The United States is set to shut down a duty-free loophole, the “de minimis” exemption that has allowed low-value parcels to be shipped without incurring duties or taxes. This move, orchestrated by President Donald Trump, will notably impact American consumers shopping at popular Chinese online platforms such as Shein and Temu, as they brace for increased prices.
For years, the de minimis exemption allowed U.S. customers to receive packages valued under $800 without facing additional tariffs, making these platforms highly attractive due to their competitive pricing. However, both Trump and former President Joe Biden have voiced concerns that the exemption harms domestic businesses and facilitates the illicit trade of restricted items, particularly synthetic opioids like fentanyl.
The term “de minimis,” originating from Latin meaning "of the smallest," refers to a long-standing U.S. trade rule enabling American tourists to bring small-value items back into the country without customs declaration. Initially set at a modest $5 in 1938, the threshold was raised to $800 for retailers, resulting in over 90% of cargo entering the U.S. being exempt from customs duties.
The looming changes come in light of recent executive orders aimed at curbing the trafficking of illegal goods, including thousands of overdose deaths linked to opioid imports. Notably, starting May 2, parcels coming from mainland China and Hong Kong will be subjected to import duties, which will escalate in the following month.
Spearheading this legislation, Trump had previously attempted to close this loophole in February but had to pause it over logistical challenges faced by customs and delivery services. Both Shein and Temu, which have enjoyed surging popularity in the U.S. thanks to low prices, acknowledged that rising operational costs attributed to changes in global tariffs would lead to price adjustments from April 25 onwards.
Amid these changes, analysts project that eliminating the de minimis exemption could impose an additional burden of $8 billion to $30 billion annually on U.S. consumers, amplifying the ongoing trend of price increases that shoppers have already encountered.
As discussions unfold about similar policies in the U.K. and the European Union to tackle similar issues, concerns are also raised over potential shifts in the U.S. Customs and Border Protection's priorities, as border officers will need to accommodate additional work while combatting substance smuggling.
Experts point out that, while the termination of the exemption aligns with the goal of deterring illegal imports, it may inadvertently create more challenges for border officials and fail to address the fundamental issues faced by U.S. manufacturers burdened by existing foreign competition.
