Cross-border payment firms are bracing for a 15-25% fall in ecommerce shipments from India to the United States after the scrapping of a provision allowing tax-free import of packages worth up to $800 (about Rs 70,000) into the US takes effect on August 29.
President Donald Trump on May 2 signed an executive order ending the ‘de minimis’ exemption, derived from a Latin phrase which refers to a principle where minor matters are disregarded by the law. Indian exporters, particularly small businesses and online-first direct-to-consumer (D2C) brands, benefited from this facility as it enabled them to compete in a favourable environment in the world’s largest consumer market, said industry executives.
“In the short term, we should brace for a 15-25% decline in shipment volumes to the US, as the new duty structures will cause immediate friction in consumer buying behaviour,” said Sanjay Tripathi, cofounder, BriskPe, a Mumbai-based cross-border payment firm.
The impact is likely to be most pronounced for Indian sellers of handicrafts, textiles, jewellery and home decor items through American online commerce portals such as Amazon and eBay.
“It will disproportionately hurt small businesses and entrepreneurs in the growing India-to-US ecommerce market. We estimate that roughly 4-6% of India's goods exports to the United States will be directly affected,” said Movin Jain, cofounder of Skydo, a Bengaluru-based cross-border focused payment firm.
Amazon runs a global seller programme which allows Indian sellers to send shipment to the US either directly to consumers or to American stores. Amazon’s Global Selling website shows that in 2023, the latest year for which data is available, Indians sold products worth more than $8 billion through this programme.
With the US doing away with the de minimis exemption, exporters might shift to sending products by sea, which means longer delivery schedules.
Besides, for American consumers of goods such as ethnic jewellery made in India, prices are likely to shoot up, hurting both sides.
While specific data pertaining to exports to the US through this route is not available, commerce ministry figures show that in July India exported tea worth Rs 815 crore, gems and jewellery worth Rs 20,577 crore and handicrafts worth Rs 1,320 crore. A large part of the consignments through this trade route would comprise these products, according to industry insiders.
Tripathy of BriskPe said as per estimates more than 40% of India’s shipments to the US were routed through this channel, particularly by small and mid-sized exporters who sell through Amazon, Walmart, Etsy, eBay and their own D2C storefronts. “Its disruption will, therefore, ripple across not only sellers but also logistics players, payment processors and marketplaces that thrive on sub-$800 parcel flows,” he said.
The Reserve Bank of India recently tightened oversight of players such as BriskPe, Skydo and PayGlocal who are focused on processing cross-border payments. Large payment firms such as Cashfree and Razorpay also operate in this sector, serving exporters and importers.
Regulatory licences helped these firms attract venture funding. While BriskPe raised $5 million from PayU last year, Skydo raised $10 million from Elevation Capital and others. PayGlocal has raised around $17 million from the likes of Peak XV Partners and Tiger Global.
“We cater to online service providers, edtech platforms and software exporters. That segment will not be hurt but ecommerce sellers and D2C brands were definitely among the new growing client base for these payment firms,” a founder of a payment firm said on condition of anonymity.
Among the new merchants being onboarded, about 40% would be global ecommerce sellers, according to the founder.
Many of these firms may shift their focus towards medium and large exporters, a sector usually catered to by banks. Software exports, which account for almost 50% of the India-US trade, remain untouched by the trade war.
Jain of Skydo said Indian sellers will not only have to bear shrinking business margins but also undertake the paperwork related to tariff payments.
The US has announced a 50% tariff on India, including 25% as penalty for buying Russian oil which is set to take effect on August 27.
Industry executives, however, said that small businesses tend to be resilient and hence sellers may rework their strategies. The sellers have multiple options from consolidating shipments to spread taxes across multiple orders, target high-value categories where margins are better and the levies can be absorbed, they said. Besides, mid-sized sellers may look to set up fulfilment centres closer to the US to reduce logistics costs.
“In the long term, we'll likely see sellers diversify into emerging ecommerce trade corridors, particularly duty-free markets like the UAE and the UK,” Jain said.
President Donald Trump on May 2 signed an executive order ending the ‘de minimis’ exemption, derived from a Latin phrase which refers to a principle where minor matters are disregarded by the law. Indian exporters, particularly small businesses and online-first direct-to-consumer (D2C) brands, benefited from this facility as it enabled them to compete in a favourable environment in the world’s largest consumer market, said industry executives.
“In the short term, we should brace for a 15-25% decline in shipment volumes to the US, as the new duty structures will cause immediate friction in consumer buying behaviour,” said Sanjay Tripathi, cofounder, BriskPe, a Mumbai-based cross-border payment firm.
The impact is likely to be most pronounced for Indian sellers of handicrafts, textiles, jewellery and home decor items through American online commerce portals such as Amazon and eBay.
“It will disproportionately hurt small businesses and entrepreneurs in the growing India-to-US ecommerce market. We estimate that roughly 4-6% of India's goods exports to the United States will be directly affected,” said Movin Jain, cofounder of Skydo, a Bengaluru-based cross-border focused payment firm.
Amazon runs a global seller programme which allows Indian sellers to send shipment to the US either directly to consumers or to American stores. Amazon’s Global Selling website shows that in 2023, the latest year for which data is available, Indians sold products worth more than $8 billion through this programme.
With the US doing away with the de minimis exemption, exporters might shift to sending products by sea, which means longer delivery schedules.
Besides, for American consumers of goods such as ethnic jewellery made in India, prices are likely to shoot up, hurting both sides.
While specific data pertaining to exports to the US through this route is not available, commerce ministry figures show that in July India exported tea worth Rs 815 crore, gems and jewellery worth Rs 20,577 crore and handicrafts worth Rs 1,320 crore. A large part of the consignments through this trade route would comprise these products, according to industry insiders.
Tripathy of BriskPe said as per estimates more than 40% of India’s shipments to the US were routed through this channel, particularly by small and mid-sized exporters who sell through Amazon, Walmart, Etsy, eBay and their own D2C storefronts. “Its disruption will, therefore, ripple across not only sellers but also logistics players, payment processors and marketplaces that thrive on sub-$800 parcel flows,” he said.
The Reserve Bank of India recently tightened oversight of players such as BriskPe, Skydo and PayGlocal who are focused on processing cross-border payments. Large payment firms such as Cashfree and Razorpay also operate in this sector, serving exporters and importers.
Regulatory licences helped these firms attract venture funding. While BriskPe raised $5 million from PayU last year, Skydo raised $10 million from Elevation Capital and others. PayGlocal has raised around $17 million from the likes of Peak XV Partners and Tiger Global.
“We cater to online service providers, edtech platforms and software exporters. That segment will not be hurt but ecommerce sellers and D2C brands were definitely among the new growing client base for these payment firms,” a founder of a payment firm said on condition of anonymity.
Among the new merchants being onboarded, about 40% would be global ecommerce sellers, according to the founder.
Many of these firms may shift their focus towards medium and large exporters, a sector usually catered to by banks. Software exports, which account for almost 50% of the India-US trade, remain untouched by the trade war.
Jain of Skydo said Indian sellers will not only have to bear shrinking business margins but also undertake the paperwork related to tariff payments.
The US has announced a 50% tariff on India, including 25% as penalty for buying Russian oil which is set to take effect on August 27.
Industry executives, however, said that small businesses tend to be resilient and hence sellers may rework their strategies. The sellers have multiple options from consolidating shipments to spread taxes across multiple orders, target high-value categories where margins are better and the levies can be absorbed, they said. Besides, mid-sized sellers may look to set up fulfilment centres closer to the US to reduce logistics costs.
“In the long term, we'll likely see sellers diversify into emerging ecommerce trade corridors, particularly duty-free markets like the UAE and the UK,” Jain said.
