As global marketplaces become increasingly interconnected, the dynamics of cross-border trade have undergone shifts, spotlighting e-commerce import practices.
At the forefront of these discussions is the de minimis threshold, which defines the value below which imported goods can enter a country duty-free, streamlining customs procedures for low-value shipments.
However, current congressional discussions on tightening regulations have sparked scrutiny of the threshold and the potential ramifications for e-commerce merchants.
In an interview with FreightWaves, Chad Schofield, co-founder and chief digital officer for BoxC Logistics, discusses the de minimis threshold, explores its impact on U.S. consumers and e-commerce businesses, breaks down strategies for adapting to evolving trade relations, and illuminates regulatory challenges that require a proactive approach. BoxC Logistics is an e-commerce shipment management solution built to help retailers build resilient global supply chains.
Questions and answers were edited for clarity and length.
AMERICAN SHIPPER: Can you explain how de minimis thresholds work and the potential impact of stricter regulations on e-commerce import practices?
SCHOFIELD: The de minimis threshold is a value below which imports can enter a country without duty. In the United States, the de minimis threshold is currently $800. This means that any item imported into the U.S. that is worth $800 or less is exempt from duty and does not need to go through formal customs clearance.
It needs to be noted that the exemption is not based on the shipment but on the person receiving imported shipments. Each person in the United States is allowed this exemption per day for all imported items. If two shipments of $600 were received by the same person on the same day, then payment of duty would be required since the total amount is $1,200 [or $400 over the de minimis].
The de minimis threshold was raised from $200 to $800 in 2016 to deal with the enormous growth of e-commerce that was increasingly burdensome, limiting the resources available for identifying shipments that posed safety and security threats.
The discussion of reducing the de minimis back to the $200 threshold could impact e-commerce retailers with high-value products by increasing costs.
AMERICAN SHIPPER: How would this change impact both U.S. consumers and e-commerce businesses that rely on cross-border trade?
SCHOFIELD: For those e-commerce retailers selling high-value products, the impact would mean their delivered price would be higher. If consumers were unable to find the same or similar product from an alternative e-commerce retailer, with inventory warehoused in the United States, they would be paying higher prices.
AMERICAN SHIPPER: With the U.S.-China trade relationship evolving, how might e-commerce businesses need to adapt their supply chain and distribution strategies to remain competitive and compliant with potential regulatory changes?
SCHOFIELD: There has been discussion of targeting a lower de minimis to specific countries, China being at the top of the list. The effect on current e-commerce shipments from China would be minimal since it is the leader in low-value shipments. Think of the price points of Shein and Temu products, arguably the largest importers of e-commerce shipments.
For e-commerce retailers selling high-value products from China, the impact would be big especially when accounting for the additional tariffs imposed on Chinese imports since 2018 and 2019.
In this situation, an e-commerce retailer would need to consider importing these products in bulk under the wholesale value and warehouse in the United States rather than import directly to consumers at the retail value.
AMERICAN SHIPPER: How can e-commerce merchants proactively plan and prepare for uncertainty in cross-border trade, especially with regard to tariffs and taxes?
SCHOFIELD: A change that hasn’t made headlines that will probably impact more e-commerce retailers than a de minimis change is the increasing necessity to provide the HS [Harmonized System] codes of products for customs clearance. This is a response to address safety and security to help in the prevention of importing drugs and other dangerous products.
The first task an e-commerce retailer should do is assign the HS codes to their product catalog. It’s becoming increasingly necessary to provide an HS code for a product to be imported regardless of whether it is above or below the de minimis and is required to calculate the duty on a product over the de minimis before it’s even sold.
Next is to consider using a service to calculate the duties and taxes for all countries around the world during the checkout to allow consumers to pre-pay the duties and taxes. Otherwise, the consumer experience will be delayed, inconvenient and will include an extra fee to pay the duties and taxes on receipt.
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The post BoxC co-founder shares insight on shifting e-commerce import regulations appeared first on FreightWaves.
