The exemption from duties for packages sent to the US valued under $800 is set to come to an end this week.
In July, President Trump enacted a Presidential Order to suspend the “de minimis” tax exemption, leading to an increase in mail carriers globally. Subsequently, package delivery to the US has faced a suspension.
Starting on Friday, August 29th, packages valued under $800 will no longer be exempt from taxes and will incur specific customs duties.
However, letters and personal gifts worth under $100 will remain unaffected by these changes.
What is a minimum exemption?
The de minimis tax exemption was established in 1938 under Section 321 of the Customs Act of 1930, allowing low-value packages to enter the country tax-free.
The rules have been revised numerous times, and in 2016, it was updated to cover items valued under $800.
In 2024, over 92% of all cargo entering the US, which amounted to over $64 billion, benefited from de minimis exemptions, according to Customs and Border Patrol (CBP).
Why is the US ending the minimum?
There is bipartisan support for reviewing or abolishing the minimum shipping exemption. Critics argue it gives international manufacturers an unfair advantage and facilitates the entry of drugs and other prohibited items into the country due to lax processing and oversight.
Both the Biden and Trump administrations have expressed concerns regarding the negative implications of minimal shipping practices.
Trump’s order in July emphasized that “the risk of evasion and illicit drug importation is heightened in low-value articles eligible for tax-free treatment.”
Before he took office in January, CBP had proposed rules to narrow the scope of the de minimis exemption, claiming that international companies were exploiting tariff loopholes to undermine US businesses.
Former Secretary of Homeland Security Alejandro Mayorkas stated, “The duties and tax exemptions on these products have harmed American businesses and flooded our ports with foreign-made goods.”
In April, Trump had issued a Presidential Order to eliminate the de minimis exemption solely for China and Hong Kong, aiming to tackle a health crisis related to the illicit flow of synthetic opioids into the US.
This move raised the duty rate for items previously protected under the de minimis exemption to 30% of their value.
Now, all countries are set to lose these exemptions.
How are countries reacting?
Due to the suspension of the de minimis exemption, mail services around the globe are halting some deliveries to the US, according to a report from News Nation. DHL, the largest shipping company in Europe, has stated it will pause shipments of business parcels to the US until the new obligations are clarified.
Countries such as Germany, Denmark, Sweden, and Italy have already suspended many shipments. France and Austria will also stop certain deliveries soon, and the UK plans to do the same shortly after.
The Indian Post Office has announced it will suspend most shipments to the US starting on August 25th.
It remains uncertain how long the de minimis exemption will be suspended, but more countries may continue to cease shipments until the specifics of the enforcement are established.
What does this mean for businesses?
The suspension of the de minimis exemption is likely to significantly affect the global economy.
Global e-commerce businesses, particularly those in fast fashion like Shein and Temu, are already facing repercussions due to these policy changes.
These companies have started increasing their product prices in response to Trump’s trade policies.
A 2023 Report indicates that Shein and Temu account for over 30% of all packages shipped to the US daily under the de minimis exemption.
Businesses that depend on imported goods, like dropshippers using third-party manufacturers, may also experience profit challenges.
Potential impact on American consumers
As global businesses are likely to raise prices due to these shifting trade policies, American consumers could feel the pinch from the end of the de minimis exemption across the board.
A study suggests that eliminating the exemption could cost U.S. consumers between $11 billion and $13 billion. Reports indicate that this will significantly affect purchasing power for many.
