Study on customs duty de minimis

In March 2022, the EC-backed “Wise Persons Group on Challenges Facing the Customs Union” issued a package of proposals. Amongst several proposals concerning rationalisation, governance, incentives and data management for the EU Customs Union, there is highly impacting recommendation #7 which proposes removing the long-standing import duty de minimis exemption. This removal was then included in the EU customs reform proposal, published in May 2023.

The duty de minimis threshold refers to a minimum value or amount of goods below which no customs duties are collected. As such, de minimis thresholds are relevant to trade facilitation provisions for low-value items: if the value of the shipment is below the de minimis threshold, it can be cleared without incurring customs duties.

While this de minimis threshold is currently set in the EU at EUR 150 (a level lower than both the old and current US threshold), the proposal would take this down to zero, i.e., remove this trade facilitation provision. This proposal is expected to be highly impactful for the functioning of e-commerce markets and logistics processes, as well as ultimately for EU consumers.

In this report, the research of which was conducted in Spring 2023 prior to the European Commission’s May 2023 customs reform proposals, we assess the role of the de minimis threshold in the EU and its impact on customs authorities, economic operators, international trade, businesses, and consumers, relying on the most relevant literature.

Our research is not an evaluation of the above proposal, but focuses on delivering relevant findings for policymakers interested in the functioning of de minimis thresholds.

From its inception, this study has been designed so to gather, structure and analyse existing evidence in the relevant literature on de minimis – in particular, relative to customs duties. This literature study aims therefore to appraise several relevant aspects of policymakers’ decisions on customs de minimis policy. This study is not a modelling exercise and the empirical measurement of the extent of any specific additional costs associated with the removal of the customs de minimis is beyond the scope of this study. When considering cost factors established in the literature, we have focused on relevant costs i.e., those above and beyond the costs of implementing existing legislation.

The removal of de minimis thresholds on duties would have a significant impact on time to trade and customs administration and economic operators’ increased complexity and costs that are hardly offset by revenue collection. Ultimately, this additional complexity and associated costs would fall onto businesses and consumers who might suffer significant welfare losses due to higher prices, fewer choices, and less efficient markets.

De minimis regimes enable imports of low-value items to enjoy customs duty-free treatment, thus expediting border processes and keeping trade costs low. As such, they facilitate trade and their removal could hamper the growth of international trade and, consequently, be detrimental to economic growth.

Increased trade frictions are particularly relevant in the EU context. Cross-border trade between Member States and countries outside the EU has in fact been an important driver of development and prosperity in the EU. The primary role that the EU has in global trade has always come hand in hand with an open trade regime. Removal of de minimis could not only impact import flows but also EU exports in the event that large trading partner would retaliate.

Globally, de minimis thresholds have remained stable in recent years. Among the countries that opted to reform their low-value goods customs regime and keep or increase their de minimis threshold, we find the United States, Australia, New Zealand, and Canada. For example:

We conclude that evidence from the existing literature and the recent experience of countries which, like the EU, are leading global economies with high exposure to imports from lower-cost countries highlight the role of customs de minimis thresholds as costefficient; furthermore, their removal could translate into increasing trade frictions.

The removal of the de minimis threshold on duties could represent a further constraint to the competitiveness and productivity of firms in the EU and be detrimental to the welfare of its citizens and businesses. Furthermore, removing this threshold would create a unilateral trade barrier that could indirectly hamper the ambitions of the European Union of being “one of the most outward-oriented economies in the world”[1] and could potentially give incentives to other economies to move backwards from trade liberalisation. Given the EU’s success in tapping into global markets via its export-oriented firms and industries, this effect constitutes a poignant factor for further policy considerations by stakeholders vested in taxation, trade, and logistics policies.

[1]        (European Union, 2023)