The de minimis trade loophole will be buried in the Cathedral of Congress on May 2.
De minimis, or Section 321(a)(2)(C) of the Tariff Act of 1930, was first cleared by Congress in 1938. The de minimis trade exemption permitted shipments costing less than $800 to enter the US duty-free and with minimal paperwork and verification. Assuming the White House follows through on its executive order signed on April 2, this so-called trade loophole—that saved several brands thousands of dollars in shipping costs, will cease to exist from May 2.
We asked two experts what a suitable epitaph for de minimis would be, and they said few will shed tears over its departure. While history may not be too kind to de minimis, however, its end will fundamentally change the economics of e-commerce pricing, and the advantages enjoyed by China-linked e-commerce platforms Shein and Temu end, too.
No void to fill: Phil Masiello, CEO of revenue acceleration agency Crunchgrowth, told Retail Brew, “I am not sorry that [de minimis is] going away, because I do think that Shein and Temu had an unfair advantage against people selling on Amazon.”
To make it official that the de minimis party is over, Shein and Temu both announced that they will begin to raise prices from April 25.
US Customs and Border Protection processes over 4 million de minimis shipments a day. Out of these, Brian Tu, chief revenue officer at logistics firm DCL Logistics, estimated roughly 2 million packages are orders placed on marketplaces like Temu and Shein.
The way Tu sees it, a lot of brands that had built their entire business models around bringing in products duty free from China and Hong Kong that didn’t really focus on building a scalable brand or community around it may wind down or raise prices.
“Most of those apparel brands, the ones that we know were near-shoring, so they’re fulfilling out of Mexico and Canada to optimize for transit speed, but to take advantage of de minimis, those brands will be largely impacted, because likely they’ll get squeezed,” Tu said. “They’ll still exist, but prices will likely go up.”
Reuters reported that de minimis accounts for more than 90% of US imports, with China accounting for about 60% of these shipments. While the rollback on de minimis is set for May 2, merchants that ship directly from China are not making sweeping changes to their strategy.
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“You’re going to wind up with a lot of people who are not making plans right now, because they’re listening to the rhetoric and they’re saying to themselves, ‘OK, we’ll just wait,’” Masiello said.
Tariff-ic problems: The larger sentiment within e-commerce has been that the end of de minimis offers no cause for relief, as tariffs remain a concern.
Shutting down de minimis is one thing, but Masiello pointed out that now sellers have to contend with tariffs. “You take away de minimis,” he said. “Now you’re paying tariffs.”
“What bothers me are the tariffs in general; they’re not well thought out, and there’s no strategy, and it’s hard to plan for it because it’s a constant moving target,” Masiello added.
While trade tariffs and de minimis are separate things, they both have similar headwinds, Tu explained. “Tariffs in general aren’t the bigger hit. It’s the level to which the tariffs went to,” he said.
For example, products from China, Tu said, went from anywhere between 5% and 15% to more than 50% percent in a two-month period: “That’s never happened in the history of the country. So that extreme increase is what I’m talking about.”
To be sure, as of April 10, President Trump has paused major global tariffs for 90 days with the exception of China. This will lead to a rise in fulfillment inside the US, Tu said, adding, “It makes zero sense anymore to ship from another country. There’s no advantage.”
Crank up local manufacturing: The absence of de minimis is not just a costly proposition for consumers. Markets like Vietnam and Cambodia are set to dominate supply chain discussions as alternatives to China, Masiello said. However, it is not possible for small businesses to establish overseas manufacturing operations overnight.
“You don’t just go and spin up manufacturing in Vietnam and Cambodia right now; they don’t have the capacity to service things,” he said.
Ultimately, the death of de minimis is expected to boost local manufacturing from small businesses in the long term. Masiello said businesses were using de minimis to save on cost and build business.
“Their long-term goal was to set up manufacturing locally anyway,” he said. “Now they’re just going to speed up that portion of it.”