Want to Grow Your Business Globally?
Start by Understanding De Minimis and How It Impacts Your Expansion Strategy
It’s a shopping behavior that may seem extreme today. Long before the Internet and its abundance of online shopping options, it was not unusual for consumers to fly to the U.S. with empty suitcases. Their strategy? Make retail purchases, pack them into the bags and return home with a variety of sought after U.S goods.
Today, the empty bags have been replaced with mobile devices, laptops and desktops as consumers shop wherever they are and whenever they want. A few simple clicks to checkout, and the package is on its way.
Greater accessibility, higher internet penetration and more mobile shopping platforms support growth, with experts suggesting that global retail e-commerce will exceed one trillion U.S. dollars in 2016, giving exporters a prime opportunity to expand online sales to a growing market.
Retail consumers aren’t the only ones jumping on the global commerce bandwagon. Business-to-business (B2B) sellers are paying close attention to expanding global opportunities. With B2B e-commerce growth predictions ranging from $1.3 trillion to $6.7 trillion by 2020, the B2B market is expected to almost double the business-to-consumer (B2C) online retail market.
In both markets, expanded internet access and growing preference for online shopping is further enhanced by a new trend toward higher de minimis values. Combined, these elements make it much easier and more affordable to do business globally.
Benefits to Business and Consumer
De minimis is the minimum dollar value of qualifying goods for which formal customs procedures are not required and duties or fees are not collected, subject to certain legal requirements and exemptions. This value is a significant step in facilitating global trade because importers benefit from reduced costs as the de minimis increases.
The de minimis impacts more than just duty and fee collections. A higher de minimis can accelerate shipment delivery and improve business efficiency by expediting customs procedures and border clearance for certain shipments. These commercially meaningful thresholds make it easier to import low value goods which can lead to increased orders and more repeat customers.
Equally important, a higher de minimis reduces documentation requirements for qualifying shipments, even though some government agencies in import countries may still require specific data to be submitted with certain shipments or may decide that de minimis does not apply to a shipment, regardless of value. However, in many cases, businesses benefit from less paperwork along with decreased customs compliance costs. This equates to lower overall costs borne by the importer, lessens the barrier for small to medium businesses to engage in e-commerce and reduces the time it takes to get a product to market.
Increased De Minimis Supports Expanding Markets
In early 2016, the U.S. increased the de minimis from $200 to $800 per shipment imported by one person on one day. Additionally, the shipment cannot be one of several lots covered by a single order or contract that is purposely sent separately to secure free entry. The change supports accelerated delivery and reduced costs of qualifying low-value import shipments into the U.S., while strengthening opportunities for companies looking to do business internationally.
A higher de minimis value threshold supports global e-commerce success. Many countries are actively evaluating potential changes to their de minimis values and, in fact, the Philippines recently moved its de minimis from $0.21 to $212 which encourages imports into the country. On the other hand, Canada, although strong in e-commerce, maintains a lower de minimis of $15. Some countries manage value-added tax or VAT (also known as goods and services tax) separately from de minimis so it is important to understand each country’s de minimis value and tax and duty process.
|Rank||Country||De Minimis||US Dollars (subject to conversion rate change)|
|6||South Korea||200 USD||$200|
|7||United Kingdom||150 EUR||$170|
Strategic Impact to Reduce Cost, Increase Efficiency
The increased de minimis drives new B2B and B2C strategies by reducing costs, improving efficiency and eventually increasing output and consumption. Failing to understand de minimis values could mean missing out on growth from a specific market opportunity, experiencing high cart abandonment rates or even targeting a market that requires much more effort with little return.
Understanding de minimis value thresholds and applying them to your business strategy is a key element of success in today’s rapidly expanding global e-commerce market. As you apply the de minimis thinking to your business model and logistics strategy, consider the impact on these areas:
- Cost savings – greater quantities of goods exempt from duties and fees
- Customer service – reduces customer calls with faster transit times
- E-commerce – supports market growth through expanded e-commerce
- Returns – provides for duty- and tax-free return shipping for qualifying shipments
- Shipments – eliminates the need to consolidate qualifying de minimis (i.e., certain low-value) shipments
- Production cycles – gives greater access to goods with fewer delays
- Supply chain – supports faster cash flow and inventory turns
Leverage De Minimis for Greatest Impact
While the Latin expression de minimis may mean “about minimal things,” in today’s business world de minimis is far from minimal relative to its impact on business growth and customer satisfaction. De minimis impacts everything from shipments and e-commerce to production cycles, inventory turns and returns.
Because UPS understands de minimis criteria and has in-depth trade knowledge, we can help you navigate the nuances of the growing global e-commerce economy. Our global network and capabilities support your business in going anywhere there is a demand for your products—we help connect buyers and sellers all over the world.
To learn more about global shipping solutions and the things you’ll need to consider when shipping internationally, visit ups.com/international.
 http://www.global-express.org/assets/files/Customs%20Committee/de-minimis/GEA-overview-on-de-minimis_April-2016.pdf. Please note that, according to the Global Express Association, Germany, Italy, Ireland, the Netherlands, France, and the United Kingdom have a different de minimis value with respect to the collection of VAT, Mexico has a higher de minimis value for postal shipments, and South Korea’s noted de minimis value applies only to the United States and Puerto Rico. In addition, China’s noted de minimis value derives from the recent change in law, which makes e-commerce retail imports with a value of 2,000 CYN or less exempt from import duties. https://www.internetretailer.com/2016/02/25/china-changes-tax-rules-purchases-overseas-e-retailers.
This document does not constitute legal advice.Learn more about shipping globally