End of de minimis exemption officially goes into effect

Earlier today, 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, officially came to an end.

This action stemmed from a White House Executive Order issued last month.

As previously reported, this move is 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. Reuters noted that White House said the Commerce Secretary Lutnick would submit a report within 90 days, from April 2, assessing the Executive Order’s impact and considering whether to extend these rules to packages from Macau.

In the April 8 executive order, the White House stated that the initially-announced tariff of 30% of an item’s value or $25 per item, whichever is more, will now 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.

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.

Noting that the majority of shipments claiming the import exemption originate from several China-founded e-commerce platforms (like Shein and Temu, among others) the White House proposed changes in which the de minimis exemption might not be allowed for products to which Section 201, 301, and 232 duties might otherwise apply.

In terms of the impact of not being able to leverage the de minimis exemption in the future, when it could eventually cease, as per the White House’s actions, industry stakeholders need to take various steps, including dealing with added paperwork and delays, and also working with and educating customers about any changes and expected and anticipated impacts.

John Haber, Chief Strategy officer for Transportation Insight, told LM that the impact of the absence of the de minimis exemption on e-commerce shippers would be huge.

“If you look at the increase on low-value exports out of China, it has gone from around $5 billion in 2018 to more than $65 billion today,” he said. “It is a massive increase in low-value exports that have flooded the U.S. market. It will be interesting [for stakeholders] to see if they can find a loophole around it.”

And Chris Rogers, Head of Supply Chain Research for S&P Global Market Intelligence, explained that the de minimis exemption applies to more than 800 million packages per year that would have to be inspected by Customs prior to entering the U.S.

“Bear in mind that the U.S. sees 25 million [import] containers per year, with a removal of the de minimis exemption suddenly increasing that by around a factor of 40,” he said. “I understand why it has been delayed and is probably the right move. Whether it comes back or not, who knows. We are already seeing companies react to it. A Chinese media outlet said that Shein is asking some of its Chinese suppliers to switch to Vietnam for U.S. sites, which could lead to increased tariff activity there.”

Adam Napoli, Director, Fulfillment Optimization, for San Diego-based parcel consultancy Shipware, told LM that shippers and brands are being forced to reassess their entire supply chain strategy due to tariff fluctuations and the end of the de minimis exemption in the U.S., adding that the potential to incur higher costs on smaller shipments requires businesses to explore alternative fulfillment strategies, such as using U.S.-based warehouses or shifting to countries with more favorable trade policies.

“The most successful brands will be those that can adjust quickly and efficiently to these new import rules…considering alternative routes, revisiting contracts, and adapting to market changes will be key to staying competitive,” said Napoli.

As for steps shippers can take as tariffs continue to rise in many regions, Napoli explained that it's more important than ever for brands to stay competitive without compromising their bottom line. One strategy, he suggested, could be to review their entire supply chain to identify areas where they can reduce costs, which could include shifting production to countries with lower tariffs, consolidating shipments to reduce the number of customs transactions, or taking advantage of preferential trade agreements. Another option, he said, is to work with third-party logistics providers who specialize in navigating the complexities of international tariffs, noting their expertise can help ensure that they're not overpaying on duties and can streamline companies’ international shipping processes.

With the removal of the de minimis exemption, carriers must now report shipment details to U.S. Customs and Border Protection, keep an international bond to guarantee payment, and pay duties on a set schedule. CBP can also require formal entry for any shipment, even if it qualifies for the new flat fee.

President Trump tied the move to the fentanyl crisis, blaming Chinese suppliers for fueling synthetic opioid shipments through small parcels. “President Trump is targeting deceptive shipping practices by Chinese-based shippers, many of whom hide illicit substances, including synthetic opioids, in low-value packages to exploit the de minimis exemption,” the White House said.

Paul Bingham, Director, Transportation Consulting, for S&P Global Market Intelligence said that the removal of the de minimis exemption is expected to have an immediate impact in various ways, including a hit to air cargo demand, inventory handling, and import pressures, in terms of how certain goods are sourced.

“That is going to be a factor in the economy as some people reduce their consumption,” he said. They're just going to say, ‘well, if I can't get those cheap Temu deliveries, I'm not going to buy it.’ In some ways, you can see consumption spending actually dampened by what's going to happen. And that's no surprise. You've raised the price, and peoples’ elasticity demand exists, so they are not going to be purchasing as much. Clearly, that affects air cargo, in terms of demand and supply. Some of the rates, perhaps, may be falling, absent some of the advanced shipping happening out of countries other than China. But de minimis is not just China. It's going to hit everything. And globally, it's not even just the U.S., because we're seeing that the Europeans are doing that, too, and have also threatened, for some similar reasons, perhaps. That market affects air cargo capacity, which is mobile. It's not as if it's can just be shifted to another market. It's going to affect [things] globally as the carriers try to find ways to deploy their capacity and their equipment, in ways where, if the Europeans are reacting similarly, it weakens that even further. That whole business model sort of goes away.”