In recent months, overseas warehouses, particularly in Southeast Asia, have experienced significant upheaval amid intensified scrutiny from local authoritiesThis surge in enforcement has left many in the industry reeling, as a wave of crackdowns has targeted these facilities, highlighting issues surrounding regulatory compliance and the broader implications for cross-border e-commerce.

On November 23, the Thai police executed a raid on the overseas warehouse operated by a Chinese individual known only as Wu, uncovering over ten thousand counterfeit goods bearing registered trademarks, valued at approximately 40 million Thai bahtJust two days later, inspections by the Thai Ministry of Industry revealed a large-scale operation involving illegally imported regulated products, totaling around 4.3 million Thai baht in valueThis aggressive approach to enforcement is not limited to Thailand; countries such as Indonesia, Vietnam, and the Philippines are similarly ramping up their inspections of overseas warehouses, with numerous Chinese sellers apprehended in the process.

Sellers in these regions have expressed their fears, stating, "These sudden raids come without warning; it feels like everything can change overnight." The overseas warehouse model has become one of the most critical components within the cross-border e-commerce landscape, particularly for Chinese businesses looking to tap into the thriving Southeast Asian markets

By mid-2023, there were over 1,800 overseas warehouses catering to this demand, driven partly by the rise of platforms like Temu and Shein, whose semi-managed structures further complicate the logistics of global shippingThis high demand has created a competitive atmosphere, where quality warehouses are challenging to secure, often relying on word-of-mouth recommendations rather than public marketing.

The sudden antagonism towards overseas warehouses prompts questions about the underlying motivations and the future landscape of e-commerce in Southeast AsiaMany within the industry are left to ponder which warehouses are most vulnerable to these crackdowns and whether these enforcement actions signify a broader trend or represent a temporary reaction to shifting political dynamics in the region.

Southeast Asia's crackdown has taken veteran players by surpriseThese warehouses, primarily designed to provide storage, fulfillment, and customer service for cross-border sellers, are crucial given that the number of Chinese cross-border sellers has surpassed 100,000, with their export volumes reaching astonishing levels

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The crowded nature of this industry has led to the emergence of three main types of overseas warehouses: platform warehouses (predominantly Amazon FBA), third-party warehouses, and seller-built facilitiesInitially, Amazon's official warehouses dominated the scene, but with the rise of e-commerce platforms like Shopee and TikTok, third-party and self-built warehouses have proliferated.

According to a statement from an operator of overseas warehouses, Zeng Qi, many third-party operations lack formal legitimacy and may turn a blind eye to gray-area tax evasion practices and the acceptance of sensitive productsThis tolerance has led to a growing sense of unease among local competitors, who view these practices as disruptive to fair market competition.

For example, when a popular product emerges in the local market, such as toys or fashion items, Chinese sellers can quickly import goods at lower prices, significantly undercutting local businesses

By storing goods in overseas warehouses and utilizing direct shipping, these sellers can reduce costs by 20-30% compared to traditional cross-border shipping, resulting in competitive pricing that local manufacturers struggle to matchAs a consequence, despite the risks of inspections and raids, the growth of overseas warehouses has continued unabated until now.

However, the enforcement actions commenced in the second half of the year have been notably aggressive and widespread, marking a departure from previous enforcement patternsIndonesia was the first to launch a comprehensive inspection campaign in July, which lasted for a month, targeting numerous overseas warehouses and uncovering a variety of goods from clothing to ceramics.

On October 28, Indonesia announced a "100-day work plan" to intensify inspections of warehouses and ports, aimed at tackling illegal imports and completing tax audits

This was a part of a broader governmental initiative to address financial leaks and safeguard the national treasuryOn the same day, the food and drug regulatory authority, in collaboration with the police and military intelligence, seized two warehouses in Jakarta, confiscating over 152,000 cosmetics products valued at approximately 20 billion Indonesian rupiah.

Similar actions were taken by Vietnamese authorities, who began inspections of overseas warehouses in JulyFor instance, on July 29, a crackdown in Da Nang led to the seizure of over 3,000 items of smuggled clothing from ChinaFurther inspections in early August targeted larger facilities focusing on electronics and high-value productsBy late October, the Ministry of Industry and Trade in Vietnam announced that customs would enhance monitoring of warehouses associated with unregistered overseas platforms, explicitly highlighting the scrutiny on warehouses belonging to Temu, Shein, among others.

Thailand, as the second-largest market in Southeast Asia, has joined in this wave of inspections

On September 13, a joint effort from multiple government departments resulted in the recovery of thousands of counterfeit and illegal products from several warehouses in BangkokOn November 25, the Thai Minister of Industry ordered further investigations that uncovered various prohibited goods and products incapable of meeting local safety and compliance standards.

This escalated scrutiny has left longstanding sellers in a state of anxiety, with many commenting on the unpredictability of operations, stating, "There's no safe haven—every time you think you're clear, another country starts inspecting." It appears that three specific types of overseas warehouses are feeling the brunt of this crackdown more than others.

The first category includes those operating with foreign agents who manage warehouses under the local legal framework to circumvent restrictions on foreign investments

Zeng Qi explained, "Many third-party overseas warehouses rely on partnerships with local influencers to operate, and the viability of their business often hinges on the stability of these local connections." For years, the Thai market had been characterized as a "paradise for agents," fostering a culture of tolerance towards these operationsHowever, recent changes in policy are now focusing on rooting out such practices.

On November 27, the Thai Deputy Minister of Commerce remarked that the government had received multiple complaints regarding foreign individuals exploiting local agents for corporate registrations, undermining fair market competitionThe Ministry of Commerce has subsequently ordered an inquiry into companies utilizing such practices.

Additionally, warehouses believed to be trading in illegal goods—often relying on grey channels for imports—have drawn particular scrutiny

Zeng noted that “most products handled by third-party warehouses do not go through formal customs clearance because that would diminish their profits.” Grey channeling involves utilizing connections within customs to by-pass costly fees, allowing products to enter markets at significantly reduced dutiesHowever, without proper documentation, these goods become illegal if discovered during an inspection.

As the crackdowns continue, sellers' perspectives have begun to shift, with some optimists believing the current wave of inspections is simply part of a transition phase in the new administrationsThis perspective is arguably valid, as many of these enforcement actions can be traced back to significant changes in political leadership in the respective countries.

With Indonesia’s new president Prabowo emphasizing cross-border e-commerce supervision, the recent enforcement measures are part of a larger effort to curb illegal imports and tax evasion

Similarly, Vietnam’s new leadership has prioritized monitoring the compliance of imported products in the cross-border e-commerce spaceThese freshly minted policies signal a determined effort to clamp down on perceived transgressions within the logistics and warehousing sectors.

In Thailand, the situation continues to evolve following recent political upheavalsThe emergence of new, reform-minded political movements has further energized the campaigns against gray businesses, urging citizens to report those engaging in tax evasion and the illegal importation of goodsThis collective vigilance from the public has reinforced the government's campaign leading to an exacerbation of inspections targeting overseas warehouses.

The fluctuations in policy regarding overseas warehouses in Southeast Asia seem closely linked to the shifting political landscapeHowever, many sellers are increasingly agreeing that the swift rise and subsequent fall of these warehouses can also be attributed to a culture of overextension, neglecting the importance of subtlety as success in the overseas warehouse industry often hinges on operating discreetly.

The growing trend seems to suggest a pivot towards compliance

Operators like Mei Li, who runs several warehouses in Chiang Mai, note that sustainable operations depend on maintaining a low profile — avoiding overt marketing and sharing sensitive information about warehouse locationsThey emphasize that maintaining a safe distance from engaging with local sellers is crucial in mitigating exposure to scrutiny.

The enduring dynamic between overseas warehouse operators and sellers is characterized by a complex negotiation—where sellers rely heavily on warehouses to store and facilitate their shipping, they also remain wary of potential fallout from engaging in illegal activities.

As these challenges mount, Zeng Qi indicates that adapting involves evolving their business structures in light of these regulationsHe has begun implementing independent warehouses where one facility corresponds to a single client's products, thereby minimizing risk exposure

Furthermore, scaling back on total inventory at any one site helps to diffuse potential ramifications of enforcement actions.

Moving forward, a culture of compliance seems necessary amidst an environment of heightened government scrutinyThe pressures from both e-commerce platforms and regulatory frameworks are mounting, and both sellers and warehouse operators are faced with the reality that the traditional operations may no longer suffice.

New operational models are emerging from this backdropAnalysis from the Whale Crossing Study Institute, which focuses on Southeast Asian cross-border e-commerce dynamics, suggests that two primary trends are likely to shape the future of overseas warehousing: the establishment of fully compliant and legitimate large-scale warehouses that demand significant investments, and a shift towards smaller-scale, somewhat gray operations relocating to less scrutinized regions.

These moves away from urban centers, where logistics and distribution channels are already established, may offer both an opportunity and a precarious risk