The Trump administration cut off this avenue when it recently announced that it was suspending the global commercial shipments’ de minimis exemption. This regulatory shift has undeniably shifted the paradigm of international trade. Local leaders celebrated as the new policy formally came into effect at midnight. It affects the majority of cargo coming into the United States, meaning thousands of American businesses and consumers are left reeling from these new duties being applied.
This measure is particularly important now, given the explosive growth in the volume of de minimis shipments into the United States over the past 10 years. In just nine years’ time, that jumped from 134 million shipments in 2015 to more than 1.36 billion shipments projected in 2024. These shipments are increasingly popular among consumers looking to purchase products from foreign online retailers. Fast fashion retailers including Shein and Temu have especially blossomed in the e-commerce world on account of this trend.
With the elimination of this exemption, analysts predict two primary consequences for consumers: rising prices and less reliable delivery services. As small and medium-sized enterprises (SMEs) in the U.S. lose the competitive edge from sourcing cheaper European costs, they deal with higher operational costs. This puts smaller firms in the European Union (EU) at a disadvantage as they are losing their current, relatively easy, duty-free access to the U.S. market. This ostensible loss has serious ramifications for trans-Atlantic trade relations.
Additionally, under the new regulation, any imported items that are at or below the value of $800 will be required to pay duties. The U.S. Customs and Border Protection (CBP) has introduced two methods for carriers to calculate these duties: a percentage of the country’s tariff rate (ad valorem) or a flat per-package fee. Their flat fee option has three tiers—$80, $160 and $200—based on a country’s tariff rate. After a six-month implementation lag, this flat fee option will be gone completely, leaving all packages subject only to percentage tariffs.
In fact, this policy change profoundly shaped the history of U.S. cargo shipments. Overnight, 92% of these shipments—almost four million packages a day—became dutiable. Small and medium-sized businesses will feel this policy’s effects most acutely, warns trade attorney and CEO of the E-Merchants Trade Council, Marianne Rowden. She assumes they’ll face more than $71 billion in costs as they adjust to the new duty requirements.
Enterprise’s Josh Teitelbaum, our international trade expert, noted the resulting complications and confusion that would come from this sudden shift. He noted that “with many of the world’s postal services temporarily suspending service to the U.S., ultimately, consumers and small businesses will be the ones that see increased costs or shipping delays as we undergo more changes to trade policy.”
The implications of these changes go far beyond economics into regulatory landscapes. Leading customs experts have testified that these changes are beginning to hit small and medium-sized businesses particularly hard. Those counting on the duty-free exemption will be affected especially hard. Ronald Kleijwegt highlighted that “what was once a straightforward cross-border trade is now full of uncertainty.” For businesses, it has created more costs and complexity as they work to change their shipping setups to meet new customs requirements.
The White House has pointed out that a significant percentage of illegal activities in shipping fell under the de minimis exemption. Specifically, “these shipments often broke the law, with 98% of narcotics seized from cargo falling under the de minimis exemption, as well as 97% of counterfeit items seized.” Illegal trade is a big factor. It’s very important that they address illegal trade. This penny-pinching policy change will hit honest small businesses that legitimately need low-value imports the hardest.
As suppliers, particularly small ones, get used to these new requirements, the large companies that depend on small suppliers need to reconsider how they source. Elliott urged these companies to “immediately get to work figuring out which suppliers they rely on for what and do what they can to either help them comply or find alternative suppliers.”
The fallout from these changes is already being felt on both sides of the border. Ryan Elliott previously reported on how multiple EU member states have stopped their transfers to the U.S. They require additional grace period to determine how to gather and transit responsibilities and data.
Jacob Bennett emphasized the precarious situation many small and medium-sized businesses find themselves in: “So many small and medium-sized businesses operate on such thin margins and don’t have the pools of capital that they can fall back on.” All would be better and many are likely to be injured or killed as a result of these changes.