U.S. e-retailers get more competition from Europe as the duty-free ceiling rises
April 25, 2016 04:48 PM
Web shoppers in the U.S. have a new incentive to buy from retailers in other countries after the U.S. Customs and Border Protection announced the limit on duty-free purchases from the European Union increased 300%, to $800 from $200.
U.S. Customs and Border Protection announced the increase in March, per an amendment to the Tariff Act of 1930 included in the Trade Facilitation and Trade Enforcement Act of 2015, signed Feb. 24 by President Barack Obama. The amendment raised the value of merchandise a U.S. consumer can import in a single day, technically termed the de minimus exemption, without paying duties and taxes. The retail value is based on the price of merchandise in the country of origin.
For companies like German shoe merchant Shoepassion.com, the new limit is a welcome change. Many of its shoes are priced above $200 and lifting the maximum amount for duty-free purchases means U.S. shoppers no longer need to pay the tax when placing an order.
Shoepassion began as a web-only retailer and now has six stores—five in Germany and one in Poland—in addition to Shoepassion.com, its e-commerce site. The company launched in early 2010 and wasn’t known in the U.S. until a blogger recommended its products at the end of 2011, says Tobias Börner, content manager for Shoepassion.com. “In 2013 we launched an English-language website and since then our sales have been growing,” he says. The English website currently targets shoppers in the United Kingdom and shows prices in pounds.
U.S.-based customers were accustomed to paying the duty tax before the limit was raised, so Shoepassion expects more online sales to American shoppers now that the duty obstacle has been amended. Shoepassion plans to alert its U.S.-based customers by email about the duty change and is about to launch a U.S. version of its website, Börner says.
Börner declines to break out Shoepassion’s e-commerce sales, but says 25% of web orders are from customers outside Germany, including France, Poland, the Netherlands and the U.S.
Shoppers outside the European Union currently are redirected to the Shoepassion.com site that shows prices in euros. When the U.S. site is ready in early May, those shoppers will use Shoepassion.com exclusively and European Union countries will shop on Shoepassion.eu, Börner says.
Shoepassion is working with BorderGuru, a unit of European shipping and fulfillment vendor Hermes, which handles the logistics of getting products to the U.S. from Germany and other countries. While Shoepassion is ready to capitalize on the new duty ceiling, the increase has not been widely publicized in Europe, says Uwe Bald, vice president of international development at Hermes. Hermes is a wholly owned subsidiary of Otto Group, the German catalog and online retailer that is No. 2 in the Internet Retailer 2015 Europe 500.
“Surprisingly, I have not seen the media pick up the topic that much, but when it does look for more cross-border sales,” Bald says. It could take three to six months for larger retailers to begin promoting the new duty level to U.S. customers, and up to a year for small and medium-sized retailers, he says.
The new duty limit means online retailers in the European Union and other countries will have less trade-related paperwork to complete, Hermes says. U.S. customers will no longer experience shipping delays resulting from customs holding up packages until duties are paid, as long as daily purchases fall at or below the $800 mark. It is the first update to the duty-free exemption since 1993, Hermes says, and the amendment provides for annual adjustments of the exemption based on inflation.
Savings to U.S. shoppers could be substantial. For example a pair of men’s oxford shoes with leather uppers and soles priced at 230 euros ($259) would incur total customs costs of about $45, Bald estimates. That brings the total to $304 and there are other costs such as shipping, he says.
In fiscal 2015, U.S. Customs and Border Protection says it processed more than $2.4 trillion in trade and approximately 33 million imports. The agency also collected about $46 billion in duties, taxes and other fees, the most collected in the past five years.