Is the Era of Low-Value Import Shipments Coming to a Close?

The final stage of the removal of the low value threshold (formally NOK 350) in Norway takes place as of 1 January 2024 with the removal of the temporary customs declaration exemption for consignments with a value below NOK 350.

The low-value threshold, often referred to as the ‘de minimis’, for imports refers to the maximum value of goods that can be imported into a country without being subject to certain import duties, sales taxes, and often with simplified customs clearance procedures. This threshold varies from one country to another and can also depend on the type of goods being imported. It is usually set by the customs authorities of each country and is designed to facilitate the flow of low-value shipments while ensuring that higher-value imports are properly assessed for customs duties and taxes.

In many countries, there is a specific threshold below which imported goods are exempt from customs duties and taxes. For example, in the United States, the low value or de minimis threshold for imports is $800. This means that most goods valued at $800 or less can be imported duty-free.

The boom in eCommerce sales in the last decade has seen a major shift in how goods are shipped. Previously, goods would be shipped in bulk, customs cleared and then sold on the local market. In the eCommerce world, these same goods are sold individually, often shipped individually, but no longer attract import duty or sales tax as they fall under the low value threshold.

Several countries, including Australia, New Zealand, the European Union (EU), the United Kingdom, and Norway, have abolished or significantly reduced their low-value import thresholds for sales tax (VAT, GST, etc.). Notably, Norway has eliminated the threshold for both import duties and sales taxes, reflecting a global trend of rethinking the de minimis concept.

The EU Customs Reform published recently includes plans to remove the existing €150 low-value threshold on consignments for import duties (already abolished for sales tax) into the EU, with the changes set to take effect from 2028. This move signifies the EU's commitment to modernising its customs procedures and fostering a more equitable trade environment.

In contrast, the United States currently boasts a relatively high low-value threshold of $800 for imports, one of the most generous globally. However, there have been recent efforts within certain sectors in the USA to modify this threshold and restrict its application based on the origin country. In July 2023, The National Law Review reported the introduction of the Import Security and Fairness Act, spearheaded by Senators Sherrod Brown and Marco Rubio, along with Representatives Neal Dunn and Earl Blumenauer. This act proposes changes to the de minimis threshold, targeting goods sourced from countries perceived as adversarial nations, particularly those classified as nonmarket economies and listed on the United States Trade Representative's Priority Watch List, which currently includes only China and Russia. This legislation would necessitate a formal importation process for all small Chinese and Russian goods, effectively eliminating their de minimis status.

The Act also introduces comprehensive reporting requirements for all de minimis shipments entering the United States, irrespective of their country of origin, under new regulations to be established by the Treasury Department. These regulations would encompass shipment descriptions, transactional values, and the identification of shippers and importers, accompanied by potential civil penalties ranging from $5,000 to $10,000 for reporting violations.

For many years, low-value import thresholds have been hailed as a means to stimulate trade, reduce bureaucratic complexities, lower costs, and allow customs authorities to focus on high-risk shipments. However, recent years have witnessed a shift towards reducing or eliminating these thresholds for sales tax and customs import duty in numerous countries. Several reasons have been cited for these changes, including:

·??????? Creating a level playing field with local / domestic retailers. Why should overseas eCommerce sellers benefit from not having to pay customs import duty or sales tax on an item that a local / domestic retailer would have to pay these extra charges?

·??????? Security and Safety – The inherent simplified customs clearance procedures that usually accompany the clearance of low value items, including simplified data sets, reduces the authority’s ability to risk assess products for security, safety, and intellectual property reasons.

·??????? Undervaluation of products to ensure that they meet with local low value import thresholds.

·??????? Poor data quality, particularly in the postal networks, which is seldom identified.

·??????? With the boom in eCommerce transactions a considerable drop in revenues collected at import.

The EU Monitor's insights on the EU Customs Reform shed light on the EU’s motivations behind the widespread changes to low-value import regimes across the globe. The exponential growth of eCommerce has inundated EU customs authorities with an overwhelming number of small, low-value packages, each requiring an individual customs declaration. This surge in volume has strained customs resources and enforcement capabilities.

Moreover, the current customs duty exemption for goods valued at under €150 has created fertile ground for fraudulent activities, with an estimated 65% of parcels entering the EU deliberately undervalued in customs declarations. This not only disadvantages EU businesses, particularly small and medium-sized enterprises (SMEs), but also encourages sellers to split larger consignments into smaller packages, exacerbating the imbalance and contributing to increased packaging and harmful emissions.

Do the recent changes in policy within the European Union (EU), Australia, New Zealand, Norway, and the United Kingdom concerning low-value import thresholds indicate the initiation of a regulatory shift, prompted by the evolving dynamics of global trade and the eCommerce sphere?

These developments underscore a fundamental shift in the regulatory paradigm, as authorities grapple with the complexities introduced by the digital economy and the exponential growth of cross-border online sales. Consequently, are these policy changes not merely adjustments but rather a fundamental recalibration of the regulatory compass, aimed at aligning it with the ever-evolving landscape of international trade and e-commerce.

It is likely that more countries will reassess and adapt their low-value import thresholds to strike a balance between facilitating trade and safeguarding their economic, security and safety interests.

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