How Small Parcels Challenge Border Security and Trade
Each day, approximately 4 million low-value shipments (LVS) enter the United States, accounting for 92% of all inbound shipments. While this surge supports the growth of e-commerce, it also exposes serious vulnerabilities: tariff avoidance, lost tax revenue, and the importation of illicit goods, including narcotics, counterfeit products, and items that violate health, safety and agricultural standards.
A new report by the Future Borders Coalition warns that the current LVS framework is no longer sustainable. Yet overly aggressive reforms could also jeopardise the economic and consumer benefits of cross-border e-commerce.
LVS: Driving Cross-Border E-Commerce in North America
- 80% of U.S. small businesses now engage in online retail sales.
- In Canada, the proportion of small firms selling online rose from 23% in 2019 to 32% in 2022. Source?
- Canadian e-commerce buyers import one-third of their purchases from foreign sources, with the United States being the leading country of origin.
- The average value of a U.S. LVS package was $54 in 2023—just 1.5% of the average value of other cargo shipments.
LVS thresholds were introduced to reduce customs processing costs and support small businesses accessing international markets. For example, the United States sets a de minimis threshold of $800 per package, while Canada applies a CAD$150 exemption for duties and CAD$40 for taxes on courier shipments.
Rising Volumes, Rising Risks
According to U.S. Customs and Border Protection (CBP), LVS volumes surged from 2.8 million per day in 2023 to 4 million per day in 2024. This dramatic growth has overwhelmed enforcement capacities.
CBP reports that 85% of shipments seized for narcotics, intellectual property violations, or safety issues in FY2023 were low-value parcels. Seized items included fentanyl precursors, pill presses, counterfeit goods, and other contraband. Canada has reported similar trends, with over 8,000 drug seizures and 22,000 weapons seizures in 2023.
Authorities also highlight a key challenge: the data quality of LVS declarations is often poor or inconsistent, making enforcement more difficult.
How the LVS System Is Being Exploited
The report identifies several weaknesses being exploited:
- Transhipment via third countries: Some shippers route goods through Mexico or Canada to avoid duties, by breaking bulk shipments into thousands of parcels that qualify as LVS.
- Postal loopholes: Postal shipments, representing about 20% of LVS, are less stringently regulated than courier services. For instance, country of origin is not a mandatory data element for postal entries.
- Minimal penalties: Because most LVS parcels have low declared values, civil penalties are minor even when rules are broken.
Key Reform Proposals from the Future Borders Coalition
The report outlines a strategy to modernise LVS regulations, balancing enforcement with continued support for legitimate trade:
1. Improve Data Accuracy Using AI and Machine Learning
Adopt emerging technologies for screening and risk assessment. AI could assist in scanning x-rays and analysing patterns in shipment data, helping authorities identify suspicious items more effectively.
2. Enforce One-Package-Per-Day Rule
Prevent abuse by fulfilment centres that split large consignments into multiple LVS-qualifying parcels.
3. Align Trusted Trader Programmes
Harmonise the U.S. Customs Trade Partnership Against Terrorism (CTPAT) and Canada’s Partners in Protection (PIP) to create a more streamlined and secure supply chain framework.
4. Tighten Data Compliance from Foreign Merchants
Implement systems requiring better quality and more consistent shipment data. Consider models such as the EU’s Import One-Stop Shop (IOSS), which centralises VAT collection and enforces traceability.
5. Eliminate Discrepancies Between Postal and Courier Rules
Align data requirements and enforcement between postal and courier channels. Review the authority to grant waivers under the STOP Act and encourage cross-border data standardisation.
A Balanced Approach to Reform
The report stresses that while reform is essential, it must not dismantle the LVS framework entirely. The Future Borders Coalition warns that removing the de minimis exemption could impose a de facto 12.1% tariff on low-value goods, disproportionately affecting small businesses and low-income consumers.
Moreover, if other countries retaliate by removing their own LVS exemptions, this could hurt U.S. exporters as well.
At MyDutyCollect, we support businesses in navigating these complex regulations by offering automated customs clearance, precise duty and tax calculation, and compliance solutions. As trade regulations evolve, having the right tools in place can make all the difference.
Get in touch with us to find out how we can assist your cross-border operations. Subscribe to our blog and visit our website and LinkedIn page for more updates. You can also contact us by sending a message to info@mydutycollect.com. We’d be delighted to hear from you.
sources :
–https://www.cbp.gov/frontline/buyer-beware-bad-actors-exploit-de-minimis-shipments?
–https://www.digitalcommerce360.com/2023/12/21/small-business-bets-big-on-ecommerce/
