Faster international shipments, lower costs and expansion of U.S. businesses internationally top the list of expected benefits of the Customs Reauthorization Bill, which went into effect on March 10. The streamlining of low-value shipments, particularly for those moving across the border, is great news for the people at small and medium-sized businesses in South Florida looking to boost their international businesses.
Individuals and businesses can now import non-restricted items valued up to $800 without incurring U.S. Customs duties and taxes. This is the new de minimis threshold, which represents a significant increase above the previous $200 limit, and opens a world of expanded possibilities for companies sourcing globally and pursuing new customers and markets around the world. This first increase in the de minimis threshold since 1993 will have both immediate and long-term benefits.
As an international hub, many South Florida businesses interact on a regional or global scale every day, and rely on the expediency of importing and exporting to maintain profitability. The biggest challenge facing many small and medium-sized businesses looking to enter the global marketplace is federal regulations for cross border shipments. This new law, known as the Trade Facilitation and Trade Enforcement Act of 2015, will benefit those small businesses throughout South Florida and across the United States by fueling faster and more efficient international shipments. The changes will be felt at all levels from the global economy to the personal pocketbook.
The big economic picture: The Peterson Institute for International Economic Logistics released a policy brief prior to the Act’s adoption, their Reform for Low-Value Shipments report (http://www.iie.com/publications/pb/pb11-07.pdf), which revealed that 48 types of merchandise would benefit by increasing the de minimis threshold to $800. At the time of the study, Express shipping firms handled approximately 3.8 million items in the $200 to $800 range every year, and the United States Postal Service processed a similar number. Together the total declared value of all these global goods approached $3.4 billion, the Institute estimates.
Importantly, although the U.S. Customs and Border Protection (CBP) agency will lose some tariff money, the Institute predicts an overall economic benefit. “The net gain from raising the de minimis threshold on the existing volume of shipments would be about $17 million, taking into account the cost savings to all affected parties — customers, express firms, USPS, and CBP. In other words, the loss of tariff revenue would be more than offset by the savings to the multiple parties in the delivery chain.”
Lower costs for individual businesses: It makes sense that getting goods through international shipping logistics quicker saves money. But how much? Since the Act just recently went into effect, the actual figures remain to be seen. But the Peterson Institute estimates that each additional day a shipment is delayed, it costs customers a “time charge” equal to about 0.4 percent of the declared value. With the average value of shipments at $300 and an estimated 7.6 million shipments now duty-free, the time value to customers is about $9 million every year, the report estimates.
The more your firm shipped in the $200 to $800 range up until now, the greater the savings you’ll realize.
Greater efficiency encourages expansion: Beyond greater shipping speed and related cost savings, raising the de minimis also increases overall business efficiency. It encourages more companies to pursue new global customers and territories, thereby boosting the volume of commerce worldwide, including e-commerce. U.S. small and medium-sized businesses can now source globally without an outsized burden of fees and delays, and they can enter global markets without fear of burdensome rules if the goods need to be returned.
Fewer impediments to low-value shipments translate to real efficiencies for small and medium businesses already reaching customers around the globe. Lower compliance costs will also spur more low-value imports, including direct purchases that U.S consumers and smaller businesses make from international suppliers. In addition, other business leaders previously considering expansion beyond current customer markets now have reason to act and move forward. And with U.S. leadership on expediting low-value shipments, the U.S. government can pursue more open markets in other countries.
Greg Hewitt is CEO of DHL Express U.S., a firm headquartered in Plantation that offers express delivery services and international shipping in more than 220 countries and territories.