The United States has paused the de minimis exception rule, a customs regulation that has been in place since 1938, to address the challenges posed by the rapidly increasing volume of small packages entering the country. This decision comes as more than 1 billion small packages flowed through U.S. customs in 2023 alone, a significant rise from 134 million in 2015. This surge is largely attributed to the growth of cross-border e-commerce, particularly from China.
Originally, the de minimis exception rule allowed for the duty-free importation of packages valued at no more than US$5. While this threshold was intended to facilitate trade and keep prices low for U.S. consumers and small businesses, it has been adjusted over the years to reflect economic changes. In 1994, the threshold increased to US$200, and in 2016, it rose further to US$800. Despite these adjustments, the explosive growth of online retail platforms such as Shein and Temu has put pressure on the system.
John Lash, group vice-president of product strategy at the supply chain platform e2open, commented on the situation:
"The volumes are absolutely incredible." – John Lash, group vice-president of product strategy at the supply chain platform e2open
By 2023, Chinese exports of low-value packages had soared to a staggering US$66 billion, up from US$5.3 billion in 2018. The U.S. Customs and Border Protection now processes about 4 million small shipments daily. Critics argue that the de minimis rule has inadvertently facilitated tariff evasion and allowed unsafe products, including counterfeits and illicit drugs, to enter the U.S.
Neil Saunders, a managing director with research firm GlobalData, highlighted the scale of the issue:
"We are talking about millions of packages every week that currently just basically get treated like domestic shipping." – Neil Saunders, a managing director with research firm GlobalData
The pause on the de minimis rule is intended to give federal agencies time to develop a plan for effectively handling the vast number of shipments. The U.S. Postal Service faces the daunting task of collecting tariffs on these small packages should new regulations be implemented.
John Lash further elaborated on the challenges posed by the sudden regulatory changes:
"It's just showing we're moving fast, and the implications are not fully understood when some of these regulations are put in place." – John Lash, group vice-president of product strategy at the supply chain platform e2open
"And all of a sudden, they go from not requiring filing (for tariffs)… to actually requiring full filing, which is a complicated task." – John Lash, group vice-president of product strategy at the supply chain platform e2open
"It's one of those things where you put in any change so quickly it catches people unprepared." – John Lash, group vice-president of product strategy at the supply chain platform e2open
The situation not only highlights logistical challenges but also raises questions about global trade practices and consumer safety. As federal agencies work to address these complexities, businesses and consumers alike are left to grapple with potential changes in pricing and availability.
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