The de minimis rule has been designed to keep track of the regulations to be applied to shipments that are traded in international markets. The rule allows import of qualifying goods without the application of export administration regulations. These goods can be exported and re-exported without worrying about additional regulations. The application of this rule also speeds up the import process, thereby making sure that the time taken for the trade is shorter. This blog focuses on the de minimis rule and the re-export of US-origin goods that may be incorporated into a non-US item.
US-origin goods are defined as items that are wholly obtained or produced within the US. The international trade of these goods is always subject to US laws. For example, if US goods are not allowed to be exported to North Korea, these may not be re-routed via China and sent there. Exporters also need to be aware of the fact that they cannot re-export goods without pre-requisite licenses. In the case of non-US items, it is important for the traders to determine whether the goods are subjected to the export administration regulations (EAR) or not. Traders who are based outside the US and want to re-export goods of US origin back into the country may need an additional license to do so. The EAR framework is applicable in case the goods have been produced in the US, or if it contains a specific percentage of US-origin content. The regulations are also applicable in case the item has been developed using US technology or if they were manufactured in a plant that is driven by a US-based technology.
However, traders are allowed to re-export items without worrying about EAR by making use of the de-minimis rule. This is where traders need to be aware of the nuances of the de-minimis rule. The rule helps traders in circumventing the EAR. Firstly, this rule can only be applied to the items outside the US. Secondly, exporters must be aware that various items are not eligible for this rule. These include items that are governed by the International Traffic in Arms Regulations (ITAR). An example of such items is sensitive military exports. Thirdly, traders must be aware of the percentage of US-origin controlled content in their items. If this percentage exceeds 25%, then the item is covered under the EAR. This threshold is applicable to most countries with the exception of nations that are under sanctions. Using the de-minimis rule, US-origin goods can be incorporated into a non-US item with the exception of sensitive items.
Thus, it is clear that exporters need to be fully aware of the EAR and de-minimis rules before they engage in trading with partners based in the US. Trade solution providers such as OCR Trade Management could help your business in dealing with the de minimis calculations and ensuring full compliance with the EAR. Please contact us to find out more about how we can help you with our trade management offerings.