Don’t let the sunsetting of De Minimis derail your US export drive

With tariff exemptions for low value imports now dead and buried, the onus is on Australian suppliers to collect duty on all their shipments to the US.

If you're making a good fist of selling your goods and services to our American cousins, well done and keep at it. For Australian businesses with a quality offering and top-notch logistics, exporting to the US can be an excellent way to grow sales and profits.

Unfortunately, doing so just got more complex, courtesy of a change to that country's longstanding de minimis value, by the Trump administration.

If you've not brushed up on your Latin lately, the term 'de minimis' refers to the threshold below which goods are exempt from import duties, also known as tariffs.

Every country has a de minimis value. Here in Australia, the threshold is $1000 and overseas sellers must collect GST on almost all the goods and services they ship to Australia, however low their value. In the European Union, it's 150 Euros and Value Added Tax (their version of a GST) is universally applied. 

A shake-up for sellers 

And in the US? The de minimis value there been $US800 for a long time but on 29 August, it will go down to zero. 

As a result, every one of the millions of packages that land on American shores each day will be dutiable, however low the value of the goods they contain.

It's a shake-up to the system that's been prompted by concern about the US Customs Service's capacity to monitor such an extraordinary volume of shipments, and to detect illicit and contraband substances, such as counterfeit goods, weapons and fentanyl.     

For Australian businesses exporting low value goods, it will mean having to choose between absorbing the 10 per cent duty on sales – and weathering the margin hit that ensues – and passing the impost on to customers and hoping they'll be willing to cop the higher ticket prices that ensue.

Some enterprises may find the change makes exporting to the US unviable. Those that do will likely pivot to alternative markets or restrict their activities to the domestic sphere. 

Complying with the new de minimis system

The remainder will need to get to grips with the business of completing US Customs declarations and collecting and remitting duties – and fast.

Fail to do so and you're likely to face a cascade of consequences, none of them positive. From having your parcels stalled in transit because customers are unwilling to pay the tariff you neglected to apply at the time of sale, to incurring fines from a customs service with little tolerance for overseas sellers that can't, or won't, adhere to its rules, there's lots that could potentially go wrong, and badly too. 

Remedying compliance errors can be time consuming and expensive and a distraction from your main game – building mind and market share for your products at home and abroad.

Tools to make the task easier

Getting things right from the outset is simpler and cheaper. Fortunately, high tech help is at hand to enable you to do so. 

Deploying automated tax compliance technology makes it easy for exporters to the US to stay on top of their obligations. It's designed to simplify and streamline all the tasks associated with tax compliance and global commerce, including registration, licensing, calculation, document management, reporting, e-invoicing and cross-border compliance, in the US and other countries.

Once this software is up and running in your back office technology stack, you'll be able to automate the calculation of a wide range of taxes and tariffs in real time. They include the new US import duties on low value goods, along with applicable sales tax and other taxes and fees in the US states to which those goods are being shipped.

Choose a solution from a vendor that's committed to keeping pace with changing trade regulations worldwide and you'll continue to get it right, in the US, and in every other country where your offering is sold.

Ensuring your export business keeps pace with changing rules

It's been a year of unprecedented upheaval in the international trade arena and whether there'll be further changes to the US taxes and tariffs regime, post the sunsetting of the $US800 de minimis threshold, is difficult to predict.

Deploying automated tax compliance software will allow you to carry on selling there with confidence, secure in the knowledge you'll always be on top of your compliance obligations, come what may. If maintaining a sustainable US export revenue stream matters, a smart, timely investment in the right technology is essential.