November 14, 2014
Clint Reid
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Free trade exists in ecommerce, just not for the United States
I truly believe the vision of free trade is good for business, good for economies, good for the world, and good for America. Too bad that, at the moment, it’s not fair or free and has never been. Today, agreements such as NAFTA, CAFTA or TPP still leave specific countries, states, or provinces on the wrong end of a deal, and it is usually the United States holding the bag. In the next five years, cross-border eCommerce sales will more than double; 424 billion USD by 2021. China will be the leader in sales abroad, not the United States. *Forrester
On February 4th, 2016, President Obama signed into law all shipments valued under 800 USD may be imported free of duties and taxes into the United States of America. China-based eCommerce giant, Alibaba, received a one-way free trade agreement for the majority of their US-based customers. Alibaba can now sell all across the United States and not incur any duties or taxes on the majority of their orders. What if you are a US eCommerce company trying to sell to China? Well, China just doubled their de minimis value to 1000 CNY. What a friendly gesture, too bad that’s only 150 USD off the U.S.’ generous mark by 650 USD. If you go over China’s de minimis, it won’t be cheap.
This principle doesn’t just apply to China; it applies to most of the world. The US is one of the few countries without a federal tax such as GST or VAT. Canada has a de minimis value of 20 CAD and will charge GST, HST, and PST on any imports above that value (yes, even NAFTA eligible orders). If you are an online clothing retailer in the US and have Canadian competitors, those competitors can sell any product under 800 USD to the US buyer, even if it is not NAFTA eligible. Yes, that is duty and tax-free to the US customer for any order under the generous US de minimis. The US shop, on the other hand, trying to sell to Canadians will have at the lowest - 20% duties and taxes incurred on the orders into Canada over 20 CAD.
The United States didn’t have the wrong idea of raising the US de minimis value; we just need to ensure other countries to do the same when we trade with them.