End of tax-free loophole for low-value goods disrupts air shipments to US from China

New York Post

12 hours ago

Air cargo shipment volume from Asia has declined by double digits since the US cancelled a tax-free exemption for low-value packages from China early in May, trade groups and analysts said.
Air cargo demand from Asia to North America declined 10.7% in May versus the same month a year earlier, showed data from the International Air Transport Association, illustrating 'the dampening effect of shifting US trade policies,' IATA Director General Willie Walsh said in a report published on Monday.
Shipments valued under $800 – often sent by air to US customers of low-cost e-commerce platforms such as Shein and PDD's Temu – fall under the so-called de minimis, or too-small-to-matter, tax exemption.
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4 An American flag flies in front of shipping containers stacked on a container ship (C) at the Port of Los Angeles on June 25, 2025 in Los Angeles, California.
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Since May 2, however, such shipments sent from China and Hong Kong have been taxed at a rate initially as high as 145% before settling to as low as 30% after a mid-May trade detente between the US and China.
The pair continue to negotiate on trade, with the US relaxing export restrictions on software, ethane and aerospace to China this week, ahead of July 9 when the US plans to re-impose a range of steep tariffs targeting multiple countries.
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The volume of low-value e-commerce shipments from China to the United States in May saw a particularly steep decline, industry experts said.
Such shipments fell 43% in May from the previous month, showed estimates from air cargo consultancy Aevean, but rose to other main export markets including Europe and South-East Asia.
It is not clear whether such dramatic declines will continue, said Aevean Managing Director Marco Bloemen, given businesses had anticipated the de minimis halt and because the tariff rate was lowered mid-month.
4 A Boeing 737 MAX 8, the second jet intended for use by a Chinese airline to be returned to its manufacturer, flies mid-air before landing at Boeing Field, as trade tensions escalate over US tariffs with China, in Seattle, Washington, on April 22, 2025.
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'Will those e-commerce players bounce back to the US now they're paying 30% duties instead of zero duties?' Bloemen said. Companies turning to other markets due to US trade policy uncertainty is also likely weighing on shipment volume, he said.
'That's a trend that we're expecting to continue – there's more Europe-destined e-commerce expected in the month of June, also to markets like Latin America.'
Air cargo consultancy Rotate said e-commerce platforms were focusing on other markets to replace lost US demand, with significant export growth to the European Union and Asia-Pacific region.
Shein and PDD did not immediately respond to Reuters' requests for comment.
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4 President Donald Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C, on April 2, 2025.
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CARGO CUT-BACKS
Low-value e-commerce out of Asia has been taking an increasing proportion of global air freight and boosting airlines' cargo businesses.
Last year such shipments – at 1.2 million metric tons – made up 55% of goods shipped from China to the US by air compared to just 5% in 2018, Aevean data showed.
As Asia-to-US demand fell in May, airlines pulled freighter aircraft off trans-Pacific routes and placed them elsewhere, industry experts said.
4 A worker carries finished red Santa Claus hats for export at a factory on April 28, 2025 near Yiwu, Zhejiang Province, China.
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Some of that demand has now returned as companies take advantage of tariff pauses between the US and a number of countries, but flight frequencies are reduced, they said.
'Some of the larger players that were chartering three flights a week have cut back to two,' said e-commerce consultancy Cirrus Global Advisors.
Direct freighter capacity between China and the US in June was 11% lower compared to March, wiping out growth in capacity over the past year on those lanes, Rotate data showed.
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Asia-focused freight forwarder Dimerco Express estimated its e-commerce bookings were down 50% in May and June. As a result, scheduled freighter flights continue to be cancelled, it said in a report.
The de minimis rule, which dates to 1938, had been a target of criticism from American lawmakers as a loophole that lets Chinese products skirt US tariffs and allows illegal drugs and precursors to make opioid fentanyl to enter the US unscreened.