By Aubrey Rose A. Inosante, Reporter

THE DEPARTMENT of Finance (DoF) is currently reviewing the “de minimis” policy that allows duty-free entry for small-value shipments, amid calls from local retailers to close this loophole that gives overseas sellers an advantage.

Asked if he is open to ending the “de minimis” policy, Finance Secretary Ralph G. Recto told BusinessWorld: “We’re reviewing it.”

“I understand the concerns of our local retailers,” he said in a Viber message on April 30.

The Philippine Retailers Association (PRA) has been advocating for the abolition of the duty-free treatment for small-value shipments for years and reiterated its call in April.

“The Philippine Retailers Association is fast-tracking this request as this created a substantial loss of revenue for the government and unlevel playing field for traditional retailers vs foreign online merchants,” PRA President Roberto S. Claudio told BusinessWorld in a Viber message on April 30.

The PRA argues that this loophole puts local retailers at a disadvantage, as they have to pay local taxes while overseas e-commerce platforms do not.

The de minimis policy refers to the threshold value below which imported goods are exempt from duties and taxes. The Bureau of Customs (BoC) has set the de minimis threshold at P10,000 since 2016 in accordance with the Customs Modernization and Tariff Act (CMTA).

BoC Assistant Commissioner Vincent Philip C. Maronilla said the agency might consider further lowering the de minimis threshold instead.

“Just like other countries that are studying the rapid increase in the volume and transactions of e-commerce and its corresponding effect on our revenue, we’re also studying and might follow suit on the trend right now of lowering the de minimis amount,” he said in a phone interview with BusinessWorld on April 30.

Mr. Maronilla noted that some entities are abusing the trade loophole to evade taxes, resulting in billions of pesos in foregone revenues.

“Rest assured that the implementation of any reduction in the de minimis amount would take into consideration the goods that are being transacted by ordinary Filipinos,” Mr. Maronilla said.

He also notes that globally, countries are revising their de minimis rules for low-value shipments.

“When we enacted the CMTA [in 2016], the highest standard is about $200. We adhered to that. And most of the modern Customs administration I think would have the same threshold amount, if not a little bit higher,” the BoC official said.

Among Association of Southeast Asian Nations countries, the Philippines’ de minimis threshold of P10,000 (around $179.03) is one of the highest.

Vietnam in February removed the duty exemption for imports worth less than one million dong (around $38.45). Indonesia capped its de minimis exemption at below $3 per shipment and recipient, while Thailand set its threshold at 1,500 baht (around $44.95), Cambodia at not more than $50, and Malaysia at 500 ringgit (around $115.89).

Singapore grants a Goods and Services Tax relief on imported goods with a total cost, insurance and freight value of up to S$400 (around $306.33).

Starting this month, the US will no longer allow duty-free imports of merchandise valued at under $800 if shipped from China and Hong Kong.

The European Commission recently called for revoking the duty exemption for low-value parcels worth less than €150 (around $169.68).

Meanwhile, some analysts support the removal of the de minimis rule to level the playing field for local retailers.

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the tax exemption disproportionately favors large foreign e-commerce platforms, eroding the competitiveness of local manufacturers and small retailers.

“The provision creates a structurally unequal playing field. Removing it can help local retailers and encourage local production and self-reliance. With support for small local firms It can help stimulate domestic sourcing and local supply chains,” Mr. Africa said.

He also urged the Marcos administration to rethink such open trade provisions to support local enterprise and reduce economic dependency.

However, Mr. Africa said the government should ensure the burden doesn’t fall on ordinary consumers or informal traders who rely on low-cost imports.

Meanwhile, Minimal Government Thinkers (Manila) President Bienvenido S. Oplas, Jr. said that while ending the policy is favorable to local retailers, consumers will be affected.

“Consumers just want cheap goods at good quality, plus ease of delivery. Since ‘customers are king,’ then their choice and preferences should prevail,” he said in a Viber message on April 30.

Janette C. Toral, an e-commerce advocate, said Customs needs to revisit its de minimis rule. She suggested the BoC track importers who use the rule for personal and commercial purposes.

“We need to separate the intention of the de minimis to help those who buy, send goods or something, or purchase for their relatives, versus those who are abusing this for business purposes,” she said over the phone on Thursday.

Ms. Toral also said the BoC could publish a report on countries that benefit the most from the de minimis value.

“They should look at it from a monthly transaction. For example, if it’s monthly, the P10,000 of the de minimis should be monthly, rather than no limit. Because I can receive 100 parcels for P9,000 each right? Then, I won’t be covered by taxes,” she said.