The Evolving Landscape of Global Cross-Border E-commerce: Is the Era of Small Parcel Exemptions Coming to an End?

Since the beginning of this year, there has been growing momentum within the United States to lower the $800 de minimis threshold for tax-free imports. Given the U.S.'s influential position in global trade, any actions it takes could set a precedent for other nations to follow suit.

Are we witnessing the end of the era of cross-border small parcels? Currently, many countries worldwide are tightening their "small exemption" tax policies.

For instance, on June 27, 2024, the Brazilian government officially introduced a new tax regime for small cross-border purchases. Starting in August of the same year, all imported parcels valued at $50 or less will be subject to a 20% import tax. This move has drawn significant attention from the global e-commerce industry and consumers alike.

Brazil isn't alone in this shift; many other countries are also tightening their small exemption policies:

• Indonesia: In June, Indonesia announced safeguard duties ranging from 100% to 200% on imported products, from footwear to ceramics.

• Turkey: On August 6, Turkey introduced new tax regulations for overseas e-commerce purchases, lowering the exemption threshold and raising product tax rates.

• France: France plans to impose a €5 eco-footprint surcharge on each fast fashion item starting in 2025, increasing to €10 by 2030.

• European Union: The European Commission is considering abolishing the current €150 tax-free threshold.

• United States: The Senate has proposed ending the duty-free status for cross-border parcels valued under $800, with a bill drafted just last week.

• Southeast Asia: Since January 1, Malaysia's Customs Department has imposed a 10% low-value goods tax on imported items sold online for less than RM500 (approximately $106).

• South Africa: The South African Revenue Service (SARS) announced that from September 1, 2024, there will be temporary tax adjustments for e-commerce platforms like Shein and Temu. The new policy will add VAT on top of the current 20% uniform tariff.

These developments indicate that countries around the globe are progressively tightening their small exemption tax policies, making it increasingly challenging for low-value, low-margin goods to compete. This shift places considerable pressure on cross-border sellers' operational costs. The rapid rise of Chinese e-commerce platforms, to some extent, has benefited from these "small exemption" policies across various countries.

However, the swift development of e-commerce platforms has exceeded many countries' expectations, prompting them to adjust strategies to control market growth.

So, is the era of cross-border small parcels truly ending?

Not necessarily.

According to research by CITIC Securities, in the absence of a systematic digital upgrade to the U.S. Customs tax system, significant changes to the cross-border small parcel policy are unlikely within the next 2-3 years.

In an extreme scenario where the cross-border small parcel tax exemption threshold is indeed abolished, platforms like Temu and Shein might face a 10% price increase pressure. The stable price gap between Temu and Amazon could narrow from 30%-40% to 20%-30%, reducing their advantage but still maintaining competitiveness.