By Laura Stevens
A change in trade rules is making it cheaper and easier for
American consumers to buy overseas goods online, heartening
merchants abroad but threatening stiffer competition for U.S.
retailers.
Since about a month ago, the government has allowed Americans to
import up to $800 at a time of most foreign goods without having to
pay import duties or tax. That's quadruple the previous exemption
of $200.
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.
As a result, UPS, FedEx Corp. and Deutsche Post AG's DHL say
they are bracing for a flood of new packages.
The higher threshold for duties "is going to open up more
opportunities for vendors around the world to sell" in the U.S.,
said Ralph Carter, managing director, legal, trade and
international affairs at FedEx Express.
Since the change, U.S. orders for Paris-based Melijoe.com's
luxury children's clothing have jumped about 27%, says Romain de La
Rivière, chief financial officer of the 3-year-old company. Its
brands, which include Little Marc Jacobs, Junior Gaultier and Kenzo
Kids, are hard, and sometimes impossible, to find in U.S. stores.
American shoppers currently account for 20% of Melijoe's sales, up
from 15% before the new rules took effect. Mr. de La Rivière says
he expects that figure to grow.
"The U.S. is definitely a strategic market for us," he says.
Globally, the company's orders average more than $200.
While cross-border shopping still accounts for just a fraction
of total global e-commerce spending, it is growing quickly -- at a
rate of more than 25% annually. Globally, the company's orders
average more than $200.
Until recently, "retail has always been local or national. There
were very few retail brands 10 or 15 years ago that ever left their
local geography," says Alan Gershenhorn, chief commercial officer
of UPS. It was expensive and risky to build stores abroad,
especially without name recognition.
By 2020, however, about 943 million people world-wide are
expected to buy online from abroad, spending an estimated $994
billion -- nearly quadruple the sum 309 million such people spent
in 2013, according to a study by Accenture and AliResearch, an arm
of e-commerce company Alibaba. Already, 5 4% of U.S. online
shoppers have made a purchase overseas, according to a survey by
comScore and UPS, as consumers increasingly shop on their phones
and look for unique products.
The new duty rules largely eliminate one of the big headaches
for those shopping abroad online: unexpected fees or delays.
As a result, U.S. orders for U.K.-based OmologatoWatches.com's
nearly $400 auto-racing-inspired watches have picked up, says Shami
Kalra, owner of the year-old company. Until recently, "customers
were hesitant in the Americas, because they were wondering how much
they would have to pay when [their watch] arrived," he adds.
The change makes international returns easier too. Consumers
still prefer to touch and try on clothing before making a final
decision on their purchases, but paying duties both ways was
pricey.
Will Green, owner of U.K.-based WillsLondon.com, says he is now
working to pattern his online specialty shoe store after U.S.-based
Zappos, allowing shoppers to buy several sizes and send back any
that don't fit without charge. The company's shoes, which are free
of leather and other animal products, average $105 a pair, so an
order of just two pairs would have fallen under U.S. duties.
"Now you can find your size, shop away and we know we're not
going to get that hit on margins," he adds.
For U.S. retailers, however, breaking down such barriers means
more competition. "It's definitely a concern" as more domestic
retailers also look to sell abroad, says John Haber, chief
executive of Spend Management Experts, a supply-chain consulting
firm. "If it's going to be easier for other retailers to import to
the U.S. and get away without paying duties and taxes, I think it's
definitely a pain point."
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
May 04, 2016 21:33 ET (01:33 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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