As global ecommerce continues to evolve, businesses face mounting challenges in navigating complex regulatory environments. In this Q&A, Alison Layfield, Director of Product Development at ePost Global, shares her expert perspective on the evolving landscape of de minimis thresholds and their wide-reaching implications for international ecommerce and supply chain management. With extensive experience in cross-border logistics and ecommerce solutions, Alison offers actionable insights into how businesses can navigate these regulatory changes effectively while maintaining competitiveness in a shifting global market.

• How have other countries recently adjusted their de minimis thresholds, and what impacts have you observed on international e-commerce as a result?

Several countries have recently reduced or eliminated their de minimis thresholds. The UK and EU, for example, have removed their thresholds for tax entirely. Canada has also implemented stricter controls, introducing new software systems for customs brokers to enable more rigorous inspections.

Read also: Ecommerce Logistics: Challenges and Solutions for 2024

These changes have had significant impacts on international e-commerce. We’ve observed increased costs for merchants, who must now either absorb these new taxes and duties or pass them on to consumers. There’s also been a noticeable slowdown in customs clearance processes in some cases, as more shipments are subject to inspection and assessment.

For e-commerce companies that were previously “flying under the radar” by exploiting high de minimis thresholds, these changes have forced a dramatic shift in operations. They now need to provide more accurate declarations, proper valuations, and detailed product descriptions, which has increased their operational complexity and costs.

• How might changes to the US de minimis rules affect American businesses exporting to other countries?

Changes to US de minimis rules could have several effects on American businesses exporting to other countries. Firstly, it may lead to reciprocal actions from other nations. If the US tightens its rules, other countries might respond by imposing stricter regulations on imports from the US, potentially increasing costs and complexities for American exporters.

Additionally, American businesses may face increased competition in foreign markets. Currently, the high US de minimis threshold gives foreign businesses an advantage when selling to US consumers. If this advantage is reduced, American companies may find it easier to compete domestically, but could face stronger competition abroad as foreign companies redirect their focus to their home markets or other international destinations.

Lastly, these changes could lead to a shift in global e-commerce strategies. American businesses may need to reassess their international shipping and pricing models, potentially leading to more localized inventory strategies or increased use of fulfillment centers in target markets to navigate varying de minimis thresholds more effectively.

• What are the potential ripple effects on global supply chains if the US implements stricter de minimis rules for textiles and apparel?

If the US implements stricter de minimis rules for textiles and apparel, we could see significant restructuring of global supply chains in this sector. Many fast-fashion and e-commerce companies currently rely on the high US de minimis threshold to offer low-cost, direct-to-consumer shipping from overseas. Stricter rules would likely force these companies to reconsider their distribution models.

This could lead to an increase in nearshoring or reshoring of textile and apparel production. Companies might opt to manufacture or at least warehouse their products closer to or within the US to avoid the complexities and costs associated with cross-border low-value shipments. This shift could benefit countries in Central and South America as potential alternative manufacturing hubs.

Furthermore, we might see a consolidation in the e-commerce apparel market as a result of these events. Smaller players who have been leveraging de minimis rules might struggle with the increased costs and complexity – and while much is to be seen here – this could potentially lead to a market driven by larger companies with more resources to navigate these new challenges.

• Do you see these proposed changes to de minimis rules impacting the competitiveness of US businesses in the global e-commerce marketplace?

The proposed changes to de minimis rules are likely to have a mixed impact on the competitiveness of US businesses in the global e-commerce marketplace. On one hand, these changes could level the playing field domestically. Currently, foreign companies can often offer lower prices to US consumers by exploiting the high de minimis threshold. Lowering this threshold could help US businesses compete more effectively in their home market.

However, on the global stage, the impact might be different. US businesses that have built their models around the current de minimis rules may find themselves at a disadvantage when exporting to other countries, especially if those countries maintain higher thresholds. These businesses may need to quickly adapt their international strategies and pricing models to remain competitive.

Ultimately, the competitiveness of US businesses will depend on their ability to adapt to these changes. Companies that can efficiently manage the increased complexity in customs declarations, leverage data effectively, and optimize their supply chains will be better positioned to maintain or even improve their competitiveness in the global e-commerce marketplace.

• In your experience, what role does data quality play in effective customs management, and how might this become more critical with potential changes to de minimis rules?

Data quality plays a crucial role in effective customs management. Accurate and detailed product descriptions, correct HS code classifications, and proper valuation are essential for smooth customs clearance. Poor data quality can lead to delays, additional inspections, and even fines or penalties. With potential changes to de minimis rules, the importance of high-quality data will only increase.

As more shipments fall below the de minimis threshold, customs authorities will likely increase their scrutiny of incoming packages too. This means that even small errors in data could lead to significant delays or rejections, and businesses will need to ensure they have robust systems in place to capture and transmit accurate data for every shipment, no matter how small the value.

With the potential for increased inspections, customs authorities may also start to use more sophisticated data analytics to flag suspicious shipments. High-quality, consistent data will be crucial for businesses to avoid unnecessary scrutiny and maintain efficient operations. Companies that invest in improving their data quality and management systems will be better positioned to navigate these changes successfully.

• How have you seen businesses leveraging any innovative solutions or strategies to navigate the complexities of varying de minimis thresholds across different countries?

We’ve seen businesses employing several innovative strategies to navigate varying de minimis thresholds. One approach is the use of advanced analytics and AI to optimize shipping routes and methods based on product value, destination country rules, and other factors. This allows companies to automatically choose the most cost-effective and compliant shipping method for each order.

Another strategy is the implementation of distributed inventory models. Some businesses are setting up multiple fulfillment centers in key markets or regions, allowing them to ship from the location closest to the customer and often avoid cross-border shipments altogether. This not only helps navigate de minimis rules but can also improve delivery times and reduce shipping costs.

We’ve also seen companies investing in comprehensive customs compliance platforms. These solutions integrate with e-commerce platforms to automatically calculate taxes and duties at the point of sale, ensure accurate customs declarations, and manage the complexities of varying regulations across different countries. This proactive approach helps businesses stay compliant and avoid surprises or delays in customs clearance.

• Are there any common misconceptions or challenges that businesses face when dealing with de minimis rules in other countries?

A big misconception is around the value itself. One of the reasons why there’s so much talk about de minimis is because of false valuations. Some companies are just putting a nominal value across the board of five dollars or ten dollars, but what they don’t realize is that if the country has the systems in place to enforce the regulations, those shipments are going to get flagged and either reassessed or returned.

Another challenge is with descriptions, especially for US merchants. Selling to a US consumer domestically, you might show a product as a catchy name. But when you’re passing on those descriptions for customs clearance internationally, that description doesn’t mean anything. Having the correct description of your product, the HS code where you can provide it, and then proper valuation – those are really three of the key components to having successful customs clearance.

• Based on your observations of global shipping trends, how might consumer behavior and expectations change if these de minimis restrictions are implemented?

If de minimis restrictions are implemented more widely, we may see a shift in consumer behavior towards more domestic purchasing. As international purchases become potentially more expensive due to added taxes and duties, consumers might opt for local alternatives where available. This could lead to a resurgence of local e-commerce platforms and marketplaces.

Consumer expectations regarding delivery times may also need to adjust. With more shipments subject to customs inspection and clearance processes, international deliveries could take longer. This might also lead to a preference for domestic or regional purchases when speed is a priority, potentially changing the competitive landscape for e-commerce businesses.

Lastly, we might see increased consumer awareness and demand for transparency in pricing. As more costs are potentially added at the point of import, consumers may expect to see these costs clearly broken down at the point of sale. E-commerce platforms that can provide clear, upfront information about all potential costs, including duties and taxes, may gain a competitive advantage in this new landscape.