Managing growth in e-commerce with changes to de minimis thresholds

U.S. Customs and Border Protection (CBP) is struggling to contain a surge in low-value imports, particularly from China, that is fueling an e-commerce boom. In 2023, CBP processed 1 billion de minimis shipments, a 53% increase over 2022. Additionally, CBP processed an estimated 705 million shipments by mid-2024. This exponential growth is straining CBP’s resources and raising security and fair trade concerns .

To facilitate the growth of the e-commerce market and address CBP staffing constraints, in 2016 the United States raised the de minimis threshold – the value below which imports are exempt from duties and taxes – from $200 to $800. This change, along with the boom in e-commerce, has led to a significant increase in low-value shipments, challenging CBP’s inspection capabilities. The Obama administration also viewed the increase as a way to “support international trade and stimulate economic activity.”

CBP is concerned about the potential for illicit goods, such as counterfeit products and fentanyl, to be smuggled through these low-value channels. CBP estimates that more than 90% of all import transactions enter the U.S. using the de minimis rule, accounting for 90% of CBP’s illicit drugs, agricultural commodities, and counterfeit seizures. Additionally, some argue that Chinese companies are using the de minimis system to gain an unfair advantage by avoiding tariffs and undercutting U.S. companies.

To address these concerns, CBP recently suspended non-compliant customs agents and is demanding more accurate data from all parties involved in the importation process. Lawmakers are also considering several pieces of legislation, including bills to limit the de minimis benefit for Chinese imports (and imports from other non-market economies), as well as the possible implementation of a “reciprocal” de minimis structure or simply eliminating the de minimis rule altogether. Entrepreneurs, however, fear that tightening regulations may increase costs and disrupt the e-commerce market.

Understanding the de minimis threshold gap and the challenge facing CBP

The de minimis threshold, intended to simplify customs procedures for low-value goods, has become a target for companies looking to avoid import duties. Critics say China in particular is exploiting this loophole.

CBP is struggling to keep pace with the growth of e-commerce due to staffing and technology constraints. Additionally, relying on limited data from carriers makes it difficult to identify suspicious shipments. Further challenges include:

Too little oversight, control and trade reciprocity for the millions of shipments arriving in the US every day.

Existing legal loopholes make it easier to import harmful and illegal products because the contents of shipments cannot be traced and verified whether they are the product of intellectual property theft, forced labor or are dangerous to the consumer.

Mismanifestation: Misclassifying goods under customs regulations can lead to delays, incorrect duty assessments, and even confiscation.

Incorrect delivery: Incorrect manifest information can result in premature delivery, causing logistical problems and potential security risks.

Undervaluation: Deliberately undervaluing imported goods in order to avoid paying applicable duties is becoming a growing problem.

Errors in power of attorney: Errors in granting power of attorney for customs clearance can cause delays and disruptions.

There is a large disparity between the $800 de minimis value for imports into the US compared to other countries such as Canada ($150 CAD), China ($7), UK ($135) and EU ($150). It should be noted that the future modernization of EU customs takes into account the elimination of de minimis.

How to deal with e-commerce surges

Specialists in global trade can minimize problems by ensuring complete and accurate data is stored and reported, such as:

Detailed product descriptions: Provide detailed descriptions, including materials, uses and country of origin
Harmonized Tariff System (HTS) code classification: Identify the correct HTS code for your goods (up to 10vol digit), a commonly used system for classifying products traded around the world.
Declared Value: Declare the full commercial value of the shipment, which should reflect the correct transaction price paid to the seller in accordance with the agreed transaction value method.
Proper Power of Attorney: Make sure a valid power of attorney designates a customs agent (if not self-filed) to act on your behalf during customs clearance.

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Automate yours Harmonized System (HS) and Export Control Number (ECCN) classifications with accurate customs codes and rates to maintain compliance

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Where should this information be recorded?

Although the customs entry serves as an official record for the authorities, most of this data is usually stored in additional systems for internal and future reference. These may include:

Global Trade Management (GTM) systems: Designed to capture and store import data, validate shipments before entry and ensure data completeness.
Product databases: Systems such as the Global Catalog (GC) can store detailed product information such as materials, uses and country of origin, facilitating accurate customs entry descriptions.

Alternative solutions to the de minimis challenges are being discussed:

De minimis cap for China: Congress is considering proposals to eliminate de minimis benefits for Chinese imports

De minimis restriction for all non-market economies

Improved data collection before shipment arrival: CBP urges you to obtain more accurate and complete data in advance from all parties involved in the importation process.

Risk-based targeting: Implementing risk profiles for e-commerce sellers can help CBP focus its resources on high-risk shipments. There was a discussion on allowing e-commerce platforms to join the CTPAT program, depending on meeting certain requirements.

Stay up to date with de minimis changes

De minimis restrictions typically do not vary from product to product, but trade conflicts can indirectly affect how they are applied. Here’s how to stay up to date:

Subscribe to industry news sources: Trade publications and logistics news can provide information on the impact of trade conflicts on e-commerce imports and De Minimis enforcement.

Consult commercial law firms, trade advisors or customs brokers: For advice tailored to your individual needs, seek advice from specialists specializing in customs compliance.

By following these strategies, companies can ensure their imports comply with de minimis regulations comply with de minimis regulations while effectively managing the growth of e-commerce.

Future import costs in e-commerce

The future cost of e-commerce imports is uncertain. A key challenge for policymakers and trade compliance professionals will be striking a balance between security concerns and facilitating legitimate trade.

Using Global Trade Software : : Trade disruptions require a comprehensive tax solution to improve compliance. Holistic product packages such as ONESOURCE Global Trade gives tax professionals the ability to adapt to changing regulations and ensures seamless collaboration between departments. This helps organizations stay compliant and thrive in changing global markets.

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