Are you interested in tapping into the world’s largest consumer economy? Want to sell your products in the United States, the country that moved over $1,14 trillion in online sales in 2023? If so, this guide, titled “Why should you sell in the US?”, is a must-read.
Welcome to the Cross Border Guide to Selling in the US
If you’re looking to expand your business into the United States, you’ve come to the right place. In this guide, we will provide you with market data, compliance information, and tax considerations.
General Information
The United States is renowned for its welcoming stance toward foreign businesses. With numerous international agreements, low taxes, and convenient logistics and payment systems, it offers a favorable environment for entrepreneurs.
Global Market Overview
Before delving into the specifics of the US market, let’s first explore the global cross-border e-commerce landscape.
Cross-border trade is not just a passing trend; it is a rapidly expanding reality that is projected to grow by approximately 100% in the coming years.
In 2021, cross-border e-commerce accounted for $785 billion in sales. Looking ahead to 2030, it is expected to reach a staggering market share of $7.938 trillion.
Selling products across borders may appear complicated. While it’s not without its challenges, it’s simpler than you might think. That being said, it’s important to be aware of certain issues.
In a survey by Statista, 43% of participating brands identified delivery delays as the primary cross-border problem. However, this issue isn’t limited to cross-border shipments; it’s common in regional ones as well.
Border regulations and the HS Code were the second major concern, mentioned by 41% of brands. This is precisely why GlobalD was created.
Now let’s dive into some general information about the US market:
| Population | 334.2 million |
| Internet Penetration | 92% of the population has access to the internet and uses it regularly |
E-commerce Users | Approximately 76% of the population shops online. |
| Top-Selling Categories | Books, computers and electronics, toys, office equipment, and clothing/fashion. |
| Leading Marketplaces | Amazon, Walmart, and eBay |
| Total E-commerce Sales 2023: | $1.14 trillion |
In 2023, the US is projected to rank second globally in terms of total international buyers (cross-border buyers), with an estimated 70 million buyers. While this figure is significantly lower than China’s 280 million, it’s important to take into account the relative population size.
In 2023, the US witnessed a growth of 3.4% compared to the previous year, with 2.3 million new international shoppers (i.e., users who shop cross-border). The pandemic contributed to the rise of cross-border shopping in the US, as foreign e-commerce sites offered English-language product listings, trustworthy transactions, easy payments, and free or affordable shipping and returns.
Furthermore, it is projected that nearly one-third of all US digital shoppers will engage in international online shopping in 2024. This represents a significant increase of approximately 25% from 2019, with an estimated 71.8 million US consumers aged 14 and older becoming international shoppers next year.
It’s worth noting that these numbers do not include foreign sellers utilizing FBA (Fulfillment by Amazon) and delivering their products from the US, which further adds to the positive outlook.
The graph illustrates the penetration percentages of international buyers, highlighting the untapped potential of the American market, which currently sits at only 31.9%.
Now, let’s delve into some technical information concerning taxes, fees, and the de minimis (minimum value) for imports into the US:
Minimum value (de minimis)
Duties and taxes are only applicable to imports into the US if the total FOB value exceeds the minimum value threshold, which is set at $800 USD.
FOB (freight on board or free on board): Tax calculation is based solely on the cost of goods sold. Shipping, tax, insurance, and similar expenses do not factor into the calculation.
Sales Tax
Instead of import duty, the US imposes state-specific product sales tax laws on business-to-consumer shipments. Importers must be aware of these laws to determine if they need to pay taxes and make declarations.
In most cases, foreign companies are exempt from paying taxes on imported goods sales due to the absence of a “nexus” (although there are variations in these laws).
The sales tax is determined by the destination of the merchandise. If you have a sales tax nexus in a particular state, you must calculate the sales tax rate based on the recipient’s location.
Criteria for Sales Tax Nexus
The “sales tax nexus” is established when an e-commerce entity has a connection with a state, or when that state requires the seller to directly collect and remit the sales tax. The specifics of nexus laws vary by state, but generally, the nexus exists in the following situations:
- Having a physical store, third-party storage/warehouse, or an employee conducting business in the state in question.
- Reaching a certain number of unit or billing sales in that state within a year (e.g., more than 200 sales or a specified dollar amount in the ABC state).
HS Code and HS Tariff
HS Code stands for Harmonized System Code, an internationally used code for classifying, standardizing, and facilitating the identification of goods in international trade. Consisting of six digits, the HS Code defines the nomenclature and origin of exported and imported products. It is typically included in commercial documents like commercial and shipping invoices.
To obtain HS Tariff information, you need to know the HS Code for your product.
HS Tariff
HS Tariff, short for Harmonized Tariff Schedule, is used by the United States to classify imported products. It is based on the international Harmonized System (HS), which is a classification system adopted by multiple countries.
The HS Tariff determines the import tax rates for each product and helps calculate import costs.
To clarify, when importing goods into the US, you need to know the HS Code to determine the applicable import tax. This information becomes relevant when the value of the goods exceeds the $800 de minimis threshold.
It’s important to note that the duty tax on imported goods in the US is based on the total purchase price of the item(s) and not on factors like product quality.
The US has approximately 14 customs and tax agreements, making it one of the countries with the highest number of such agreements globally. As a result, some countries enjoy zero import tax on certain products, even when exceeding the de minimis threshold.
For example:
| HS Code | 6112.41 |
| Product (with components) | Women’s swimwear made of knitted or crocheted synthetic fibers |
| HTS (HS Tariff, import tax) | When imported from Spain, the tax rate is 24.9%. However, imports from Jordan, Australia, Panama, Peru, and a few other countries are tax-free, even when exceeding the de minimis threshold. |
But wait, there’s more! For countries in economic blocs like Russia and Belarus, the tax rate for this item is 90%. Additionally, some items are not authorized for export to the US.
In general, the average import tax rate is around 5 to 6%, which is relatively favorable compared to other countries.
Banned and Restricted Products from Entering the US
It’s essential to know that some products are prohibited from exportation to the United States, while others have restrictions and require certification to enter.
Prohibited Items:
- Medications and drugs not approved by the FDA
- Absinthe distilled beverage
- Products from embargoed countries
- Goods made with fur from cats and dogs
- Counterfeit trademark or copyright items
Restricted Goods (Certification Required)
- Contact lenses and glasses
- Health and beauty items such as nutritional supplements, medication, cosmetics, dental instruments, veterinary products, and medical/pharmaceutical articles
- Animal products
- CD-ROMs, CD players, computers with CD/DVD drives, microwave ovens, televisions with cathode ray tubes, and infrared products under consumer electronics
- Chemicals
- Wood and wood products
- Certain food items
- Tableware items under home and decor
For a detailed list, please refer to the CBP website.
In summary, you will need product certifications based on the list provided, not certifications related to your company.
Here are the main certifications you should be aware of:
- HACCP certification (Hazard Analysis and Critical Control Points) for food products like fish, low-acidity juice, and canned goods.
- FCC (Federal Communications Commission) certification for electronic devices that emit radio waves, such as Wi-Fi, Bluetooth, and Zigbee.
- UL (Underwriters Laboratories) certification for electrical and electronic equipment.
- ANSI (American National Standards Institute) certification for products that ensure user safety, such as motorcycle helmets.
- FDA (Food and Drug Administration) certification for drugs, medical devices, food products, and cosmetics.
- CARB (California Air Resources Board) certification required for wood composite products sold in California and some other states.
- TSCA (Toxic Substances Control Act) certification regulates chemical substances and mixtures, including alcoholic beverages, paints, varnishes, cleaning chemicals, and others.
It’s important to note that many industries do not require certifications. For general-purpose products like fashion and decoration, certifications are not necessary to enter the US. However, it is advisable to consult companies that can assist in the process.
International Shipments
International shipments have become more efficient in recent years. Logistics challenges, including delivery time and cost, have been addressed by courier companies offering faster and more affordable options like air and traditional maritime modes.
Here are some of the top logistics companies that you may find helpful:
DHL: One of the widely-used logistics companies for cross-border services (not limited to the US), with an extensive presence in Latin America. It has excellent delivery times, though its prices can be a little steep. However, it is worth considering the speed it offers, which is essential for competing in the market.
FedEx: It is one of the leading domestic logistics services in the US and has a strong global presence. FedEx offers good prices and deadlines and has excellent reviews from its users.
Moreover, airlines have shown to be exceptional in logistics with their dedicated services. They operate daily flights from Europe to the US.
Keep in mind that additional costs may arise depending on the chosen logistics operator, such as insurance, customer signature, and special treatment for the product/cargo.
For those looking for advanced inventory management and shipping larger volumes using containers, it’s suggested to use trustworthy traditional companies like MAERSK.
Source:
https://ecommercedb.com/insights/european-ecommerce-market-worth-us-1-1-trillion-by-2026/3982
https://www.insiderintelligence.com/content/more-us-consumers-becoming-cross-border-buyers
https://www.fedex.com/pt-pt/customer-support/faq/customs/customs-codes/what-is-hs-code.html
https://www.trade.gov/harmonized-system-hs-codes
https://www.trade.gov/free-trade-agreements
https://www.fda.gov/industry/importing-fda-regulated-products
https://www.epa.gov/formaldehyde/formaldehyde-emission-standards-composite-wood-products