Report from the Washington Post
In Brief – The Trump Administration has amended its executive order that imposed new tariffs on China, Canada, and Mexico, and ended the “de minimis” exemption for packages from those countries, by delaying the de minimis change until the US Commerce Department has policies in place to “fully and expediently process and collect tariff revenue” for the shipments. While the new tariffs on Canada and Mexico were paused before they went into effect, the added duties on products from China have entered into force, which meant an end to the de minimis exemption that currently applies to around 4 million daily packages valued at under $800 shipped from China. That number has grown rapidly as app-based retailers, most notably Temu and SHEIN, built big businesses shipping inexpensive consumer products and apparel directly from factories in China to online consumers in major markets globally.
Context – Drastically scaling back the de minimis rules has been a long-time goal of retailers that import products in bulk from China and distribute them in stores. Anything to increase the costs of competitors helps them. While claims related to drug precursors flowing through packages have been made for years, the real issue is tax disparities. When tariffs are low, the disparities are small and tradeoffs between different business models are balanced, but as tariffs escalate, which is the case with President Trump’s trade interventions, disparities are more meaningful. The US Postal Service, and private shippers like FedEx and UPS, have all long-supported the de minimis policy because it facilitates their ability to handle huge volumes of low-value packages where the compliance costs of calculating the tariff rates, and potentially inspecting packages, far outweighs the revenue collected. They are certain to want to work closely with the US customs officials to get the “expediently” part of the new order right. In Europe, the EU is exploring their own Temu and SHEIN-inspired rule changes. As Temu and SHEIN react to US de minimis changes, one sectoral winner may be distribution center builders and operators.