Chinese merchants may lose U.S. postal subsidies
American shoppers may have to kiss goodbye to the $1 yoga pant deals with free shipping from Chinese sellers that have sprung up on eBay and other e-shopping platforms after the latest salvo in President Donald Trump’s trade war.
Trump’s ordering of the U.S. Postal Service to withdraw from an obscure 192-nation postal treaty threatens to hit American shoppers used to bargains on platforms such as eBay Inc. and Amazon.com Inc., where thousands of listings from sellers based in China hawking dirt-cheap consumer goods will likely disappear.
The treaty, which sets fees that national postal services charge to deliver mail and small packages from other countries, gives poor and developing markets lower shipping rates than developed nations. The agreement – and another one building on it signed between the U.S. and China postal services in 2011 – has essentially given Chinese merchants a $170 million annual subsidy to ship products directly to American homes.
“Chinese sellers on eBay and other platforms may disappear, or at the very least they will not find it so easy to sell to Americans anymore,” said Gary Huang, chairman of the American Chamber of Commerce in Shanghai’s supply chain committee. “This has been a big advantage for them for many years and how they’ve beat out the American seller on their own turf.”
On eBay Thursday, hundreds of sellers from China advertised women’s workout leggings, including ones for little as $0.76 that could be purchased instantly. That seller, Webstainless based in China, has racked up more than 21,680 positive reviews from buyers in the last 12 months, according to the e-commerce site. The seller offers free shipping to the U.S.
The loophole can be seen in shipping options that Chinese eBay sellers and other major e-commerce portals offer. On AliExpress, Internet giant Alibaba’s e-commerce portal for international buyers, shipping is free if a pair of $10.29 yoga pants are transported via ePacket, the name of the subsidized service by the U.S. Postal Service. The other shipping options, via private courier companies like FedEx Corp., United Parcel Service Inc. or DHL Worldwide Express, range from $40 to $60, essentially hiking the total cost of the pants.
Trump’s directive to eliminate the postal discounts could potentially raise costs for Alibaba Group Holding Ltd., while helping FedEx and other international shipping companies.
Any changes to international postal rates potentially disrupts cross-border e-commerce, the sale of goods from a retailer in one country directly to consumers in another. That business, enabled by platforms such as Amazon, eBay and Alibaba, is expected to reach $1 trillion by 2020.
Representatives for Alibaba didn’t respond to requests for comment. Alibaba rival JD.com Inc.’s logistics arm said it was looking into the potential impact. Amazon and eBay, through spokespeople, said they were reviewing Trump’s memo and declined to immediately comment.
The shipping rate under the postal treaty can be a fraction of what it costs to send the same item from the U.S. to China – making returns very difficult – and it can be lower than what it costs to ship an identical product within the U.S.
Amazon’s prices illustrate the gap: standard shipping for an iPhone case from China to a New York address is $4.99, while from a seller based in the U.S. is $5.99. The difference may not seem like a lot, but added up over millions of low-cost consumer items, its effect has been a disadvantage for American retailers on e-commerce portals.
“American sellers simply cannot compete,” said Huang, who’s also founder of consultancy 80/20 Sourcing. “It seems like Trump wants to level the playing field and one outcome is that American consumers will have less access to that really cheap stuff.”
The subsidized ePacket service limits packages to 2 kilograms (4.4 pounds) and less than $400 value. Chinese sellers estimate shipping through the services take 10 to 20 days from China to the U.S.
American companies have cheered Trump’s plan to withdraw. “This outdated arrangement contributes significantly to the flood of counterfeit goods and dangerous drugs that enter the country from China,” UPS, which along with other private couriers stands to gain if the subsidized service is removed, said that withdrawal was “the right step.”
Under the treaty’s framework it takes a year for a country to withdraw, during which rates can be renegotiated.
“It’s been an unbalanced deal,” said McDavid Stoddard, a director at Beyond, a shopping app that connects foreign brands to Chinese consumers. “The U.S. Postal Service has been complaining about this for a while and we’ve always doubted the long-term viability of this channel.”