Shipping prices could soon be rising for cheap online stores like Shein and Temu.
Changes from next month will add fees and levies to small parcels crossing the border, making them fairer and helping cover Customs costs.
It should save taxpayers $70 million in parcel subsidies.
Customs Minister Casey Costello told Kerre Woodham Mornings border control can't cope with the more than 24 million packages entering New Zealand each year.
She says the relationship between retailer and couriers may need changing, and could increase the price of some goods.
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Speaker 1 (00:06):
You're listening to the Carrywood and Morning's podcast from News Talks, he'd.
Speaker 2 (00:10):
Be This is what I didn't even realize was a
problem that existed. Free shipping from e commerce businesses like
Shane and Timu may become a thing of the past
when new levees come into force on April first. Changes
to fees and levees for goods crossing New Zealand's border
are being introduced to ensure they're farer and to better
(00:31):
recover the cost of customs. The costs to customs the changes,
the change to charges for small packages next month means
taxpayers will no longer spend seventy million dollars seventy million
dollars subsidizing cheap e commerce packages. Minister of Customs Casey
(00:52):
Costello joins me, Now, good morning.
Speaker 3 (00:55):
To you, Good morning, how are you well perplexed?
Speaker 2 (00:59):
I didn't even know this existed. So not only are
our retailers having to battle the cheap online retailers, they're
subsidizing the shipping of these cheap goods to New Zealand.
Speaker 3 (01:13):
God, thank you, thank you for highlighting that. Yeah, there
is fundamentally they're sure and I think the big thing
that I mean, we were kind and aware of it.
Like New Zealanders, we sort of know that we've been
doing a lot more of it. But if you look
sort of twenty seventeen twenty eighteen, we had about seven
point eight million packages. By twenty three, twenty four we
(01:33):
had twenty four million packages. So it's tripled over tripled
in that short space of time and continues to grow.
And therefore, you know, the process of dealing with those packages,
inspecting them, verifying them was being incurred by the taxpayer,
effectively and because there was a fixed cost. Not trying
(01:55):
to overcomplicate it, but effectively, there's a consignment sheep that
lists a whole bunch of packages, and so the small
freight companies were doing by consignment, which could have hundreds
of items on it, and that meant that we could
only charge per consignment. So it shifted rather than being
(02:16):
by consignment to per package, and that's that's really they shift.
And we're talking a few cents. But given that we
don't pay like when you order those things generally it's
posted in handling included, that cost isn't being incurred. It's
being incurred by the courier companies that are processing packages.
Speaker 2 (02:36):
So when Customs became aware that they were subsidizing these packages,
did they not say we're not We're not going to
do this anymore. You have to you have to pay
for the cost of process.
Speaker 3 (02:50):
Yeah. So we started a consultation process as soon as
Customs saw that there was a big spike, because this
is a change for the businesses that have these international
agreements around packet baggage, posted handling stuff. So we started
a very dec our consultation process and then provided a
lead in time before this was introduced, so that the
(03:12):
legislation passed last year and it comes into effect on
the first of Apful this year.
Speaker 2 (03:16):
And are other countries doing this as well or did
they not have the same methods?
Speaker 3 (03:21):
Slightly different, Yeah, different systems, but yeah, all of the
all of those being impacted by this massive increase in
the e commerce market has had to change their systems.
And so Customs went out and looked at what other
countries were doing and applied what would work within our system,
and that's that's where we're heading it. It was something
(03:43):
that because it grew so rapidly and I think you know,
we all saw the spike post COVID we're suddenly buying
things online. Was just something we did that was really
where where we headed. So we headed down this path
of recognizing that there is a massive shift and customs
runs and an activity based costing model, so their costs
(04:05):
are paid for within the cost center of the work
they're doing. So it's not like we can collect money
off here and use it to pay for airport presence
or something like. It has to be the cost recovered
has spent where it is, and so there's very meticulous
costing based models, activity based costing models that are put
(04:26):
in at which determined how much we were spending. So
the consultation process has been a good two and a
half years of consultation with the sector, the end users
to understand what the implications would be, and then work
through the legislation and then pass the legislation and then
give lead and time to bring it into effect.
Speaker 2 (04:44):
So how long have we been paying as taxpayers? How
long have we been paying this sort of money? Is
it only a matter of a couple of years.
Speaker 3 (04:54):
Or it's been recently As I said, you know, we
were sort of dealing with you know, sort of seven
million packages up to twenty four million packages so it
was a very quick increase over a short space of time.
So you know that the the the process of consignment
costing was was okay because we were getting consignment sheets
(05:16):
with hundreds of items on it, so we could we
could deal with it. But then you know, with this
rapid increase, almost immediately customs went into a consultation price.
We can't continue down this pathway.
Speaker 2 (05:29):
So was it COVID? Was it the COVID shopping the
era that saw that messive increase.
Speaker 3 (05:34):
If you looked at if you looked at the spike,
it really really did peak at that period, you know,
and we all did you sort of became you know,
we couldn't go online, so we had a lot of
time on a hand, so we were going online and
shopping and so we built more trust in that and
I think collectively around the country we saw people adopting
(05:54):
that method and becoming more trusting in that online purchases model.
And so yeah, so I think that there what you
could see in the numbers that there was a big
spike at that pure but it started increasing sort of
from about twenty eighteen.
Speaker 2 (06:10):
Oh right, okay, but that's still quite a long time
to be subsidizing these huge online retailers. So when I
look at my I've just gone on to Temu, I
think I've maybe bought one thing off Timu. But if
I go on to Timu now and I look at
this women's floral print casual, short sleeved dress, sequined in
mint green, and it's eighteen dollars and nine cents, and
(06:32):
god knows how little the people who were paid to
make it. Yes, yeah, how much will I now have
to pay if I'm adding on shipping?
Speaker 3 (06:43):
But no difference to you, the consumer. So these these
freight companies have agreements with the retailer directly, So the
retailer has a contract agreement around what they charge for
those packages. So it's the retailer, doesn't you know that
(07:05):
the consumer doesn't pay anything. What will What will be
incurred is the price for the relationship between the retailer
and the career company, and that agreement may need some changing.
So therefore there may be a few cents added onto
your eating dollar dress to offset that cost, but that
will be over time once they work out what the
(07:27):
what that actually impact is going to be.
Speaker 2 (07:29):
Because it doesn't seem Yeah, I've always wondered there's no
such thing as free anything. So when they say free
shipping for my eighteen dollar dress, somebody's payingful somewhere.
Speaker 3 (07:38):
Yeah, so's it's included in that costing. On that costing
items you do get a few, you know, the more
high end retailers will charge you postage and handling for
but those bigger companies, they work on volume, and therefore
that the career company that has the relationship with them
and curse those costs. Okay, as part of that agreement.
Speaker 2 (07:59):
I've got a question from one of our listeners, Helen's
just making should we can get Kat on to ask
us where are we here?
Speaker 3 (08:11):
We go?
Speaker 2 (08:12):
Kat, good morning to.
Speaker 4 (08:13):
You, Good morning, how are y good?
Speaker 2 (08:16):
Thank you? You've got a question for the minister.
Speaker 4 (08:18):
Yeah, I dove that we're a small business. We produce
and we ship from New Zealand. Seventy of ourseals are
overseas and our average order value is fifty dollars. This
adds on a five percent surcharge to everything we send
and it is the difference between us having to produce
(08:43):
internationally and ship internationally. So it's a really really big
deal for us and we don't. But we didn't really
hear about this until it had already been done, and
even talking through the business chambers they were also unaware.
So yeah, it's quite huge fast this morning.
Speaker 3 (09:06):
Have you spoken to customs about this because you're talking
about export relationships? This is the proport.
Speaker 4 (09:14):
So export as well, forty eight for every package exported.
So it's a low value export. Our average export value
is fifty dollars. We send up to one thousand parcels
a day, so yeah, and it's to dollars forty eight
on top of everyone. I get the import one hundred,
(09:38):
but the export as a first of eight pril total
forty eight.
Speaker 2 (09:45):
So you have been told that as an exporter you
will incur this cost as well. Yes, okay, is that true, minister.
Speaker 3 (09:53):
Yeah, I'm just I'm just clarifying. So you're you're the
what what are you currently paying at the moment?
Speaker 4 (10:01):
What do you the moment? So we just pay for
our career charges. So that's ten dollars fast day, that's
tot dollars forty a going on totals forty eight going
on top of that, so it's almost a thirty percent
increase and our chapage and because our average order value
is only first day, it's a five percent increase on
(10:22):
our bottom line.
Speaker 3 (10:25):
Yeah, so there is a table. I can't appreciate it,
but there's a lot of There's a lot of variables
between whether it's going by air, whether it's going by sea.
There's different cost things around our structures. So I'd love
to give you the detailed answers over this call, but
there is a range of depending on the value of
the item, be tending on whether it's going by sea
(10:46):
or by air, what are the different charges, and whether
it's perishable goods versus non perishable goods, et cetera. So yeah,
I mean I could give you lots of details, but yes,
we have. We consulted widely in Customs. If you feel
that you weren't consulted with or that your business association
wasn't where I would encourage you to contact Customs the
(11:06):
right directly?
Speaker 2 (11:08):
Is that where CAT should go next to.
Speaker 3 (11:11):
I think, yeah, I think contact Customs directly and explain
what your situation is because there is variables in this
space and I don't want to give you the incorrect
advice around what this is. Because there was extensive consultation
around what those impacts and in some areas the costs
have actually gone down based on the sectopicy based costing
model around where these costs are being incurred. Says, there
(11:33):
has been decreases in costs for some of the charges
based upon where these fees are incurred. So I just, yeah,
I didn't want to provide advice that's incorrect.
Speaker 2 (11:45):
Okay, So go to Customs first. Yes, it didn't occur
to me that. Of course it would apply to exporters
as well. If it's going to apply to importers, isn't it.
Speaker 3 (11:53):
Yeah, And because it's again, i'd highlight that this is
based on the activity based costing model, So this is
exactly what the costs are being incurred to process these items,
and Customs exist to support tray like we this is
why customs is about supporting trade and travel. We want
people to come and go, we want trade to come
(12:14):
and go. So this isn't about trying to make things
harder to do business. So if this hasn't been communicated,
Customs would welcome the opportunity to speak. But that's you know,
you're at a very operational level there.
Speaker 2 (12:26):
Right, Okay, thank you very much for your time, Minister
of Customs Casey Costello.
Speaker 1 (12:31):
For more from Kerry Wooden Mornings, listen late to news
talks that'd be from nine am weekdays, or follow the
podcast on iHeartRadio
You're listening to the Carrywood and Morning's podcast from News Talks, he'd.
Speaker 2 (00:10):
Be This is what I didn't even realize was a
problem that existed. Free shipping from e commerce businesses like
Shane and Timu may become a thing of the past
when new levees come into force on April first. Changes
to fees and levees for goods crossing New Zealand's border
are being introduced to ensure they're farer and to better
(00:31):
recover the cost of customs. The costs to customs the changes,
the change to charges for small packages next month means
taxpayers will no longer spend seventy million dollars seventy million
dollars subsidizing cheap e commerce packages. Minister of Customs Casey
(00:52):
Costello joins me, Now, good morning.
Speaker 3 (00:55):
To you, Good morning, how are you well perplexed?
Speaker 2 (00:59):
I didn't even know this existed. So not only are
our retailers having to battle the cheap online retailers, they're
subsidizing the shipping of these cheap goods to New Zealand.
Speaker 3 (01:13):
God, thank you, thank you for highlighting that. Yeah, there
is fundamentally they're sure and I think the big thing
that I mean, we were kind and aware of it.
Like New Zealanders, we sort of know that we've been
doing a lot more of it. But if you look
sort of twenty seventeen twenty eighteen, we had about seven
point eight million packages. By twenty three, twenty four we
(01:33):
had twenty four million packages. So it's tripled over tripled
in that short space of time and continues to grow.
And therefore, you know, the process of dealing with those packages,
inspecting them, verifying them was being incurred by the taxpayer,
effectively and because there was a fixed cost. Not trying
(01:55):
to overcomplicate it, but effectively, there's a consignment sheep that
lists a whole bunch of packages, and so the small
freight companies were doing by consignment, which could have hundreds
of items on it, and that meant that we could
only charge per consignment. So it shifted rather than being
(02:16):
by consignment to per package, and that's that's really they shift.
And we're talking a few cents. But given that we
don't pay like when you order those things generally it's
posted in handling included, that cost isn't being incurred. It's
being incurred by the courier companies that are processing packages.
Speaker 2 (02:36):
So when Customs became aware that they were subsidizing these packages,
did they not say we're not We're not going to
do this anymore. You have to you have to pay
for the cost of process.
Speaker 3 (02:50):
Yeah. So we started a consultation process as soon as
Customs saw that there was a big spike, because this
is a change for the businesses that have these international
agreements around packet baggage, posted handling stuff. So we started
a very dec our consultation process and then provided a
lead in time before this was introduced, so that the
(03:12):
legislation passed last year and it comes into effect on
the first of Apful this year.
Speaker 2 (03:16):
And are other countries doing this as well or did
they not have the same methods?
Speaker 3 (03:21):
Slightly different, Yeah, different systems, but yeah, all of the
all of those being impacted by this massive increase in
the e commerce market has had to change their systems.
And so Customs went out and looked at what other
countries were doing and applied what would work within our system,
and that's that's where we're heading it. It was something
(03:43):
that because it grew so rapidly and I think you know,
we all saw the spike post COVID we're suddenly buying
things online. Was just something we did that was really
where where we headed. So we headed down this path
of recognizing that there is a massive shift and customs
runs and an activity based costing model, so their costs
(04:05):
are paid for within the cost center of the work
they're doing. So it's not like we can collect money
off here and use it to pay for airport presence
or something like. It has to be the cost recovered
has spent where it is, and so there's very meticulous
costing based models, activity based costing models that are put
(04:26):
in at which determined how much we were spending. So
the consultation process has been a good two and a
half years of consultation with the sector, the end users
to understand what the implications would be, and then work
through the legislation and then pass the legislation and then
give lead and time to bring it into effect.
Speaker 2 (04:44):
So how long have we been paying as taxpayers? How
long have we been paying this sort of money? Is
it only a matter of a couple of years.
Speaker 3 (04:54):
Or it's been recently As I said, you know, we
were sort of dealing with you know, sort of seven
million packages up to twenty four million packages so it
was a very quick increase over a short space of time.
So you know that the the the process of consignment
costing was was okay because we were getting consignment sheets
(05:16):
with hundreds of items on it, so we could we
could deal with it. But then you know, with this
rapid increase, almost immediately customs went into a consultation price.
We can't continue down this pathway.
Speaker 2 (05:29):
So was it COVID? Was it the COVID shopping the
era that saw that messive increase.
Speaker 3 (05:34):
If you looked at if you looked at the spike,
it really really did peak at that period, you know,
and we all did you sort of became you know,
we couldn't go online, so we had a lot of
time on a hand, so we were going online and
shopping and so we built more trust in that and
I think collectively around the country we saw people adopting
(05:54):
that method and becoming more trusting in that online purchases model.
And so yeah, so I think that there what you
could see in the numbers that there was a big
spike at that pure but it started increasing sort of
from about twenty eighteen.
Speaker 2 (06:10):
Oh right, okay, but that's still quite a long time
to be subsidizing these huge online retailers. So when I
look at my I've just gone on to Temu, I
think I've maybe bought one thing off Timu. But if
I go on to Timu now and I look at
this women's floral print casual, short sleeved dress, sequined in
mint green, and it's eighteen dollars and nine cents, and
(06:32):
god knows how little the people who were paid to
make it. Yes, yeah, how much will I now have
to pay if I'm adding on shipping?
Speaker 3 (06:43):
But no difference to you, the consumer. So these these
freight companies have agreements with the retailer directly, So the
retailer has a contract agreement around what they charge for
those packages. So it's the retailer, doesn't you know that
(07:05):
the consumer doesn't pay anything. What will What will be
incurred is the price for the relationship between the retailer
and the career company, and that agreement may need some changing.
So therefore there may be a few cents added onto
your eating dollar dress to offset that cost, but that
will be over time once they work out what the
(07:27):
what that actually impact is going to be.
Speaker 2 (07:29):
Because it doesn't seem Yeah, I've always wondered there's no
such thing as free anything. So when they say free
shipping for my eighteen dollar dress, somebody's payingful somewhere.
Speaker 3 (07:38):
Yeah, so's it's included in that costing. On that costing
items you do get a few, you know, the more
high end retailers will charge you postage and handling for
but those bigger companies, they work on volume, and therefore
that the career company that has the relationship with them
and curse those costs. Okay, as part of that agreement.
Speaker 2 (07:59):
I've got a question from one of our listeners, Helen's
just making should we can get Kat on to ask
us where are we here?
Speaker 3 (08:11):
We go?
Speaker 2 (08:12):
Kat, good morning to.
Speaker 4 (08:13):
You, Good morning, how are y good?
Speaker 2 (08:16):
Thank you? You've got a question for the minister.
Speaker 4 (08:18):
Yeah, I dove that we're a small business. We produce
and we ship from New Zealand. Seventy of ourseals are
overseas and our average order value is fifty dollars. This
adds on a five percent surcharge to everything we send
and it is the difference between us having to produce
(08:43):
internationally and ship internationally. So it's a really really big
deal for us and we don't. But we didn't really
hear about this until it had already been done, and
even talking through the business chambers they were also unaware.
So yeah, it's quite huge fast this morning.
Speaker 3 (09:06):
Have you spoken to customs about this because you're talking
about export relationships? This is the proport.
Speaker 4 (09:14):
So export as well, forty eight for every package exported.
So it's a low value export. Our average export value
is fifty dollars. We send up to one thousand parcels
a day, so yeah, and it's to dollars forty eight
on top of everyone. I get the import one hundred,
(09:38):
but the export as a first of eight pril total
forty eight.
Speaker 2 (09:45):
So you have been told that as an exporter you
will incur this cost as well. Yes, okay, is that true, minister.
Speaker 3 (09:53):
Yeah, I'm just I'm just clarifying. So you're you're the
what what are you currently paying at the moment?
Speaker 4 (10:01):
What do you the moment? So we just pay for
our career charges. So that's ten dollars fast day, that's
tot dollars forty a going on totals forty eight going
on top of that, so it's almost a thirty percent
increase and our chapage and because our average order value
is only first day, it's a five percent increase on
(10:22):
our bottom line.
Speaker 3 (10:25):
Yeah, so there is a table. I can't appreciate it,
but there's a lot of There's a lot of variables
between whether it's going by air, whether it's going by sea.
There's different cost things around our structures. So I'd love
to give you the detailed answers over this call, but
there is a range of depending on the value of
the item, be tending on whether it's going by sea
(10:46):
or by air, what are the different charges, and whether
it's perishable goods versus non perishable goods, et cetera. So yeah,
I mean I could give you lots of details, but yes,
we have. We consulted widely in Customs. If you feel
that you weren't consulted with or that your business association
wasn't where I would encourage you to contact Customs the
(11:06):
right directly?
Speaker 2 (11:08):
Is that where CAT should go next to.
Speaker 3 (11:11):
I think, yeah, I think contact Customs directly and explain
what your situation is because there is variables in this
space and I don't want to give you the incorrect
advice around what this is. Because there was extensive consultation
around what those impacts and in some areas the costs
have actually gone down based on the sectopicy based costing
model around where these costs are being incurred. Says, there
(11:33):
has been decreases in costs for some of the charges
based upon where these fees are incurred. So I just, yeah,
I didn't want to provide advice that's incorrect.
Speaker 2 (11:45):
Okay, So go to Customs first. Yes, it didn't occur
to me that. Of course it would apply to exporters
as well. If it's going to apply to importers, isn't it.
Speaker 3 (11:53):
Yeah, And because it's again, i'd highlight that this is
based on the activity based costing model, So this is
exactly what the costs are being incurred to process these items,
and Customs exist to support tray like we this is
why customs is about supporting trade and travel. We want
people to come and go, we want trade to come
(12:14):
and go. So this isn't about trying to make things
harder to do business. So if this hasn't been communicated,
Customs would welcome the opportunity to speak. But that's you know,
you're at a very operational level there.
Speaker 2 (12:26):
Right, Okay, thank you very much for your time, Minister
of Customs Casey Costello.
Speaker 1 (12:31):
For more from Kerry Wooden Mornings, listen late to news
talks that'd be from nine am weekdays, or follow the
podcast on iHeartRadio
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