Government responses in Australia and Singapore

Despite these guardrails, many governments view a situation of growing packages with suspicion. Many officials have been subjected to furious lobbying by both offline and online retailers about the consequences of growing sales from e-commerce channels.

As a result, some governments, such as Australia, have started adjusting de minimis. The Australian government, for instance, considered eliminating the de minimis threshold completely from a generous A$1000 in the wake of strong outreach by offline retailers.³ After further study, the government decided not to adjust the de minimis threshold but to remove the exemption for Goods and Services Tax (GST). In other words, arriving packages below the threshold must pay the Australian GST but do not have to pay relevant tariffs or duties. Packages can still arrive using simplified information for customs clearance documentation.

A big part of the reason for maintaining de minimis in Australia was that the costs of collecting and remitting tariffs on low value goods was judged to be too high to be offset with whatever revenue might have been collected. Eliminating the rule would have imposed additional burdens on small firms outside Australia and limited goods available to citizens shopping online from smaller retailers.

Australia now requires platforms to collect and remit GST on behalf of every foreign supplier with goods sold via the platform. Firms that do not sell via a platform that have an annual turnover above A$75,000 have had to register with Australia’s GST system and begin paying GST on inbound shipments once they have reached the threshold.

The solution chosen by Australia was designed to improve tax neutrality between local and overseas sellers. It put the burden of managing tax collection back onto the overseas seller.⁴ It is possible that Australia’s actions have helped level the playing field between online foreign retailers and offline local retailers. Australian consumers are now charged GST on overseas goods and may also be paying more to platform operators that have had to take on responsibility for tax collection and remittance for all listed sellers.

The Australian Productivity Commission recommended periodic comprehensive reviews to consider adjustments, especially to the registration system and carefully monitor changes in emerging e-commerce technologies.⁵

Following the Australian model, Singapore imposed a similar change to the collection of taxes on low-value goods in January 2023, with GST due on all products imported via air or post from overseas GST registered suppliers.⁶

The challenge for US regulators

Because of its size, the US consumer market is the most appealing market for online sellers around the world.

But the solution to the problem of low-value imports that Australia and Singapore have used – treating duties and taxes in de minimis differently – is not available to the United States because the US does not have a national level GST or VAT. Instead, some members of Congress are currently working on a bill to drop the US de minimis level from US$800 to zero.

De minimis in the US originated in Section 321 of the Tariff Act of 1930 and is still often referred to as Section 321 imports. Until 2015, the US de minimis rate was US$200. It was raised to US$800 under the Trade Facilitation and Trade Enforcement Act (TFTEA) to allow consumers greater access to overseas goods and match the level of duty-free access granted to Americans returning from trips abroad.

Congressional members, however, have been carefully watching the sharp rise in the import of e-commerce goods, especially from China. There is a growing concern that Chinese sellers are taking advantage of a high de minimis level to ship a wide range of packages and to send even more goods by splitting shipments into sub-US$800 packages to further avoid tariffs and taxes.⁷ However, importing firms are not allowed to declare more than one Section 321 import per day.⁸

The size of the cross-border e-commerce market for the United States reached US$1 billion in 2023, with more than 80% of packages, totalling 880 million, arriving by air.⁹ Most of these goods are sent via express carriers, which means that the vast majority of shipments arrive in the US with full customs declarations.

Package content review is the real problem

Most of the goods shipped to the United States are included in several ongoing pilot programs that involve additional data collection on the content of packages. More than 50 different federal agencies are involved in monitoring and clearing de minimis shipments under existing rules. The Food and Drug Administration (FDA), for instance, maintains the same regulatory practices for all shipments, regardless of declared value at the border.