Termination of the De Minimis Exemption

As of August 29, the United States has officially discontinued the de minimis exemption, which previously allowed for duty-free imports valued under $800. This decision, articulated in a White House executive order released in late July, marks a significant shift in import regulations aimed at curbing the influx of low-value shipments that could evade tariffs.

Targeting Tariff Evasion from Asia

The primary focus of this policy change is to address shipments originating from China and Hong Kong, which have been identified as major sources of products that exploit this loophole. The White House has expressed concerns that these shipments often include unsafe goods, including synthetic opioids, posing risks to American consumers and businesses.

Impact on E-commerce and Retailers

This executive order is poised to heavily affect online retailers like Shein and Temu, which have relied on sending packages directly to U.S. customers without incurring tariffs. The changes are expected to complicate their operations, resulting in increased costs for both retailers and consumers as they navigate the newly imposed duties.

Historical Growth of De Minimis Shipments

From 2015 to 2024, the U.S. saw a staggering increase in de minimis shipments, jumping from 134 million to over 1.36 billion annually. U.S. Customs and Border Protection now processes over 4 million such shipments daily. The significant rise in these shipments has resulted in substantial lost revenue for the government, prompting the need for regulatory changes.

New Regulations and Customs Procedures

With the de minimis exemption now rescinded, all low-value shipments will be required to undergo formal customs entry, regardless of their origin or value. Non-postal shipments will now be processed through the Automated Commercial Environment (ACE), requiring entry filings and bonds, while postal shipments will incur duties based on their country of origin.

Repercussions for Global Trade and Air Cargo

The elimination of the de minimis exemption, coupled with heightened tariffs, is anticipated to significantly reduce air cargo volumes for low-value e-commerce shipments, a crucial segment of China-U.S. trade. As a result, e-commerce giants may shift to bulk sea freight methods, leading to a reassessment of cargo airline strategies and global trade routes.