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One good way to increase B2C e-commerce and other kinds of lower value sales is to increase the dollar limit of imports that are duty and tax-free. Today, the de minimus (not worth much) value for imports into the U.S. is $200, and it’s been that amount for 20 years, even though inflation has eaten most of it away.
Other countries have different de minimus rates, with the lowest at $1 and the highest $1000, though most are less than $200. Eligibility for these rates also vary, and some countries tack on additional documentation burdens to further reduce low value imports that are judged to compete with protected local industries.
Republican Senator John Thune introduced Senate bill 489 in March of this year. It was immediately embraced by eBay, which pointed out that 97 percent of its commercial members export and of those 81 percent export to five or more countries, a rare feat for U.S. companies. Freight forwarders, customs brokers and logics giants UPS and FedEx jumped in with full support. The bill would raise the limit to $800 with annual adjustments for inflation.
Similar efforts are underway to raise and to make uniform de minimus values as part of the two mega trade deals now in negotiation. Separately, APEC, the Asia-Pacific Economic Cooperation forum, has agreed to look at the issue and is being lobbied hard by the U.S. Trade Representative and business interests that will benefit from lower rates.
Since it’s not immediately clear to some special interests, including those governments loathe to give up tax revenue, a number of studies have been conducted to weigh costs and benefits. For one, faster border clearances resulting from no collection of duties and taxes other taxes generate economic benefits by refocusing public revenue collection on more efficient revenue sources, reducing the costs borne by importers, and accelerating the delivery of imports.
APEC to the Rescue?
One study took a basket of six APEC countries and calculated benefits at four different thresholds: $50; $100; $150; and $200. The $200 threshold generated the largest net economic benefit — around $5.9 billion a year, or $30.3 billion when extended to all 21 APEC members. In relative terms this is around 0.086 percent of the region’s gross domestic product (GDP). Not too shabby.
Resource savings in government administration are the largest benefit, accounting for 76 percent of the benefits, while savings in business compliance made up the rest. The latter is particularly important for small and medium sized enterprises (SMEs), as they generally face disproportionate burdens in completing customs formalities. Savings in shipping times have a clear economic benefit. The longer products take to get to market, the more likely they will rot, become outdated, be displaced by superior alternatives, lose the purchasers interest, invoke the purchasers wrath by costing him as much in taxes as the item is worth, or racking up storage fees because of some nitpicking documentation issue.
Previous research has shown that a 10 percent cut in delivery time will expand exports of time-sensitive manufactures by over 4 percent. This does not capture the likely increase in trade volumes if shipping lower valued items becomes easier for the shippers and cheaper for the customers.
The revenue loss to government is surprisingly little. The loss of tariff revenue is less than 1 percent of the savings under the $200 scenario; 0.7 percent under the $100 scenario. Although the loss of VAT revenue is more difficult to estimate, at worst it is no more than four percent of the savings under the $200 scenario and less under the rest. One reason for these low costs is that revenue has already been substantially eroded by preferential tariff rates under Free Trade Agreements (FTAs) and the existing de minimis exemptions.
Don’t adjust your e-commerce sales figures upwards quite yet, as a bird in the hand is not looked upon as an albatross that it is. APEC’s wheels move slowly and some members will likely kick up a fuss. The trade agreements aren't done deals, by any means. And even the U.S. may find it difficult to raise the current limit, despite strong support from business interests. President Obama’s Export Cabinet, comprised of business members, has asked the White House to lobby hard for the Senate bill.
Alas, nothing is easy in the U.S. Congress these days, even in the face of strong evidence that making this change will save the government money, increase employment, and help small business. According to govtrack.us, the bill is still in the Senate finance committee with “0 chance of getting out and zero chance of getting enacted” during this term.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| 696-2Z bearing | 6 | 15 | 5 |
| 686-2Z bearing | 6 | 13 | 5 |