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De Minimis Rates in Southeast Asia

Written by
Hui Shan Tan
Published on
June 27, 2019
Updated on
June 21, 2023

In the first part of our series on De Minimis, we looked at what de minimis values mean in cross-border shipping. We also explored why they’re important to merchants, especially eCommerce merchants who usually ship lower-priced items or ship small volumes.

As a brief recap, de minimis is the price threshold below which fewer or no taxes are charged on shipments. When shipping internationally, the total of your good's value, shipping fees, and insurance cost if any, is the value used for calculating import taxes and duties at the customs office. It will include the monetary value of your goods plus the cost of shipping.

This suggests that if a country has a higher de minimis threshold, your shipments can have higher customs values before incurring higher taxes. Hence, a higher threshold allows your shipment to contain more goods, or higher priced goods before going over the limit and incurring higher customs duties and taxes.

Therefore, a higher de minimis rate is good news for everyone shipping cross-border because it gives more leeway for tax and customs duties exemption.

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If you are a merchant who is responsible for paying for import duties and taxes on cross-border shipments to your end-consumers, shipping below the de minimis rates can help you enjoy cost-savings as you’ll have lower or no taxes to pay when clearing customs.

If your customers are the ones paying for the import duties and taxes for their cross-border purchases from your store, then shipping below de minimis rates would reduce the chances of rude shocks awaiting them at the customs office. Additionally, if the items shipped are below the de minimis, it reduces the possibility of them getting displeased with having to pay for additional import taxes and duties unexpectedly.

On another note, de minimis thresholds are important also because they affect how much you can import into your home country without being taxed. This matters especially if your product involves manufacturing with intermediate goods from other countries or with certain processes that are better off outsourced overseas. This also helps if you’re an eCommerce merchant who’s involved in selling small quantities of goods cross-border if you make sure these shipments fall under the de minimis rates of your target countries.

Now that we know the importance of de minimis values in customs clearance and cross-border shipping, let’s take a look at what the thresholds are for individual countries in Southeast Asia.

De Minimis Values by Countries in Southeast Asia

You can save yourself and your international customers a fair bit of money by understanding how de minimis rates work. Another vital aspect to understanding these rates is familiarising yourself with the de minimis rates of the countries you’re currently shipping to or aiming to expand to.

Here are the de minimis thresholds for prominent trading economies in Southeast Asia:

Disclaimer: This is based on research from official customs websites for each of these countries and is accurate as of 3rd January 2020. Please consult your logistics service provider or your destination country’s customs office for greater details.

As these rates vary from country to country and can be updated at different points in time, it would be helpful to be kept updated on them either by checking the country’s official customs websites, or by using information provided by reliable eCommerce logistics service providers.

If you’d like to find out more about how you can clear customs in Southeast Asia’s major countries, check out our Customs Clearance guide!

Why do De Minimis Rates Vary?

On a country to country basis, de minimis rates vary depending on the openness of the country’s economy to trade. Openness of the country’s economy to trade refers to how much of the country’s total economy (its GDP) is made up of international trade (imports and exports). If a country is more open to trade, they are likely to have a higher de minimis rate to facilitate trade.

On the other hand, if a country wants to encourage consumption of domestic goods or reduce trade as a percentage of their GDP, they may have a lower de minimis rate. This causes more imports to fall above the de minimis rate, making them appear relatively more expensive compared to that of domestic goods. The resulting increase in higher priced imported goods will make them less attractive to consumers and could encourage them to switch to domestic goods instead.

Additionally, de minimis rates have foreign exchange implications. Research has shown that there is a link between openness to trade and depreciation of a country’s currency.1 Hence, by adjusting de minimis rates, governments may be able to help strengthen or weaken their currency based on their goals for their economy.

Here’s how this works: every time an import is paid for, local currency needs to be sold to get foreign currency to pay for the imported product. A high de minimis value could encourage more eCommerce imports into the country. If the number of imports grows too high, the supply of local currency in the world increases, increasing the chances of the local currency depreciating relative to international currencies.

A real-life example of this is Indonesia’s government recently announcing a revision to their de minimis rates, decreasing it from USD 75 to USD 3 per day, per buyer which they are looking to implement on 20th January 2020. The reduction was done to improve Indonesia’s current account balance by reducing imports, and to strengthen the rupiah by decreasing the need for Indonesians to sell off their rupiah to purchase foreign currency.

A move like this was deemed necessary by the Indonesian government because eCommerce has become a large part of the Indonesian lifestyle in recent years. eCommerce often encourages trade by nature since it connects customers to merchants, who may be based overseas, through online platforms.

The expansion of eCommerce in Indonesia therefore directly led to an expansion in the amount of imports in Indonesia. If the government had not lowered their de minimis value, eCommerce imports would have continued to grow even more rapidly. The Indonesian rupiah would then weaken even more due to high supply and low demand of rupiah caused by locals selling the currency to purchase foreign currency.

The weakened rupiah could cause serious problems to the Indonesian economy, such as imported inflation. Imported inflation would happen if the rupiah weakened to the point where prices of imports rose significantly, simply because it costs more rupiah to exchange for foreign currency which is needed to purchase imports. This results in the prices of domestic goods using imports as raw materials increasing, and by extension causing the general prices of all goods and services to rise as well.

Another reason they could decrease de minimis rates is to protect local producers of products that cross-border eCommerce competes with. In the case of Indonesia, part of the reason they dropped their de minimis to USD 3 is to protect local producers of items like garments and shoes, who felt they could not compete with products imported via cross-border eCommerce. However, it remains to be seen if this will dampen Indonesia’s appetite for products bought beyond Indonesia’s borders.

As evidenced in the Indonesian example, governments thus have to closely monitor their current account balances, and tweak their de minimis values based on their economic goals whenever necessary.

Hence, given the variability of de minimis rates, it would be good to engage a logistics service provider who can offer you help in the customs clearance process. They can arrange payments for duties and taxes on your behalf, and provide shipping advice especially if you are shipping into a diverse region like Southeast Asia.

While leveraging de minimis rates may seem insignificant in the supply chain process as compared to other procedures, this can actually benefit your business by enabling huge cost-savings for both you and your customers. Be sure to check the most updated versions of the de minimis thresholds of the countries you are shipping to or plan to ship to. This would give you a better idea of how to plan your shipments and grow your eCommerce business.

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Want to find out more about customs clearance in Southeast Asia? Check out our articles below for more!

  1. Springer: Does trade openness influence the real effective exchange rate?