Summary of Key Points
Starting from July 1st, the EU imposed a 3 euro tariff on imported e-commerce parcels worth less than 150 euros (replacing the previous tax-free policy), which directly led to a decline in sales for Chinese cross-border sellers in Europe, especially affecting low-priced products. However, sellers have begun to adapt: some have set up overseas warehouses to avoid the tariffs, others have shifted to emerging markets such as Latin America and South Korea, and some have discontinued low-priced items to focus on mid-to-high-end or branded products. The EU's new rule is intended to protect local businesses, but Chinese sellers continue to gain a global presence and will likely move towards differentiation and branding in the future.
Detailed Analysis
1. What exactly has changed with the EU's new rule?
Previously, the EU was completely tax-free for small parcels sent from abroad with a value of less than 150 euros. Now, regardless of whether the item is a 3 euro toy or a 149 euro jersey, any parcel delivered directly to EU consumers will incur an additional 3 euro in tariffs. This extra cost is added to the product price, increasing the total amount customers have to pay and naturally affecting their willingness to buy.
2. Who is most affected?
The new rule has a significant impact on products of different prices:
- Low-priced products (3-5 euros): For example, a toy sold by Xiaoting originally cost 3 euros, but with the additional 3 euro tariff, the price doubles. Customers will likely avoid buying such items, resulting in a sharp drop in sales.
- Mid-to-low-priced products (under 20 euros): For instance, a jersey that originally cost around 20 euros now costs 23 euros, an increase of 15%-20%, which may deter customers and lead to a 20% decrease in sales.
- Mid-to-high-priced products (over 10 euros): An item costing 100 euros only sees a 3% increase in price due to the tariff, so the impact is relatively minor.
Why are low-priced products the hardest hit? Because the tariff accounts for a large proportion of the original price, effectively eliminating their price advantage.
2. Sellers' strategies for coping:
Facing the new rule, sellers have taken various actions:
- Using overseas warehouses: Some, like Linli, plan to pre-stock goods in European warehouses (such as Amazon FBA) so that products can be shipped directly from Europe and avoid the small parcel tariffs. This is suitable for standardized products (e.g., household essentials with stable demand and high repurchase rates), but less so for non-standard items like toys, which are more varied and harder to predict in sales.
- Shifting to emerging markets: Sellers like Xiaoting are targeting regions with fewer competitors and faster logistics, such as Latin America (Mexico, Brazil) and South Korea. In South Korea, deliveries take only 10 days compared to the 1-2 months needed for Europe, providing more stable cash flows.
- Discontinuing low-priced items and focusing on mid-to-high-end or branded products: Xiaoting intends to phase out low-priced toys and focus on higher-selling items priced over 10 euros. Linli aims to promote mid-to-high-end products on Amazon, taking advantage of the platform's overseas warehouse services. Both believe now is a good time to build brands and establish competitive advantages through their supply chains.
3. Why did the EU suddenly impose the tax?
According to Zhang Zhouping from Bense智库, the EU introduced the new rule for two main reasons:
- Protecting local businesses: It was unfair for local European merchants to pay taxes while Chinese sellers were exempt from tariffs on similar products.
- Unifying the internal tax system: Many countries around the world are tightening small parcel tax-free policies, and the EU is following this trend to simplify its own cross-border e-commerce taxation.
4. Long-term implications for Chinese sellers:
Although short-term sales may decline, Chinese sellers still have significant global advantages:
- Data shows: From 2020 to the present, the share of Chinese sellers in the top 10,000 on Amazon has increased from 42.5% to 55.9%, while the share of American sellers has decreased. Chinese sellers benefit from having production bases, direct access to factories, and familiarity with AI tools.
- Future directions: Experts suggest:
- Discontinuing low-priced items and focusing on mid-to-high-end products.
- Using overseas warehouses instead of direct shipping.
- Diversifying markets to regions with more relaxed regulations (e.g., Southeast Asia, the Middle East).
- Building brands to avoid competition on low prices.
In summary, the new EU rule acts as a filter, eliminating sellers who only offer low-priced products and allowing those with brand awareness and compliance capabilities to thrive. With adaptation, Chinese sellers still have many opportunities ahead.
(The entire analysis explains the impact of the new rule, coping strategies, and future trends in plain language, making it easy for non-financial professionals to understand.)