US Tariff Exemption for Low-Value Imports Ends: Implications for Shoppers and Businesses

Low-value imports to the United States are losing their duty-free status this week. This change is part of President Donald Trump's agenda to reduce reliance on foreign goods and reset global trade with tariffs. An executive order signed last month eliminates a customs exemption for international shipments worth USD 800 or less, starting Friday, nearly two years earlier than initially planned.

The removal of the "de minimis" rule, which previously applied to inexpensive items from China and Hong Kong, will now affect small parcels from all countries. Purchases that previously entered the US without customs clearance will now require vetting and be subject to applicable tariff rates, ranging from 10% to 50%. For the next six months, carriers can choose a flat duty of USD 80 to USD 200 per package instead of a value-based rate.

Impact on Global Postal Services

In response to these changes, national postal services in over a dozen countries have decided to temporarily halt sending some or most packages bound for the US. Countries like Japan and Switzerland joined others such as Australia, Austria, Belgium, Finland, France, Germany, India, Italy, Norway, Spain, Sweden, Denmark, Thailand, the UK, and New Zealand in pausing shipments due to confusion over processing and payment requirements.

The Trump administration argues that the exemption has become a loophole exploited by foreign businesses to avoid tariffs and by criminals to smuggle drugs and counterfeit products into the US. Former President Joe Biden and members of Congress have also discussed this issue. Other countries have similar exemptions but with lower thresholds; for example, the European Union has a limit of 150 euros (USD 129), while the UK allows parcels worth up to 135 pounds (USD 182) without tariffs.

Historical Context and Current Situation

The "de minimis" exemption began in 1938 as a way to save the federal government time and money on collecting duties for goods valued at USD 1 or less. Over the years, US lawmakers increased this threshold: USD 5 in 1990, USD 200 in 1993, and USD 800 in 2015. Since then, shipments claiming de minimis treatment have surged. Last year alone saw 1.36 billion packages worth USD 64.6 billion enter the US under this exemption.

According to an analysis by logistics firm Flexport based on US government data, about 60% of these shipments came from China and Hong Kong. The rest were from various regions including Canada, Mexico, the European Union, India, and Vietnam. Proponents of limiting the exemption argue it has allowed platforms like Temu and Shein to flood the US with low-priced goods.

Effects on Small Businesses

Kristin Trainor fears that ending de minimis could mean closing her boutique Diesel and Lulus in Avon, Connecticut. Over 70% of her stock comes from small fashion houses in Europe. She places weekly orders under USD 800. "Our business model is to provide casual chic and unique clothes at affordable prices," she said. "The added customs charges will eliminate that affordability."

Trainor is considering replacing her European vendors with US-based ones but finds it challenging as her best-selling items come from abroad. She estimates that a linen sundress costing USD 30 wholesale will rise to USD 43 next month. Raising prices might offset higher shipping costs but could deter customers.

Challenges for Other Entrepreneurs

Ken Huening started CoverSeal in Los Gatos, California in 2020. His company makes protective covers for cars and furniture manufactured in Mexico and China. Although a trade agreement exempts most Mexican goods from US tariffs, de minimis withdrawal affects all countries. Huening may need to raise prices or end free shipping as his products will be taxed when sent from Mexico.

Shannen Knight owns A Sight For Sport Eyes in West Linn, Oregon. She imports sports goggles from Europe that fell under de minimis limits. Knight estimates needing to raise prices by 50% for Italian rugby goggles approved after two years of testing by the International Rugby Board.

Knight noted that some products make sense being made internationally due to stronger demand there but still have some demand in the US: "There are products that it just makes sense to be made internationally," she said.

With inputs from PTI