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US to drop item on tax-free threshold from North American trade pact: sources

Reuters | 11 December 2019

US to drop item on tax-free threshold from North American trade pact: sources

by Andrea Shalal

WASHINGTON (Reuters) - The Trump administration has agreed to drop a footnote from the U.S.-Mexico-Canada trade deal that would have let it lower the $800 tax-free threshold for imported goods, easing concerns of small business owners who buy overseas materials in small batches, said sources familiar with the matter.

The measure had sparked opposition from technology groups and a bipartisan group of 150 lawmakers, who warned U.S. Trade Representative Robert Lighthizer about any effort to override Congress, which had raised the threshold in 2016.

While some businesses have complained that the level is too high and allows Chinese sellers an unfair pricing advantage on Amazon (AMZN.O), eBay (EBAY.O) and other internet sites, small business owners argued that lowering the tax-free level could raise their costs and hurt their ability to compete globally.

Top officials from Canada, Mexico and the United States signed another overhaul of the 1994 North American Free Trade Agreement (NAFTA) on Tuesday after House of Representatives Democrats agreed to the revisions.

A full text has not been released, but multiple sources said the Trump administration was ready to drop a footnote from its initial draft implementing legislation that it could have used to lower the U.S. “de minimus threshold,” or value below which imported goods are free of sales tax and duties.

“The problematic footnote will not be in there,” said one source briefed by the office of the U.S. Trade Representative. “They dropped it due to pressure from industry and the many members of Congress who expressed concern.”

Three additional sources said USTR was ready to drop the footnote, which had suggested Washington could lower its tax-free threshold to match the lower ones of Canada and Mexico and other countries in the future.

Internet platform eBay welcomed the news.

“We are supportive of the deal and not lowering the de minimis threshold,” said eBay spokeswoman Ashley Settle. “The new USMCA agreement ... will help the thousands of eBay small businesses in every corner of the country who export by facilitating streamlined cross-border transactions and creating much needed certainty for businesses and consumers.”

As part of the USMCA, Canada and Mexico both raised their tax-free thresholds, although their levels will remain well below the U.S. level of $800, the highest in the world.

 source: Reuters