US legislators are planning to scrap or make major changes to the US$800 ‘de minimis’ limit, below which no taxes are paid on imports. The change is motivated by efforts to reduce ‘import sensitive’ products from China and stop drug smuggling. However, the plans could seriously harm British exporters
Commercial shipments arriving in the USA valued at under US$800 currently face no duties and little scrutiny. The country’s de minimis rules allow for the free entry of low-cost products to the USA, particularly from international e-commerce platforms. This US$800 threshold has helped fuel the growth of online platforms such as Temu and Shein, which sell China-sourced products, but it is also of huge value to UK exporters to the USA.
However, now British exporters of products valued under US$800 – particularly clothing, textiles and leather goods – could find themselves caught up in the USA’s crackdown on Chinese competition and the smuggling of illegal goods and drugs such as fentanyl.
Impact of de minimis changes
US lawmakers are planning to either scrap or introduce major changes to the US$800 de minimis provision. Back in 2016, US President Barack Obama raised the threshold under which low-cost goods enter the USA without further inspection or payment of duties from US$200 to US$800. At the time, it was believed this move would help cut red tape and reduce import costs for US consumers.
The simplest solution, but the one with the most potentially damaging results for UK businesses, would be to abolish the scheme entirely
The generous new limit had an instant impact. US Customs and Border Protection says it processed one billion de minimis shipments in 2023, more than six times the volume it handled in 2015. While Shein and Temu’s (almost entirely China-produced) items account for nearly a third of these shipments, companies from all over the world, including UK manufacturers and exporters, have also greatly benefitted from the provision.
However, legislation supported by Democrat and Republican lawmakers is now being planned to either abolish or significantly alter the US$800 de minimis exemption. Currently, international companies across a wide range of sectors – from clothing and consumer goods to health and beauty – use the provision but many US manufacturers say this introduces unfair competition by flooding markets with cheaply produced imports. Likewise, law enforcement leaders claim these shipments are a conduit for smuggling, particularly of drugs such as fentanyl.
Several different bills and government initiatives have been proposed. The simplest solution, but the one with the most potentially damaging results for UK businesses, would be to abolish the scheme entirely or significantly lower the US$800 threshold. This could result in America mirroring the European Union (EU) de minimis threshold of €150 (US$166). An even more severe reduction would be to follow Canada’s customs duty and tax remission value of up to C$20 (US$15).
Such a move would have a significant impact on UK-US exports of goods including clothing (such as waxed jackets), leather products (such as handbags) and even bicycles. All such goods, but especially smaller items sold through international e-commerce platforms and shipped by airfreight, would be affected by lower exemption thresholds and increased paperwork and customs checks.
However, a recent study by Yale and UCLA economists reveals that eliminating de minimis channels entirely will lead to a loss of US$14bn for American consumers and importers. Low-income and minority consumers will be disproportionately affected, as their purchasing power will be weakened.
Alternative solutions
Several alternative schemes are in the pipeline, with at least three separate bills under consideration. These include the De Minimis Reciprocity Act (also known as the End China’s De Minimis Abuse Act, which certainly makes its motivation clear). It aims to end the import of goods that are low-cost, harmful, counterfeit or produced by forced labor. Also in the pipeline is the Import Security and Fairness Act, which would entirely ban China and Russia from using the de minimis ‘loophole’.
Eliminating de minimis channels entirely will lead to a loss of US$14bn for American consumers and importers
Finally, The Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for America Act proposes to reduce the overall volume of low-value packages entering under de minimis rules. Other aims of the act are to reduce the amount of fentanyl coming into the USA and to “level the playing field for US manufacturers and workers”. The legislation would also require US Customs to collect more information about commercial packages.
Significantly, the FIGHTING Act would also establish a customs user fee of US$2 per shipment for the use of de minimis entry procedures. This would significantly increase the cost for UK SMEs that export low-value items into the US in volume.
UK exports to the USA reached £192bn (US$252bn) in the four quarters to the end of Q1 2024. That’s an increase of 3.2% or £6bn (US$7.9bn) compared with the four quarters to the end of Q1 2023. The US is also ParcelHero’s biggest individual overseas market. Sending a parcel to the USA is now no more difficult than shipping to the EU.
For frequently asked questions, help for exporters and prohibited items details, see our USA guide.
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Publish date : 2024-08-29 03:43:00
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