Drop Shipping Changes US Government
So apparently, the US Government has officially ended drop shipping. This is a comment that I get all the time, is something that I’ve heard for the past few months. And in this article, what I want to do is go through the facts, you know, go through the details so that if you’re someone that is thinking about building up a drop shipping store, or maybe you’re someone that is already drop shipping, you’re going to be able to get a lot of value from this article.
Drop Shipping Laws Understanding
So before I get into any of the details as to what you need to know when it comes to all of the different laws that have changed with drop shipping, specifically in the US, I just want to quickly define what drop shipping is for those of you that may not know what it is, maybe you’re new to it and you’re not really sure of exactly how it works.
Drop Shipping Suppliers China
Now it’s a very simple business model. Basically, the way that it works is you’re going to find a product that you know people are interested in buying, and instead of you having to buy that product in bulk, what you’re going to do is use a drop shipping supplier. One of the most popular ways to find drop shipping suppliers is to use suppliers that are based in China. This is going to be using sites like AliExpress, CJ Drop Shipping, even Alibaba.com.
Drop Shipping Platform Profit
And what you’re going to do once you found a winning product that you know people want to buy and you’re able to source it from a drop shipping supplier, you’re going to make that product available for a customer to buy. One of the most popular platforms that you can use when it comes to building up a drop shipping website is Shopify, and for example, if the item is available to buy from the drop shipping supplier for let’s say $10, you’re now going to list that product for sale for around $50, and whenever you make a sale you’re going to be able to make a gross profit of around $40.
Drop Shipping Process Details
So throughout this entire process, you’re never going to have to handle any inventory or see any products. Literally all you’re doing is driving traffic to your drop shipping store, and whenever you make a sale, your supplier is going to receive the details for your customer in terms of their name, their address, and the item that they ordered.
Drop Shipping Market Changes
So those are the foundations of the drop shipping business model, and now that we’re all on the same page when it comes to how the US Government has changed drop shipping, they’ve mainly made some changes when it comes to how you’re going to deal with US customers. And because the US market is the biggest market when it comes to e-commerce generally speaking, this is very important to know if you’re looking to build a drop shipping store.
Drop Shipping Import Rules
So let’s jump straight into one of the first proposed changes that the US Government has put forward, which is the change when it comes to the import and the duty that needs to be paid on items that are valued below $800. So normally the way that it works when an item is shipped from China to the US, as long as it’s valued under $800, there’s not going to be any duty or import fees that need to be paid by either the customer or the seller. This rule is also known as the “De Minimis” rule, if I said that correct, and it’s been one of the biggest.
E-commerce Growth Value
Reasons why the E-commerce industry has grown so much over the past few years in the United States, most items that you’re going to be selling on the internet via drop shipping stores is going to be valued under $800. So this rule has helped so many drop shippers and E-commerce store owners make a lot more profit because you’re not paying any import taxes or duty or anything like that. You’re able to keep a lot more money in your pocket and grow your business even more.
De Minimus Rule Changes
And all of this sounds really good and you’re probably thinking “Sam, what’s the issue? How can drop shipping be dead when you don’t have to pay any duty or any import taxes?” Well, that’s the thing, because in September 2024, the Biden Administration, you know, announced that they’re going to be making changes to the “De Minimus” rule, which means that there may be some extra charges that you’re going to have to pay, some extra paperwork that you’re going to have to do.
Product Categories Tariffs
They announced that they’re looking to specifically add extra tariffs and charges on certain categories of products, you know, that fall under certain sections. These are products that fall under Section 2011, 232, and 301. And the thing is when it comes to these different sections, it has some of the most popular products that are drop shipped from China to the United States, whether it’s mobile phone accessories, camera equipment, Bluetooth headphones, general consumer electronics, you know, toys, things that people use on a day-to-day basis.
Extra Charges Documentation
And it’s not just gadgets, it’s also clothing items, apparel. There’s hundreds of different items that fall under these different sections that they’re looking to add duty and taxes to. So no matter what the value of the item is, even if it’s less than $800, there’s still going to be extra charges that you’re going to have to pay. In addition to that, there’s also going to be extra paperwork that you’re also going to have to do as well.
US Manufacturing Push
So in all honesty, this is something that’s super important that every single drop shipper that’s drop shipping to the United States from China needs to be aware of. It is going to have a big effect on the profitability of the stores that you’re running, and the reason why the US Government has decided to implement these different things is because they want to reduce the amount of items that are bought or sold from China and they want more items to be manufactured in the United States.
Customer Documentation Requirements
So essentially they’re trying to eliminate people from going onto sites like AliExpress, CJ Drop Shipping, all of the popular sites that drop shippers are using right now. And in addition to all of that, there’s also been proposed changes that will require the customer to fill out extensive documentation and provide their Social Security Number whenever they purchase from a drop shipping store. This of course is also going to reduce the amount of sales that drop shippers that are drop shipping from China to the United States are going to get because customers don’t want to give personal information due to the rise of identity theft.
Drop Shipping Future Questions
So basically these are all of the different changes and there’s some other ones that have been announced that’s going to affect drop shipping specifically in the United States. Now you’re probably thinking “Sam, what exactly does this mean? Can I still drop ship to the US? Is it finished? Am I not going to be able to make money anymore?”
Implementation Timeline
Now that’s the thing, when I say all of these different changes have been proposed, they’re not actually in effect as of yet.