As Chinese cross-border e-commerce rapidly expands in the global market, governments of various countries have begun to adjust their previous preferential tax policies to address the market impact it brings.
Recently, Brazil’s Federal Revenue Service announced a new tax policy for cross-border e-commerce imports, which will be implemented from August 1, 2024. The policy stipulates that a 20% tax rate will be levied on imported e-commerce packages valued at less than $50; for goods valued between $50.01 and $3000, a 60% tax rate will apply, with a fixed tax exemption of $20.
At the same time, it has also been reported that the European Commission is considering abolishing the current tax-free threshold of 150 euros (approximately $161) to further adjust the tax policy for cross-border e-commerce.
This series of measures marks that many countries around the world are gradually tightening the tax policy for cross-border e-commerce, aiming to weaken the competitiveness of cheap imported goods in the local market and create a fairer competitive environment for importers and local producers. This move is seen as a form of protectionism, directly targeting rapidly developing e-commerce platforms such as AliExpress, Temu, and Shein.
However, despite regions such as Southeast Asia having taken the lead in implementing policies to increase tariffs, this has not been able to curb the momentum of Chinese cross-border e-commerce development. Taking the experienced cross-border sellers from Yiwu as an example, they have stated that although the increase in tariffs will increase operating costs and weaken price competitiveness, considering the cost control advantages of China’s supply chain, the increased tariffs are not enough to become the lifeline of the sellers. Especially for those low-order-value goods, the impact of increased tariffs on front-end pricing is relatively limited.
In addition, the impact of different shipping models and e-commerce platforms in the adjustment of tax policies is also different. For example, merchants using independent sites and self-shipping models may face greater shocks; while e-commerce platforms like Amazon, due to their products usually directly stored in overseas warehouses or FBA services in the target market, are relatively less affected by the adjustment of tax policies.
For cross-border e-commerce platforms that are good at low-price strategies, such as Temu and SHEIN, their product categories are mainly light and small pieces, clothing, and mostly adopt direct mail small package logistics methods. This logistics method, although it has the advantages of flexible volume, high cost performance of logistics, and convenient customs clearance, may face greater challenges after the adjustment of tax policies.
The adjustment of cross-border e-commerce tax policies will undoubtedly have a profound impact on the global e-commerce market. Guangzhou cross-border e-commerce headhunters have learned that for Chinese cross-border e-commerce, actively responding to policy adjustments on the basis of fully utilizing their own supply chain advantages will be the key to their continued development.
For Chinese cross-border e-commerce platforms that adopt a “low-price strategy,” they also need to actively pay attention to market changes, make risk plans, and improve their own market competitiveness. Even facing increased tax burdens, Chinese products still have the opportunity to flow to the world.
The overseas expansion of Chinese e-commerce has benefited to some extent from the “small exemption” policy bonus, and policy changes are often aimed at such platforms. According to the statistics of the US Customs, last year there were about 1 billion packages that enjoyed tax-free policies, equivalent to nearly 3 million small packages per day, among which China is the largest exporter, and the two platforms Temu and SHEIN account for one-third of the market share.
If tariffs are added in the future, the competitiveness of these e-commerce platforms may be impacted, so they need to plan in advance to respond to the strategy.
Considering the United States as a weathervane for the global cross-border e-commerce market, its policy trends have an important impact on the global market. According to the internal sources of the e-commerce platform from the Guangzhou cross-border e-commerce headhunting company, the results of the US election and policy signals will have a profound impact on the global cross-border e-commerce market, and all platforms are closely monitoring the dynamics of the US market.
Recently, the US Customs has rectified the customs clearance industry, and many customs clearance companies have suspended the “small exemption” (T86) business, including large international freight forwarders such as SEKO Logistics, and Chinese low-value goods have become the focus of inspection. Behind this event, the US political circle has once again turned its attention to Chinese cross-border e-commerce. This year, two US senators wrote to President Biden, suggesting the abolition of the tax exemption for cross-border small packages under $800.
Looking back to 2016, the Obama administration raised the “minimum threshold” for tax-free cross-border goods from $200 to $800. However, with the rapid development of Chinese cross-border e-commerce, US lawmakers believe that this policy has become a “huge loophole,” squeezing the local manufacturing and retail markets, and specifically pointing out the impact of platforms such as Temu and SHEIN.
In the past year, the US Congress has proposed six proposals to amend the $800 minimum threshold. Before the results of the US election are announced, this policy issue will continue to be a focus of market attention.
To cope with potential policy changes, e-commerce platforms are actively taking measures to improve local warehousing and fulfillment capabilities, and increase the value of goods. For example, Temu and SHEIN have begun to focus on developing a semi-hosted model, which is for cross-border sellers with overseas warehouses and logistics partners, by fulfilling orders on their own to reduce the pressure of small package logistics and reduce fulfillment costs. At the same time, Temu is also accelerating the recruitment of official cooperative overseas warehouses to reduce dependence on a single market and optimize global layout.
On the other hand, Shopee, which focuses on the Southeast Asian market, also enhances its competitiveness by increasing transaction fee rates, strengthening local fulfillment capabilities, and laying out overseas warehouses. Despite facing increased tax burdens, Chinese cross-border e-commerce platforms still have the opportunity to maintain market competitiveness by improving supply chain capabilities and operational efficiency.
Overall, Sun Tzu China Headhunting believes that although the duty-free treatment has brought certain dividends to Chinese cross-border e-commerce platforms, it is not a decisive factor. In the future development, the platform needs to pay more attention to the construction of the supply chain and the improvement of operational efficiency to cope with market changes and risk challenges. At the same time, the disappearance of the small exemption dividend will also help to reduce low-price vicious competition and promote the upgrade of Chinese foreign trade to brand and high-quality development.
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