Couriers say less Internet purchases could translate into less cargo space for exports

[Dolores]

Dominican courier companies are concerned they would see considerable drop in sales if Congress approves the Ministry of Hacienda proposal to apply VAT to the import of low value goods (LVG), or (Envios de Poco Valor). These are purchases normally made via the Internet and that are shipped here via courier with a cost, insurance and freight (CIF) value of US$200 or less for the goods. As proposed, the VAT would be calculated based on the CIF value of these products, regardless if they are for personal use.

The proposal grants the Tax Agency (DGII) 120 days to prepare the necessary regulations for implementing the measure after it is passed in Congress.

The Dominican association of couriers (Asodeo) alerts that the tax on low value goods would affect the availability of cargo space for exports, impacting the country’s desired positioning as a regional logistics hub.

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[windeguy]

With this being the 3rd or 4th time they try and tax these under $200 USD shipments, will it actually happen this time?

 

[JLSawmam]

Can someone explain how this tax would affect cargo space for exports?

 

[josh2203]

Can someone explain how this tax would affect cargo space for exports?

People order less, so imports take less space so this same space cannot be used for exports anymore?

 

[Manuel01]

Can someone explain how this tax would affect cargo space for exports?

In the early days of forwarders, these Couriers used available Cargo Space in Passenger Airplanes (mostly AA) that flew from Miami to SDQ. Because of the dramatic Increase of Volume, today they use almost only dedicated Cargo Planes for this Service. The come in with your Amazon orders etc. and fly back with time sensitive Dom. Export Articles. If the Planes needs to fly in empty and are only loaded upon return to the US, costs would almost double.

 

[PJT]

Can someone explain how this tax would affect cargo space for exports?

The tax would reduce the amount of cargo for inbound courier shipments, cargo that fills aircraft space. Air cargo carriers are determined every aircraft must be full to make revenue. They do not fly empty. It costs cargo aircraft owners about US$ 29,000 an hour, full or empty, to operate an aircraft. If they are unable to fill the aircraft on a regular consistent basis, flights are reduced. Reduced inbound flights means less aircraft (space) available for outbound flights. It would drive up the cargo costs for Dominican exporters wanting to use remaining flights. The tax on internet purchases under US$ 200 brings trouble.

Regards,

PJT

 

[chico bill]

18% tax on Amazon purchases (the majority under $200) will kill many of the courier's business.
The DR is embarking on taxation that, if passed, implemented and enforced, would pretty much cripple the economy.

What's that old expression your dad used to say "You're going to play with it till you break it" and Abinader seems to be ignoring that advice

 

[chico bill]

The tax would reduce the amount of cargo for inbound courier shipments, cargo that fills aircraft space. Air cargo carriers are determined every aircraft must be full to make revenue. They do not fly empty. It costs cargo aircraft owners about US$ 29,000 an hour, full or empty, to operate an aircraft. If they are unable to fill the aircraft on a regular consistent basis, flights are reduced. Reduced inbound flights means less aircraft (space) available for outbound flights. It would drive up the cargo costs for Dominican exporters wanting to use remaining flights. The tax on internet purchases under US$ 200 brings trouble.

Regards,

PJT

How did you arrive at those operating costs ? What numbers are you using for asset depreciation, aviation fuel, airport fees and crew expenses

 

[chicagoan14]

With this being the 3rd or 4th time they try and tax these under $200 USD shipments, will it actually happen this time?

Something feels different this time around. Can't put my finger on it. A lot of huge announcements in the last three weeks.

 

[PJT]

How did you arrive at those operating costs ? What numbers are you using for asset depreciation, aviation fuel, airport fees and crew expenses

Many years back working as a transportation and distribution supervisor for a very large company this poster had opportunities to visit and evaluate cargo companies. One of them was Flying Tigers, who had recently at that time acquired 747 cargo aircraft. Flying Tigers was bought by FedEx in 1988. During a visit at FT's Boston's Logan facility this supervisor has the chance to view the empty interior of one of the 747's. The FT sales director mentioned it was costing them US$ 25,000 hour to operate the aircraft, that included all costs. This empty plane sitting idle, during this poster's 3 hr visit ate up US$ 75,000 while making no revenue. A Google search for "how much does it cost an hour to operate a large air cargo planes" was done and the result was $28,744. It is obvious operating costs have gone up from the $25,000 mentioned many years ago to this poster. It would be reasonable to think present operating costs are considerably more than $29,000 said in the Google search.

Regards,

PJT

 

[windeguy]

Something feels different this time around. Can't put my finger on it. A lot of huge announcements in the last three weeks.

I do agree. This time the PRM has full control of the government, but we will see if the negative reactions from businesses can overcome that.

 

[josh2203]

18% tax on Amazon purchases (the majority under $200) will kill many of the courier's business.
The DR is embarking on taxation that, if passed, implemented and enforced, would pretty much cripple the economy.

What's that old expression your dad used to say "You're going to play with it till you break it" and Abinader seems to be ignoring that advice

Very much so. As I wrote in the other thread about this same topic, it appears to be impossible for a Dominican retailer to grasp the idea of operate with competition and try to do things better/differently. In Europe as well, the internet/ecommerce has killed many small brick-and-mortar stores, but not all of them, as many have thought how can they offer something for the customer that makes them come to us instead of ordering online. But no, a DR retailer would not want to go this extra mile, better to sit quietly, do less work and complain more. I realize you cannot compare these two scenarios 100 %, but the idea is the same, and many have indeed survived...

 

[chicagoan14]

I do agree. This time the PRM has full control of the government, but we will see if the negative reactions from businesses can overcome that.

Even the small businesses i purchase from are sending out petitions by whatsapp.

I saw in the news today the government was "open" to negotiate

 

[chicagoan14]

Very much so. As I wrote in the other thread about this same topic, it appears to be impossible for a Dominican retailer to grasp the idea of operate with competition and try to do things better/differently. In Europe as well, the internet/ecommerce has killed many small brick-and-mortar stores, but not all of them, as many have thought how can they offer something for the customer that makes them come to us instead of ordering online. But no, a DR retailer would not want to go this extra mile, better to sit quietly, do less work and complain more. I realize you cannot compare these two scenarios 100 %, but the idea is the same, and many have indeed survived...

I agree. Many of the products in these small stores are not quality or big-name brands. It's just greed in my opinion more often than not. As said in the other thread, they don't want a competitive market they enjoying monopolizing it.

If this were to happen, with certain products, once you factor in the cost of import and convenience people will just resort to purchasing on the island.

 

[Manuel01]

18% tax on Amazon purchases (the majority under $200) will kill many of the courier's business.
The DR is embarking on taxation that, if passed, implemented and enforced, would pretty much cripple the economy.

What's that old expression your dad used to say "You're going to play with it till you break it" and Abinader seems to be ignoring that advice

I agree but for a different reason; i think that the aditional 18% would be a bitter pill but a swallowable one. I'm much more afraid of the aditional delay that this will cause. I'm pretty sure that the entitre system would collapse.

 

[josh2203]

If this were to happen, with certain products, once you factor in the cost of import and convenience people will just resort to purchasing on the island.

With certain products yes people would resort in buying locally, but there will still be those products that even after the taxes and perhaps delays are worth being ordered online. Obviously, that's much less than now...

An example of something I would order online even if taxed are certain car parts. A few years back, I needed a new part of A/C. Price on Ebay was around 15 USD, price locally 2800 DOP. Had to buy locally as was in a hurry, the part had no warranty and it failed after a month. After that, purchased the Ebay one and after one year going strong...

 

[chicagoan14]

With certain products yes people would resort in buying locally, but there will still be those products that even after the taxes and perhaps delays are worth being ordered online. Obviously, that's much less than now...

An example of something I would order online even if taxed are certain car parts. A few years back, I needed a new part of A/C. Price on Ebay was around 15 USD, price locally 2800 DOP. Had to buy locally as was in a hurry, the part had no warranty and it failed after a month. After that, purchased the Ebay one and after one year going strong...

Absolutely! There are many products a lot of us order that there is no market for here. I think they should protect certain items from excessive taxes.

When I saw Forever 21 close at Agora I knew they'd eventually make some changes. They can't compete anymore.

 

[Manuel01]

Absolutely! There are many products a lot of us order that there is no market for here. I think they should protect certain items from excessive taxes.

When I saw Forever 21 close at Agora I knew they'd eventually make some changes. They can't compete anymore.

FOREVER 21 went broke worldwide. Has nothing to do with DR Tax system.

 

[chicagoan14]

FOREVER 21 went broke worldwide. Has nothing to do with DR Tax system.

What i am suggesting is certain retailers flourish here despite underperforming in other countries. Payless is about belly up stateside but are still relatively successful here.

 

[windeguy]

There is some pushback. Of course there would be when you want to eliminate CONFOTUR, tax items under $200, Tax more real estate, etc, etc..
See the link for those pushbacks so far:

Dominican Today | Search results for tax reform

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