New tax rules are implemented here! Temu and other platforms are affected

It’s already 2025 in the blink of an eye. Did everyone have a perfect ending in 2024?

However, sellers whose main base is in Mexico may have a headache. On the last day of 2024, Mexico gave a "big gift" to cross-border sellers around the world.

Starting from New Year's Day, Mexico will begin to impose taxes on small packages

Mexico's tax authority SAT announced on Tuesday that it will implement the latest tariff policy on December 31, 2024. Prior to this tariff policy, small packages (less than US$50) from various countries entering Mexico were exempt from tariffs .

But after the new policy is implemented, that is, starting from January 1, 2025, goods entering Mexico through express delivery companies from Canada and the United States, if the value exceeds US$50 but does not exceed US$117, will be subject to a 17% tariff. These countries are part of the United States-Mexico-Canada Agreement (USMCA).

Goods that enter Mexico through express delivery companies but come from countries with which Mexico has not signed an international treaty are subject to a 19% tariff , regardless of their value .

The SAT said the tariffs would help strengthen the "fight against abusive practices".

It is worth mentioning that China and Mexico have not signed relevant international treaties. Therefore, many foreign media speculate that e-commerce platforms and products from China such as Temu are the "targets" of Mexico's tariff adjustment this time .

It is reported that because Mexico's CPI (Consumer Price Index) increase (inflation rate) has exceeded 4% and has remained high, Chinese e-commerce platforms such as Temu that use price as a weapon have continued to rise in Mexico.

According to a survey released by the analysis company Comscore, Temu's traffic has been on the rise since it went online in Mexico. The platform's traffic exceeded 300,000 at the beginning of its launch, and in the following 6 months, the number of visitors soared to 18.4 million, making it the third largest e-commerce platform in Mexico after Meikeduo and Amazon. AliExpress and SHEIN also performed well in the Mexican market, opening up a new situation for domestic products in the Latin American market.

In addition to small packages , the Mexican National Tax Service has previously announced that starting from January 1 this year , all companies selling products through cross-border e-commerce platforms will also be subject to a 16% value-added tax (VAT) .

According to the new policy, regardless of whether a physical company has been established in Mexico, sellers must register for VAT and obtain a tax number ( RFC) with the Mexican Tax Administration. Relevant agencies expect that this move will bring 15 billion pesos in tax revenue to the Mexican government while also strengthening tax supervision of large foreign e-commerce platforms such as Amazon, SHEIN, and Temu .

In addition, last month, Mexican Economy Minister Marcelo Ebrard announced a 35% tariff on textiles and clothing products (covering 138 tariff numbers) , a 15% tariff on textile raw materials (involving 17 tariff numbers), and a list of banned textile imports to protect Mexico's textile and clothing industries.

The tariffs came into effect on December 20 and will be valid until April 22, 2026. The new tariffs are mainly aimed at products imported from countries that have not signed a free trade agreement with Mexico, including China . It is worth mentioning that China is Mexico's largest source of textile imports, exporting textiles worth US$14.532 billion to Mexico in the first nine months of this year alone.

The former blue ocean market, now the sellers’ “graveyard”?

Data shows that Mexico has a population of about 128 million, making it a well-deserved populous and economic power in Latin America. According to the Online Retail Research released by the Mexican Online Sales Association (AMVO), the size of Mexico's e-commerce market will reach 658 billion pesos (about 231.162 billion yuan) in 2023, an increase of 24.6% compared to 2022, making Mexico one of the countries with the highest e-commerce sales growth in the world.

At the same time, data from Statista also shows that the annual growth rate of Mexico's retail e-commerce market will reach 25% in 2023, which is 2.5 times the global average.

According to a report by a financial magazine, Mexico, as a country with underdeveloped light industry, import dependence and high prices, has left room for Chinese products to enter. Compared with the Brazilian market, which has strict taxes but a shortage of service providers, the Mexican market, with relatively complete supporting service providers, once became the first stop for Chinese cross-border sellers to develop the Latin American market. Some sellers even said that in 2023, when SHEIN and Temu entered Mexico, "as long as there is stock, it will sell like hot cakes when it is put on the shelves."

As Mexico tightens its taxes, this grand scene will undoubtedly become a thing of the past.

Recently, Zhongyuan Home Furnishing, the parent company of CANMOV, a well-known brand in the Amazon sofa category and a leading exporter in the sofa category in East China, announced that it plans to terminate its investment in the Mexican production base project. The announcement mentioned that the reason for the termination was that "in view of the current complex and changing external environment, many potential changes have made continued investment subject to greater uncertainty and risk." Zhongyuan Home Furnishing has actually invested more than 20 million US dollars in projects in Mexico since 2021.

In recent years, Mexico's land rent, transportation, labor and other costs have been high; the influx of Chinese sellers has made competition increasingly fierce, and has further increased e-commerce costs. The newly implemented 16% value-added tax and 19% small package tax are undoubtedly worse for Chinese sellers. These cost increases will eventually be reflected in commodity prices, but high cost performance has always been an important competitive point for Chinese products. Therefore, once commodity prices rise, the competitiveness of Chinese products in Mexico will inevitably be reduced.

Although some foreign analysts believe that " market competition may limit the ability of companies to significantly increase prices, which means that consumers may only see a small increase in prices ", this also means that sellers' profit margins will be greatly compressed. At the same time, for business strategy considerations, some sellers may choose to exit the market, while others will adopt more intense competition strategies.

The implementation of the new small parcel tax and value-added tax policies also means that Chinese sellers need to pay more attention to compliance operations in Mexico and pay close attention to various platform-related policies. For example, AliExpress recently reminded sellers to sign the "Mexico Tax and Fee Payment Logistics Service Contract Address" as soon as possible. Self-operated merchants who have not signed when the Mexican tax reform actually takes effect will not be able to continue selling in Mexico.

In addition, there are also industry opinions that 2024 will be the graveyard for Mexican sellers. Not only are profits not guaranteed, but they will also have to bear risks such as unstable logistics timeliness, difficult customs clearance, seized containers and lost goods, an influx of new sellers, low-price competition, and depreciation of the peso.

However, the potential of Mexico's e-commerce market and the attractiveness of Chinese products still provide a broad market space for Chinese cross-border sellers. Changes in Mexico's tax policies will also prompt Chinese cross-border e-commerce sellers to transform and upgrade, such as optimizing supply chain management, adjusting product portfolios, reducing costs and increasing profits, increasing product added value, and providing buyers with more attractive goods and services. Chinese cross-border e-commerce platforms such as AliExpress, SHEIN and Temu are also actively responding to Mexico's new tax policies to maintain their competitiveness in the local market. These will become important factors for Chinese sellers to gain a foothold in Mexico.

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