The United States has ended a decades-old tariff exemption that helped fuel trade in low-cost goods.
From Friday, imports valued at $800 or less will no longer be duty-free and will face stricter customs checks. The move will impact millions of packages every day.
In 2023, nearly 1.4 billion parcels worth more than $64bn entered the US duty-free under the de minimis rule. Experts warn the change will hit small businesses hardest and push prices higher, leaving shoppers with fewer options.
“I’ve reached the point of acceptance, but when I first heard the news, I thought it could end my business,” said Katherine Theobalds, founder of Argentine shoe brand Zou Xou.
Understanding the de minimis rule
The de minimis exemption was created in 1938 to avoid collecting minor customs duties.
Over the years, the threshold increased, helping e-commerce platforms expand rapidly by sending goods directly to American buyers.
Companies like Shein and Temu used the rule to deliver cheap goods from factories to US consumers. Many other businesses later integrated the system into their supply chains.
Executives at Tapestry, owner of fashion brand Coach, expect a $160m profit hit due to tariff changes. About one-third of the loss comes from the elimination of de minimis.
Coach has grown strongly with Gen Z shoppers in recent years, but tariffs now pose fresh challenges.
US customs says over 90% of cargo entering the country benefited from this exemption.
Both Donald Trump and Joe Biden criticised the policy as harmful to US companies and a loophole for smuggling drugs. Trump adviser Peter Navarro said the repeal would “save lives” by curbing narcotics and add $10bn annually to government funds.
Trump accelerated the rule’s repeal with an executive order this year, years before its planned 2027 expiration.
Shippers must now either pay tariffs based on country of origin or opt for a temporary fixed fee between $80 and $200. That alternative will only last six months.
China and Hong Kong lost the exemption in May, prompting Temu to halt direct sales to the US. Letters and gifts under $100 remain duty-free.
Fewer products and slower shipping
Shoppers face less variety online and in stores as firms adapt to the new system.
Small businesses are most affected since they previously avoided such paperwork. Logistics expert Tam Nguyen said companies must now detail the origin of all materials, often sourced from multiple countries. This will slow shipping and complicate operations.
The complexity may discourage sellers from exporting niche items.
Portland psychologist and DJ Christopher Lundell recently tried to buy a $5 record from the UK, only to see the order cancelled due to shipping restrictions. He now looks for US sellers first but believes the suspension is “political theatre.”
Some orders remain frozen as firms wait for clarity. Major postal services in Europe and Asia-Pacific halted shipments to the US this week, citing confusion and lack of preparation time.
Rising prices on the horizon
Businesses must now pay tariffs based on origin country, already in effect since August.
Tariffs range from 10% for goods from the UK and Australia to 50% for those from Brazil and India.
New rules impose duties of $80 for countries with tariffs under 16%, $160 for tariffs between 16% and 25%, and $200 for higher ones.
A senior US official downplayed consumer worries, insisting the policy will make Americans “safer” and “more prosperous.”
Some companies welcomed the change. Gap Inc. said ending the exemption creates fairer competition for domestic retailers.
But trade expert Deborah Elms warned small firms face steep compliance costs, making stable prices difficult. Many sellers may switch to expensive express couriers while postal services pause shipments.
British retailer Wool Warehouse stopped US sales due to the sudden shift. Managing director Andrew Smith expects prices to rise by up to 50%. The firm will also update its website to show tariff charges transparently.
In Buenos Aires, Theobalds of Zou Xou said large shipments were already taxed, but small direct sales to US customers depended on the exemption. She is now reconsidering her business model and how to explain changes to buyers.
“Our customers value artisanal quality,” she said. “But they may now ask if the product is worth the added hassle.”
Will China gain an edge?
Some analysts believe US retailers will benefit as consumers turn to Walmart or Target instead of overseas sellers.
Yet many Americans may return to Chinese platforms. Shein and Temu already operate US distribution centres, softening the blow of tariffs.
Nguyen said Chinese firms are months ahead in adapting to the new paperwork compared with sellers in other countries. Smaller firms may struggle, making it harder for new e-commerce ventures to compete.
“It used to be simple: launch a site, list products and ship. That low-cost entry point is gone,” Nguyen said.
