Background of Duty-Free Policies for Low-Value Parcels
United States: In 2016, the U.S. raised its duty-free threshold from $200 to $800, allowing Chinese cross-border e-commerce businesses to flood the U.S. market through direct shipping of small parcels. This has put significant pressure on local small and medium-sized businesses. For instance, in 2024, approximately 60% of parcels entering the U.S. under the "de minimis exemption" originated from China, triggering strong opposition from American manufacturers and labor unions.
European Union: In 2024, the EU received around 4.6 billion low-value parcels, with 90% coming from China. This surge has led to unfair competition for local businesses, safety concerns, and environmental issues. As a result, the EU plans to abolish the VAT exemption for parcels under €150 and tighten security checks and tax regulations.
However, the duty-free policy for low-value parcels is not entirely negative. It has fueled the rapid expansion of cross-border e-commerce, diversified the range of imported goods, and, most importantly, while these parcels are duty-free, the industry generates revenue through platform transaction fees, logistics, warehousing services, and other taxable activities such as VAT and corporate income tax. This has led to an upgrade in the supporting industries of the importing countries. While local manufacturers oppose the policy, its broader economic benefits cannot be ignored.
Some may wonder: given the massive volume of parcels, wouldn’t imposing import taxes generate significant revenue? The reality is not that simple.
Why Is It Difficult to Tax Low-Value Parcels?
Sheer Volume and Scale
The overwhelming number of packages creates a huge challenge for customs authorities in terms of manpower, resources, and time. It is nearly impossible to conduct thorough inspections and collect duties on every parcel. In 2024, the U.S. imported 1.36 billion low-value parcels.
Incomplete or Incorrect Declarations
To evade taxes, some senders or recipients deliberately underreport parcel values, misdeclare quantities or product categories, or provide false recipient details. Customs authorities lack the time and resources to verify each parcel’s declaration, resulting in significant tax losses.
Complex Logistics and Limited Inspection Capacity
Parcels enter through various logistics channels and multiple transit points, making it difficult to track and monitor each shipment. Customs officers cannot inspect every batch comprehensively.
High Cost of Tax Collection
Taxing low-value parcels requires substantial resources for inspection, valuation, tax calculation, and collection. In many cases, the cost of enforcement could exceed the revenue collected. This means customs authorities would incur higher costs while generating minimal tax revenue, ultimately hurting the cross-border e-commerce industry.
Thus, the exemption of low-value parcels is not just beneficial to exporters but also has significant advantages for importers.
Challenges in Cancelling the T86 Policy
Customs Perspective
U.S. customs authorities have the necessary manpower, resources, and technology. However, without increased budgets and system upgrades, enforcing taxation would add an unmanageable workload. Customs departments are responsible for much more than just processing low-value parcels—they also oversee high-value goods, contraband, and other regulatory tasks. Without a more efficient solution, customs officials have little incentive to push for taxation.
Consumer Impact
Eliminating T86 would raise the prices of imported goods, forcing consumers to pay more for the same products. This would increase living costs and potentially exacerbate inflation in the U.S., leading to public dissatisfaction and negative political repercussions. Additionally, the domestic supply chain may struggle to meet consumer demand for affordable daily goods.
Impact on Cross-Border E-Commerce Platforms
The T86 policy doesn’t just impact one platform—it affects almost all major cross-border e-commerce platforms, which in turn are closely tied to various industries in importing countries. The negative ripple effects of its cancellation must be carefully considered.
Amazon:
The direct shipping model would take a significant hit, forcing many sellers to switch to FBA. Low-ticket sellers would see their profit margins shrink, operating costs rise, and some may exit the market altogether, shrinking Amazon’s overall business scale.
Temu & Shein:
The U.S. market would face disruptions, pushing these platforms toward overseas warehousing models and increased collaboration with local suppliers. This shift would reduce trade friction risks but could also weaken their competitive advantage in low-cost, fast-moving products. Platforms might transfer tax costs to consumers and focus more on high-ticket items, which could reduce their overall competitiveness.
AliExpress:
Since a large portion of sellers on AliExpress rely on low-value parcel shipments, removing T86 would significantly increase logistics and customs clearance costs, leading to delays. Low-margin products could become unsustainable.
Shopify:
Independent sellers on Shopify would struggle with logistics and customs clearance, lacking the resources of larger platforms. Rising clearance and logistics costs would make operations more difficult, particularly for low-margin businesses, possibly leading to stagnation.
International Trade Relations
If the U.S. cancels T86, its trade policy’s stability and openness could be questioned by other countries. The move might be seen as protectionism, escalating trade tensions and inviting retaliatory measures from trade partners. Such actions could strain international relations and challenge the U.S.’s position in global trade. For Trump’s new term, this will be a major test—global economic growth depends on a stable trade environment. A full decoupling between China and the U.S. is neither feasible nor beneficial; cooperation remains the best path forward.
Final Thoughts
Policy implementation depends on execution. While the restoration of T86 is a positive development, Trump has also stated that its cancellation remains an option "until a comprehensive and rapid system is in place to process tariff revenues." This suggests that U.S. authorities have not entirely abandoned efforts to curb Chinese cross-border e-commerce.
Cross-border sellers should remain vigilant. It is crucial to focus on brand building and product competitiveness, enhancing brand recognition and product value to improve resilience against rising costs.
Additionally, in 2025, sellers should explore multi-channel strategies—expanding across various cross-border platforms and entering diverse markets. Avoiding reliance on a single platform or market will help mitigate business risks caused by trade tensions.
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