In the dynamic realm of cross-border e-commerce, the recent fluctuations in the US T86 policy have sent shockwaves through the industry. Every adjustment to the T86 tariff policy is like a boulder thrown into the lake of cross-border e-commerce, creating ripples that affect every link from the supply chain to the sales end. Sellers, from small and medium-sized enterprises relying on small package direct shipping to large corporations with overseas warehouses, are closely monitoring the policy trends and actively seeking countermeasures.
Hugo Cross-Border engaged in a dialogue with Angela Peng, the founder of Jingqi Yuedong, to delve deep into the details and impacts of the T86 tariff policy turmoil. They explored the pricing strategies, operational adjustments, and future development directions of cross-border e-commerce sellers in the new trade context, aiming to provide valuable references for industry practitioners.
Understanding the T86 Policy The T86 policy directly impacts cross-border e-commerce sellers of small 3C products (small consumer electronics) or those mainly relying on small package direct shipping to the US. A significant proportion of sellers in the cross-border e-commerce industry rely on this shipping method, especially those from Fujian, Guangdong, and Yiwu in Zhejiang. These sellers have enjoyed a wave of policy dividends for nearly nine years, during which Chinese supply chain products have had a distinct advantage in going global.
Angela believes that new policies may emerge in the next one to two months. She is relatively pessimistic about whether these new policies will have a substantial impact on Chinese cross-border e-commerce, particularly for small and medium-sized products. The US's "stress test" and rapid policy changes are due to a large number of goods being stockpiled at US ports, putting enormous pressure on US customs. With the number of stockpiled goods exceeding one million pieces, the US government quickly relaxed the policy. This was not only a test of their system but also had an impact on the financial economy, stock market, and cross-border e-commerce industry.
Moreover, considering the geopolitical factors in the US over the past 20 years, this policy change is likely to prompt the EU to follow suit. Based on her observations during her study in the UK, both the UK after Brexit and the EU as a whole tend to follow the US's political and economic decisions. Once the US makes geopolitical decisions regarding countries like Canada, Mexico, and China, the EU is likely to follow in a group. There are already rumors that the EU may cancel the duty-free policy for Chinese exports and increase tariffs on some goods in line with the US's higher tariffs. This could mean that not only US sellers but also those in the European market, whether operating independent stations, on Amazon, or other e-commerce platforms, will face restrictions if their products are exported from China.
Possible Policy Directions Angela outlined several possible scenarios for future policy changes. The relatively optimistic scenario is that the US government restores the "minimum" duty-free threshold for small Chinese parcels (valued below $800). However, the more pessimistic outlook is that Chinese exports may face significant restrictions, with additional tariffs imposed. For small and medium-sized products, such as those from Yiwu, adding tariffs could make them lose their competitive edge if the cost is passed on to consumers. American consumers may then turn to domestically produced products.
An even more concerning prediction is that the US may formulate different tariffs for various industries and price ranges of Chinese products, such as smart home appliances and 3C technology products. In both scenarios, Chinese products will need to enhance their market value.
Calculating Tax Costs When it comes to calculating tax costs after the cancellation of T86, Angela suggests that sellers should break down the main sales regions of their products. Taking the US as an example, they should consider the new policies in different regions such as the West and East coasts and various states. All cross-border e-commerce practitioners need to calculate in detail the taxes to be paid from the time of delivery until the goods reach US customs, referring to the increase in US tariffs when the T86 policy was first introduced and the additional manual operation fees per order for express companies.
Since the operating costs and consumption tax rates vary greatly from state to state in the US, sellers can focus on calculating the tax requirements of the states with high sales rankings. Currently, sellers' overall costs have increased in all aspects.
Optimizing Pricing Strategies through Cost Accounting For sellers engaged in brand operation and accumulating independent consumer and sales data, when facing policy changes, they need to consider various factors in cost accounting. For products with relatively low unit prices, sellers should first consider the sales channels. Taking Amazon as an example, they need to calculate the entire sales operation cost from the factory to the market, including the factory price with tax, first-mile logistics, last-mile warehousing, dropshipping, potential return issues, and marketing costs for new product promotion.
After the implementation of the T86 policy, if the US formulates more detailed policies for different industries, sellers need to reevaluate whether their products still match the original market positioning after the increase in tariffs. For example, if a product originally priced at $150 increases to $170 - $180 after tariffs, sellers need to consider whether consumers are willing to pay the additional cost. If consumers find the product less cost-effective, sellers may need to reposition their brand, product, market, and target audience.
Products with high value, such as pet electronic household products worth $400 - $500 or more, may not be significantly affected by a tariff increase of $20 - $50. However, for products priced at $100 or below, consumer acceptance of price increases due to cost increases becomes a crucial factor. Therefore, sellers need to consider the original operating costs, consumption costs, and tariff costs before repositioning their products. If the price increase makes the product unaffordable for consumers, sellers may need to first change their marketing positioning and then adjust the product positioning.
To accurately position products, sellers are advised to calculate all the detailed costs under the influence of the T86 policy in each state, combined with past operating costs. If the product can be targeted at the right audience, the impact of tariffs may be minimal. Otherwise, sellers may need to consider changing their product line, selecting new products, or developing new products.
When formulating pricing strategies, sellers must consider the overall operating costs, especially when operating on platforms. They need to take into account the lowest price of the same product on the platform last year and whether the platform expects them to maintain the lowest price during major promotions this year, as this will affect their profitability and willingness to bear the cost increase due to tariffs.
In addition, sellers should also be aware of some logistics and policy issues related to tariffs. For example, although some may consider transshipping goods through Macau or Taiwan to avoid tariffs, this approach may carry risks as the policy may target China as a whole, including Hong Kong. Therefore, it is recommended to choose friendly countries around China for transshipment. Some international logistics companies have already started providing export services from countries like Vietnam and Laos and are equipped with factory qualifications, indicating that there are always solutions under corresponding policies.
Regarding the refund of handling fees and prepaid taxes, it is possible, but sellers should be cautious when choosing relevant companies and consider asking them to complete the work before making payments to reduce potential losses.
Impact on FBA Sellers and Strategies to Reduce Tax Costs As Amazon FBA is part of the US e-commerce platform and mainly focuses on domestic transportation in the US, the concern for FBA sellers is relatively low. The US government is unlikely to harm the core interests of its domestic enterprises.
To reduce tax costs while ensuring compliance, sellers need to wait and see how the new policy unfolds. If the policy does not target the source of goods, the problem may be relatively easy to solve. For some industries like health care products, which have a market and demand foundation in the US and are well-recognized by consumers, if the policy is implemented, it may accelerate their development. Some domestic leading health care product companies or sellers with US resources may use the qualifications of US local factories, such as FDA qualifications, to produce and transport products more quickly in the US. For some industries, especially those with low-cost daily necessities, if the tariff increases, Chinese sellers may lose their price advantage compared to domestic US brands. In such cases, sellers should quickly adjust their prices. If they find that the pricing does not match the market, they should change their product line as soon as possible, clear the original inventory, and consider new product selection strategies.
Short-Term and Long-Term Adjustments for Sellers In the short term, some sellers who are good at using data to select and list new products can quickly adapt to the changes. For these operation-oriented sellers, changing direction aligns with their business logic.
In the long term, for铺货 sellers, the impact may mainly be reflected in product selection adjustments due to cost changes. Since they usually have a large number of product selections and can quickly list new products using their familiar promotion methods, the impact on them may not be significant.
For brand sellers, the key lies in product research and development. They need to clearly define the target audience before investing. If the target audience can accept the price increase due to tariff hikes and the product value can justify the price increase, consumers may still be willing to buy.
For those "intermediate sellers" who are neither fully brand-oriented nor rely on a large number of product selections for铺货, and are overly focused on one or two industries, they may face greater challenges, especially if the product prices in these industries are around $30 - $40. These sellers should assess the risks, decide whether to clear their inventory immediately, and consider whether they have the resources to switch to other industries.
Impact on Overseas Warehouses The cancellation of the T86 duty-free policy affects every aspect of the industry, including overseas warehouses. Although overseas warehouses may seem to benefit in the short term, for example, not having to increase single-order operation fees, they will also face issues such as rising personnel costs if more restrictive policies are introduced. Overall, while overseas warehouses can generally withstand these changes, the costs will ultimately be passed on to sellers.
In conclusion, the T86 policy changes pose both challenges and opportunities for cross-border e-commerce sellers. By understanding the policy trends, accurately calculating costs, and making timely adjustments to pricing strategies and operations, sellers can better navigate the complex and ever-changing market environment and strive for sustainable development in the new trade landscape.