The shipping fee for products accounts for costs incurred during customs clearance. As an e-commerce business exporting low-value goods, the payable taxes and duties involved in the process are a barrier to reaching markets like the US. However, with the US de minimis rate, Malaysian e-commerce businesses can hope to lower shipping costs, possibly even to make it free.
In the context of trade, de minimis – which means “too small to be taken into consideration” – refers to imported goods with a considerably low value and are hence exempted from shipping tax payments. In 2016, the US raised the de minimis threshold from US$200 to US$800, meaning that goods valued at US$800 or less can enter duty-free into the US. This threshold depends on the total value of your shipped goods, including shipping fees.
This is especially beneficial for small e-commerce businesses as it translates to a cut in overall shipment costs and reduced delivery time. Each low-value order can be sent directly from Malaysian suppliers to American customers without going through countless payments and paperwork. Besides being able to fulfil orders more efficiently, you may now consider free shipping to the US without jeopardising your profits.
To utilise the US' de minimis rate, your shipments must be declared under ‘Section 321’ to the US Customs and Border Protection (CBP). The declaration can be made on CBP’s Automated Commercial Environment (ACE) eManifest, where you will need to include details such as shipment control number, value, and country of origin. Importers may file de minimis claims on their own or through custom brokers.
So how much is US shipping? Would a de minimis claim make it free? It could, but if you are not careful, the penalties for going against the requirements for a de minimis shipment poses a steep cost. There are conditions that importers, couriers, and customers must be mindful of.
The de minimis threshold applies to a shipment of products imported by one person in a single day. Meaning that if a customer splits a US$900 item into three US$300 shipments received on the same day, it will not qualify for de minimis. Such attempts to undervalue goods could be penalised with a merchandise processing fee of 0.326% of the total value, with a US$25 minimum, with all shipments held by the Customs and Border Protection (CBP). Future shipments from the shipper and importer will be flagged as well.
To avoid penalties, you must clarify that you are not making multiple transactions per day. Clearly indicate the shipment using the Section 321 claim each day and engage a customs broker to check for consistency in your transactions. Providing thorough detail in your declaration to CBP and the logistics team managing your shipment, be it to carriers or freight forwarders, will go a long way.
Compliance cannot be taken lightly, especially by e-commerce businesses heavily reliant on cross-border transactions. It is especially important for businesses to adhere to the compliance requirements, lest heavy penalties will be imposed.
If you have trouble navigating customs, rules, or regulations, let us help you! At DHL Express Malaysia, we wish to help you take your business to the next level, and beyond! Apply for a DHL express account, and we can help you navigate not only customs, but the overall import and export landscape.