Trumps Scrapping of de-minimis is an Opportunity to Fix the UK's Broken Virtual Border

With Trump scrapping de-minimis the UK is at a crossroads; eCommerce created a new virtual border that for decades has been poorly maintained. Trumps actions create an opportunity for the UK to address issues that have been swept under the carpet for too long. 

When the UK left the EU the problems surrounding the collection of import VAT and duty on mail order imports intensified because imports from Europe no longer qualified for exemption and had to be treated the same as imports from the USA and the rest of the world. Jon Thompson then Chief Executive Officer of HMRC, told MPs on The Treasury Committee prior to Brexit that HMRC did not have the resources to assess all of the additional European imports for VAT and duty and that essentially goods would have to be waved through. 

It is widely known that on the first of January 2021 Online Marketplaces were made to collect the VAT from overseas sellers. What is less known is that the threshold for VAT collection was increased to £135 from £15 and that all VAT and duty assessment for postal packages below £135 was scrapped. Goods not sold on an Online Marketplace collecting VAT were in effect waved through exactly as Jon Thompson had warned, although HMRC will always optimistically point out that overseas sellers can register for VAT in the UK, even though there is nothing compelling them to do so. Why bother when nothing below £135 will be assessed for VAT anyhow ? 

Now that Trump has announced the removal of de-minimis and the UK faces a further avalanche of re-directed Chinese eCommerce, the UKs existing arrangements are totally inadequate. As I point out in Hannah Boland's piece for The Telegraph there is literally no mechanism in place in the UK to collect VAT and duty on items with a value of £135 or less, unlike the EU and the USA. There are also a number of other problems that remain unresolved. There is the ongoing confusion over seller location (made worse by the fiasco that is Companies House) the subsidised postal rates given to Chinese Sellers under Universal Postal Union rules, the abuse of the postal system (goods that should be classified as freight are sent as mail to avoid proper customs checks) minimal compliance checks, and an overarching failure to develop a tech solution to our virtual customs border. 

Whilst Rachel Reeves has announced a 'review' of the £135 threshold it remains to be seen how thorough the review will be, what interests it will pander to and whether genuine, holistic customs reforms will result from it. There is a real opportunity to fix a number of long term problems and improve the UK's customs regime for the better. I hope that in the face of pressure from UK retail the Government grasps this opportunity and acts in the interests of all UK businesses, instead of initiating yet another compromised, fudge-fix. Similarly UK retail should not be quick to accept it.