For those that are in the E-Commerce space, you may have already heard the great news. US Custom’s officially raised its custom’s threshold from $200 to $800 USD on the 10th march! When we first heard the news in February we weren’t exactly sure if this was true as the threshold was proposed to increase by 4-folds, a dramatic jump, which of course has great implications for global E-Commerce. The US customs threshold had not seen any change since 1993, but this recent now puts the US duty-free threshold to a similar level of Australia’s known high threshold of $1000 AUD.
(Source) Straight from the US CDP website! By the way, De Minimis Value is just another fancy word for custom’s threshold
What does this change really mean though? Here's a quick recap - especially for those who missed our last post on import duties & taxes. Prior to 10th of March, US-based online shoppers would have to pay import duties on purchases from foreign stores which the total value exceeded $200 USD. This would be quite problematic as the effective cost of your purchase would be higher than expected once you add the import duties on top - Surprise!. Now with this increase in the duty-free threshold to $800 USD, US-based online shoppers won't need to pay any of these duties until their purchases exceed $800 USD, great news for them of course.
So you might be thinking, how does this change affect me exactly...? Well it depends, are you an online seller, US-based online shopper or a US business? Let's break it down for you and take a look at the implications. (Oh and if you're neither of these 3, then it probably doesn't affect you that much, but you should read on anyway - Knowledge is power my friend!)
As an Online Seller, this change is sunshine and rainbows for you. If you were selling items above $200 USD, your items will now be effectively cheaper for US-based online shoppers. In most cases, this should translate into more sales! You'll notice more faster transit times on your shipping as now less items will need to pass through US customs go through the time-hungry process of being cleared for delivery. This will be great for your customers as they'll receive their items faster.
On the same note you're going to see less complaints from angry US customers that don't understand their customs & duties obligations. You know - the customers that complain and blame you that they have to pay import duties when they didn't understand their obligations when shopping online - Yes those ones.
For those sellers that previously covered import duties & taxes for their customers on a delivery duties paid basis (DDP) basis, the first thing you would have thought when you found this article was that your cost of selling has now decreased - fantastic! But the key takeaway for this is, how can you be smart with these new savings? Our suggestions is to reinvest them back into your business and here's a few simple ways:
- If you're not already, consider selling high value products or expand into high value product categories
- Offer your customers a better shipping service - You were using postal before to save money? Try an express service like FedEx or DHL now (P.S we have the best FedEx & DHL prices)
- Price your items more competitively - You have lower costs now!
Don't forget to let your customers know of these new changes. In your next email or newsletter, let your US-based customers know that they are duty-exempt for purchases up to $800 USD. It'll encourage more spending and your customers will also thank you for it!
US-Based Online Shopper
On the other side of the equation, if you're a US-based online shopper then you'll be on the receiving end of all the benefits. Cheaper goods for you to buy online means shopping, more shopping and even more shopping.
Now that items up to $800 USD are tax-free for you, be a bit brave - venture into purchasing higher value items. You can snag great deals on Electronics and Luxury brands online that are often cheaper than buying locally in the US. Quick tip: When shopping from foreign online stores, compare the price with the item on Pricewatch to ensure you're getting the best deal.
If you were paying attention to the part about online sellers, then you already know you'll be receiving your items faster. Without your packages needing to clear customs, it'll reach you 2-4 business days earlier (Assuming everything goes smoothly) - Impressive, we know.
On the flip side, if you're a US Business and you've just finished reading the above 2, you might have came to realisation that you're getitng the short end of the stick with this recent change. With more online shopping spent abroad, it's going to mean less sales for you. But things don't have to be this way, if you don't let it. It's a great signal to push your business forward, think of creative and innovative ways to sustain or increase business. When the going gets tough, the tough gets going!
All in all, the increase in US's duty free threshold is a step forward for Crossborder E-commerce. It's quite clear that Online Stores will benefit greatly from this, providing an opportunity for growth that needs to be captured. At Easyship, we've already seen a 6.5% increase in high valued shipments (We'll define it as goods over 500 USD) in the past 3 weeks, which has been nothing but great news for our online sellers. We hope this trend continues and look forward to seeing everyone takes advantage of it.
Want to learn more about duties and taxes for selling internationally? Check out our comprehensive guide.