Have you ordered an item from China and wondered how do they actually make any money? Items can cost as little as 99p and that includes free shipping! The items are being shipped halfway around the world, and somehow the Chinese vendors are still making a profit.
To put it into context, if you have a franking machine it will cost you 41p just to send the item via second class post. It will cost an additional 2p for the bag it goes on, never mind the cost of labels etc.
Cheap post for the Chinese
The cost of sending an item from China can be as little as half a pence! This is due to the Universal Postal Union which is a treaty organization. Its remit is to manage the compensation of costs for mail delivery between countries. The last time compensation rates were set, China was classed as a developing country along with others like Turkey and Cuba. Countries like the USA and UK were net exporters of mail and so it was deemed fair to give China almost free access due to the way compensation works under the treaty.
No VAT for Beijing Inc.
In addition to almost free postal access, under EU rules, packages sent valued at under £15 are exempt from VAT. This gives Chinese traders incredible access to our market, all the while disadvantaging British companies. No wonder we are being flooded with cheap Chinese goods.
Trump to the Rescue
It is not all doom and gloom though, thanks to President Trump this is all set to change this year. In 2018 he served a one year notice to withdraw from the treaty due to the massive cost on the US Postal Service. A new set of terms have been negotiated which puts an end to the unfair access into our markets. This will be effective from July 2020. when we will be able to set our own tariffs on incoming mail.
At the end of this month, we leave the EU. Hopefully, then the UK government change the law for VAT thresholds
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