De Minimis Trade Benefit
The de minimis benefit is a perk in international trade that allows for imports below a certain value to enter a country duty-free and with minimal to no inspection. Here's a breakdown of its advantages:
Cost savings: By avoiding duties and taxes, businesses and consumers can save money on imported goods. This can be especially beneficial for low-value items.
Faster clearance: De minimis shipments typically go through a simplified clearance process, which means they get delivered quicker. This is because they don't require extensive customs checks.
Increased efficiency: For countries, de minimis helps streamline the import process, allowing customs to focus on higher-value shipments that might pose a greater risk or generate more revenue in duties.
Benefit for small businesses: De minimis is particularly helpful for small businesses that import goods in smaller quantities. It reduces the complexity of international trade and makes it more accessible.
It's important to note that the de minimis value (the threshold below which the benefit applies) varies depending on the country. For instance, in the US, it's $800, while in Canada, it's $20.
History:
The de minimis trade benefit in the United States wasn't established at a single point in time. The concept originated with the Tariff Act of 1930, but the specific exemption level has been raised over time.
Here's a breakdown of the key developments:
1930: The Tariff Act of 1930 laid the groundwork for the de minimis rule, exempting low-value imports from cumbersome customs procedures.
1938: Congress formally established a de minimis value, though it likely started at a much lower amount than the current threshold.
While I couldn't find the exact year the initial value was set, we know it has been increased at least twice:
1994: The Customs Modernization Act increased the de minimis value to $200.
2016: The Trade Facilitation and Trade Enforcement Act raised the de minimis value to the current level of $800.
Current Developments:
The U.S. Customs and Border Protection (CBP) is clamping down on shipments that qualify for the de minimis trade benefit. This move has suspended several customs brokers from a program designed to expedite these low-value imports.
This crackdown reflects the growing tension between U.S. authorities and foreign e-commerce giants like Shein and Temu. It also highlights the increasingly complex landscape for logistics companies handling imports into the U.S.
Crackdown on Expedited Low-Value Imports
Reports identified Seko Logistics as one of the brokers suspended for 90 days from the Entry Type 86 program.
While the exact reason for the suspension remains unclear, it follows the CBP's recent implementation of stricter filing requirements for Entry Type 86. These stricter requirements include filing complete and accurate data, including detailed product descriptions and HS codes, before or upon cargo arrival. Previously, filing could occur up to 15 days after arrival.
The CBP justifies these changes to prevent illegal goods like narcotics, counterfeits, and products made with forced labor from entering the U.S.
Concerns Over Fairness and Competition
The surge in de minimis imports, particularly from companies like Shein and Temu, has raised concerns among U.S. lawmakers and retailers regarding fair trade practices and e-commerce competition. Critics argue that the de minimis threshold gives foreign companies an unfair advantage, allowing them to undercut U.S. businesses with lower prices.
The massive volume of air freight shipped by Shein and Temu has also been blamed for capacity constraints in the logistics industry throughout 2024. This situation is expected to worsen during peak shipping seasons.
Limited Impact on Major Importers
While the suspension of brokers like Seko is unlikely to significantly impact the overall operations of Shein and Temu, it could further complicate Shein's efforts to go public in the U.S. Facing scrutiny from lawmakers, the company has shifted its IPO focus to the U.K.
De Minimis Trends
CBP data shows a rise in de minimis imports, from 636.7 million in 2020 to an estimated 1 billion in 2023 and are estimated at 705 million for 2024 by mid-year. However, the total value of these imports has decreased, from $67 billion in 2020 to $32.8 billion for the first half of 2024.
Why It Matters To You and Your Business:
Shein and Temu’s business models have been disruptive to US based brands in the US.
Both Shein and Temu ship more than 1 million packages per day into the U.S.
Shein and Temu offer extraordinarily low prices for goods that are often used on a disposable basis negatively impacting the environment, retail at large, and US based businesses.
The volume of shipments has caused capacity constraints (limiting ability to get your goods in your customer hands and the cost of doing so).
The volume of imports is allowing many false records (fake addresses etc.), incorrectly declared shipments (packages containing fentanyl and other illegal drugs are being found by customs), counterfeit goods are entering the U.S. and other safety hazards can slip through.
Additional resources:
https://financialregnews.com/bipartisan-bill-seeks-to-seeks-to-enhance-u-s-trade-policy/