Concerns about damage to domestic industry due to the abolition of small-value duty exemptions on Chinese products in the U.S.
On the 2nd, President Trump announced a policy of imposing reciprocal tariffs on countries with trade deficits. It was announced that the reciprocal tariff rates for each country were set in consideration of differences in tariff rates for U.S. products and non-tariff trade barriers such as exchange rate manipulation, unnecessary permits, and quarantine, but in reality, it is presumed that the U.S. trade deficit and the import amount of the other country served as important criteria. In addition, President Trump also declared that he would withdraw tax exemption benefits for small parcels originating from China and Hong Kong. Previously, in early February, it had already announced the abolition of duty-free benefits due to the importation of fentanyl into the United States, but it was overturned the next day due to confusion in field operations at the time. The policy of withdrawing duty-free benefits for small parcels originating from China and Hong Kong, which was finally announced, is scheduled to take effect from May 2. The targets are goods manufactured in China and Hong Kong and shipped to the United States under $800, and tariffs are applied at 120% based on the product value. A fee of $100 per transaction will be charged from May 2 to 31, and a fee of $200 per transaction will be charged from June 1. Transporters must hold a certain level of deposit to guarantee payment of taxes and fees. In addition, it is necessary to submit mail-related information and proof according to the method set by the U.S. Customs and Border Protection (CBP). Currently, the volume of small parcels eligible for duty-exemption in the U.S. is estimated to be approximately 4 million per day as of 2024. Annually, it is approximately 1.4 billion, of which 60% are estimated to originate from China. Therefore, the abolition of the small-value duty-free system for Chinese goods is expected to have a significant impact on American consumers. In addition to the United States, major countries such as Korea, Japan, and the EU are also considering abolishing the duty-free system for small-value goods. This is because low-priced Chinese goods have been flowing into their countries in large numbers under the small-value duty-free system, disrupting the market. Looking at the small-value duty-free system in major countries, the duty-free limit is $800 in the United States, $150 in Korea ($200 for list clearance from the United States), It is 10,000 yen in Japan and 150 euros in the EU, but it can be seen that the tax exemption limit in the United States is higher than in other countries. The small tax exemption limit in the United States was originally $200, but was relaxed to $800 as of 2016. Since then, as e-commerce has grown rapidly during the coronavirus pandemic, problems such as increased drug smuggling through small packages and deepening China's deficit have grown, which led to a movement to abolish the small tax exemption system even within the United States at the time. And eventually, the second Trump administration announced the abolition of the small-value parcel duty exemption system for products originating from China and Hong Kong. As the market is disturbed by the large influx of low-priced Chinese goods, the EU is also exempting tariffs on small-value goods but imposing value-added tax from July 2021. Starting in March 2028, tariffs will also be imposed on small-value items less than 150 euros, so the duty-free system for small-value items is expected to be eventually abolished. In Korea, as the e-commerce market grew rapidly during the coronavirus pandemic, Chinese e-commerce companies such as Ali Express, Xuyin, and Temu also became active in entering Korea. However, while Chinese goods receive benefits such as exemption from customs duties and KC certification through the small-value duty exemption system, domestic businesses cannot apply small-value duty exemptions to goods for sale, so reverse discrimination became a problem as they had to pay customs duties and obtain relevant KC certification for all imported goods. As President Trump revoked duty-free benefits for small parcels from China and Hong Kong, Chinese e-commerce companies that were hit in the U.S. market are likely to target the Korean market even by dumping product prices. It got higher. And since Korea has a very low tariff rate compared to China, there is a risk that Chinese products will be imported in large quantities into the country for bypass export to the United States. Therefore, support measures are urgently needed to protect the domestic manufacturing industry, which is inevitably losing out in price competition with Chinese products. In addition, it seems necessary to revise the system appropriately so that the original purpose of the tax exemption system for small items, which is to improve the convenience of people's lives, can be revived. Small Business Team[View full article]
Concerns about damage to domestic industry due to abolition of small-value duty exemption for Chinese products in the U.S. (Click here)