Why Increased De Minimis Provide Online Retailers a Great Opportunity to Expand the U.S. Market
Last year, the U.S. congress passed a new bill increasing the United States de minimis rate from $200 to $800 for shipments arriving from international companies, and being shipped into the U.S.
But why is this important?
What people don’t realize, is how much this bill positively affects online retailers selling cross border to the United States.
What does de minimis mean?
According to the ICC Customs Guideline, de minimis is defined as a valuation ceiling for goods, including documents and trade samples, below which no duty or tax is charged and clearance procedures, including data requirements, are minimal.
More simply put, there are no formal procedures, such as taxes or duties, for goods with dollar value below the de minimis.
What does an increase in the de minimis rate really mean?
Since the bill increasing the rate was passed the de minimis rate was raised all the way from $200 to $800, all online retailers selling orders up to $800 to the United States are tax and duty exempt meaning international shipping for e-commerce retailers becomes as much as two-thirds cheaper.
Okay, so what does this mean for the online retailers and consumers in the United States?
Here are some more of the major benefits of this increased de minimis rate according to UPS:
It accelerates shipment delivery
It improves business efficiency
It expedites customs procedures and border clearance
It improves merchandise transit time
It stimulates trade and business growth
It reduces paperwork and record keeping
It decreases compliance costs
It lowers costs borne by consumers
It shrinks time to get products to market
Before the increase in the de minimis rate, any import exceeding $200 would have tax and duty on it. The amount of duty depended on the country it was being shipped from and the products being shipped. Because so much went into the process, it was a very time consuming and complicated process.
An increase in the de minimis rate greatly speeds up shipment deliveries while simultaneously lowering the costs of any lower value shipments into the United States. This makes it much easier for international online retailers selling cross border to the U.S. and makes it much cheaper for consumers in the States to buy from overseas. This is a substantial step in facilitating international trade. It shows foreign e-commerce retailers the benefit in faster procedures and border clearance which, in turn, will speed up international delivery and increase their sales.
All of these things make the entire e-commerce logistics process way more efficient and makes the consumer experience better. Why? Because purchases are cheaper and deliveries are faster.
How can United States based retailers use this to their advantage?
U.S. based retailers can take advantage of this by setting up their e-commerce fulfillment center outside the country. A popular choice for retailers sourcing from Asia is Hong Kong, a free-trade logistics hub. Being one of the largest air freight hubs in the world, Hong Kong offers fast and cost-effective deliveries to most countries around the globe.
Since the entire process of getting goods cross border is sped up, and cheaper for companies overseas, U.S. companies can bring their products to market faster, reduce cost by saving on bulk shipping, taxes, and duties, and also possibly lower their need to stock inventory which then lowers their warehousing costs.