Trade Community Call - De Minimis Rule

Context

De Minimis

Many countries have a de minimis rule for imports, which allows lower value products to be imported for B2C sales without paying duty and/or other taxes. It is permitted within the WTO rules and many countries have them. It was intended to both reduce the burden on trade enforcement agencies, to allow them to focus on higher value, volume imports and to ease the burden for consumers and small scale traders of low value items.  

Rates of de minimis vary from some countries who have no level to, until recently, one of the highest in the US of $800 per consignment (it has announced it will scrap this for goods from China and Hong Kong from 2/5 and signalled a complete removal in the near future). The current UK level is £135 per parcel and in the EU €150. In Australia the limit is Aus$1000 but businesses pay a 10% goods tax if their total sales of low value products exceed Aus$75,000 in a year. This followed a review of the operation of de minimis in Australia in 2017.

The de minimis rule has allowed businesses to send products to the UK without paying duty, by sending lower value parcels direct to UK consumers. Similarly, UK retailers use other countries de minimis rules to export products without paying duty, through online sales.

The UK has taken action in recent years, primarily focused on the VAT regime. It requires the seller to collect VAT upfront when dispatching parcels and send it directly to HMRC, also making the platform responsible for payment. It has increased surveillance of transactions and the penalties available to HMRC for non compliance to reinforce this. There is little visibility of enforcement of duty payment for low value imports.

The massive changes in US tariffs for China, and possibly other countries following the recent announced pause,  will have a significant impact on global trade. Goods destined for the US but facing large tariffs will be diverted to other markets. Together with the closing of de minimis rules, some members are concerned we will see more businesses outside the UK taking advantage of the UK’s de minimis rules to sell their displaced stock from the US and undercut domestic retailers.

Possible BRC Action

The UK Government is currently considering its trade policy in response to the US decision on tariffs. That could include retaliatory tariffs and/or support for domestic producers at risk from surplus US supplies being dumped on our market. As part of its review we could ask the Government to include the operation of the de minimis rule. It could be argued a review of policy, which was designed to reduce the burden on low volume, low value imports is overdue.

There are UK retailers currently using the de minimis rule for exports to other countries to increase sales, so it is important to recognise there could be consequences for them as well as the UK market.

We are very keen to know if members think the de minimis rule isn’t meeting the policy objectives it was set up to meet and should be reviewed as part of the Government’s review of its trade policy.