De minimis regulations are rules that govern the “non-regulation” of small packages moving across borders. They are important rules in the context of cross-border e-commerce and e-trade.
Roughly translated as “lacking significance or importance”, the historic reason for de minimis rules is that when the value of packages is small, the cost of undertaking trade regulation, taxation or other customs checks would have higher costs than benefits. As such, they may be less regulated.
Therefore, de minimis (or thresholds with similar goals) exists as a national-level rule across a number of countries in the world. For example, the de minimis level in Australia is 1000AUD ($660), in Costa Rica, the level is $50, in Indonesia, it is $3, in Kenya and Tanzania it is $0. Even where this level is similar, different types of deregulations may apply to such packages.
De minimis and e-trade
Although originally intended to simplify parcel logistics between individuals, these regulations have been used by e-commerce platforms and online sellers to reduce trade costs and enable cross-border e-commerce models.
The impact of de minimis on development has been much debated. In E-commerce, de minimis can enable small firms to export goods without undue trade regulation. De minimis (and associated rules) might then be important to ensure that firms are able to rapidly become exporters.
Such arguments have led to pressure for de minimis levels to be increased across the globe. This would facilitate exporting small firms more global access and therefore be developmentally positive. These positions have also been pushed by cross-border platforms or third-party (3PL) logistics firms.
Challenges of cross-border e-commerce
When e-commerce is in its infancy in a country, small package logistics can support the emergence of digital marketplaces. As cross-border models expand, countries may struggle to handle the unruly volume of small packages.
Goods that go through traditional general trade (i.e. imported/exported in bulk) are supported by a well-agreed global system with regular tariffs, rules, procedures, checks and taxes. As more goods move through small package delivery, these rules are side-stepped by going through the less regulated system of small package trade.
The most startling example of this is the rapid rise of cross-border e-commerce firms Temu, Shein and Aliexpress. De minimis has enabled business models grounded in low-cost direct sales from China around the globe.
As they have exapanded, the response in the US to emerging challenges has been to eventually remove their $800 de minimis levels as these platforms are seen to be unfairly competing with domestic firms.
Global regulation of de minimis
Global rules of de minimis are fragmented but have been much discussed across different areas of regulation.
- FTA may include an undertaking on de minimis.
- The WTO TFA (trade facilitation agreement) includes the following soft agreement to “provide, to the extent possible, for a de minimis shipment value or dutiable amount for which customs duties and taxes will not be collected”.
- In some more advanced agreements, logistics has become an area of negotiation, such as DEPA.
- A notable campaign around small package e-commerce regulation is the Alibaba-led eWTP (e-World Trade Platform) that has sought to push global agreement around a number of aspects of trade for small firms, included de minimis.
Some e-commerce for development alliances have also supported global rules in this area as part of a developmentally friendly set of global rules.