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What is De Minimis Value?

Written by
Hui Shan Tan
Published on
June 18, 2019
Updated on
June 20, 2023

What is De Minimis Value in International Shipping?

If you’re a new merchant looking to start cross-border shipping, customs clearance may seem like a daunting procedure with several aspects to look at. However, by understanding how duties and taxes work, a huge part of customs clearance would already be accounted for.

Partnering with an eCommerce shipping provider or freight forwarder who has experience in regional customs clearance can help you get through the shipping process with ease, and speed up your eCommerce growth in Southeast Asia.

One of the major parts of clearing customs is paying for your shipment’s taxes and duties when importing into a foreign country so that the goods can leave the airport. Just as a visitor has to pay entrance fees into a museum, a country charges fees for goods that enter their country.

De minimis is the price threshold below which fewer or no taxes are charged on shipments. This threshold is dependent on the total value of your shipped goods, including shipping fees.

In Latin, de minimis is a part of a longer phrase which translates into ‘the law does not concern itself with trifles’1, meaning that the law does not look at things that are too minor to be meaningful. When it comes to cross-border shipping, it means that the government will not impose import duties on goods below a certain value, because the duties collected from such small shipments are not worth the administrative effort put into imposing them.

Now that we know the basics of customs clearance, let’s go into detail to find out what exactly de minimis rates mean in cross-border shipping.

What do de minimis rates mean in cross-border shipping?

Since de minimis is the price threshold below which fewer or no taxes are charged on shipments, the higher the threshold, the better it is for you and your eCommerce business.

When cross-border shipping, a higher threshold means that there is a greater leeway for tax and customs duties exemption when importing goods. This is because you’re allowed to either import more goods or import higher-priced goods in a single shipment for your end-consumers without being taxed.

This is good news for merchants, especially eCommerce merchants, who do not ship in bulk or ship goods whose values fall under the de minimis rate. It could also benefit merchants who need to import intermediate goods from overseas for manufacturing or resale from their home country.

Looking to start shipping internationally to and throughout Southeast Asia? Check out our customs clearance eBook to find out more about how you can clear customs easily!

How exactly will knowing about de minimis rates help?

By being aware of these rates, you would be able to calculate the total delivery costs with and without additional tax charges in countries you are shipping to or looking to expand your eCommerce business to. This can help you educate your customers on how much in duties and taxes they need to pay for their purchase, or even save if their basket sizes are smaller.

For instance, some merchants’ online stores have shopping carts that help their customers not spend above the de minimis value of their country. This in many cases helps customers save on customs duties, and minimises the possibility of having rude shocks awaiting them at customs clearance.

Depending on whether you have chosen Delivery Duties Unpaid (DDU) or Delivery Duties Paid (DDP), customs duties and taxes would have either been settled beforehand, or by your customers when the shipment arrives at the customs office.

When choosing DDU, customs duties and taxes need to be paid by end-consumers within usually three days of the goods arriving at the customs office. This may displease your customers who did not expect to foot for the additional charges of their goods. Even though different arrangements can be made for you to be billed instead, the DDU option still has other risks such as shipments getting stuck or damaged at customs, especially in the event that the customs officer opens your individual shipments to check their values.

Hence, regardless of whether or not your shipments are below the de minimis threshold, it is always safer to choose DDP so that the goods can clear customs at a much faster rate to reach your customers. It would be helpful to look for logistics service providers who offer DDP services, where they pay for the customs duties and taxes to help move your shipments without a hitch.

In the case that your shipments happen to hit above the de minimis thresholds, logistics providers with DDP services would be able to cover for it first, then invoice you in a post-paid system. Working with such partners will minimise any disruption to the delivery process and is cost-efficient as well.

On the other hand, de minimis thresholds also 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. De minimis rates then determine your production cost-savings in these cases depending on the size of each of your imported shipments.

Additionally, eCommerce merchants who are involved in reselling or drop shipping in small quantities or low prices can also stand to benefit when selling cross-border. This is because merchants who import finished products to their home country to sell can make sure they fall under de minimis rates to avoid paying customs duties.

Customs clearance may seem challenging for new eCommerce merchants to navigate, especially in complex regions such as Southeast Asia. However, not all is gloomy - certain rules such as de minimis rates can be beneficial for your eCommerce if understood properly. With the help of logistics service providers who are well-informed of the little nuances in shipping, you can be at ease when cross-border shipping.

In the next part of our series on de minimis, we’ll be covering the different rates in the countries of Southeast Asia. We’ll also look at why these thresholds vary from country to country and at different points of time. Stay tuned to find out more about how you can leverage de minimis rates to benefit your eCommerce!

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  1. UK Practical Law