The new NAFTA goals put forward by the White House would raise the threshold for when a duty is required of foreign shoppers. Such a change would be beneficial for e-commerce businesses in the U.S. allowing more foreign shoppers to buy more items before they incur additional costs to their country of residence, Canada or Mexico.
Here's how it works now: Mexican shoppers pay a duty if they buy more than $50 of goods from US-based online retailers. Canadians, however, only have to spend about $16 on U.S. goods before incurring a tax on their purchases. The shoppers pay the tax to their home country.
Canada has set its de minimis threshold -- the value below which goods can be shipped into the country before duties and taxes are assessed -- at $16, which has not increased since 1985 and is one of the lowest in the world, according to Global News.
By comparison, the U.S. has a $800 threshold that is applied to e-commerce.
The U.S. has negotiated a tentative side deal with Mexico that raises the de minimis threshold to $100 and hopes to achieve an increase for Canada too -- around $200. However, some Canadians argue that changing the de minimis levels would put Canadian businesses at a disadvantage.
How E-Commerce Helps Small Online Retailers Go Global
Changes proposed by a new NAFTA agreement could have a big impact on U.S. businesses, because many of them are shipping to Canada. For those who aren't, the new changes could incentivize them to expand their business north of the border.
Data analyzed in Shippo's platform finds that more than 20 percent of its small and medium-sized businesses used its platform to export to Canada in 2018. Today, Shippo serves more than 35,000 online retail businesses.
To compare, in 2015, Shippo's first full year of business, fewer than 2 percent exported to Canada. By 2017, retailers shipping to Canada reached 17 percent. Over the last few years, we found that the highest velocity growth was happening in very small businesses, a segment with just one to ten employees.
Should the new NAFTA terms become finalized, small online retailers should prepare for an increase in orders from Canada and Mexico. There are many reasons to consider expanding your business internationally. There are more potential customers, and you'll have a bigger marketplace to play with. But it's just as important to consider the right strategy when it comes to shipping abroad.
Consider a Variety of Shipping Options
Since international shipping can get expensive and take a long time to arrive, it's important to give customers the option that best fits their needs when checking out. Not only will that increase your sales and customer experience, but it may also increase your margins depending on how you decide to charge for shipping.
You can easily do this by diversifying your shipping profile to include multiple carriers to take advantage of the services they're best optimized for.
For cost-sensitive but patient customers, you may be want to try out USPS Priority Mail International. Especially for smaller, lighter packages, USPS offers the most competitive rates.
But it's important to note that USPS is a U.S. government entity. So when shipping internationally, the parcel is handed off to the local postal service provider in that country. Thus, your USPS tracking can be spotty depending on where you're shipping. Sometimes it can be hard to tell if your shipment is just stuck at customs or lost.
For those who are willing to pay for fast service, and want a more accurate, trackable method, consider integrating with a few private carriers like DHL Express, UPS, and FedEx to check out their rates and options. All of these carriers have international fleets that are much more reliable at updating tracking information.
When expanding internationally, remember to take a look at who your customers are and what service levels they are expecting. By giving them the option to select what they need, you'll be able to increase both your sales and customer service reputation.