Core Viewpoint - The European Union's decision to eliminate the tax exemption for low-value imports under €150 will significantly impact cross-border platforms and sellers, particularly those relying on low-cost small packages [2][9]. Group 1: Policy Changes and Impacts - The EU Council has approved a resolution to end the tax exemption for small packages, which is expected to take effect by 2026, adding a processing fee of approximately €2 per package [2]. - In 2024, an estimated 4.6 billion low-value packages are projected to enter the EU, with 91% originating from China [2]. - This policy mirrors the U.S. decision to cancel T86 earlier this year, which forced platforms like Temu to raise prices, resulting in a significant drop in order volume [2][3]. Group 2: Seller Strategies and Market Reactions - Temu has introduced a semi-managed Y2 model in Europe, allowing sellers to ship directly from domestic locations to overseas warehouses, which is expected to reduce order volume for fully managed services [4]. - Despite the success of the Y2 model in the U.S., European sellers remain cautious, with many still observing the market before making a transition [4][5]. - The complexity of European regulations, such as VAT requirements and compliance with local laws, poses significant challenges for sellers considering the Y2 model [4][5]. Group 3: Logistics Industry Dynamics - Logistics companies that depend on small package direct shipping are facing severe challenges, with a notable decline in order volume impacting their growth plans [6]. - Conversely, overseas warehouse service providers are experiencing increased demand as the new regulations necessitate higher local warehousing and logistics capabilities [6]. - The anticipated rise in local warehousing in Europe is seen as an opportunity for domestic players to expand their logistics operations [6]. Group 4: Future Outlook and Market Adjustments - The transition period before the new EU regulations take effect is viewed as a critical time for platforms and sellers to adjust their strategies [10]. - The fragmented nature of the European market complicates compliance and operational strategies, creating potential for gray market activities as sellers seek lower costs and simpler procedures [7][10]. - The overall direction of the EU's policy change is unlikely to reverse, signaling the end of the small package direct shipping model [9].

Core Viewpoint - In recent months, Chinese cross-border sellers and platforms have expanded into new markets, with significant revenue increases in Europe, surpassing levels prior to the U.S. termination of the small package tax exemption policy [2] Group 1: Impact of U.S. Policy Change - In May, China's exports of low-value small packages to the U.S. fell by 39% year-on-year and 53% month-on-month, reaching 7.84 billion yuan, the lowest level since the beginning of 2023 [2] - The termination of the small package tax exemption policy by the U.S. government has led to a drastic decline in sales for platforms like SHEIN and Temu, with some sellers reporting a drop of over 50% in sales [2][3] - Following the policy change, SHEIN's sales in the U.S. decreased by 23% and Temu's by 17% in the week leading up to the termination, with Temu's weekly sales dropping by over 25% in the subsequent weeks [3] Group 2: Strategic Adjustments by Platforms - SHEIN and Temu are shifting their focus away from the U.S. market, increasing digital advertising spending in Europe, with SHEIN's ad spend in France and the UK rising by 35% and Temu's by 40% and 20% respectively [5] - A seller reported that their income from Europe has significantly increased, with earnings rising from 14,000 yuan in April to nearly 20,000 yuan in May, indicating a positive impact from the platforms' advertising efforts [5] - In May, China's small package exports globally increased by 42%, with Malaysia receiving over 5.5 billion yuan worth of goods, following the U.S. [5] Group 3: Transition to New Operational Models - Platforms are accelerating the transition to a semi-managed model, allowing sellers to find logistics companies independently for direct shipping to the U.S. [6] - Temu has introduced a "Y2 model" supporting domestic direct shipping, while SHEIN has launched a U.S. POP (self-operated) model, moving away from the previously dominant fully managed model [6] - The Y2 model allows for higher profit margins per item compared to the fully managed model, with one order under Y2 potentially equating to 5-10 orders under the previous model [6]