In 2016, the United States increased its de minimis rate from USD 200 to USD 800 – giving it the highest de minimis rates in the world.1 With this, cross-border online shoppers in USA can purchase up to USD 800 per person per transaction duty-free. But what does this high de minimis rate mean for eCommerce, and also for merchants in Southeast Asia in particular?
When it comes to cross-border shipping and customs clearance, de minimis refers to the value below which imports into the country are not charged additional duties and taxes, or in some countries, are duty-free. Most of the time, these are targeted at low-value shipments for personal use – like overseas online purchases.
Customs facilities need to process many of these parcels each day, and to process every single one can become quite a burden. On the other hand, lower de minimis rates can be used to deter a country’s citizens from importing too much if the need arises.
This de minimis rate change came as part of the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA),1 which was signed into law on the 24th of February 2016. The de minimis rule is known in the USA as Section 321 of the Tariff Act of 1930.
The TFTEA’s overall objective is to ensure a fair and competitive trade environment which also has key areas including anti-dumping, balanced trade operations, automated commercial environment, prohibitions for all imports of products made by forced labor, intellectual property rights and more.
The US Customs Border and Protection (CBP) credits this change with an explosive increase in cross-border eCommerce.2 Back in 2013, it processed around 150 million parcels entering the US.3 This grew to over 500 million shipments in 2017, a nearly 50 per cent increase in express consignment billings in 5 years and a 300 per cent increase in international mail.3 By January 8th 2020, the CBP was processing more than 600 million express consignment and international mail shipments a year – around 1.8 million a day.2
Such a high de minimis rate means a larger order that can be placed by individual shoppers based in America, which will boost eCommerce usage. Not only shoppers but small businesses that rely on small parts orders also greatly benefit from more duty-free international orders coming into the USA. USD 800 translates to SGD 1087 (as of 7th October 2020), MYR 3326.40, or IDR 11,798,680.00. Singaporean made goods also enjoy preferential rates through the Free Trade Agreement the country shares with the USA.
This high de minimis rate means that 2020’s high cross-border eCommerce growth in the USA will continue unhindered by import duties and taxes. In the second quarter of this year, around USD 1 of every USD 5 was spent online in USA – the highest eCommerce penetration of any quarter or year on record.4 Coupled with knowing the types of trends you can work with, the USA can become one of your leading markets in terms of revenue. You can find the eCommerce trends in the USA that Southeast Asian brands should be aware of in our latest article.
But while you’re planning to your eCommerce campaigns to reach American shoppers, logistics should also be top of mind. As the delivery is the moment of truth for almost every shopper, be sure to work with a shipping partner like Janio who can help you get your eCommerce deliveries to your customers on time and on target. To request a quote or to find out more about our services, click on the banner below:
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