The De minimis Rule in the U.S. Arrives Stronger in 2016 than in the 1990s and Its Effects on Customs and Border Protection

Under the de minimis rule, small packages of less than 800 grams are not subject to import duties. It was meant to be used for personal gifts and other items that Americans send home from overseas trips, but it has enabled foreign businesses to sell items to US consumers without paying import taxes. The number of de minimis packages has soared in recent years as the ecommerce market has become more global, making it difficult—it not impossible—for Customs and Border Protection to keep track of all the parcels flowing into the US.

But that now stands to change, after President Trump signed an executive order stating de minimis treatment “shall not be available” for products made in China, the top source of goods imported to the U.S.

The number of de minimis packages that came to the US was ten times higher in fiscal year 2016 than in the previous year. It takes about 3.8 million packages to fill an average day. Many are subject to scrutiny at the border for the first time.

Teresa Murray of Public Interest Research Group told NPR that her group supports changes to the law.

The U.S. International Trade Commission describes de minimis as being “trifling or of little importance.” It became law in the U.S. Tariff Act of 1930, as a way to let people skip import fees for small-value shipments.

De minimis exceptions are based on a variety of monetary thresholds. The US level increased in 2016 to $800, one of the highest in the world, after President Barack Obama signed the Trade Facilitation and Trade Enforcement Act. Across the European Union, the level is 150 euros (about $156).

Items imported under the exemption “are free of duty and taxes and are subject to expedited clearance processing,” the U.S. International Trade Commission notes.

Implications of Trump’s de minimis action on the USPS and other international markets: A vetting platform and case for bipartisan legislation

The existing de minimis structure is supported by backers who say it is used to facilitate commerce and give consumers low prices, while critics claim that it is used to hawk cheap goods and give foreign companies an unfair advantage.

While previous administrations have considered removing the de minimis exemption or introducing reforms, Trump is the first to have actually done so. “This is the administration’s version of moving fast and breaking things,” says Ram Ben Tzion, cofounder and CEO of Publican, a digital shipment vetting platform, citing one of the core tenets of startup culture.

The USPS has stopped accepting packages from Hong Kong and China due to international service disruption, according to a notice on the website. The move comes after China imposed retaliatory tariffs on US imports, including coal and liquified natural gas, in response to President Trump’s executive order to increase tariffs on China.

A report on de minimis policies updated last week by the Congressional Research Service (CRS) says that Temu andShein accounted for over one-third of the US discount market for items such as consumer goods, fast fashion, and toys.

Murray, of the Public Interest Research Group, said her group supports bipartisan legislation such as the Ensure Accountability in De Minimis Act, which would limit which shipments can benefit from de minimis rules.

“Restricting what qualifies for a de minimis exemption would help keep more unsafe toys and other products from getting into our homes,” Murray said. “This would make people in the United States safer.”

She said that it wouldn’t be enough to stop shipments of small packages that go directly from Temu and Shein to the U.S. consumers.

Exporters also use “master cartons” (large containers holding individually wrapped boxes) and transshipments (transferring cargo to another container or vessel) to obscure products’ origins and contents, according to the CBP.

Shein, Temu, and other companies in China are leaving the U.S. to the “higher-up,” warns CBP

Some businesses founded in China have shifted their corporate structures outside of the country. The CRS report notes that Shein doesn’t sell goods within China and has a parent company that “is based in Singapore and tied to a holding company in the British Virgin Islands,” while Temu’s parent company, PDD Holdings¸ “changed its legal domicile from the PRC to Ireland.”

Shein could expand its warehouse quickly in the U.S., while Temu could double down on its semi-consignment model. Logistics cost can be reduced by shipping in bulk to the U.S.

The USPS suspension may last a while but the crack down on the de minimis excemption seems to be more of a long-term shift in policy.

China imposed tariffs on fuel from the US, along with restrictions on exports of rare minerals for technology manufacturing, to retaliate for Trump’s tariffs. The country has started antitrust proceedings against both Intel and Apple, and is rumored to be investigating other tech giants as well.

It will likely impact online shopping destinations like Shein and Temu, popular with younger shoppers in the U.S. for cheap clothing and other products, usually shipped directly from China.

The “de minimis” exemption allows shipments to go tax-free if their value is under $800, which saves these companies money.

It’s price advantage will be eroded by the recent scrapping of the de minimis exemption for most products from China.

“We talked to the Montana CBP cargo supervisor, and they said everything is from the higher-up,” Daniel says. “A lot of trucks were actually turned away today at the border, we were told by our drivers. Drivers were being questioned about whether there were any made-in-China items in their trucks. It is your last chance. They checked the packages through the trucks.

He adds that identifying and separating packages from China is an arduous process because the goods that his trucks carry usually include thousands of small parcels like DVDs, toys, and video games, all coming from a variety of sources.

What do you do at Shein, Temu, and other e-commerce companies? The impact of de minimis violations on electric vehicle production in New York City

The US Congressional Research Service estimates that around 10,000 people work for the US Agency for International Development, accounting for roughly two-thirds of those stationed overseas. The agency has more than 60 regional and country missions and represents less than 1 percent of the total US federal budget overall.

Do you work at Shein, Temu, or another ecommerce company and have insight into what’s going on? We’d like to hear from you. The reporter can contact them using a nonwork phone or computer.

About 100,000 entries are processed daily by US Customs, says the vice president of customs and trade management at Flexport. Now, agents have to process a few million more packages a day, verifying what’s in them and how much they cost.

In addition to enabling the likes of Shein and Temu, de minimis shipments have posed safety concerns, making it easier for low quality products to reach US buyers. In the extreme case, some e-bike and battery manufacturers have used de minimis to skirt safety regulations and avoid product inspection, contributing to hundreds of fires caused by faulty e-bike batteries in New York City alone.