An end to the Low-Value imports de minimis era

A wave of change is sweeping across major economic blocs as Germany (as part of the European Union), the EU collectively, and Japan move to revise or entirely abolish their long-standing de minimis rules for low-value imports. These policies, which traditionally exempted small-value shipments from customs duties and taxes, are now under intense scrutiny as governments grapple with the e-commerce boom, concerns over unfair competition for domestic businesses, and the proliferation of non-compliant goods.

The de minimis threshold has long been a feature of international trade, designed to streamline customs procedures for low-value items where the cost of collection would outweigh the revenue. However, the explosive growth of online retail, dominated by giants sending vast quantities of small parcels directly to consumers, has led to a fundamental rethinking of these exemptions.

European Union Eyes Abolition of €150 Threshold

The European Union is at the forefront of this global shift, with significant reforms to its customs framework underway. A key component of these reforms is the proposed elimination of the current €150 de minimis threshold, below which goods can enter the EU free of customs duties.

The primary drivers for this change, expected to be implemented as part of a broader Customs Union Reform Package potentially by 2028, include:

• Levelling the Playing Field: EU-based retailers argue that the current system places them at a competitive disadvantage compared to foreign sellers who can offer lower prices by avoiding import duties and taxes on small shipments.

• Combating Non-Compliance: A substantial volume of low-value imports has been found to be non-compliant with EU standards, including safety regulations. Removing the threshold aims to enhance scrutiny and consumer protection.

• Addressing Soaring Volumes: The sheer number of small parcels entering the EU, largely fueled by e-commerce, is overwhelming customs authorities. The reform seeks to better manage this influx.

While the complete abolition of the duty exemption is the headline change, the EU is also considering measures such as a "non-discriminatory handling fee" to manage the costs associated with processing these imports. For Germany, as a leading EU member state, these Union-wide changes will directly reshape its import landscape for low-value goods.

It's important to note that separate EU de minimis rules pertaining to State Aid (allowing small amounts of government support to companies without needing formal Commission approval) were recently revised, increasing the general threshold from €200,000 to €300,000 per company over three years, effective January 1, 2024. This, however, is distinct from the customs de minimis for imported goods.

Japan Targets Consumption Tax Exemption on Small Imports

Similarly, Japan is moving to tighten its de minimis rules, with a particular focus on the JPY 10,000 threshold for consumption tax on low-value imported goods. The government is reportedly planning to remove this exemption, potentially as early as 2026.

The rationale behind Japan's policy shift mirrors that of the EU:

• Fair Competition: Japanese domestic businesses have voiced concerns about the competitive edge enjoyed by overseas e-commerce platforms that benefit from the current tax exemption.

• Revenue Collection: The growth in direct-to-consumer imports has led to a significant loss of potential tax revenue.

Interestingly, while the consumption tax exemption is set to be scrapped, Japan may continue tariff exemptions for these low-value goods to avoid overburdening customs clearance processes. The main objective is to ensure that imported goods are subject to the same consumption tax regime as domestically sold products.

Implications for Businesses and Consumers

These impending changes in Germany, the wider EU, and Japan signal a significant shift in the global e-commerce landscape.

• For Online Retailers: Businesses, particularly those based outside these regions and heavily reliant on the de minimis provisions, will need to adapt their pricing and logistics models. The cost of goods for consumers in these markets is likely to increase as import duties and taxes are applied more broadly.

• For Consumers: Shoppers may see higher prices for low-value items purchased from international e-commerce platforms. However, they may also benefit from increased consumer protection and a reduction in non-compliant or counterfeit goods.

• For Domestic Businesses: Local retailers are likely to welcome these changes, anticipating a more level playing field where the price advantage of overseas competitors is diminished.

• For Customs Authorities: While the aim is to improve control and revenue collection, the increased volume of declared goods will require significant adjustments and potentially investment in technology and personnel by customs agencies.

As these major economies recalibrate their de minimis policies, the era of largely unchecked, tax-free entry for small e-commerce parcels is drawing to a close. The focus is shifting towards fairness, compliance, and adapting customs frameworks to the realities of 21st-century global trade. Businesses and consumers alike will need to stay informed as these significant policy revisions are implemented in the coming years.