If you're a U.S. resident, the idea of buying online from sellers in other countries just got quite a bit more enticing. That's because a new rule signed into law by President Obama raises the duty-tax threshold to $800, a quadrupling of the previous $200 limit, as the Wall Street Journal reports:
The change, part of a bill signed into law earlier this year to overhaul the U.S. Customs and Border Protection agency, is good news for online shoppers and package-delivery companies but presents another challenge to traditional retailers struggling to cope with e-commerce.
Until the new rules took effect March 10, duties averaged 33% on the top 50 products brought into the U.S. when purchases exceeded $200, according to United Parcel Service Inc. On a $201 purchase of costume jewelry, U.S. customs would collect a duty of 110%, more than doubling the price.
Now, those duties are zero, providing the price totals less than $800.
Compare that to Canada, where residents must pay duty taxes on import purchases that cost more than $20. The new U.S. policy has sparked some debate in Canada over that country's policy, and whether it makes sense in today's economy.
Meanwhile, the new duty-tax rules have different implications for U.S. businesses. For one thing, package delivery companies are expecting a boost in the number of parcels being shipped to U.S. customers from other countries. (According to figures cited in the WSJ report, 54 percent of U.S. residents already have made purchases from overseas vendors.) This will present an opportunity to increase revenue, while also posing challenges to delivery companies' global logistics operations.
In turn, the new rules will put pressure on U.S. retailers—both on the e-commerce and brick-and-mortar front—as shoppers turn increasingly to overseas sellers in search of unique products at the sort of prices that were beforehand prohibitive.
Ultimately, U.S. consumers will be the winners, says Constellation Research VP and principal analyst Guy-Frederic Courtin.
"This is an indication of how commerce is truly global," he says. "As barriers such as trade tariffs come down, it allows the consumer to broaden their choices. While some may argue this will hurt domestic players, what it will do is force these players to be sharper—competition raises everyone's game—or fade away."
U.S. retailers and merchants will have to hone their product sets and services, Courtin adds. For example, brick-and-mortar retailers could start placing more emphasis on the fact they are local: "They can offer more contextual, in-person services."
For example, the barriers are now lower for a company in the UK to sell high-end men's shaving items to U.S. customers, Courtin notes. But there is no way for that same company to offer customers complimentary shaving tips from skilled barbers, as is possible at the Art of Shaving chain of stories in the U.S.
"Experiences like that are where the domestic commerce players will have to step up their game to compete if the barriers for foreign e-commerce go down," Courtin says.
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