Clint Reid

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 at the moment it’s not fair or free, and it 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 tax 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 US’ 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 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 wrong the idea of raising the US de minimis value; we just need to ensure other countries to do the same when we trade with them.