Low Value Imports update
Background
The Chancellor announced in April the Government would review the application of the low value imports (LVI) rule, commonly known as de minimis. This allows businesses and individuals outside the UK to send goods to customers with a value of less than £135 in the UK without paying the tariff or the usual customs declaration.
The use of the rule has grown significantly in recent years and a number of members have raised concerns about its impact on UK retailers. As part of the Government’s review, the BRC organised a call with the Treasury and HMRC team leading it to enable members to give their views.
Review Process and Timing
Officials said this was a more informal process than the usual consultation. They are collecting evidence from industry to give Ministers an assessment of the use of the rule and its impact on UK retailers and the wider economy. They are aiming to present their review in July. Ministers will then decide on next steps which include a range of options including no intervention at this stage, further consultation on legislative changes or an immediate intervention.
Members were clear swift action was required. They pointed to the big increase in trade using LVI and the increasing, visible impact on the competitiveness of UK retailers.
Scope of the Review
This review is primarily considering the customs aspects of the rule; the exemption from tariffs and simplified customs approach. However, members were keen to stress the associated issues they have seen from the use of LVI, particularly payment of VAT and enforcement of UK product safety regulations.
On VAT officials said they were interested in comments on avoidance of VAT and, as HMRC are part of the review team, expected this to be a key part of the final report for Ministers. On product safety officials accepted two points made by members. Firstly, it would be important to use the regulations which will be laid under the new Product Regulation and Metrology Bill to better regulate the safety of products sold through online market places. Secondly, greater visibility of imports currently using LVI, coupled with targeted resources for enforcement, would make a difference in ensuring UK customers are buying compliant products.
Impact of LVI
Members were clear the exemption from tariffs has had an impact on price and their ability to compete. However, they also pointed to the significant costs of compliance, particularly with product safety regulations. On regulations they also pointed to future regulations on environmental and ethical production which would increase compliance costs. As well as having a long established culture of compliance, importing in bulk with full customs declarations means their goods are easily traceable and visible to enforcement agencies.
As well as the immediate impact on competition, members also said it was impacting decisions on future investment in the UK which is why they believe swift action by Government is required.
Alternative Approaches
Officials were interested in views on proposals in the EU on LVI and the recent approach by the US to remove its application for exports from China and Hong Kong.
On US members felt the intervention had impacted on global trade more generally, particularly increased marketing by businesses who had been using LVI and were affected by the ban. There was more discussion on the merits of the EU proposal. They felt that the use of a simplified tariff scheme had merits in terms of proportionality, they also believed greater visibility of distribution could increase surveillance of products to improve compliance in other areas, both payment of VAT and product safety. There was also some interest in the recent proposal for a handling fee, which could be used to increase resources for enforcement.
Next Steps
Officials said they were continuing engagement before submitting their report to Ministers. They couldn’t be clear when Ministers would respond to the report.
We will continue to work with members to keep this high on the Government’s agenda. As well as discussing in more detail how changes to the current system could work we will be pushing Treasury Ministers for a swift response to the review.
