What is de minimis value?
You are looking to expand your eCommerce business internationally when you come across the term - de minimis.
What does this mean, and why should you care? When we’re talking about international eCommerce, de minimis refers to a country-specific threshold that tells you when duties and taxes are applied.
Country-specific de minimis threshold examples:
De minimis (pronounced dā ˈminiˌmēs) is a Latin term that simply means something that is so small or trivial that the law does not refer to it and will not consider it. This term has been around for a while with usage in legal arenas for various applications, but its application within international eCommerce is much more specific.
How does de minimis apply to cross-border transactions?
When goods get shipped to another country, the importing (or destination) country may wish to levy duties and taxes on those goods by collecting them from the person or company importing the products. Duties and taxes generate revenue for the importing country, but the de minimis can be used to encourage or discourage certain trade/purchasing habits of both consumers and businesses. So what does this have to do with de minimis?
The process for assessing and collecting duties and taxes requires time and resources for the importing country, so it doesn’t make economic sense to spend time on low-value shipments. That is why each country sets its own de minimis value threshold for when it will assess duties and taxes on an import. Generally, the duty de minimis threshold will be different from the tax de minimis threshold. The value threshold is what we call the de minimis value. Anything below this value is considered to be, “so small or trivial that the law does not refer to it and will not consider it.” The de minimis value may also be used to encourage or discourage certain trade/purchasing habits.
Take note that many items can be received duty-free if the goods meet the rules of origin under free trade agreements.
How does this affect my eCommerce business?
As merchants grow their international business, they need to understand the barriers an international shopper faces when purchasing from a foreign website. Many of these barriers involve rules and regulations that do not apply domestically. De minimis value is an excellent example of one of these foreign regulations.
De minimis value significantly impacts eCommerce. This is because B2C orders are typically a much lower value than B2B, and a larger percentage of your shipments will clear duty and tax-free to specific countries. Shipments below the de minimis value will clear faster and provide an opportunity to sell into certain markets more competitively.
The de minimis value varies greatly by country, and it’s worth understanding the markets you ship to or want to target.
Example - Canvas shoes with rubber sole, $175 USD:
|Destination||HS codes and duty & tax rates||Foreign value||Duty de minimis||VAT/tax de minimis|
|United Kingdom||64.0411.00 / 16.9% Duty / 20% VAT||134.24 GBP||<135 GBP||>15 GBP|
|France||64.0411.00 / 16.9% Duty / 20% VAT||154.51 EUR||>150 EUR||>0 EUR|
|Canada||64.0411.11 / 16% duty / 5% GST + PST||231.38 CAD||>20 CAD||>20 CAD|
|Australia||64.0411.00 / 5% duty / 10% GST||246.69 AUD||<1,000 AUD||<1,000 AUD|
How can de minimis influence the buying experience on a website?
Clearly communicating the calculated de minimis value can have the same effect as offering a promotion or sale. If a shopper realizes they can spend up to 150 EUR before a duty will be applied, they will more likely add items to their shopping cart to maximize the benefit of staying under the de minimis value. Providing a transparent de minimis value to international shoppers can have a positive impact on your ability to convert international shoppers into international customers.
If you are in the eCommerce business, de minimis is no small matter. To learn more about de minimis and other significant features of international eCommerce, please visit our Zonos docs.
You can also try our free Zonos Hello to provide de minimis information to your international shoppers while they browse your site.