The evolving landscape of global e-commerce presents both opportunities and challenges for merchants engaged in cross-border sales. Recent developments in international trade policies, particularly the imposition of new tariffs and elimination of key exemptions, have created a complex environment that necessitates strategic approaches to maintain competitiveness.
This white paper examines how larger international e-commerce merchants with multiple corporate entities can optimize their tax and duty positions through a Business-to-Business-to-Consumer (B2B2C) company structure.
While this paper focuses on a specific case (French-based fashion business importing a Italian manufactured good to the U.S. market), the principles outlined here apply across a wide range of industries and trade routes. Whether importing electronics from Japan, luxury goods from Europe, or textiles from India, the B2B2C strategy provides a framework for optimizing tax and duty positions.
The imposition of tariffs and import taxes on cross-border transactions is a common feature of global trade, with governments seeking to protect domestic industries, generate revenue, or respond to geopolitical considerations. For e-commerce merchants, these duties can significantly increase the cost of goods sold internationally, creating challenges in maintaining competitive pricing and profit margins.
To illustrate the impact of tariffs and import costs on cross-border transactions, let us consider a French based fashion retailer manufacturing high-end silk dresses in Italy. The wholsesale price per dress is assumed at $500, and its retail price on the U.S. web store is set at $2,000.
In the traditional B2C export model, when a U.S. customer purchases this silk dress, the package is subject to several layers of import duties and costs upon arrival in the United States:
Under this scenario, the shipment will incur total import costs of $353. These costs either reduce the company’s profit margin (if absorbed by the seller), or must be passed on to the customer (on top of any additional sales taxes), making the product less competitive.
This financial burden makes it essential for merchants operating in any cross-border market to explore strategies to minimize import cost exposure.
An alternative method for legally minimizing import duties is to adopt a B2B2C transaction structure. This approach leverages a merchant's local subsidary to optimize cost efficiency.
Instead of selling products directly from one country to an international customer, businesses can introduce a financial intermediary step by selling first to a subsidiary or related entity in the destination country at the lower wholesale "inter-company transfer" price.
Rather than selling products directly across borders to an international customer, businesses can add a financial intermediary by first selling the products to its local subsidiary in the destination country at a lower wholesale 'inter-company transfer' price. This reduces the declared value upon which import duties are calculated and permits allocation of the revenue to the local entity.
For example:
This strategy reduces duty payments because they are calculated based on wholesale rather than retail values — a significant saving when dealing with high-cost, high-margin products like luxury apparel.
Beyond the savings of restructuring the financial flow, merchants can further reduce the effective customs fees per order by consolidating shipments.
Express carriers like DHL, FedEx, and UPS all offer advanced solutions to aggregate shipments virtually. That aggregated master shipment can pass customs as a single entity and so share clearance fees. For example, aggregating 15 parcels in that way can reduce the customs processing fees from $15 down to just $1 per parcel, saving the seller a total of $210.
This tactic, when combined with the inter-company transfer pricing strategy, amplifies the import cost savings potential, making the B2B2C approach even more compelling for high-volume international sellers.
Notably, the physical flow of the shipments can remain the same in this setup — i.e. shipping directly from the dedicated fulfilment hub via express carrier to the buyer, and bypassing any local distribution center.
Traditional B2C Model:
B2B2C Model:
Total savings per dress: $183 - a 52% reduction in import costs!
The B2B2C strategy is not limited to specific trade routes or industries but applies broadly to any cross-border transaction where import duties or taxes are significant. For example:
While the potential savings are substantial, implementing a B2B2C structure requires careful planning:
The B2B2C strategy offers e-commerce merchants a powerful tool for optimizing tariffs and import costs across all cross-border transactions. By structuring operations strategically and ensuring compliance with transfer pricing rules and local regulations, businesses can achieve significant cost savings while enhancing competitiveness in international markets.
For merchants operating globally—whether importing electronics from Asia, luxury goods from Europe, or textiles from South America—this framework provides actionable insights into optimizing tax positions while supporting sustainable growth in an increasingly complex trade environment.