This article appeared in the Fall 2018 International Issue.
Several new international regulation changes have flown under the radar this summer. These changes could potentially have a profound effect on US export shippers and importers, especially as these shippers plan their inventory for the holidays and 2019.
Mexico De Minimis Changes: The US and Mexico recently reached a bilateral agreement that will increase the minimum duty-free shipment threshold from $50 to $100 for shipments that can be imported into Mexico. According to Euromonitor, the online market in Mexico is expected to be worth around $7 billion in 2018 and increase to $14 billion by 2022. As Mexico is Latin America’s second-largest economy, a change to the de minimis value is significant.
Australia De Minimis Changes: Australia recently instituted a 10% Goods and Services Tax (GST) legislation enforcement on products imported into Australia. This charge went into effect July 1, 2018. Previously, Australian de minimis laws allowed goods valued around $1000 USD to be imported into Australia without duties and taxes, while domestic products could be subject to the 10% GST when sold domestically. The new law is aimed at making domestic Australian retailers more competitive.
What Is De Minimis?
“De minimis” refers to the value below which goods can be imported into a country before duties and taxes are assessed by an in-market customs authority. A high de minimis value means there is a high threshold by which goods can be imported into a market. A higher de minimis is typically preferable, as it means higher-value items can be imported into a market without the burden of duties and taxes.
It is important to note that Canada typically imposes import duties on shipments valued over $20, while the United States typically assesses a duty on goods over $800.
What Is the Impact on Me as a Shipper?
A change in import policy for a large economy such as Mexico is always noteworthy, but the change in importation limit for Mexican consumers, coupled with improvements in ground transportation options between North America and Mexico, creates a perfect opportunity for US and Canadian e-commerce merchants to sell and ship their products to Mexican consumers.
As for Australia, it means that many cross-border e-commerce retailers are increasing their prices on products shipped to Australia. Still, Australia is a strong market for US cross-border sales, as the customer base shares shopping habits and product interests similar to US consumers.
Where to Learn More?
Websites such as Export.gov can help US businesses as they navigate tax and de minimis changes. It’s also a good idea to work with a reputable licensed customhouse broker (CHB) who is knowledgeable about preferential tax treatments on goods and services globally.
Krish Iyer is Director, Strategic Partnerships at ShipStation. He is an industry leader in cross-border trade and logistics software with more than 16 years of Fortune 100/500 global product marketing/product development, sales, supply chain technology, and integrated marketing experience. He can be contacted at krish.iyer@shipstation.com.
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