What is De minimis?
The de minimis threshold (DMT) determines how much an import charge needs to be applied to a single shipment of goods entering a country, in its local currency.
Every international purchase is assessed against the de minimis level when they pass through a customs barrier. If an item’s worth exceeds this threshold, further fees may apply.
Significance of De minimis in E-commerce Logistics
The exact knowledge of the de minimis rates aids in the better calculation of total delivery costs including or excluding the additional tax. Some notable benefits of de minimis cover –
- Easy custom clearance – As the tax structure differs according to geographic and demographic location, merchants often face challenges in navigating. De minimis allows a merchant to understand the threshold value properly and makes the cross-border shipping process easier.
- Cost efficient – Customs duties and taxes are all either pre-paid or paid by your consumers when the order arrives at the customs department, depending on whether you selected Delivery Duties Unpaid (DDU) or Delivery Duties Paid (DDP). However, in the case of DDP services, the customs clearance is already taken care of with minimal chance of disruption and increased savings.
Prerequisites to Calculate De minimis and How It Works
The de minimis threshold is a historically determined value used widely for traditional trading structures. However, in order to determine the de minimis value, one needs to look into the following –
- The total value of the goods, including the shipping fees
- The de minimis structure of the concerned country
- Import duties
Use Case With De minimis
Let us assume the DMT of the Philippines is ₱500. That implies, if a merchant is transporting goods that amount to ₱500 or less to a customer in the Philippines, the shipment will successfully enter the country’s borders devoid of any additional charges.
However, if the total value of the shipment is above ₱500 for the same place, the merchant will need to pay an extra import charge depending upon the exceeded value.