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Table of Contents:
CBP Daily de Minimis Threshold for Ecommerce Goods: Higher de Minimis Benefits
Higher de Minimis Benefits for CBP Entry type 86 Clearance
Transaction Limits & CBP Daily de Minimis Threshold
Managing CBP Daily de Minimis Threshold for Ecommerce Goods to Help Grow your Business
In 2018 and 2019, a combined 1.2 billion de minimis imports entered the United States compared to only 68 million formal entries. The majority of the imports (60 percent) came from China and were low-value shipments from online retailers. In May this year, DHL eCommerce Solutions in the U.S. reported a 36 percent increase in domestic and 28 percent increase in cross-border volumes. Both Amazon and Alibaba also plan to expand their cargo fleets within the next year. The volume of ecommerce imports is expected to keep growing as customers stuck at home turn to websites and apps to do their shopping under the new normal. This presents both opportunities and challenges for online retailers and traders moving goods into the U.S. If you’re an importer, here are what you need to know about the CBP daily de minimis threshold for eCommerce goods.
Ecommerce shipments have made screening significantly harder for U.S. Customs and Border Protection (CBP). There are not enough agents to handle the overwhelming volume of parcels, plus it’s time consuming considering the shipments are low value. Increasing the de minimis threshold removed some of the pressure and provided incentives for ecommerce businesses. Instead of wasting time and resources on screening low-cost parcels, CBP can focus on higher revenue sources and support small and midsize enterprises (SMEs) engaged in global trade.
CBP raised the daily de minimis threshold for low-value (Section 321) ecommerce shipments from $200 to $800 in 2016, causing international parcel imports to increase 50 percent since that time. According to trade groups, the 2016 increase has improved bottom lines by expediting the clearance of goods that small businesses use for assembly and manufacturing. Other industries that benefit from the higher de minimis threshold are apparel, textile, and IT component manufacturing.
With the USMCA or U.S. Mexico Canada Agreement (popularly called NAFTA 2.0), Canada and Mexico also increased their de minimis thresholds to support ecommerce growth and expedite the processing of low-value shipments. Mexico raised their de minimis threshold to US$50 for tax-free treatment and US$117 for tariff-free and streamlined customs treatment, while Canada raised theirs from CAD$20 to CAD$150 for duty-free, streamlined customs treatment, and CAD$40 for tax-free treatment. The new values apply to regular mail parcels.
A higher de minimis threshold is a great advantage for online sellers and importers as well as U.S. consumers. With higher thresholds, there’s less paperwork and sellers can import more goods and clear them faster without increasing costs. Since there are no taxes, duties or broker fees, sellers can price their products at a lower rate and attract more customers.
For buyers, a higher de minimis threshold means access to a wider variety of products and faster and more affordable deliveries. It’s also less expensive to buy and return goods from Mexico and Canada. Raising the de minimis threshold opens up the U.S. ecommerce market to more businesses around the world, leading to increased exports and imports even from smaller firms.
For CBP and Partner Government Agencies (PGAs), a higher de minimis threshold means dealing with massive amounts of inbound shipments every hour. CBP wants to further streamline paperwork and simplify the clearance process for parcels. The agency is currently testing Entry Type 86, basically an extension of the Section 321 rule that expands coverage to include PGA-regulated low-value goods and low-value goods in all modes of transport.
Entry type 86 is designed to accelerate cargo clearance for low-value shipments including those regulated by PGAs. Type 86 also aims to encourage global ecommerce trade and divert CBP resources to tax/duty collection on more profitable high-value parcels while at the same time improving national security.
Entry type 86 requires importers and brokers to submit the Harmonized System (HS) code for each shipment. HS codes are used to determine applicable duties, fees and tariff treatments for imports, but in this case the codes will be used mainly to determine the exact nature or type of commodity being imported.
Entry type 86 allows for entries that qualify for de minimis (including regulated goods) to be filed via the Automated Broker Interface (ABI) in the Automated Commercial Environment (ACE). Entry type 86 is currently a voluntary alternative to the normal Section 321 release process. Traders can still clear Section 321 shipments the usual way.
The use of Section 321 release has increased dramatically due to ecommerce orders, which has skyrocketed as more people shop from home during the coronavirus pandemic. Section 321 allows for a duty- and tax-free entry of goods valued at $800 or less (fair retail value in the country of shipment) if imported by one person per day.
This rule applies to base MFN tariffs as well as section 301 tariffs such as those against imports from China. Some critics in the Trump administration suggest lowering the de minimis threshold as it exceeds the thresholds of trade partner countries and allows large volumes of low-value goods to enter duty free and with practically no screening.
CBP is aware of the potential for abuse of Section 321 and Entry Type 86. The agency has limited the number of eligible shipments to one per individual or company per day, as long as the shipment value does not exceed $800. Importers are also not allowed to consolidate multiple Section 321 shipments into one order as the total value will then exceed $800.
In addition, certain items regardless of value cannot be released under Section 321 or entry type 86. These include goods that require payment of a CBP fee, goods subject to countervailing and anti-dumping duties, goods subject to quota, and tobacco, alcohol and agricultural products.
The HTSUS requirement for PGA-regulated low-value shipments also guards against abuse. The HTSUS code is mandatory and means an extra step for importers and businesses, but ensures that CBP knows the exact nature of the product being imported. It’s easier and faster for CBP officers to target high-risk cargo when they know exactly what type of products are included in the shipment. This means less screening for low-risk, legitimate cargo and faster clearance and processing.
As long as importers or their customs brokers submit the required information in advance of the shipment’s arrival in the U.S., the goods can be released immediately and delivered to a warehouse or the end user.
Online sales are expected to keep growing as people remain confined to their homes. Now is the perfect time to grow your business by taking advantage of higher de minimis thresholds and new customs regulations promoting ecommerce. The right partner can automate customs filing for you and provide advanced technology to streamline processes and optimize compliance.
Global eTrade Services (GeTS) offers industry-leading ecommerce solutions based on the software-as-a-service model. GeTS eCommerce Managed Services allows importers, brokers, and logistics providers to automate type 86 entry filing and ACE customs reporting. The service features HS classification, brokerage assistance, CFS and logistics arrangements, scalable technology, airport ground handling, and shipment deconsolidation.
GeTS eCommerce Managed Services subscribers have access to cutting-edge technology and automation solutions that can scale with your business without increasing costs. Obtain cargo clearance within 24 hours from cargo arrival, and overcome cross-border challenges with expert assistance from the GeTS team.
Learn more by visiting our page on CBP daily de minimis threshold for ecommerce goods or contact us today!
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