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What the impact of the de minimis exemption on U.S. consumers and businesses

Arriana McLymore & Helen Reid

NEW YORK, Aug 29 -

The Trump administration ended Friday duty-free imports to the United States of packages valued at less than $800. This so-called de minimis exemption has been a source of controversy.

Shipments surge dramatically

Global sellers will likely charge higher prices to U.S. customers. On July 30, President Donald Trump announced the end of duty-free parcels for all countries. This will take effect a month after. Tariffs increase the cost of shipments from overseas retailers to the U.S. unless they absorb the tariff costs.

This move by the administration expands a move made in May to impose tariffs against these shipments coming from China and Hong Kong. It affects retailers like Shein and Temu who primarily ship out of China.

What does the new rule mean for U.S. consumers and small U.S. companies that deal with suppliers overseas?

WHY THE MOVE? The Trump administration has taken action against de minimis, claiming that the exemption allowed drug traffickers to send fentanyl-containing parcels into the country.

Retailers and industry groups in the United States also oppose the exemption, believing that it gives an unfair advantage to foreign companies like Shein and Temu and some third-party Amazon sellers. Amazon, Shein, and Temu all declined to comment.

Prices of goods at Walmart and Target, for example, already reflect the tariffs that retailers pay when they import the products, making them more expensive.

What does it mean?

The de minimis exclusion enabled an ecommerce boom across borders as U.S. consumers snapped up bargains such as $12 dresses on Temu. Orders valued under $800 were exempt from duty until May 2.

In fiscal 2024 1,36 billion shipments were declared as de minimis, with a value of $64.6 Billion.

In 2024, according to U.S. Government data, approximately 73% of the de minimis packages that enter the U.S. originate from China.

What are the most affected countries? CBP data shows that Canada, Mexico, and the United Kingdom were the next largest senders. Red Stag Fulfillment, a logistics provider, said that other important sources include South Korea. India, Vietnam, and Thailand.

Red Stag reported that since the China exemption was removed on May 2, the de minimis volume has already dropped by a third.

Customers of small British businesses who sell online to U.S. customers have been alerted to price increases. Merchant & Mills announced, in an Instagram message, that it will increase its U.S. price by 15% for duties.

WHAT ARE THE RAPID EFFECTS? This change has caused chaos in the postal services around the world. Australia Post, Britain’s Royal Mail and Germany’s DHL have all halted shipments to America while they adapt.

It's difficult for the post office to enter an environment in which they must collect duties when they have never collected duties before, said Clint Reid. Reid is CEO and founder of Zonos whose software allows businesses to calculate, collect, and remit duty.

U.S. Customs and Border Protection announced that it would take the necessary steps to implement the Order.

As U.S. Customs demands information about the origin and nature of goods, sellers will have to increase their paperwork. The Trump administration temporarily halted its initial ban of de minimis shipments to the United States in February as U.S. Customs piled up packages.

WHAT DOES IT MEANS FOR ONLINE RETAILERS

Shein and Temu, two of the biggest ecommerce companies in China, have had plenty of time to adjust to this change. Although prices have begun to rise on Shein, the most recent change may place it in a stronger position than its rivals. Yao Jin is an associate professor at Miami University.

Jin stated that "it is now economically feasible to ship out from China, on a comparative basis. This is because the costs of shipping directly from other countries have also increased."

HOW WILL SMALL BUSINESSES BE AFFECTED BY THE BANKRUPTCY?

Some small businesses plan to raise their prices in order to offset tariff costs.

Platforms such as eBay and Etsy where small businesses and individuals sell anything from vintage soccer shirts and electronics to consumers, advise sellers to inform their customers of tariff-related increases in price.

(source: Reuters)