Looking at the impact of the removal of the de minimis exemption on U.S.-China e-commerce logistics operations

At a time in which there are so many moving parts when it comes to the flurry of trade policy and tariff changes, including implementations, pauses, and speculation, it sometimes is beneficial to look at one piece of the trade-related pie to get a read on it, in terms of its impact and how it is changing things, related to operations, production, and costs, among other factors.

In this case, it is worth taking a look at the de minimis exemption, which allowed shipments under $800 sent from China and Hong Kong to the U.S. to not be subject to tariffs, and officially came to an end on May 2. With this change now in effect, it requires all shipments from these regions—regardless of value—to undergo full customs processing and be subject to applicable tariffs, as noted in various reports.

As previously reported, this move was expected to have a major impact on online retailers like Shein and Temu, which rely on sending goods directly to U.S. shoppers without paying tariffs. As reported by LM, under the Biden administration, the White House in 2024 said it was taking steps towards changing the rules around imports claiming the $800 de minimis exemption.

In an April 8 executive order regarding the removal of de minimis, the White House stated that the initially-announced tariff of 30% of an item’s value, or $25 per item, whichever is more, would be increased to 90% and $75 or more, effective on or after 12:01 A.M. ET on May 2. And it added that fee per postal item containing goods will be increased from an initially-announced $50 to $150, effective, set to take effect on or after 12:01 A.M. ET on June 1.

But those parameters subsequently changed on May 12. In the executive order, entitled “Modifying Reciprocal Tariff Rates to Reflect Discussions with the People’s Republic of China,” the White House said tariffs on these low-value U.S.-bound shipments will be reduced to 54%, from its previous level of 120%, with the $100 duty fee per postal item remaining.

Fast-forward a few weeks later and it is clear that the impact of the removal of the de minimis exemption has been significant, as evidenced by Temu reporting net profits have dropped by 47%, whereas other retailers have taken steps to increase prices and also make strategic changes, too.

What’s more while it has not been long since the end of the de minimis exemption took effect, there has been no shortage of feedback in regards to its subsequent impact on the sectors that previously relied on it—and in advance of it, too.

That was made clear in comments from Brandon Fried, Executive Director at the Washington, D.C.-based Airforwarders Association (AfA), just prior to the de minimis exemption taking effect.

At that time, he said that the freight forwarding community was preparing for what he called a seismic shift in how low-value shipments—those under $800—are processed at the border.

“Shippers who built their business models around direct-to-consumer fulfillment from Asia are going to be hit hard,” Fried told LM. “These changes will mean more documentation, more delays, and significantly higher costs—particularly for air shipments, which have thrived under the current De Minimis structure. We're already seeing a pivot toward bulk ocean shipments and U.S.-based warehousing as companies try to find workarounds. Airfreight volumes are falling as well. But the real challenge isn’t just the added compliance burden—it’s the uncertainty. We’re hearing from members who are scrambling not because they don’t want to comply, but because they’re not sure what compliance looks like. CBP has provided limited transparency and unclear guidance, especially when it comes to what data is needed, how shipments will be evaluated, and how enforcement will be handled. It’s nearly impossible to plan when the rules seem to shift in real time.

Fried also noted that AfA is also extremely concerned about the instability created by these rapid policy changes, explaining that tariff levels can effectively change overnight depending on the country of origin.

“Today it’s China and Hong Kong, but importers are rightly worried that Vietnam, Cambodia, or other sourcing hubs could be next,” he said. “We’ve already seen this administration move quickly to impose additional tariffs with minimal notice. That unpredictability is creating chaos across global supply chains. In short, we’re facing a perfect storm: mounting compliance demands, a lack of clear direction from regulators, and policy volatility that undermines confidence and long-term planning. We're advising our members to reinforce their compliance infrastructure, stay in close touch with customs brokers, and keep their customers informed as the ripple effects begin to take hold.”

Judah Levine, Head of Research, for Freightos, said on a recent Freightos-hosted Webcast that the anticipation of the de minimis pause was clear based on reports of sharp drops in China-U.S. e-commerce volume by as much as 50% compared to before May 2.

And he added that there are indications that platforms like Shein and Temu are already shifting away from air cargo and moving to ocean logistics the US, and shifting manufacturing to other countries in Asia, as well as increasing their prices.

“There are also reports of shifting their focus somewhat away from the U.S. and to other markets, or promoting the fact that there are fulfilling domestically in the U.S.,” he said. “The drop in tariffs to a 30% minimum and changes to the de minimis for goods coming in by post, they make the de minimis and air cargo a little more attractive for low-value goods than they were in terms of e-commerce and B2C commerce, and relieve some of that cost pressure that these platforms were facing. But probably these changes aren't significant enough to kind of reopen the e-commerce by going down the air cargo half, especially as these shifts to other modes are already underway.”

Looking at the impact of the de minimis exemption on trade and ocean cargo, Port of Los Angeles Executive Director Gene Seroka noted that the impact is already being felt.

Seroka explained that the parcels that came into the U.S. under de minimis were priced well and the items were good quality, delivered at a competitive speed-to-market, albeit a little longer than what U.S. consumers are accustomed to with overnight, next-day, and weekly delivery services.

“This 54% tariff will be impactful,” he said. “It is likely, prices will go up and some already have, selections will be fewer, and the American consumer will be a little choosier about what they're buying. This market segment has been important for a number of years now, and from what we see, differences will be in how much the consumer will be willing to pay as we go into the future. This story has not been fully written yet, but safe to say, the volume of this cargo will probably come down. We've even seen some of the American parcel companies who do business internationally, beginning to tweak their service offerings.”

Perhaps the most obvious example highlighting the impact of the de minimis exemption was laid out in a May 16 Reuters report, which observed that air-freight capacity between the U.S. and China is down by nearly one-third since de minimis was removed. And while the U.S. and China are currently amid a 90-day pause through August 14, with tariffs temporarily reduced, the report said e-commerce air volumes remain affected, coupled with the sudden drop in demand for air cargo products and low prospects for a rebound are leading to headwinds for Asian airlines.

The report also highlighted two very interesting data points.

One being that in 2024, low-value e-commerce shipments, at 1.2 million tons, comprised 55% of goods shipped, via air, from China to the U.S., whereas that figure was at 5% in 2018, according to data from Aevean. Another one was that operators flew 26% less freight capacity from China and Hong Kong to the United States between the May 2 “de minimis” suspension and the May 13 detente compared with a year earlier, according to data from air cargo consultancy Rotate.

To be sure, given the fast—and unpredictable—pace of trade-related policy and activity, there are sure to be more changes and shifts in store for industry stakeholders. In a short time, the removal of the de minimis exemption serves as a baseline in a way. What happens next remains to be seen, of course, but it is clear this is a major change, with a whole host of impacts.