Regional stakeholders discussed harmonized de minimis thresholds for EAC Partner States at a regional validation workshop for a USAID Hub report on July 8 in Nairobi, Kenya. The report is intended to facilitate the determination of appropriate de minimis threshold across the EAC Partner States that balances the need for expanded e-commerce and business efficiencies versus government revenue generation and risk management. The 19 participants, drawn from Kenya, Uganda, Tanzania and Rwanda, made several recommendations which will be incorporated into the final draft.
De minimis thresholds denote the minimum value for imported goods at which no duties and taxes are applied. Parcels that fall below the threshold can travel across borders without duty or taxes being collected and they have simpler customs declarations. While EAC Partner States had previously agreed to a de minimis threshold of $150 in principle, only Uganda has agreed to use this threshold at the national level and is working on the legal reforms to support it.
Varying thresholds in the region adversely affect cross border trade. Traders, particularly those dealing with low-value shipments, experience high customs duties, hidden costs and long transit times. The different thresholds also inhibit the potential of e-commerce where low-value parcels feature prominently. Consumers and U.S. businesses are deterred from making online purchases when they are compelled to absorb extra customs costs.
McKinsey predicts that by 2025 retail e-commerce in Africa could account for 10 percent of all retail sales, or $75 billion in annual revenue. Removing complex and costly customs procedures while increasing the de minimis threshold for import duty exemptions could help East Africa attract global e-commerce players to the region. This would give East African consumers access to a greater range of products and allow U.S. businesses to operate in a dynamic, growing market. EAC Partner States could also benefit from greater and more efficient trade and the resources saved through simplified customs procedures. Customs officials could redirect their efforts to enforce duties on higher value imports.
The Hub’s report incorporates international best practices, data analysis and stakeholder feedback to provide balanced recommendations. Once finalized, its findings are expected to inform discussions on de minimis at the next EAC Committee on Customs meeting in November 2019.