President Trump is ending the de minimis extemption, a 1938-era rule designed to encourage the sale of small packages to the US.
The change does into effect on August 29, roughly a month after the announcement.
The rule had previously been ended for imports from China earlier in the year, but this new change will end it for imports to the US from any country.
What’s Changing and Why?
The de minimis threshold was $800 (per item, per day) prior to the removal of the exemption, and allowed small companies to avoid duties and complex paperwork on small-scale imports.
Why the new change? According to a statement from Trump covered by the New York Times, the rule was used to “evade tariffs and funnel deadly synthetic opioids as well as other unsafe or below-market products that harm American workers and businesses into the United States.”
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A US Customs and Border Protection report found that more than 60% of 2021 de minimis shipments originated in China and Hong Kong.
Who Loses Without De Minimis?
The ecommerce industry will likely be disrupted by this news. Many smaller operations or dropshippers have already adjusted to the China-only removal of de minimis by shifting to new sources for imports, and will now be forced to re-examine their supply chains once again.
Consumers will likely also lose out. Prices will rise across the board in many categories, with hobbiests and tech-lovers among the hardest hit.
Not only is the de minimis exemption ending, but new, higher tariffs mean that the duties paid on low-valued products are, in many cases, higher than ever.
Who Wins Without De Minimis?
It may be relatively good news for large US retailers like Walmart, since they’ll have the size needed to withstand these headwinds and can benefit from the reduction in competition.
After all, fast-fashion online retailers like Temu and Shein may see valuations drop, since their cost structure depended on the de minimis exemption. Low-value China and Hong Kong exports reached $66 billion in 2023, a number that’s now not likely to be repeated any time soon.
It’s also good news for many US-based companies, which may be able to produce domestic versions of now-costly products, although constaints including raw materials and climates will still impact them.
US-produced goods may eventually fill the gap in the market for lower-priced products, though these companies may lack the competition that could in theory push them to create higher quality goods.
