The U.S. trade environment is experiencing rapid transformation, driven by evolving tariff structures, compliance complexities, and shifts in e-commerce regulations. For UK and European brands in sectors such as apparel, footwear, cosmetics, supplements, and consumer electronics, selecting the appropriate import model is critical. This choice significantly influences cost management, risk exposure, and competitive advantage. Understanding the alignment of these models with your brand’s operational realities and strategic ambitions ensures sustainable success in the valuable yet challenging U.S. market.
The New Reality of U.S. Trade
The trade landscape for foreign e-commerce merchants entering the U.S. market is becoming increasingly complex. Recent shifts in U.S. trade policy—most notably, the end of the de minimis exemption for goods originating from China and Hong Kong—have reshaped cost dynamics and intensified compliance scrutiny. Meanwhile, the U.S. remains a top e-commerce destination, with robust consumer demand for international brands. Navigating this environment requires an informed selection of an import model that aligns with specific business characteristics, risk tolerance, and growth objectives.
The right import model is a strategic imperative. It directly impacts financial performance, risk management, and competitive positioning by influencing speed to market, customer experience, and compliance costs. Overseas sellers face distinct challenges given their geographic distance, regulatory unfamiliarity, and the necessity of efficient cross-border logistics.
Understanding the Three Primary Import Models
Direct-to-Consumer (DTC) Model
In the DTC model, products ship directly from international manufacturers, suppliers, or fulfillment centers to the U.S. consumer. This approach capitalizes on the $800 de minimis threshold for products not made in China or Hong Kong, streamlining customs clearance and minimizing infrastructure investment. The DTC model is ideal for brands with high SKU counts, rapid product innovation, and minimal exposure to tariffs. Cosmetics and supplements companies often prefer DTC due to simpler regulatory paths and cost-effective customer acquisition strategies. Consumer electronics brands may leverage DTC to avoid complex warranty fulfillment infrastructures.
Ideal for:
- Brands with extensive product lines who frequently introduce new SKUs
- Businesses aiming to minimize upfront cash investments
- Low duty exposure product categories
- Low average order value (AOV)
- Low returns rate
In-Country Enablement Model
This model involves bulk importing to U.S.-based warehouses for domestic fulfillment. It requires robust compliance management and offers reduced per-unit shipping costs, optimized delivery times, and marketplace integration. This model excels where rapid fulfillment and multiple sales channels (e.g. marketplaces, retailers) are competitive imperatives. Apparel and footwear brands, facing considerable tariffs and returns, benefit significantly from domestic fulfillment capabilities. Companies eyeing investment or acquisition should prioritize robust compliance via in-country enablement to demonstrate operational maturity.
Ideal for:
- High-duty categories like apparel and footwear, especially those impacted by recent tariff hikes
- Products made in China or Hong Kong that are excluded from de minimis entry
- Brands prioritizing rapid fulfillment and marketplace visibility
- Companies managing high product return rates
- Brands looking for “accelerated” sales growth in the U.S. market
- Businesses comfortable with robust inventory planning and forecasting
- Higher gross margins can offset increased opex fixed costs of mutli-warehouse operations with lower last mile shipping costs
B2B2C Model
Under B2B2C, products are imported and sold through a legitimate U.S. subsidiary. This model demands substantial business substance, including U.S. employees, operational control, and rigorous adherence to transfer pricing regulations. The B2B2C approach suits large, sophisticated enterprises with well-established U.S. entities capable of meeting strict IRS and CBP requirements. Its complexity is offset by enhanced control and duty optimizations, provided the necessary scale and operational maturity exist.
Ideal for:
- Large multinational enterprises with existing U.S. operations
- Brands with complex supply chains and substantial market presence
- Organizations capable of managing significant compliance and financial documentation requirements
- Companies with a clear understanding of indirect tax and transfer pricing rules for ecommerce operations
Strategic Decision Framework: When Each Model Makes Sense
DTC Model Optimization Scenarios
The DTC model excels for businesses with specific characteristics that align with its strengths. Brands managing 500+ SKUs with frequent new product launches benefit from the flexibility to test products without committing inventory. When products originate outside China/Hong Kong and qualify for de minimis treatment, the duty advantage remains significant.
Cash flow sensitive businesses appreciate avoiding inventory investments and warehouse commitments. For companies prioritizing minimal U.S. regulatory exposure, DTC limits touchpoints with U.S. authorities to customs clearance alone.
Industry considerations vary significantly. Cosmetics brands navigating FDA facility registrations may find DTC’s arm’s length approach advantageous. Supplement companies can maintain tighter control over product claims and marketing materials. Consumer electronics firms can manage warranty obligations through international service centers.
Key quantitative thresholds guide model selection. When average order values consistently fall below $800 and qualify for de minimis, DTC economics often prove superior. Brands introducing new products monthly or more frequently benefit from DTC’s flexibility. When customer acquisition costs approach 40% or more of average order value, avoiding inventory risk becomes crucial.
In-Country Enablement Optimization Scenarios
In-Country Enablement becomes optimal when market dynamics demand domestic fulfillment. High-duty categories – particularly apparel and footwear facing significant combined tariffs on China origin – see immediate benefits from importing at inventory values. When customers expect two-day delivery as standard, international shipping cannot compete.
Marketplace strategies often mandate domestic inventory. Amazon’s Buy Box algorithm favors FBA sellers, while Walmart Plus requires specific service levels. For fashion and footwear brands experiencing return rates exceeding 20%, domestic processing dramatically improves unit economics and customer experience.
Volume thresholds typically justify the infrastructure investment when monthly shipments exceed 1,000 units. Geographic concentration in specific regions enables efficient warehouse placement. Predictable seasonal patterns allow optimized inventory planning and cash flow management.
Compliance requirements increasingly drive In-Country adoption. Brands preparing for fundraising or acquisition benefit from clean U.S. operations. Products requiring FDA establishment registration, CPSC testing, or FTC substantiation find compliance easier with domestic presence.
B2B2C Model Optimization Scenarios
The B2B2C model suits sophisticated organizations with specific structural advantages. Legitimate U.S. subsidiaries with real substance – employees, decision-making authority, and operational independence – can leverage inter-company transactions effectively. The financial sophistication to manage transfer pricing documentation, defending positions under CBP and IRS scrutiny, becomes table stakes.
Scale justifies complexity when transfer pricing optimization yields seven-figure duty savings. The model particularly suits brands with concentrated product lines where per-SKU documentation burden remains manageable.
Risk-reward calculations must account for audit exposure and administrative burden. While transfer pricing can reduce duties by 50% or more, CBP and IRS challenges can result in significant adjustments and penalties. Permanent establishment implications affect global tax strategies, potentially triggering U.S. corporate taxation on worldwide income.
Critical Decision Factors: A Comprehensive Assessment Framework
Product and Supply Chain Factors
- SKU complexity: Management of extensive and dynamic product lines.
- Logistics: Warehouse location strategies impacting inventory turnover and customer delivery expectations.
Financial and Tax Implications
- Duty optimization: Strategic product sourcing and tariff classification.
- Tax exposure: Navigating sales tax complexities and federal corporate tax obligations.
Risk and Compliance Considerations
- Regulatory risks: Managing IOR responsibilities and product-specific compliance (FDA, FTC).
- Operational risk: Addressing return logistics, product quality, and customer service obligations.
Product and Supply Chain Factors
SKU complexity fundamentally shapes model selection. Brands managing thousands of SKUs face different challenges than those with focused product lines. New product velocity – whether you’re introducing items weekly or seasonally – determines needed flexibility. Diversification across manufacturers and suppliers affects risk concentration and customs strategies.
Logistics considerations extend beyond simple shipping. Warehouse network design must balance inventory investment against service levels. Working capital tied up in inventory affects overall business economics. Customer expectations for delivery speed vary by category but increasingly trend toward Amazon-set standards.
Financial and Tax Implications
Duty optimization requires sophisticated analysis beyond headline rates. Product classification under the Harmonized Tariff Schedule can vary interpretation, affecting rates by 10% or more. China/Hong Kong origin products face stacked tariffs approaching 200%, making inventory value importation crucial. Total landed cost calculations must incorporate not just duties but MPF fees, customs broker charges, and inventory carrying costs.
Tax exposure varies dramatically across models. State sales tax nexus triggers in different ways – DTC may avoid physical presence nexus while In-Country creates it immediately. Federal tax implications range from none in pure DTC to full corporate taxation in improperly structured B2B2C arrangements. Administrative burden across 47 state tax jurisdictions can overwhelm small finance teams.
Risk and Compliance Considerations
Regulatory risk has escalated with enhanced CBP enforcement. Importer of Record responsibilities create personal liability for company officers in cases of negligence. Product compliance requirements vary by category – cosmetics face FDA facility registration, supplements require careful claims substantiation, electronics need FCC certifications.
Operational risks multiply with model complexity. Returns processing can consume 5-8% of revenue in fashion categories. Customer service expectations require expertise in U.S. consumer protection laws. Quality control becomes challenging when inventory sits overseas, while product liability exposure increases with domestic presence.
Category Considerations
Apparel and Accessories
The seasonal and trend-driven nature demands responsive inventory strategies and efficient returns handling. Sustainability compliance, particularly under U.S. forced labor laws, remains paramount.
Cosmetics
Robust FDA compliance, careful management of shelf life, and substantiated marketing claims influence model choice, particularly emphasizing regulatory vigilance.
Supplements
Strict FDA registration, GMP compliance, and thorough claims substantiation significantly shape operational decisions.
Consumer Electronics
High certification standards (FCC, UL), warranty obligations, and rapid product evolution necessitate flexible and responsive import and fulfillment strategies.
Deep Dive: In-Country Enablement Implementation Strategies
There are two key approaches to the In-Country Enablement model. Whether brands prefer direct control through a Do-it-Yourself (DIY) approach or seek operational ease by outsourcing, each option requires careful consideration and alignment with business capabilities and long-term objectives.
DIY Approach: Building Your Own Infrastructure
Building an in-country fulfillment operation yourself offers maximum control but demands significant administrative investment. Forming a U.S. LLC involves selecting an appropriate jurisdiction (U.S. State) that balances costs, regulatory ease, and strategic business advantages. Establishing banking relationships requires rigorous compliance documentation, including detailed information about company ownership, business operations, and anticipated transaction volumes. Securing Importer of Record (IOR) registration demands careful navigation of U.S. Customs and Border Protection (CBP) procedures, including thorough documentation of business legitimacy, compliance processes, and adherence to product-specific regulatory standards.
Logistics partnerships form the operational backbone. Selecting an optimal third-party logistics (3PL) partner entails comprehensive vetting for warehousing capabilities, technology integration, fulfillment efficiency, geographic coverage, and scalability. Integration requirements span inventory management, order routing, and returns processing. Performance metrics must align with customer expectations while maintaining cost efficiency.
Brands choosing this path must manage extensive ongoing operational responsibilities, including continuous monitoring and compliance with varied state tax laws across 47 jurisdictions, regular financial and corporate tax filings, and detailed regulatory oversight across all aspects of customs clearance, product compliance, and logistics operations.
Resource requirements often surprise first-time implementers. Internal teams need expertise in customs classification, state tax law, and U.S. employment regulations. Technology infrastructure must connect international systems with U.S. operations. Professional services – legal, tax, customs brokers – create substantial ongoing costs.
Outsourced Approach
Third-party enablement offers faster implementation with lower capital requirements. Comprehensive providers handle IOR services including customs bonds and clearance expertise, MOR services managing sales tax and financial compliance, and integrated logistics from port to customer doorstep. Leveraging third‑party providers transforms in-country enablement into a frictionless solution—but it’s not just “hire a partner and forget it.” Top-tier outsourced setups typically include:
- Bulk Import & Strategic Customs Clearance
- Providers handle ocean or air freight coordination and act as your Importer of Record (IOR).
- They file customs entries using valuation methods compliant with regulations, ensuring duty is based on cost, significantly reducing tariffs.
- A single consolidated entry minimizes broker fees and Merchandise Processing Fees (MPF).
- Warehousing & Fulfillment Network
- Inventory is strategically stored across U.S. locations to maximize speed and reduce last-mile delivery costs.
- Domestic fulfillment enables rapid 2–3-day delivery, enhancing customer satisfaction.
- Returns are efficiently managed onshore, enabling restocking and refurbishment—essential for high-return sectors like fashion and beauty.
- Sales Tax Compliance & Merchant of Record (MOR) Services
- Providers handle registration, monitoring, collection, and remittance of sales tax across multiple states.
- This approach mitigates the complexity of tracking nexus requirements and reduces audit exposure.
- Marketplace & Wholesale Channel Enablement
- In-country inventory qualifies brands for participation in programs like Amazon FBA and Walmart Fulfillment.
- It facilitates easy integration with wholesale retailers and diverse B2B/B2C channels.
- Regulatory & Compliance Assurance
- Customs classification and valuation adhere strictly to CBP guidelines, avoiding risky workarounds.
- Comprehensive documentation trails ensure preparedness for audits and regulatory scrutiny.
- Scalable, Modular Stack
- Solutions are flexible, allowing brands to choose comprehensive packages or specific components (IOR, MOR, logistics).
- Providers offer scalable structures to seamlessly accommodate growing U.S. market volumes.
Future-Proofing Your Import Strategy
Trade policy remains volatile. Universal de minimis elimination looms once systems upgrade. Tariff levels fluctuate with political winds. New compliance requirements emerge regularly. Anticipating future trends, including technological integration, sustainability mandates, and trade policy evolutions, brands must choose adaptable models. Geographic and channel expansion plans should align with scalable operational frameworks to ensure agility and responsiveness to market shifts. Successful brands build flexibility into their operating models.
Action Framework and Next Steps
The shifting U.S. trade landscape demands strategic thinking about import models. No single approach fits all businesses – success requires aligning model characteristics with your specific situation. DTC preserves flexibility for diverse catalogs and new market entrants. In-Country Enablement optimizes for scale and service level requirements. B2B2C structures suit sophisticated operators with concentrated product lines.
Brands must meticulously align their business attributes with the strengths of each import model, carefully evaluating risk tolerance, financial implications, and operational complexities. Ongoing assessment, strategic planning, and compliance audits ensure that chosen import strategies remain effective amid continuous market and regulatory evolutions. Model flexibility prevents lock-in as businesses evolve. Starting with DTC doesn’t preclude later In-Country expansion. Hybrid approaches often optimize across product lines. Strategically selecting and continuously refining your import model is not just an operational decision—it is foundational to your brand’s U.S. market success.
The U.S. market remains compelling despite increased complexity. Brands that adapt quickly, choose appropriate import models, and execute effectively will capture disproportionate rewards. The window for action narrows as enforcement increases and competition intensifies. Success belongs to those who act decisively while others hesitate.
Ready to future-proof your international shipping? Passport is here to help you navigate these complexities, ensuring your U.S. market entry remains profitable, compliant, and worry-free.
Want to learn more? Watch our webinar recorded on Friday, May 16th, as we explore the impacts of the de minimis change and how brands can compliantly mitigate impacts. Watch here.
Want to discuss potential solutions? Reach out to Neoshi Chhadva, General Manager of U.S. Solutions, neoshi@passportglobal.com.
This article is provided for informational purposes only and does not constitute legal advice. Merchants are advised to consult with their customs broker and legal counsel to ensure compliance with all applicable laws and regulations based on their specific circumstances.
Authored by Thomas Taggart
Head of Global Trade | Passport
Thomas Taggart is a cross-border commerce leader with more than 20 years of experience in international shipping and regulatory affairs. As the Head of Global Trade, Thomas helps ecommerce brands go global by simplifying international trade, tax, and product compliance issues. Prior to Passport, he brought international shipping solutions to market through multiple roles in UPS’s product development organization.
