Trump suspends tax exemption for cheap shipments

CNN

4 days ago

President Donald Trump last week suspended a global trade loophole allowing smaller parcels into America duty-free. This closes a backdoor into the United States for Chinese mega-shippers like Shein and Temu, who could potentially pass the cost of those duties down to consumers.
Trump eliminated the so-called 'de minimis exemption,' which had admitted duty-free shipments of goods worth $800 or less into the United States. Giant e-commerce sites used the loophole when shipping hundreds of millions of packages to US consumers.
The administration did away with the exemption for goods coming out of China and Hong Kong in May amid the US-China trade war. This latest move extends that to every country around the world.
Trump said in an executive order issued on Wednesday that 'many shippers go to great lengths to evade law enforcement and hide illicit substances in imports that go through international commerce' and the risk of 'evasion, deception, and illicit-drug importation are particularly high for low-value articles that have been eligible for duty-free de minimis treatment.'
This is more bad news for Chinese retailers and their customers because it shuts down the option of re-routing small shipments duty-free through countries like Vietnam, which is facing a tariff rate of 20%. The executive order also demands that the origin of the package must be declared to US Customs and Border Protection (CBP).
Temu and Shein had already started stockpiling goods and bulk-shipping to US warehouses to lower shipping times.
Hours after the de minimis exemption expired for China in early May, Temu announced it was overhauling its shipping model. It said it would send out all American orders via US-based distributors, adding that its 'pricing for US consumers remains unchanged.' But some of Temu's American buyers subsequently complained of higher prices and items were quickly out of stock.
Companies also will eventually need to restock their warehouses, and 'by imposing (the suspension of de minimis) for the whole world, there is no other workaround,' Chris Tang, a professor of global supply chain management at the University of California, Los Angeles, told CNN.
Companies will now have to pay a hefty import tax even if they ship in bulk, which means customers may eventually have to pay more.
The suspension of de minimis will also affect the millions of sellers on Amazon Haul, a discount competitor to Temu and TikTok Shop.
Amazon and Temu have not responded to CNN's request for comment.
Last week's repeal will affect a massive amount of packages that Americans are accustomed to receiving duty-free, the sheer amount of which has grown exponentially over the past decade.
CBP previously told CNN it processes 'nearly 4 million duty-free de minimis shipments a day.' Research indicates that a majority of those shipments come from China and Hong Kong. In total, over the last fiscal year, CBP said 1.36 billion packages came to the United States under the de minimis exemption.
When Trump's executive order goes into effect on August 29, most goods shipped internationally will be subject to the tariffs of the country of origin. Those duties will be about $80 per item for a country with a tariff rate less than 16%, $160 per item for a country of a tariff rate between 16% and 25%, $200 per item for a country with a tariff rate above 25%. Some of that cost could be passed down to consumers.
Lower-income households will suffer the most from higher prices on Chinese e-commerce sites. About 48% of de minimis packages were shipped to America's poorest zip codes, while 22% were delivered to the richest ones, according to research in February from UCLA and Yale economists.
The Trump administration had first slashed the de minimis exemption on China in May, but then cut the tariff on those cheap packages from 120% to 54%. There is also a $100 flat-fee option for those goods.
A federal trade court this week declined to block Trump's elimination of the de minimis exemption on goods from China because the issue is already covered in a broader case challenging Trump's tariff policies.
As part of Trump's 'Big Beautiful Bill,' the de minimis rule was slated for repeal on all countries in July 2027. It even established a civil penalty up to $10,000 for more than one violation of the rule.