De minimis is an important concept for anyone who deals with international shipping. According to this principle, items below a certain value are not subject to customs duties, and sometimes other taxes as well.
If you're in the business of eCommerce, this can enable you to sell goods up to a certain value threshold before they attract duties or tax – which can have a significant impact on your business.
Here we take a look at how de minimis works in a variety of countries, and why you need to think about these thresholds if you’re running an eCommerce business.
What is the de minimis principle?
The de minimis concept – sometimes referred to as ‘de minimus’ – is the broad principle of an issue being so small it’s not worth the government getting involved in.
The term de minimis comes from the Latin ‘de minimis non curat lex’, which literally means ‘the law does not care about trifling things’.
This can apply in various contexts, such as:
- Taxation: where the goods sold are below a certain value
- Legal cases: where the dispute is over something considered minor
For the purposes of trade, which this article is focused on, it refers to a valuation ceiling below which goods do not attract any duty or tax, and requirements for trade-related paperwork and data reporting is minimal.
This can create excellent selling or promotional opportunities for eCommerce and multichannel sellers, who can advertise deals up to that threshold to allow consumers to take advantage of de minimis benefits.
Need to manage eCommerce inventory?
Discover real-time inventory control for your eCommerce business here. Learn moreHow is the de minimis principle used in customs for international shipments?
In customs, de minimis sets a threshold for the value of goods that are being shipped. When the goods are below this amount, they do not attract duties or taxes – but when the goods are valued at more than this amount, they do.
In general the customer – or the importer – is liable to pay certain costs including any taxes or duties payable in their jurisdiction, along with freight, insurance and other handling costs. Combined with the price of the goods themselves, these make up the full amount payable by the buyer.
But it’s important to note that this is a general overview of costs, and this can vary from country to country and according to each contractual relationship. Shipping costs, for instance, might be covered by the seller, or alternatively be folded into the product cost. Returns costs might also be covered by the seller, or requested from the buyer if a return is required.
What is the de minimis threshold for different countries and how is it administered differently?
The de minimis threshold is different for each country, and it's important to understand how the application of this principle differs, and what the implications are for your business and its selling strategy.
The differences in threshold vary hugely – the EU has recently discarded de minimis thresholds completely, while in Australia the de minimis value is US$1,000.
These differences are driven by each government’s financial and economic policy: higher de minimis thresholds can ensure more agile and active trading flow, but don’t deliver on tax revenue as much as if there is a lower de minimis threshold. At the same time, governments have to consider the cost of administering customs duties on low-value goods. As such, the decisions around a de minimis threshold are specific to the country involved.
A full list of de minimis thresholds can be found here. As this document shows, the figures vary hugely and it is important to be across the detail and keep up with recent changes to policy.
Individual jurisdictions set de minimis values around the world - so it's important to keep up with changes to de minimis values and processes if you ship internationallyThe de minimis thresholds for goods imported into the UK, EU, Australia, USA and NZ
De minimis thresholds across the UK, EU, the USA, Australia and NZ vary significantly. The impact of Brexit has also had a major and ongoing impact on the trading relationship between Europe and the UK. Below, we outline the de minimis thresholds and any recent changes in each of these jurisdictions.
What is the de minimis value for the UK – and how is it applied?
In the UK, customs duties are administered by HMRC, and non-excise goods worth up to £135 do not attract customs duties.
There are staggered benefits for gifts above that value. Gifts that are valued at between £135 and £630 attract duties of 2.5%, with some exceptions. Gifts above £630 attract duties depending on what they are, and this needs to be checked with HMRC.
Alcohol and tobacco fall outside these criteria, as they are products that always attract excise duty.
The UK’s decision to exit the EU has had a significant effect on their trading relationship overall, but at present the de minimis threshold remains – however, it may be increased in the future. There is pressure now on the UK to design its own subsidy scheme as it continues to negotiate new trading agreements.
What’s the difference between the de minimis threshold and VAT in the UK?
In addition to customs duties, VAT is in play for those who import goods into the UK’s jurisdiction.
There is of course a difference between duties on goods over the de minimis threshold and the application of VAT. In brief, duties are applied to any goods that cross international borders. The duty is based on the type of good that is being imported and sold.
Value-Added Tax, or VAT, is applied to any goods when their value has increased. Generally, duties and VAT are applied to goods entering the UK when they have exceeded the de minimis threshold. Otherwise, neither tax is imposed.
Are there waivers available for de minimis in the UK?
There are also waivers you can apply for in the UK when you bring in goods to certain jurisdictions, such to Northern Ireland. While declarations need to be made when goods are brought into Northern Ireland from Great Britain, there is also the possibility of a waiver under certain circumstances, such as your business being involved in the production of goods for the agriculture, fisheries or aquaculture sectors. Having a waiver means the duty owed does not need to be paid.
The EU has removed de minimis values completely, and set up an electronic portal to streamline the payment of VAT for importsHow has de minimis changed in the European Union?
In the European Union, customs duties are administered by the Taxation and Customs Union. Changes to EU de minimis thresholds were made mid-2021, updating rules that were last changed in 1993.
As part of the 2021 changes, the EU de minimis threshold has been removed. This was in response to studies that showed the threshold was being abused: the €22 de minimis exemption was being used for items such as smartphones, which were fraudulently being declared at less than their true value. As such, the new rules have removed any de minimis claims for goods entering the EU.
The new rules mean Value-Added Tax (VAT) now applies to all goods entering the EU. Payment of VAT has also been streamlined for goods under the threshold of €150 through an electronic portal called the Import One Stop Shop (IOSS). This allows suppliers to collect and pay duties to the authorities, rather than making the buyer pay duties at the point where goods are imported. This makes the process quicker and easier for both parties, and limits the potential for fraud as seen under the previous regime.
What is the de minimis value in the USA – and how is it applied?
US customs duties are administered by the US Customs and Border Protection agency, and the law that determines de minimis values is referred to as Section 321. The USA has one of the highest de minimis thresholds in the world, with policies designed to promote the flow of trade.
In 2016, the USA raised the de minimis threshold from US$200 to US$800 in order to boost trade and encourage consumption. Goods that reached the higher threshold were eligible for the looser regulations that had previously applied to the lower threshold. The goal of the change was to drive up trade and encourage eCommerce.
De minimis and the US-Mexico-Canada (USMCA) Agreement
In 2020 the new USMCA free trade agreement between the US, Mexico and Canada saw changes to de minimis thresholds for the movement of goods between these countries. This agreement replaces the 1994 North American Free Trade Agreement (NAFTA).
While there had been suggestions that de minimis thresholds could be raised for Mexico and Canada to match those of the USA through this agreement, Canada’s and Mexico’s de minimis thresholds are still lower, at approximately US$117.
The US has a high de minimis value, set at US$800, to encourage the free flow of goods - which presents commercial opportunities for some SMEsWhat is the de minimis value in Australia?
In Australia, the administration of customs duties is administered by the Australian Border Force. The de minimis threshold for Australia sits at AU$1,000.
This means most imported goods – excluding alcohol and tobacco – are considered low value and are exempt from customs duties, as long as they come under this threshold. However, they may attract Goods and Services Tax (GST) when imported from overseas by Australian consumers. If they arrive by air or sea, they also need a Self-Assessed Clearance (SAC) Declaration.
The Australian Government has been looking at how to achieve greater consistency of the application of GST, including collection over more online transactions – something to watch for in future.
What is the de minimis value for New Zealand?
In New Zealand, the de minimis threshold is NZ$1,000. Under this threshold, items purchased overseas can come into the country without incurring any duty or customs charges. Under New Zealand regulations, the GST on such a trade will be collected by the overseas supplier. Alcohol and tobacco products are not included, and will always attract a duty.
The New Zealand Customs Service, which administers the collection of the duties, says on its website that the value of such an import is based on all items imported at any one time, meaning the value of items sent in one lot could add up to be over that threshold.
For products being brought into New Zealand that are above that sum, duties and Goods and Services Tax (GST) will be applied. There are several steps to paying the right sums for products over this sum, including applying for a customs number, liaising with the transportation company, and working with Customs to evidence the purchase, fill in the correct forms and provide a shipping document.
New Zealand’s Customs team will then invoice based on the value of the items, the cost of the Customs Value, and the cost of transportation. This can all add up to a rather tidy sum, which is why many in the eCommerce business ensure they are selling goods that do not breach the de minimis threshold.
With eCommerce booming, it's important for SMEs to consider how de minimis will impact their business - and keep up with any changesDe minimis and eCommerce
So what do de minimis thresholds – and changes to these – mean for eCommerce businesses?
The answer: Quite a bit if your business ships internationally. This is especially true if you’re in the B2C eCommerce market, since B2C transactions are generally lower in value that B2B sales and more likely to be affected by de minimis rules.
Make de minimis part of your business strategy
If you ship to customers internationally, you should consider de minimis values as part of your business strategy:
- Shipping to countries with higher de minimis values will generally mean faster and easier shipping – there is often less paperwork involved and goods clear customs more quickly
- Your overall cost to fulfil orders will generally be lower when de minimis is higher
- Sending goods to countries with a higher de minimis will help you remain competitive in those countries
Keep up with changes to de minimis rules
Changes to de minimis rules around the globe have in part been a response to the huge growth of eCommerce in recent years. The changes each government makes depend on broader financial and economic concerns: lower de minimis values are generally designed to protect local businesses, while higher values are intended to encourage the open flow of goods.
It’s important your business keeps up with any changes to de minimis thresholds and administrative processes associated with them to ensure compliance when you ship to your customers – penalties can be hefty if your documentation is incorrect. Keeping up with de minimis processes may also open up new opportunities for your business, or improve existing ones.
Having a thorough and current understanding of de minimis thresholds will also benefit your customers: often changes are designed to facilitate eCommerce transactions and speed up delivery, allowing products to reach the end consumer quicker. Recent changes to customs duties in the EU, for instance, mean that suppliers can streamline the shipping process by using the EU’s new Import One Stop Shop (IOSS).
- Learn more: Guide to Effective Multichannel Selling
