Perhaps the biggest shift is the end of the de minimis exemption for low-value parcels entering the United States. This move is going to change the e-commerce battlefield in a profound way. Starting soon, packages valued at $800 or less, primarily from China, will no longer bypass tariffs, impacting consumers and businesses alike.
The de minimis administrative exception opened its doors back in 1938. It simplified shipment of lower-value packages — those worth as little as $5 (today about $109). In the intervening years, the threshold for this exemption rose dramatically as well, reaching up to $800 by 2016. This adjustment allowed the flooding of up to 4 million low-value parcels into the U.S. daily. Tens of thousands of these parcels came from China.
In January and February of this year, more than 70% of the 216 million packages entering the U.S. originated from China. Chinese exports of low-value, manufactured goods have increased at an incredible rate. They blasted from $5.3 billion in 2018 to an estimated $66 billion in 2023—that’s 12 times growth! This trend has raised concerns for American producers. As a consequence, they are rethinking their business models based on a steady diet of low cost imports.
John Curry, owner & CEO of swimwear brand, HAPARI International, gave us a look behind the curtain at the new law. These shifts are making many companies rethink their logistics strategies. Half a year ago, he moved from bulk shipping to de minimis shipping in order to benefit from cheaper prices. Curry emphasized that “there has to be a solution because both countries cannot survive this way.”
Izzy Rosenzweig, founder and CEO of Portless, assists companies like HAPARI in shipping goods from China using the de minimis exemption. With the new regulations on the horizon, businesses must prepare for increased import charges and potential adjustments to their pricing structures.
The Biden administration has indeed issued a new rule. The rule specifically aims at foreign businesses that attempt to evade tariffs by undervaluing their products as less than $800. The rule has been proposed in response to long standing complaints from domestic manufacturers that these sorts of practices damage their competitiveness. Donald Trump previously condemned the de minimis exemption as “a big scam going on against our country, against really small businesses.”
The dismantling of this duty-free regime has created a difficult burden that the majority of U.S. companies. That’s particularly the case for those companies that have done well by off-shoring production to China. As for the upholstery industry, earlier this year, Larry Severini, CEO of Embroidery Solutions Manufacturing LLC, found himself getting whipped by low-cost imports. As a result, he was forced to shutter one of his two South Carolina plants. He stated, “We need duties to level the playing field to make it fair.”
In fact, commercial carriers are about to introduce tariffs averaging 145% on declared values. Accordingly, consumers should get ready for increased prices and possible delivery slowdowns. Retailers like Shein have assured their customers that “tariffs are included in the price you pay,” meaning no additional charges will arise at delivery. That still might not allay fears about increasing costs.
The rapid growth of cross-border e-commerce has complicated the purpose of this decades-old customs exception rule. The expected movement on the de minimis exemption comes from increasing pressures from domestic producers. These pressures happen within a global trade ecosystem that is deeply defined by the Chinese export machine.
Heather Mason, Chief of Staff for the International Shipping Federation, which represents internationally recognized brands, testified that safety and labor standards in international shipping were being undercut. “Reputable brands follow strict safety, labor, and warranty standards,” she noted, suggesting that not all imports maintain quality or ethical production standards.
