With the tightening of “small exemptions”, is the era of cross-border small packages coming to an end?

Since February, many cross-border sellers have felt like they were on a roller coaster ride due to the frequent changes in tariff policies.

On February 1, Trump signed a bill to cancel the $800 tax exemption policy, and then restored it on February 7. In just a few days, the customs clearance of parcels at John F. Kennedy International Airport in New York was paralyzed, and more than one million parcels were piled up at the local customs, causing massive congestion.

In fact, sellers are well aware that a temporary recovery means there is a possibility of continuation in the future. Once the policy is implemented, the average tariff rate for a large number of cross-border small packages entering the United States will increase sharply from 0 to about 30%.

“If the profit is less than 30% of the orders, won’t we lose money?”

According to public data, hundreds of thousands of small packages are shipped from China to the United States every day. That is to say, according to the new regulations, the number of packages entering the United States from China that need to be declared and paid for tariffs will exceed 1 billion pieces each year.

Especially for fully managed sellers, if the tariff exemption below $800 is cancelled, their business and profits will definitely be affected.

Rapid price increase and then reduction

Price increases, products being taken off the shelves, sales plummeting, packages stranded at airports... The U.S. executive order issued on February 1 to "cancele the $800 tax-free quota" caught consumers, sellers, logistics companies, and platforms off guard.

After more than a week of chaos, all parties gradually returned to normal track.

On February 7, a TEMU user with an American IP posted a complaint on a social platform, saying that the price of the clothes in his shopping cart rose sharply overnight, and the clothes that were only $16 after the coupon were now soaring to $33. This phenomenon is not an isolated case. Many netizens expressed the same experience in the comment area, and similar complaints appeared in an endless stream on the Internet.

At the same time, cross-border e-commerce sellers are also facing difficulties. Many sellers reported that their products were removed from the shelves and sales plummeted, especially sellers in the full-hosting model, who were hit the most. A TEMU seller said that due to the price increase and product removal of the platform, the sales of his store were halved. However, TEMU has now lowered the price of its products, and the price has fallen back to the previous level, and the logistics and customs clearance processes have also returned to normal.

In terms of logistics, some logistics companies and freight forwarders have hastily added customs clearance fees and pre-collected tariff deposits, but later cancelled these additional fees. SF Express, Yuntu Logistics, Orange Union and other companies have successively issued announcements, announcing the cancellation of tariff deposits and additional handling fees.

Behind this series of fluctuations is TEMU's strategic change in response to US policy adjustments and market competition. On February 1, the United States signed an executive order to impose a 10% tariff on goods imported from China and cancel the tariff exemption for small-value goods worth less than $800. Although the United States temporarily restored the small-value exemption policy, TEMU's product prices were still affected, and the prices of some fully managed products even exceeded those of Amazon's products.

Small and medium-sized distributors face a major reshuffle

The frequent changes in the US tax exemption policy mean that the cross-border e-commerce industry will usher in another major reshuffle, and many sellers may have to leave the market for various reasons.

First, the platform may lose a large number of sellers. Building or leasing overseas warehouses in the United States is a huge cost for both the platform and the sellers. Not many sellers can afford the costs and risks of overseas warehouses. As we all know, overseas warehouses not only require expensive rental fees, but also prolong capital turnover time and increase the risk of inventory backlogs.

In addition, some categories are not suitable for pre-stocking in overseas warehouses. For example, highly seasonal products, products with fast replacement speed, and low-frequency long-tail products are more suitable for direct air shipment. These categories are characterized by fast demand changes and low inventory turnover. Pre-stocking in overseas warehouses may lead to inventory backlogs, increasing operating costs and risks.

In addition to the loss of sellers, another problem the platform has to face is price increases. The cancellation of the tax-free policy will inevitably be transmitted to the price link.

Once American consumers discover that previously low-priced products on TEMU and SHEIN suddenly become more expensive, they may switch to other platforms such as Amazon to place orders.

In recent years, China's cross-border e-commerce platforms have been competing with each other at low prices, and many industries have been pushed to the "floor price". It is even accelerating to the whole world.

Since the end of 2024, TikTok has entered the Spanish and Irish markets, and the British cross-border store is under preparation. TEMU has begun to accept Japanese sellers and is about to enter the Korean market...

The ever-tightening tax policy on “small amount exemptions”

Currently, many countries are tightening their tax policies on "small exemptions".

On June 27, 2024, the Brazilian government officially established and announced a new tax system for small cross-border purchases. President Lula signed a decree that from August of the same year, all imported packages worth US$50 or less will be subject to a 20% import tariff.

Last June, Indonesia announced that it would impose safeguard tariffs of 100% to 200% on imported products ranging from shoes to ceramics. On August 6, Turkey introduced new tax rules for overseas e-commerce shopping, reducing the tax-free amount and increasing product tax rates. France plans to impose an ecological footprint surcharge of 5 euros on each fast fashion product from 2025, which will increase to 10 euros by 2030. The European Commission is also considering removing the 150 euro tax-free threshold...

There are signs that many countries around the world are gradually tightening their "small exemption" tax policies, and the tax-free benefits of small cross-border packages are disappearing. This has undoubtedly put pressure on the operating costs of cross-border sellers and greatly reduced their profit margins.

At the same time, governments around the world are increasingly tightening their supervision of the "four little dragons going global", especially the European Union. Whether they can "take over" the world for a long time, perhaps only time can tell.