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Resolution to de minimis tax exemption issue

MS Siddiqui | Published: October 14, 2019 21:06:56 | Updated: October 14, 2019 22:01:30


Major obstacles to delivery of samples in some developing countries include high tax and delay in completing procedural formalities of importing samples of items. Such costs of both official and unofficial natures are unbearable for business houses in Bangladesh. And one of the drawbacks of the country's main export-earning readymade garments sector is longer lead time, caused. by, among other factors, such hassles.

Samples are required for selecting what traders consider as perfect products before order for imports and exports. Testing of samples is an essential activity to ensure quality of the products. Long negotiated deals are often stuck up only for final approval of the samples before delivery/shipment.

Many methods have been developed and adopted to resolve this issue for providing small consignment exemption from customs duty under de minimis rules. In Bangladesh rules, it means 'either a value of the imported goods on which customs authorities do not collect duties and taxes or a total amount of duties and taxes on imported products the customs authorities offer exemption'. De Minimisis, an abbreviated form of the Latin 'Maxim De Minimis non curatlex', denotes "the law cares not for small things.". It is a legal doctrine that a court refuses to consider trifling matters.

All the countries have their own De Minimis value of small consignment determined under own laws and rules. The trade bloc of Asia Pacific Economic Co-operation (APEC) at summit of 2011, introduced a common De Minimis value of $100. It was estimated that this would generate a net economic benefit of about $19.8 billion among the 21 APEC economies including Australia, Canada, China, Japan, South Korea, Malaysia, Russia, Singapore, the United States, and Vietnam. Bangladesh is reportedly willing to join the APEC bloc.

International Chamber of Commerce (ICC) has recommended establishing a global baseline De Minimis value of at least $200. It has stated that ideally governments should strive to implement a commercially significant De Minimis value of $1,000. According to the Immediate Release Guidelines of ICC, customs authorities shall ensure that information regarding the De Minimis values is readily available. It says De Minimis threshold values and/or amounts should be stipulated in national legislation.

The National Board of Revenue (NBR) has just issued the rules allowing duty-free import of non-commercial goods, including samples and other small consignments, worth up to Tk 2,000, according to media reports. That means, if the total duty and tax amount of any imported non-commercial goods stands up to Tk 2,000, duty-free benefit will be applicable for the product. The NBR had in July 2018 raised the exemption value to Tk 2,000 in the Customs Act-1969 from previous Tk 1,000 following request from stakeholders, including European Delegation in Bangladesh. To make the law functional, the customs wing of the revenue board on September 19 issued the rules titled 'Customs (De minimis) Rules-2019.

However, there is additional licensing formality for importing samples. All the recipients of samples must have import licence and VAT registration for release of consignment of samples. An exporter who has only export licence cannot import samples. According to the NBR, no input can be given to the ACYCODA world software, without a registered number as importer.

Courier service companies are supposed to deliver samples at the door of an importer in any other countries except Bangladesh where tax on product catalogues and brochure is charged as well. The new rules will not also allow door-to-door delivery of samples.

It seems that the rules only increase the invoice value per consignment. It would partially resolve the problems but the additional requirement of import licence and VAT registration will remain as additional hassles for imports of samples. It will require further amendment and simplification of release of sample.

The rules say De Minimis facility will not be applicable for the products declared as 'no commercial value' or 'without commercial value,' or marked as 'value for customs purpose only'. This point should be clarified.

Customs officials told the media that importers, exporters, freight forwarders or consignees would have to mention the value of imported products under De Minimis rules in invoice and purchase documents or similar types of documents. However, it should be noted that setting such De Minimis value[s] shall not affect the right of customs authorities to examine, detain, seize, confiscate or refuse entry of goods, or to carry out post-clearance audits.

Moreover, the Revised Kyoto Convention (RKC) in 1999 acknowledged e-commerce trend of increasing numbers of small consignments and included a provision on De Minimis values. According to Transitional Standard of the RKC, customs administrations shall specify a minimum value or minimum amount of duties and taxes below which no duties and taxes will be collected.

The cost of preparation, submission, processing and retaining/storing of cargo and goods declarations ether on paper and made electronically, are very costly processes, both for business enterprises and the NBR.

Import Policy Order should be aligned with the new De Minimis rules and ensure updating of the ACYCUDA software. If these reforms are carried out, the stakeholders will then get the benefits of De Minimis.

MS Siddiqui is a legal economist.

mssiddiqui2035@gmail.com

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