What: countries increasingly review their approach to de minimis, the low value parcel tarriff exemption system, as this give a competitive advantage to some.

Why it is important: Chinese fast fashion built its model on this loophole in the US and EU

The de minimis threshold, which exempts low-value imported parcels from tariffs, varies significantly by country, with the UK at £135, the EU at €150, and the US at $800. These thresholds reduce administrative burdens and promote international trade for small businesses, supported by organizations like the World Customs Organization and OECD. The economic rationale behind these thresholds is that the cost and administrative intensity of collecting tariffs on low-value items often outweigh any potential revenue gains.

However, the US's high threshold is facing political criticism for allegedly aiding Chinese companies in undercutting American competitors and facilitating illicit activities such as tax evasion and drug trafficking, according to statements by U.S. Trade Representative Katherine Tai and Ohio Senator Sherrod Brown. The U.S. is considering legislation to remove this threshold for Chinese goods already under Section 301 tariffs.

Concurrently, the EU is moving towards eliminating its de minimis threshold, driven by a desire to combat fraud and increase revenue, with customs duties being a significant source of EU funds. A proposed change could raise an additional €1 billion per year by shifting tariff collection responsibilities to large e-commerce platforms, following the EU's approach to import VAT.

These changes indicate a shift in policy that could make online shopping more expensive in both the US and the EU, reflecting broader economic strategies rather than merely addressing issues like tariff evasion or illicit imports.

E-commerce: more regulation in parcel shipment to come