U.S. Announces Elimination of Duty-Free Action for Imported Small Packages Under $800

On September 13th, the Biden administration announced a series of measures aimed at addressing the significant abuse of the “de minimis” exemption policy and strengthening efforts to block goods that violate U.S. laws. The government also urged Congress to pass legislation this year to comprehensively reform this exemption policy. Under Section 321 of the Tariff Act of 1930, individuals can import goods with a retail value not exceeding $800 per day, which can be processed through informal entry. These “de minimis” shipments are exempt from duties and taxes and enjoy expedited customs clearance.

According to a press release from the White House, the number of goods applying for the de minimis exemption has surged from approximately 140 million in the past decade to over one billion annually. Most of these goods are said to come from several China-based e-commerce platforms, primarily targeting TEMU and SHEIN. The U.S. government claims that these platforms have “abused” the exemption policy for various reasons, including concealing the transport of illegal and dangerous products, evading U.S. health, safety, and consumer protection regulations, and escaping U.S. trade enforcement measures. The Department of Homeland Security also noted that 89% of goods seizure cases in fiscal year 2024 were related to de minimis shipments.

In response, the U.S. plans to implement the following measures by the end of the year:

• Propose a rule to exclude all goods subject to tariffs under Section 301, Section 201, or Section 232 from the de minimis exemption. The White House notes that currently, 70% of textile and apparel imports from China are subject to Section 301 tariffs.
• Propose a rule requiring de minimis shipments to provide specific additional data, including a 10-digit HTSUS number and the identity of the individual requesting the exemption.
• Finalize a rule requiring importers of consumer goods to electronically submit compliance certificates to U.S. Customs and Border Protection and the Consumer Product Safety Commission upon entry, including for de minimis shipments.

The U.S. government is also urging Congress to pass comprehensive de minimis reform legislation by the end of 2024, which would
(1) codify the first two measures mentioned earlier.
(2) exclude sensitive imported products, including textiles and apparel, from de minimis eligibility.

These actions come amid increasing scrutiny of the large influx of de minimis goods into the U.S. According to a dashboard maintained by U.S. Customs and Border Protection (CBP), the volume of such goods doubled in the first half of 2024. Data indicates that over 87% of de minimis shipments arrive in the U.S. by air, with the majority of the remainder transported by truck and a small number by sea.

If the Biden administration successfully closes the so-called “de minimis loophole,” prices for SHEIN and TEMU could rise by up to 20%. However, both companies claim their low prices are not related to the de minimis exemption but rather stem from their innovative business models. A spokesperson for SHEIN stated that the company supports de minimis reform and has joined CBP’s voluntary pilot program to provide more data on packages and goods.

In recent years, these two companies have rapidly gained popularity among U.S. consumers with their ultra-low prices and faster trend responsiveness than competitors. SHEIN’s annual revenue is estimated to exceed $30 billion, though TEMU’s sales figures are unclear. Its parent company, Pinduoduo, reported revenues of $34.9 billion for fiscal year 2023, a 90% year-on-year increase. As these companies become shopping favorites, they have taken market share from competitors like H&M, Zara, Target, Walmart, and Amazon.

Through their innovative business models, TEMU and SHEIN are further disrupting the air freight market. Cheap clothing and home goods headed for the U.S. and Europe are filling airplane cargo space, raising concerns about capacity constraints during peak seasons. SHEIN currently sells products in over 150 countries, while TEMU has expanded to 40 countries and continues to grow. Both companies operate on a demand-driven business model, delivering orders to suppliers within days. Real-time demand data allows for timely restocking, reducing storage and inventory risks. It is estimated that Chinese cross-border e-commerce platforms now account for over 30% of cargo space on key routes from Asia. Some freight forwarders have signed long-term aircraft leasing contracts, primarily filling planes with e-commerce goods. Typically, air freight is used for high-value and perishable items, but the demand for SHEIN and TEMU’s low-priced goods has led to the transport of items like wallets, T-shirts, and cookware by air. Freight forwarders are warning that air cargo capacity will be even tighter during the normal fourth-quarter retail peak.

The U.S. Trade Representative’s office has confirmed that starting September 27, the tariff rate on Chinese-made electric vehicles will be increased to 100%, and the tariff on solar cells will rise to 50%. Additionally, tariff rates on electric vehicle batteries, key minerals, steel, aluminum, masks, and shore-based container cranes will increase to 25%. Adjustments to tariffs on other products, including semiconductor chips, will also take effect over the next two years. The first round of tariff adjustments was initially set to take effect on August 1st but has been postponed to September 27th. The last wave of expedited shipments was completed in early June and is not expected to cause additional rushes to this day.