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The Latin Term Every Exporter Should Know: De Minimis

Fulfilling your retail dreams around the world is mission possible.

Nando Cesarone | UPS

Nearly three years ago, Will Green set out on a mission to fulfill his dream of providing fashionable, ethically produced vegan shoes to everyday people around the world.

His vision was to provide customers with the latest fashions at fair prices, all without hurting animals or people in the process.

Will soon set up shop in London and located just the right materials and factories to make his stylish, earth-friendly shoe designs come to life. From there, Wills London (formerly known as Wills Vegan Shoes) was born.

Will’s dream quickly became a reality as his shoes gained international popularity. He now ships dozens of varieties of vegan shoes, belts and wallets to customers around the world.

For European small business owners like Will, selling internationally can be a complicated and time-consuming endeavor, especially when shipments are going to non-EU countries like the United States.

Fortunately, the U.S. recently made a change in its trade rules that positively impacts the way entrepreneurs, like Will, can do business.

More trade, less headaches

The recently implemented Trade Facilitation and Trade Enforcement Act is a law that helps businesses – even small ones – in Europe, Asia and the rest of the world tap into the robust U.S. market.

The opportunity comes from a change regarding the threshold for de minimis—the maximum dollar value of imports that are exempt from customs duties.

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Raising the de minimis is just the start.

Previously, goods sent into the U.S. that exceeded a $200 value were subject to customs duties and something else that no entrepreneur loves: headache-inducing paperwork.

The good news is that threshold was raised to $800.

Although it may seem like a small change, the new de minimis threshold represents a significant step in making it easier to trade across borders.

Businesses in Europe are especially well-positioned to seize this opportunity. The economic relationship between the United States and the EU is already one of the strongest in the world, with approximately $2.7 billion in trade conducted every day.

[Also on Longitudes: At the Heart of Free Trade]

Entrepreneurs on the rise

Historically, many European small businesses owners have hesitated to take advantage of opportunities beyond EU borders.

My company recently conducted a survey on exporting with more than 10,000 small and medium sized businesses with fewer than 250 employees in Italy, Poland, France, Belgium, Germany, The Netherlands and the UK.

We learned that smaller businesses are reluctant to export outside of Europe – largely because of the barriers posed by onerous trade regulations and procedures.

Customs and regulatory differences are the biggest obstacles to overcome. However, of those businesses that did export, almost half (49 percent) saw turnover grow over the last three years, compared to only 29 percent of non-exporters.

The new de minimis threshold relieves many pain points, giving small businesses the ability to get their products to the U.S. with more speed and efficiency.

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The de minimis threshold drops barriers that stood in the way of shipping to the U.S.

But don’t just take it from me. Will, the vegan shoemaker, is already seeing a brighter future for his business.

Although Will was already selling his products in the U.S., the new de minimis increase makes it easier and more affordable for him to expand his customer base across the country.

Will has always made a point of keeping his U.S. sales easy and convenient for customers. He does this by offering free shipping and returns to customers, regardless of where they live.

With many of his shipments falling below the de minimis cost threshold, Will estimates that he will save up to 10 percent on his exports to the United States, money that he plans to spend on a larger-scale marketing effort.

“The de minimis threshold drops barriers that stood in the way of shipping to the U.S.,” said Will. “By taking away some restrictions to free trade, we are able to grow our U.S. business faster and easier than ever.”

[Also on Longitudes: Your Business Without Boundaries]

The road ahead

There is still more to be done to open trade lanes, modernize customs and break down regulatory barriers.

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The EU has never been short on ambition.

At UPS, we believe trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) have the potential to open up a world of opportunities for small and medium sized businesses in both the EU and the U.S.

If enacted, TTIP would eliminate tariffs, allow for the release of goods at the first point of arrival in the U.S. or EU and enable importers and exporters to deal with a single customs authority.

In two of the most heavily regulated economies in the world, TTIP can serve as a framework for the kind of long-term cooperative regulatory structure that not only opens markets, but brings an end to the conflicts, duplications and inefficiencies that have slowed trade and frustrated importers and exporters like Will for decades.

Such agreements take time, but the EU has never been short on ambition. I am optimistic that with more open trade we can connect even more businesses to global opportunities.goldbrown2

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Nando Cesarone is President of UPS Europe.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

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