The de minimis Rule

As we reported previously in the Newsletter, EFA submitted a paper to the EU calling on it not to scrap its de minimis rule which allows low-value goods to enter the EU duty (tariff) free. The link to the EFA submission is on the EU’s website (https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13316-Revision-of-the-Union-Customs-Code/F3437665_en).  EFA argued that if the EU does away with its de minimis system, that would adversely affect African SMMEs which sell low value quality goods online to EU customers. Presently, these small entrepreneurs can send parcels of up to the value of 150 Euro without paying customs duties. Payable Value Added Tax for the EU is collected by courier companies or postal operators.

The solutions offered by the EU are unworkable (for example, that the ecommerce platform should be responsible for the collection of any taxes/tariffs – is the Commission seriously suggesting that a social media marketplace, like TikTok Shop, would collect taxes/tariffs on its behalf?). The solutions will also require that African SMMEs and African national customs authorities are forced to complete reams of red tape. This will dissuade small businesses from exporting their goods, or tie up their slender resources. In its supporting paper to the Reforms, the EU estimates that a billion ecommerce parcels are imported into the EU every year, and that the new plans will generate one billion Euro in revenue. EFA wonders if the EU believes that at one Euro a parcel, the tariffs are worthwhile, when it will drive African (and other developing countries) entrepreneurs out of business and onto the list of unemployed. EFA recognises that the EU and other markets (including markets in Africa) have suffered from aggressive ecommerce business practices mainly from Asian ecommerce companies which avoid paying tariffs or taxes and frequently refuse to follow the consumer protection laws of those countries they target. EFA believes there are better, more effective ways to prevent these unethical practices, rather than scrapping the de minimis. Finally, EFA points out that de minimis is enshrined in international agreements (OECD, WCO, etc). If the EU unilaterally scraps de minimis, EFA fears that there will be a race to the bottom from other countries, including the USA. If the EU wishes to see African economies flourish, it should adopt regulations that will encourage African entrepreneurship. The proposal to scrap the de minimis in the Customs Code Reform is an example of restrictions that will kill African innovation and home-industries.