feature just because our current society has it" is a weak argument. If we were to adopt such a line of reasoning, we would continue doing everything undesirable that we do today.

Is there a stronger reason to justify international online purchases? There is one reason. One could argue that authorized bulk importers could import various goods, both common and esoteric, making them available in our society and eliminating the need for international online purchases. For esoteric goods, demand is low and varies over time. From an importer's perspective, these goods lack stable demand and the economies of scale. Importers engage in the import business to make a profit, and these esoteric goods might not be profitable. In a Utopian society, we should neither force importers nor subsidize them to import products. Thus, not everything that people desire will be imported and made available in our society by importers. Therefore, if we want to enjoy such esoteric items, we need the freedom to buy them from a seller outside our society.

Currently, citizens have the freedom to buy locally. A Utopian society does not wish to arbitrarily restrict citizens from fulfilling their needs and wants. If such needs and wants can be satisfied by purchasing the item from another society, then they should have the freedom to purchase goods and services directly from a seller in another society.

There are a few valid objections to letting citizens purchase goods directly from outside their own society. We address these objections to international online purchases by imposing restrictions and limits, which are discussed in a separate section.

From a societal perspective, any individual purchase from another society is classified as a want, not a need.

This is because if it were the need of even a significant minority, it would likely be profitable for an importer to import it into the society. In such cases, importers will be highly motivated to procure such items, productize them, and make them available locally. Citizens are in charge of classifying products as needs or wants, but only for locally available products, including those that bulk importers import and productize. Hence, a product from another society cannot be classified as a need.

Therefore, a society cannot justify any item that an individual may wish to purchase from a foreign society as a general need of its citizens.

Since international online purchases are not classified as needs, they cannot be considered "essential". Therefore, neither the Utopian Payment Model nor the Social Credit can be used for such transactions. The citizen must either have the funds for the purchase or have collective credit.

Citizens should recognize that international purchases represent a freedom, not a necessity.

It is Retail Trade - Not Bulk Trade

An international online purchase is intuitively a retail transaction. In retail trade, the buyer is the consumer. Bulk trade is the counterpart of retail trade. In bulk trade, buyers purchase items either for resale or as raw materials for manufacturing.

In the context of international online purchases, what kinds of things are allowed to be purchased from some foreign online store?

For individuals, anything classified as goods or services can be purchased as long as it is permitted for export from the other society. Investing money is not considered a "trade", even though some people engage in trading financial instruments that represent investments. International investments are neither exports nor imports. International investments are discussed in a separate chapter, and hence, are not part of this discussion. In earlier chapters, we have already mentioned that individuals are not allowed to buy standardized commodities. There are no additional purchasing categories beyond these.

Organizations, like individuals, can purchase only goods and services, but not commodities. Why? In the context of international online purchases, an organization is on par with an individual, because it is retail foreign trade, and organizations are just consumers.

In the context of bulk imports, specialized organizations do not have this restriction and hence they can import commodities.

Therefore, an international online purchase is retail foreign trade in which consumers purchase goods and services.

In a previous chapter, we discussed the payment method and tariffs associated with the import of goods and services. Here are the key points:

Exporters price goods and services in their local currency. Importers can view this price in both currencies.
Purchased items are paid using fiat currency.
Import tariff, if any, is displayed in both currencies, and paid using local currency.
Shipping costs, if any, are displayed in both currencies, and paid using fiat currency.
Import tariff on shipping, if any, is displayed in both currencies, and paid using local currency.

Societies also engage in bulk foreign trade. Commodities are traded exclusively in bulk. Goods are routinely exported and imported in bulk quantities. Compared to retail foreign trade, importing goods in bulk and distributing them within society is more efficient, but the process is different to accommodate the larger scale.

Bulk exports and imports are handled by specialized organizations authorized to conduct the trade in bulk quantities. These organizations handle bulk foreign trade in compliance with the regulations designed for large-scale transactions.

There are commonalities between bulk foreign trade and retail foreign trade, but bulk foreign trade needs to operate differently due to its scale. So the regulations for bulk foreign trade are specifically tailored for its larger scale. These regulations would have plenty of details, but the distinction is procedural rather than conceptual. Hence, this book will not delve further into bulk foreign trade, as it primarily involves executing similar processes on a larger scale.

ProductID and Inventory

Our account books contain an inventory of our personal belongings. When we make purchases, we update our inventory. At any time, we can browse our inventory to retrieve meaningful information. As time passes, most things in our inventory depreciate and eventually lose value. Based on this inventory, our UFI can account for the current value of all our personal belongings, and hence, our total wealth.

These activities are possible even when purchasing from another society. In this section, we will outline them at a conceptual level.

Conceptually, when a consumer buys goods from a physical retail store, and pays for them, the following changes occur in 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; however, due to shipping delays, there are differences in exactly when 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 item that we purchased is not individually identifiable.
Quantity of items. This value is 1 if the item we bought has a serial number. It may be greater than 1 when we buy many items of the same kind, and when each one of those items is not uniquely identifiable (like a dozen cans of soup).
Acquire date.
Purchase cost.
Depreciation type.
Depreciation period.
Current value. The current value starts off as purchase cost, and changes every day, based on depreciation type and period.

When we buy goods from another 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 an embedded society code. Whenever our UFI needs product information, it can access the database of the society where the product was created. In fact, at the time of purchase, our UFI accesses this record to copy the depreciation period and depreciation type and places them in our inventory record.

When we are browsing through our own inventory of our personal belongings, our UFI 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.

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

Thus, we can browse the inventory of our items to get meaningful information, and our UFI can account for the current value of all our personal belongings, whether purchased locally or internationally.

In the conceptual discussion above, we implied that our UFI 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 UFI may cache some records for improving performance and other operational conveniences.

During the computation of our current total wealth, our UFI 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 conceptual discussion above, we did not account for the shipping delay in obtaining possession. This needs to be accounted for in the implementation.

In the conceptual discussion above, 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, possession does not generally imply ownership. Ownership is indicated by a "record of ownership" in a database. All the things that a citizen owns are listed in the account book of the citizen. This is conceptually known as the citizen's "inventory database". In actual implementation, this will most likely consist of tables containing inventory information.

Before considering the ownership transfer of international online purchases, let's review what 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 the society's UFI. 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. From the UFI's perspective, both the accounts are in a single conceptual database, within the control of the UFI.

Unlike a local physical retail purchase, in an international online purchase, the retailer and the customer are in different societies. Thus, the UFIs of both societies are involved; hence, changing the ownership of an item from the retailer to the customer cannot be completed in a single transaction within a single database. This complicates the implementation of ownership changes.

In 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 the order is placed and 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 a local physical retail purchase, an international online purchase involves multiple sub-transactions. The first of such sub-transactions occurs when the customer confirms and authorizes the order. At this point the customer pays and the retailer receives the money (this money transfer is accomplished using fiat currency). 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 shipping, shipment tracking, and attempted-delivery transactions. There are at least two major handoffs: one from retailer to shipper, and another from shipper to customer. Each such handoff is accompanied by its own accounting that deals with receivable and deliverable accounts. Each one of these sub-transactions may fail to complete, and there will be rules associated with "what should be done with these failures". All sub-transactions must succeed for the international online purchase to be completed successfully.

From a customer's perspective, when the customer buys something, they pay for it and hence their money account decreases. 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 tariff paid. The customer's current wealth does not change because the customer's one asset account decreases (money account) and another asset account increases by exactly the same account (goods receivable account).

A significant gap in time may exist between the payment and ownership transfer. During this time, the customer's total wealth does not change because of the purchase.

Sometime 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. The delivery requires confirmation from the customer that they have received 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. At this point, the customer officially becomes the owner of the purchased item. This is a simple description, but in practice, various accounting sub-transactions are involved, including order placement, payment, shipping manifests, shipment tracking, delivery confirmation, ownership changes, paying import tariff, etc.

Possession confirmation is required because, if there is a dispute, resolving it is complex due to cross-border jurisdiction. Therefore, 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. Once the customer becomes the owner, the item begins depreciating in value as indicated by the previously discussed depreciation information. From this moment onward, the customer's wealth begins to change due to 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 (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 until the item is 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. So, profit from the sale can only be booked once the ownership transfer has completed. This differs from current accounting practices; it accurately represents the ownership information, its accounting, and the account books.

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

Restrictions and Limits

The freedom to engage in international online purchases is not unlimited. We do not want citizens, organizations and self-owning entities using their direct import freedom to the detriment of 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.

There will be restrictions on buying certain types of items across country boundaries. Typically, materials that are dangerous to ship on a retail scale fall in this category. There could be other reasons for restrictions, such as not exporting rice during years of poor harvests, or not importing certain kinds of fruit. Restrictions may apply to both imports and exports. If a transaction associated with such a restricted item is initiated, then the UFI of the society that identifies the potential violation of the restriction will reject the transaction.

Who creates and maintains this list of prohibited items or item categories? The short answer is: Citizens delegate the responsibility of creating and maintaining this list 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 (not an authorized importer), to purchase something from a foreign retailer and have it shipped across the country boundary, the item must have a depreciation period of at least the minimum chosen by citizens. In addition, products must have a depreciation period that is no more than a maximum chosen by citizens. These limits are policy parameters, with reasonable initial values of three months and ten years.

Why these restrictions? These restrictions are a standard mechanism for citizens to express their opinions about the desired durability of an item to qualify for direct import by a consumer. If the above two values are chosen, then it means that citizens reject direct import of perishable goods and extremely durable goods.

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

Citizens can delegate the setting of these specific parameters to their representatives. Furthermore, if a society deems such restrictions unreasonable, it can set them to 1 day and 100 years.

Policy parameter based restrictions allows cooperating societies to use the same software while enabling individual societies to express and enforce their specific view about direct imports. Unlike the list-based restrictions discussed earlier, these kinds of restrictions applies to future products as well.

Similarly, there are two policy-parameter-based restrictions for direct exports by retailers who are not authorized 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.

Why do we need such a limit? Societies desire that citizens prefer local producers and manufacturers over those from other societies. The desire is implemented as a limit that is proportional to the typical wealth of the individual. Furthermore, imports are wants - not needs. So, when a citizen spends locally, it helps fellow citizens; and when that citizen needs to use the Utopian Payment Model to pay for essentials, fellow citizens help this citizen. Limiting imports fosters this mutual co-dependence.

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 as 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 its current total wealth. 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.

Why do we need such a limit? The limit 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. Let us now examine this issue. A normal organization is not expected to be a bulk importer. Normal organizations are expected to buy things locally; even the imported goods. Authorized importers import goods in bulk and make them available locally, and hence, authorized importers are not limited by 10% of their book value because importing goods is their business. Thus, normal organizations should find an authorized importer willing to import the goods needed for their 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 an 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. International online purchases cannot have backlogged orders. A retailer can only accept an order from outside their society if the retailer has unencumbered inventory. Why? Because international online orders is a form of trade; specifically it is retail trade. It is not "manufacturing on demand". The UFIs 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 "only if you have it, you can sell it internationally".

The seller's UFI must enforce this requirement at the time when a foreign customer places the order. Note that UFIs 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. Note that the European Union is much more than just a trade union between neighboring countries.

Other Requirements

When we begin to think about any of the ideas mentioned in previous sections, we will inevitably have questions. Often, such questions focus on details, implications, and nuances. The following paragraphs provide short answers to such questions. Everything in this section should be considered high-level requirements for system designers and developers. More specific requirements and designs are derived from these high-level requirements.

If a customer fails to receive the shipment associated with an international online purchase, the financial and ownership aspects of the transaction must be reversed. The customer may file a complaint with the UFI and have the "pending" international online purchase nullified, receiving a full refund. The retailer may classify the shipment as "lost" and write the shipped item off.

If a retailer fails to ship an item associated with an international online purchase within a reasonable time frame, the retailer's UFI will address the delay. Repeated delays in shipping purchased items may result in the retailer losing the privilege to serve international customers. After all, a Utopian society values its reputation, and would not want it tarnished by incompetent retailers.

It is possible that the item was not delivered because the customer was unavailable. It is also possible that the customer may fail to pick up the item within a reasonable time frame. What happens in these cases? Should the customer be penalized?

Customers may prefer the convenience of having the item dropped off in front of their home, foregoing in-person delivery and its associated benefits. If we choose to implement this convenience feature, what consequences might arise in case of disputes?