Simon Schropp, a director at the consulting firm BRG, explains how importers are coping with elimination of the de minimis duty exemption for small packages.
Last August, the Trump Administration ended the rule that exempted from Customs duties imported packages with a value of under $800. Schropp says importers and buyers have been affected by the move in several ways.
First is the requirement to pay import duties on every package. Second is the possibility of additional fees, such as a value-added tax, on top of that. Third is the cost of the manpower required to process the paperwork for billions of small packages entering the U.S.
U.S. Customs and Border Protection, for its part, is being swamped with packages that it had previously allowed through without processing and duty assessment. Invariably, that’s resulting in longer lead times, “and those delays cost real money,” says Schropp.
Finally, there are the brokerage fees being charged by express couriers and postal services, which can easily exceed the value of the product itself. “Those are all real costs that stack up.”
Who’s absorbing those additional costs? In most cases, it’s the purchaser of the goods. “E-commerce businesses are on very thin margins,” Schropp says, “and the importer has very little alternative but to pass it on to customers.”
Other than eat the cost, there’s not a lot that importers can do to mitigate the impact of the de minimis elimination. Schropp recommends that they rely on import specialists — an expertise that smaller companies rarely have in-house.
“That obviously is going to jack up the price of those products as well,” he says, “but it’s less hassle. Maybe ultimately buying from a wholesaler in the U.S. who has previously imported from elsewhere may not be the worst decision. But it comes at a cost to the bottom line.”