What is the tax situation of cross-border EC in the U.S.? 5 points to keep in mind when doing business with the U.S.

Cross-border EC (international e-commerce conducted over the Internet) is currently attracting a great deal of attention due to its rapidly expanding market.

In this section, we will provide an overview of cross-border EC taxes, followed by a detailed explanation of the cross-border EC market in the U.S., where the market is large, with a focus on popular products and points to keep in mind when transacting.

Tax situation of cross-border EC

Various taxes are incurred when doing business with foreign countries. So, do taxes arise in the same way in cross-border EC? We will explain the treatment of taxes in cross-border EC from two perspectives: domestic and U.S..

Domestic Perspectives

In principle, no domestic taxes are incurred when doing business with foreign nationals in cross-border EC.

For example, when buying or selling goods in Japan, a “consumption tax” is imposed. However, for a transaction to be subject to Japanese consumption tax, it must be a domestic transaction. Therefore, it is not possible for Japan to levy consumption tax on international transactions.

American Perspective

Next, let’s take a look at what kind of taxes are incurred when developing a cross-border EC business in the US.Unlike in Japan, the U.S. is subject to taxes.

In the U.S., unlike in Japan, consumers must pay customs duties and local consumption taxes at the time of payment. Therefore, when displaying product prices online, the following two methods should be used.

  • DDU -> no customs duty included in the price of the goods
  • DDP -> Customs duty is included in the price of the goods

Regardless of which price display method you use, remember to include tax information on your site’s help page or other information.

Cross-border EC in the U.S.

 

usa

The United States is one of the world’s largest economies, but how widespread is cross-border EC in the United States?

In the U.S., the cross-border EC market is the second largest after China. Many companies from Japan are also using cross-border EC to enter the U.S. market.

Furthermore, many cross-border EC users in the U.S. use major companies such as Amazon and eBay, which are well-known sites in Japan. Therefore, it is an easy country for Japanese companies to enter the market.

The market for cross-border EC is expected to expand further, partly due to the new coronavirus in the United States. Therefore, it is possible that new legislation on the tax aspects of cross-border EC will be born in the future.

Popular products in the U.S.

Fashion

The U.S. market for cross-border EC is expanding, but if you want to develop your cross-border EC business in the U.S. market, you need to know what products are popular in the U.S.

So what kind of Japanese products are popular in the U.S.? There are five main products that are popular in the United States.

  • clothing
  • Accessory
  • toy
  • shoes
  • Japanese Anime and Manga related

From here, we will discuss the above popular products in detail.

clothing

In the United States, as in Japan, purchasing clothing over the Internet is commonplace.It is estimated that more than half of U.S. cross-border EC users purchase clothing through cross-border EC.

Accessory

Second, many people in the U.S. purchase accessories through cross-border e-commerce. Many accessories are expensive products. However, purchasing accessories through cross -border EC has the advantage of allowing them to be purchased at lower prices.

The following are examples of accessories sold through cross-border e-commerce.

  • clock
  • necklace
  • (finger) ring
  • bracelet
  • earrings
  • necktie pin

In particular, you can increase the number of consumers who will purchase your products by selling popular brands at prices lower than the list price. Also, try to increase the number of customers to your own site by holding price reduction sales of products for a limited period of time.

toy

Many consumers in the U.S. also purchase toys, which are popular with children, through cross-border e-commerce. Toys that appear in Japanese anime and manga are particularly popular.

However, some U.S. states impose taxes on different types of toys. For example, in the U.S. state of West Virginia, glowing toys (fireworks and toy guns) are subject to taxation.

Before selling an item, make sure that the item is subject to taxation before selling it.

shoes

Today’s health-conscious consumers are becoming more and more health-conscious, and the impact of this trend is being seen in the cross-border e-commerce market as well. In the U.S., along with the popularity of clothing, shoes are also very popular.

However, since there are many shoe brands in the U.S., the purchase rate of brand-name products originating in the U.S. is low. Therefore, if we sell shoes of Japanese origin or limited edition Japanese models, the purchase rate will be higher.

Alternatively, selling traditional Japanese products such as zori (slippers) as a set with a kimono may also increase the purchase rate.

Japanese Anime and Manga related

Some foreigners who use cross-border EC do so because they want distinctive Japanese products. Therefore, products related to Japanese anime and manga are also popular.

In particular, many people purchase products such as figures and dolls from Japanese anime. In relation to clothing, many people also purchase clothing products collaborated with anime and manga.

Before selling products in the U.S., research popular Japanese anime in the U.S. in advance.

Points to keep in mind when dealing with the U.S.

Business professionals at work

Cross-border e-commerce is a large market in the U.S., but there are some things to keep in mind when selling products. If you do not pay attention to what we are about to discuss, your cross-border EC business development in the U.S. may fail.

There are three main points to keep in mind when doing business with the United States.

  1. Understand the laws regarding cross-border EC in the U.S.
  2. Maintain low prices
  3. Beware of products banned for import and export.

The above notes will now be explained in detail.

Understand the laws regarding cross-border EC in the U.S.

If you want to do cross-border EC business in the U.S., you need to understand the laws regarding cross-border EC. Because if you do not understand the laws for cross-border EC, you will be at a disadvantage compared to others.

For example, the U.S. has an E-Commerce law, which is the law regarding cross-border e-commerce. At a minimum, you should understand e-commerce laws.

The agency that sets the above laws and rules is the Federal Trade Commission (FTC ). If you have any questions, check with the FTC.

Maintain low prices

Half of those who use cross-border EC in the U.S. do so “because the price is lower than the list price. In other words, if the price is higher than the list price, the purchase rate will be low and it will be difficult to anticipate a profit.

Therefore, by trying to keep prices as low as possible for our products, we will be able to anticipate a profit.

Beware of products banned for import and export.

The business of cross-border e-commerce is the business of buying and selling goods across borders. Doing business across borders is the act of importing and exporting.

There are several commodities that are banned for import and export in some countries. There are also commodities for which import/export is restricted. The following are examples of products that are restricted for import and export.

  • foodstuff
  • cosmetics
  • Medical supplies

In addition to the products listed in the examples above, there are many other products whose import/export is prohibited or restricted.Be sure to check in advance which products are prohibited or restricted for import and export.

summary

So far, we have explained the tax situation of cross-border EC in detail, as well as an overview of cross-border EC in the U.S., popular products, and points to note.

When doing cross-border EC in the U.S., it is essential to gather local information in advance. By gathering information, you can not only avoid being disadvantaged, but also develop your business to your advantage.

In particular, knowledge of taxes is a must for cross-border EC. Be sure to gather sufficient information on taxes.

Also, do not neglect to gather information in advance when expanding into countries other than the U.S.

It is said that the market for cross-border EC will continue to expand. By entering the cross-border EC industry at an early stage, you can develop your business to your advantage.

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