On July 1, 2026, the European Union officially abolished the duty-free exemption for imported small parcels under €150 that had been in place for 35 years. This policy change represents a seismic-level transformation for the global cross-border e-commerce industry, especially for Chinese sellers who relied on the "low-price small parcel" model.
In the past, imports under €150 enjoyed duty-free treatment, and a large number of Chinese cross-border e-commerce sellers used the "direct mail small parcel" model to enter the European market — €9.9 and €19.9 products proliferated, to the great distress of European domestic retailers. Now, the free lunch is officially over: every single parcel entering the EU requires customs duty payment, and tax compliance costs have risen dramatically.
### 2.1 Fiscal Pressure and Domestic Protection: A Two-Pronged Consideration
Behind the EU's cancellation of the de minimis exemption are dual pressures on public finances and industry. During the pandemic, cross-border small parcel imports surged, costing the EU substantial customs revenue; at the same time, large volumes of non-compliant goods — low-quality, IP-infringing, and safety-hazard products — flooded in through small parcel channels, disrupting the domestic retail ecosystem. Under this dual pressure, the EU chose a "one-size-fits-all" reform path.
### 2.2 Dramatic Policy Reversals in France and Italy
Notably, on the very day the policy took effect, France and Italy experienced dramatic "reversals" — France announced a suspension of the new rules, and Italy announced a postponement. Behind this lies the two countries' considerations for protecting their domestic e-commerce ecosystems, also reflecting the initial chaos and resistance in policy implementation. However, the general direction is set — suspensions and postponements are not cancellations, and sellers cannot afford to be complacent.
### 2.3 The IOSS Declaration System: A New Compliance Tool
The EU simultaneously optimized the IOSS (Import One-Stop-Shop) system, allowing sellers to register IOSS in any EU member state and declare VAT uniformly across all member states. IOSS's advantage is that VAT can be prepaid during customs clearance, so goods do not need to go through VAT clearance again after arriving in the EU, significantly shortening customs clearance time. For compliant sellers, IOSS is the most effective tool for responding to the new rules.
### 3.1 The "Low-Price Free Shipping" Model Takes a Deadly Hit
The bestseller model of €9.9 free shipping and winning through volume faces annihilation under the new rules. The maneuverability of "passing taxes on to consumers" has been greatly squeezed — with customs duties layered on top of VAT, the combined tax burden increases by 10%–20%, completely eroding the price competitiveness of low-price goods. A large number of sellers dependent on low-price small parcels face a dilemma: raising prices loses customers, not raising prices means selling at a loss.
### 3.2 Cost Restructuring for Direct Mail Models
The new costs of customs duty plus VAT directly squeeze the profit margins of direct mail small parcel models. Sellers need to recalculate landed costs inclusive of taxes and evaluate whether "split shipment" workarounds (such as dividing orders to ship separately) can legally avoid customs duties — however, while this approach may be technically feasible, it carries compliance risks and requires careful evaluation.
### 3.3 Overseas Warehouse Model Gets a Boost
The policy substantively benefits the overseas warehouse model. Shipping goods in bulk to EU overseas warehouses and completing sorting and delivery locally gives sellers more flexible control over tax compliance costs, without worrying about single-parcel customs clearance delays. Although the overseas warehouse model increases first-mile and storage costs, compared to the new tax burden on direct mail small parcels, the all-in cost may actually be better.
### 4.1 Demand Differentiation in First-Mile Logistics
Direct mail small parcel volumes will decline significantly, but demand for "consolidated parcel" logistics (merging multiple small parcels into one customs declaration) will rise — logistics service providers can help sellers reduce taxes through compliant "consolidated customs declaration" services. At the same time, demand for batch ocean freight first-mile plus European overseas warehouse pre-positioning will grow substantially.
### 4.2 A New Blue Ocean for Tax Compliance Services
The EU's new rules have generated massive demand for VAT registration, declaration, and European compliance services. Freight forwarders and cross-border service providers capable of offering "logistics + tax compliance" one-stop services will gain new growth points during this period of change. IOSS registration, EORI number applications, and intra-EU VAT declarations — these compliance services are becoming new profit growth engines.
### 4.3 Redesigning European Parcel Special Lines
Traditional "low-declaration" small parcel routes will become unsustainable. Logistics service providers need to redesign compliant European parcel special-line products — covering full-chain services including compliant customs declaration, legitimate IOSS declarations, and destination VAT agency payment, helping sellers transition smoothly.
First, complete the VAT compliance system as soon as possible. Completing VAT registration in major target markets (Germany, France, Spain) and integrating with the IOSS system are prerequisites for entering the EU market. Do not wait until goods are delayed at customs to regret it.
Second, reassess your business model. The profit margin of the low-price small parcel model has been greatly compressed, and product structure and pricing strategies need to be reevaluated. Higher-average-order-value products still retain some competitiveness after tax; low-price products need to consider shifting to European localized operations.
Third, strengthen cooperation with professional compliance service providers. The EU tax system is complex and continuously evolving. Working with qualified, experienced professional firms is more efficient and safer than figuring things out independently.
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