INF/MSME/P/2  
 
17 June 2022 
(22-4716) Page: 1/6 
  Original: English  
 
INFORMAL WORKING GROUP ON MSMES  
PROPOSAL ON SIMPLIFIED TAX / DUTY COLLECTION ON IMPORTED LOW -VALUE SHIPMENTS  
The following communication, dated 17 June  2022, is being  circulated at the request of the 
Coordinator of the Informal Working Group on MSMEs . 
 
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The information reproduced in Annex was provided  by the Global Express Association . This document 
is circulated for information only.  
 
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  INF/MSME/P/2  
 
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  ANNEX  
 
 
PROPOSAL ON  
SIMPLIFIED TAX / DUTY COLLECTION  
ON IMPORTED LOW -VALUE SHIPMENTS  
 
Option 1 – Flat Rate Assessment and Collection System  
 
POSSIBLE PROCESS ASPECTS  
 
FOREWORD  
 
This paper should be read in conjunction with the GEA’s “Proposal on Tax/Duty Collection on Low  
Value Shipments”  (September 2020).  This paper advocates the radical simplification of the  
assessment, collection and remittance of duty and/or tax on such shipments, which are typically  
generated by e -commerce transactions.  It contemplates three possible options  to carry out such a  
policy.  
 
This paper elaborates exclusively on ‘Option 1 – A Flat Rate Collection’. This is arguably the simplest  
one,  meant  for countries  that seek  or need  the simplest  policy  instruments.  
 
GEA’s two additional proposals, not covered here, are: Option 2 – Simplified Duty Collection; and  
Option  3 – Simplified  VAT/GST  Collection,  for countries  with  a focus  on consumption  taxes.  
 
GEA intends to develop individual technical papers for each of the three options. It has already  
published  a technical  paper  for Option  2, and will develop  one for Option  3 shortly.  
 
Option 1 contemplates a flat rate collection for low -value imports . It draws inspiration from the  
“WCO Recommendation concerning the application of a flat rate assessment system to goods sent in  
small consignments to private individuals ”, adopted in June 1968 (see Annex). The application of a  
flat rate system does not deprive the goods of the benefit of duty -free admission under other  
provisions  if all the conditions  laid down  by those  provisions  are fulfilled.  
 
All three options suggested by GEA are based on the vendor collect principle, ie that the duty and 
tax  calculation  and collection is performed by the overseas vendor selling goods directly to 
consumers in   the importing country. Should a country wish to adopt this flat -rate approach, it will 
need to follow  the principles set out by the WCO Recommendation in addition t o the principles 
associated with the  vendor  collect  approach.  
 
The aim of this paper is to generate a public discourse and trials or pilots of this idea, in order to 
fine- tune  it. 
 
Comments, suggestions and criticism are welcome. Please address them to info@global -express.org .  
Geneva,  November  2021  
INF/MSME/P/2  
 
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PROPOSAL ON SIMPLIFIED TAX / DUTY  
COLLECTION ON IMPORTED LOW -VALUE SHIPMENTS  
 
Option 1 – Flat Rate Assessment and Collection System  
 
POSSIBLE PROCESS ASPECTS  
 
The proposed duty/tax collection system using a flat rate collection approach is based on the 
vendor - collect  revenue  collection  model  whereby  the seller/marketplace/platform  in the originating  
(foreign)  country  of sale collects  the duty/tax  applicable  in the country  of consumption/destination.  
 
1. The seller/marketplace/platform will be required to have a registration number recognized  
by the destination country.  This should be achieved through a simple and convenient 
online   registration process in the country of destination. There should be no requirement 
in particular for micro, small and medium sized sellers to establish a legal or fiscal  
representation  in dest ination  countries as  this creates  non-tariff  barriers.  
2. At the time of the sale , the seller/marketplace/platform will query the database (see 
point  2  below) in real -time through an API, identify the applicable rate, apply the 
applicable  exchange  rate and calculate  the full landed  cost to the buyer.  
3. The seller/marketplace/platform may/should provide the commercial details about the  
transaction (commodity description, quantity, price paid, etc.) to the authorities at  
destination.  
4. The seller/marketplace/platform will remit the duties , preferably  on a periodic basis, 
directly  to the authorities in the country of destination with reference to the registration 
number and   the transactions.  
5. During the import clearance process the loop will be closed by including the registration  
number of the overseas vendor in the simplified goods declaration applicable for this  
process. Authorities may also require a commercial invoice to be available which gives 
access   to relevant  reference  data  of the underlying  purchase.  
6. The compliance and enforcement of this duty collection system should be based on  
cooperation and information exchange between Customs authorities using mutual  
administrative  assistance  arrangements  in place . 
What will governments have to do to establish such a system in their country  
 Step  1: Determine  your  criteria:  
Where it is necessary to collect duties and taxes, each government would have to determine the  
criteria  that would  be applicable  to a flat rate assessment  and collection  system,  including:  
- a value threshold up to which this collection approach will be applicable. For example, the  
Immediate Release Guidelines define a threshold of 1,000 SDR (approx.  1,400 USD) for  
shipments falling under category 3 of the IRG, ie low -value dutiable shipments. The WCO  
Recommendation of 1968 on a flat rate assessment system suggests a threshold of no less  
than 60 USD, which converted to the dollar value of 2021 corresponds to a thresh old of  
approximately  470 USD.  
- Where countries apply a de minimis value below which no duties and/or taxes are applied,  
this de minimis threshold would represent the lower threshold beyond which the flat rate  
collection  system  would  be applied.  
- Identify the  scope and the list of excluded goods , e.g. prohibited and restricted items, items  
subject  to excise  duties,  etc. INF/MSME/P/2  
 
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  - Any other  parameters  that the government  requires  to be followed  in this program.  
After this step, a country will have defined the scope of its low -value import simplification process.  
The next  step  will be to group  the determine  the flat rate.  
 
Step  2: Determine  your  flat rate.  
As stipulated by the WCO Recommendation, a flat rate assessment system can simplify and expedite  
the clearance of goods and, subject to certain conditions, safeguard Members' revenue and  
economic  interests.  
 
A flat rate combines applicable Customs duties and import taxes into one.  Given that the flat rate  
should apply across all commodities, it is therefo re necessary to establish an average duty rate to be  
combined with an average import tax rate. This could lead to a preferential treatment for some  
commodities with a higher than average Customs duty rate, but also to a disadvantage for those  
commodities w ith a lower than average duty rate.  In order to avoid issues under WTO obligations  
(GATT schedules), this system should be optional, leaving the importer the possibility to go through 
a regular channel should the applied rate be lower than the flat -rate.  This does not take into account  
the extra costs generated by the red -tape involved in regular import channels, which may lead to 
the overall  cost being  higher  than  a flat-rate approach.  
 
The flat rate should not be based on the commodity with the highest duty rate as this would present  
a tariff  barrier  for the vast majority  of B2C shipments.  
 
Example: Customs duties of typical B2C shipments range from 5% -20%, which gives an average of  
12,5%. The applicable import tax (GST, VAT or other) is 15%.  This leads to a flat rate of  
12,5%+15%=27,5%.  Simplicity  is of the essence  in this approach.  
 
What will be required at the international level to facilitate this flat rate assessment and collection  
system  at the global  level?  
 
1. Central  duty/tax  rate  repository  
The system would be enhanced by a central database or repository of tax/duty information  
for imports.  Such a global database would be the central reference point for the applicable  
flat rate as well as the applicable exchange rate. Ideally, it ought to be located at a central  
point, for example an international organization such as the WTO or WCO and would be  
supplied  with  relevant  information  from  the participating  governments.  
 
Each participating government would have to make their respective flat rate information  
publicly available and provide it to said central reference point.  The information would 
have to be kept up to date, be legally valid and reliable. This will ensure that the duty/tax  
calculation by the vendor will be accurate and reliable for the consumer in the destination  
country.  
 
2. Advance  Programming  Interface  (API)  
Vendors world -wide would access such information through an Advance Programming  
Interface (API).  APIs would ‘ping’ the database, effectively asking a question.  What is the  
flat rate applicable for imports of this or that commodity into country A?  The API would 
bring  back a reply (x%), which would allow the vendor’s IT system to automatically 
calculate a  landed  cost.  
 
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Annex:  
 
CUSTOMS CO -OPERATION              C-7 
    COUNCIL                T2-3211  
          _                     1 
 
 
 
 
RECOMMENDATION OF THE CUSTOMS CO -OPERATION COUNCIL  
CONCERNING THE APPLICATION  
OF A FLAT RATE ASSESSMENT SYSTEM TO GOODS  
SENT IN SMALL CONSIGNMENTS TO PRIVATE INDIVIDUALS  
OR CARRIED IN TRAVELLERS' BAGGAGE  
(FLAT RATE ASSESSMENT)  
(11th JUNE 1968)  
 
 
THE CUSTOMS  CO-OPERATION  COUNCIL,  
 
CONSIDERING that the assessment of import duties and taxes chargeable on goods sent in small  
consignments to private individuals or carried in travellers' baggage is a source of problems for  
Members' Customs Services in view of the number and diversity of such importations, of the need to  
handle them expeditiously and of the wide range of go ods thus imported, usually in limited  
quantities;  
 
CONSIDERING that, in general, a flat rate assessment system can simplify and expedite the clearance  
of such goods and, subject to certain conditions, safeguard Members' revenue and economic  
interests;  
 
HAV ING REGARD to the experience gained by Member States who apply such a system and to  
Resolution (66)43 of the Committee of Ministers of the Council of Europe addressed to  the  Customs  
Co-operation  Council  on this subject;  
 
RECOMMENDS that Members of the Council and members of the United Nations Organization or its  
specialized  agencies,  and Customs  or Economic  Unions,  should  : 
 
1. apply a system of flat rate assessment to goods sent in small consignments to private individuals  
or carried in travellers' baggage, provided that such importations are of a noncommercial 
natur e and the aggregate  value  of the importation  does  not exceed  a figure  which,  so far as 
possible,  and having  regard  to national  economic  circumstances,  should  not be less than  60 US 
dollars;  
 
2. determine  the flat rate so as to cover  all the types  of import  duties  and taxes  chargeable;  
 
3. ensure  that the formalities  relating  to flat rate assessment  are as simple  as possible;  
 INF/MSME/P/2  
 
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  POINTS  OUT  : 
 
1. that where several consignments are sent at the same time by the same consignor to the same  
addressee,  the aggregate  value  of the importation  shall  be taken  to be the total  value  of all those  
consignments;  
 
2. that the application of a flat rate system shall not deprive the goo ds of the benefit of duty -free 
admission  under  other  provisions  if all the conditions  laid down  by those  provisions  are fulfilled;  
 
3. that a flat rate system  may  include  provision  for the addressee  or traveller  to claim  that the goods  
be charged at their own appropriate rates of import duties and taxes, provided that all the  
dutiable  and taxable  goods  shall  then  be so charged;  
 
4. notwithstanding  the terms  of this Recommendation,  Members  remain  free to withhold  its 
facilities  from  certain  goods;  
 
STRESSES that this Recommendation does not prevent the application of greater facilities which  
certain Members grant or may grant in future by unilateral provisions or by virtue of bilateral 
or  multilateral  agreements;  
 
REQUESTS Members of the Council and  members of the United Nations Organization or its  
specialized agencies, and Customs or Economic Unions which accept this Recommendation to  
notify the Secretary General of the Council of the date from which they will apply the  
Recommendation and of the con ditions of its application.  The Secretary General will transmit  
this information to the Customs administrations of all Members of the Council.  He will also  
transmit it to the Customs administrations of the members of the United Nations Organization  
or its specialized agencies and to Customs or Economic Unions which have accepted this  
Recommendation.  
 
 
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