USA Scraps de minimis on Chinese Imports

The USA is scrapping the de minimis threshold for imported goods that are subject to Donald Trump's new tariffs. This will apply to Chinese imports which includes goods sold by Temu and Shein. The di minimis threshold is a value threshold below which goods are not subject to import VAT and duty.

In the UK the de minimis threshold is set at £135. Consignments declared at a value below this are exempt from duty (misdeclaration of value is therefore rife) At declared values below £135 goods are also exempt from Import VAT but HMRC somewhat optimistically assumes that overseas sellers either operate on an Online Market Place that will collect VAT when the goods are sold or that the overseas seller has 'volunteered' to be registered for VAT in the UK. In any event overseas sellers set up paper companies in the UK to pretend to have a UK establishment and thus avoid the collection of VAT by an Online Market Place.

Truth be told, it's a bit of a mess.

It will be interesting to see how effective the disapplication of the US de minimis threshold will be and also what impact it has on Temu and Shein, who operate a business model that is to a great degree reliant on taking advantage of de minimis thresholds to avoid paying import taxes. US retailers will no doubt welcome this development since, as retailers in the UK and Europe are also experiencing, it is impossible to compete with these tax free Chinese imports.

The removal of de minimis in the US gives rise to a number of questions.

Firstly, given the US can remove de minimis, why can't the UK ? Critics may point to the overloading of UK Border Force but I'd argue that is due to Border Force being under funded, a failure to plan for the impact of Brexit, and a lack of investment in new technology that could make collecting import duty and VAT easier.

Secondly what will the UK do if Trump imposes tariffs on the UK? Will the UK keep its de minimis in place allowing US and Chinese businesses continued access to duty-free, direct sales, to the disadvantage of UK traders? Given the damage to UK businesses that the abuse of de minimis already causes that would be a very strange policy choice.

Why should American businesses be protected from Chinese imports and UK business not be protected ?

It looks like the UK may well have to confront these issues sooner rather than later.

We live in interesting times.