In this articleSHOP-CAEBAYETSYWMTAMZNLULUTPRFollow your favorite stocksCREATE FREE ACCOUNTThe de minimis exemption, an obscure trade law provision that has simultaneously fueled and eroded businesses across the globe, officially came to an end on Friday following an executive order by President Donald Trump. For nearly a decade, shipments valued under $800 were allowed to enter the country virtually duty-free and with less oversight. Now, those shipments from the likes of Tapestry, Lululemon and just about any other retailer with an online presence will be tariffed and processed in the same way that larger packages are handled. In May, Trump ended the exemption for goods coming from China and Hong Kong, and on July 30 he expanded the rollback to all countries, calling it a “catastrophic loophole” that’s been used to evade tariffs and get “unsafe or below-market” products into the U.S. The de minimis exemption had previously been slated to end in July 2027 as part of sweeping legislation passed by Congress, but Trump’s executive order eliminated the provision much sooner, giving businesses, customs officials and postal services less time to prepare.”The ending of that under-$800-per-person-per-day rule, from a global perspective, is about to probably cause a bit of pandemonium,” said Lynlee Brown, a partner in the global trade division at accounting firm EY. “There’s a financial implication, there’s an operational implication, and then there’s pure compliance, right? Like, these have all been informal entries. No one’s really looked at them.”Already, the sudden change has snarled supply chains from France to Singapore and led post offices across the world to temporarily suspend shipments to the U.S. so they can ensure their systems are updated and able to comply with the new regulations. It’s forced businesses both large and small to rethink not just their supply chains, but their overall business models, because of the impact the change could have on their bottom lines – setting off a panic in boardrooms across the country, logistics experts said. “Obviously it’s a big change for operating models for companies, not just the Sheins and the Temus, but for companies that have historically had e-com and brick-and-mortar stores,” Brown said.The change also means consumers, already are under pressure from persistent inflation and high interest rates, could now see even higher prices on a wide range of goods, from Colombian bathing suits to specialty ramen subscription boxes shipped straight from Japan. The end of de minimis could cost U.S. consumers at least $10.9 billion, or $136 per family, according to a 2025 paper by Pablo Fajgelbaum and Amit Khandelwal for the National Bureau of Economic Research. The research found low-income and minority consumers would feel the biggest impact as they rely more on the cheaper, imported purchases.Tailoring supply chainsPopularized by Chinese e-tailers Shein and Temu, use of the de minimis exemption has exploded in the last decade, ballooning from 134 million shipments in 2015 to more than 1.36 billion in 2024. Before the recent change to limit its use, U.S. Customs and Border Protection said it was processing more than 4 million de minimis shipments into the country each day. A 2023 House report found more than 60% of de minimis shipments in 2021 came from China, but because the packages require less information than larger containers, very little information is known about their origins and the types of goods they contain. That opacity is one of the key reasons why both former President Joe Biden and Trump sought to curtail or end the exemption. Both administrations have said that the exemption was overused and abused and that it’s made it difficult for CBP officials to target and block illegal or unsafe shipments coming into the U.S. because the packages aren’t subject to the same level of scrutiny as larger containers. “We didn’t have any compliance information … on those shipments, and then that is where the danger of drugs and whatnot being in those shipments” comes in, said Irina Vaysfeld, a principal in KPMG’s trade and customs practice.The Biden administration particularly focused on how the exemption allowed goods made with forced labor to make it into the country in violation of the Uyghur Forced Labor Prevention Act. Meanwhile, Trump has said the exemption has been used to ship fentanyl and other synthetic opioids into the U.S. In a fact sheet published on July 30, the White House said 90% of all cargo seizures in fiscal 2024, including 98% of narcotics seizures and 97% of intellectual property rights seizures, originated as de minimis shipments.Across the globe, it’s common for countries to allow low-value shipments to be imported duty-free as a means to streamline and facilitate global trade, but typically, it’s for packages valued around $200, not $800, said EY’s Brown.Until 2016, the U.S. threshold for low-value shipments was also $200, but it was changed to $800 when Congress passed the Trade Facilitation and Trade Enforcement Act, which sought to benefit businesses, U.S. consumers and the overall U.S. economy, according to the Congressional Research Service. It said higher thresholds provide a “significant economic benefit” to both business and shoppers and thus, the overall economy. While well intentioned, the law came with unintended consequences, said Brown. The “rise in value, from $200 to $800, just made it kind of like a free for all to say, ‘OK, everything come in,'” she said. Eventually companies designed supply chains around the exemption: They set up bonded warehouses, where duties can be deferred prior to export, in places like Canada and Mexico and then imported goods in bulk to those regions before sending them across the border one by one, duty-free, as customer orders rolled in, said Brown.”Companies have really laid out their supply chain in a very specific way [around de minimis] and that’s really the crux of the issue,” said KPMG’s Vaysfeld. “The way that the supply chain has been laid out now may need to change.” The impact on the retail ind …
