The De Minimis Threshold in International Trade: The Costs of Being Too Low

20 Pages Posted: 18 Jan 2018

See all articles by Olim Latipov

Olim Latipov

Sidley Austin LLP

Christine A. McDaniel

George Mason University - Mercatus Center

Simon Schropp

George Washington University; Sidley Austin LLP

Date Written: January 2018

Abstract

With tariffs largely negotiated away, trade facilitation issues such as custom delays and border costs are one of the next key barriers for trade policymakers to address. One important trade facilitation issue is the de minimis threshold (DMT)—a valuation ceiling for imports below which no duty or tax is charged and the clearance procedures are minimal. Customs assessments are costly and low thresholds can hinder trade flows. We offer a detailed analytical approach to assess the direct economic effects of raising the DMT. We focus on Canada, which has one of the lowest DMTs among developed countries. We utilise a unique data set and find that raising Canada's DMT would have positive effects for consumers and businesses, particularly small businesses because the cost saving for smaller entities is disproportionately large. For the government, foregone duty and tax revenues are outweighed by the cost saving, resulting in a fiscally neutral or even positive effect for government revenues.

Keywords: de minimis threshold, International trade, trade facilitation

Suggested Citation

Latipov, Olim and McDaniel, Christine A. and Schropp, Simon, The De Minimis Threshold in International Trade: The Costs of Being Too Low (January 2018). The World Economy, Vol. 41, Issue 1, pp. 337-356, 2018, Available at SSRN: https://ssrn.com/abstract=3104256 or http://dx.doi.org/10.1111/twec.12577

Olim Latipov (Contact Author)

Sidley Austin LLP ( email )

Geneva
Switzerland

Christine A. McDaniel

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States
703-993-9228 (Phone)

Simon Schropp

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Sidley Austin LLP ( email )

Washington, DC
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
12
Abstract Views
320
PlumX Metrics