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Free trade exists in ecommerce, just not for the United States

Last updated on October 9th, 2020 -

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 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. 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 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.

Zonos Cross Border

About the author

Clint Reid

Clint Reid is the founder and CEO of Zonos, a St. George-based technology company on a mission to create trust in global trade. During Clint’s previous experience working in international logistics at DHL and UPS, he repeatedly witnessed the pain and frustration on the faces of global business owners losing money due to refused packages and hidden international costs. Clint decided to take a chance and started Zonos with the mindset that many cross-border problems could be solved with technology. Today, Zonos helps thousands of companies to sell cross-border.

By Clint Reid

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