UK retailers with regular direct orders into US markets are set for another period of upheaval as a customs charge threshold is set to be slashed.
The tariff exemption on imports, known as a de minimis, enables retailers to export orders into a country without incurring duty charges if the value of the order stays below a certain level.
Up until now, the US had offered one of the more generous de minimis levels, set at $800, compared to $648 in Australia, $181 in the UK, and $174 across the EU (where additional VAT charges are also levied).
This higher-than-standard threshold from the US has delivered years of innovation from retailers around the world since its introduction nine years ago, enabling them to set their sights on wealthy US consumers with direct-to-consumer sales and little in the way of paperwork and additional taxes.
Data from the likes of the OECD has demonstrated this has disproportionally benefited SMEs and start-ups by removing the up-front investment required to otherwise sell products into the US.
In 2021, according to the British Chambers, $5bn of goods from the UK were shipped to the US under the de minimis threshold, with 80% coming directly from e-commerce orders of which fashion accounted for the largest share.
Globally, almost 14 billion packages worth around $65bn fell under the threshold last year and did not incur a duty charge.
But it’s not just online retailers with US audiences that will be hit. Giants such as Shein and Temu, and brands that sell through marketplaces such as Amazon and Etsy will also encounter issues.
When will the change happen, and who will have to pay?
The de minimis threshold of $800 will sunset on Friday 29th August. Shipments from that date of any value will then incur an additional charge ranging from 10% to 50% depending on the category of product.
Many global postal services, including major EU players, have paused or slowed services whilst they await further clarification from US authorities
Who pays the charge is a little muddier. Retailers that wish to keep their direct entry into the US market will likely look to swallow some of that cost and save the end customer from having a bill to pay to receive their goods once it lands in the US.
However, some consumers may end up having to pay the bill themselves, especially from smaller, more niche businesses that may not be entirely up to speed with the legislative change.
The Royal Mail has said that items sold from the UK into the US worth over $100 (including items sent to family and friends) would likely incur a 10% duty charge.
DHL said in a statement that: “Key questions remain unresolved, particularly regarding how and by whom customs duties will be collected in the future, what additional data will be required, and how the data transmission to the U.S. Customs and Border Protection will be carried out.”
Goods originating from the EU will likely be hit by the same 15% tariff as was agreed between the bloc and the US in their new trade agreement.
Long-term, it may push more international sellers to look towards State-side distribution hubs to accept and ship orders from within the US market. This is more aligned with the ultimate aim of the Trump administration – to bring jobs and manufacturing to the US, and raise significant revenues on sales from abroad.
Short term, consumers in the US can expect increased prices, whilst businesses around the world will be faced with increased bureaucracy, delays, and costs.
