Perhaps falling under the radar during the tariff threats and counter threats that have marked President Trump’s first three weeks in office, has been the war he has been waging on small parcels originating from China.
When the US imposed its 10% duty hike on Chinese products on February 1st, they also canceled the de minimis trade exemption, a rule that lets businesses import goods with a value of less than $800 duty-free.
By doing this, Trump was seemingly aiming his sights at Chinese e-commerce giants Temu and Shein, who have been growing substantially while benefiting from this loophole, and similar ones around the world.
However, if you are going to turn on duty collections overnight for the estimated 4 million parcels that arrive in the US per day, then you need to have the systems in place to do so. That was not the case, and the US Postal Service (USPS) announced on February 4th it could no longer receive packages from China.
One day later, the USPS reversed their decision, which was closely followed by the government backtracking and pausing their cancellation of the de minimis trade loophole.
This week, the de minimis executive order has been adjusted and will only come into effect “upon notification by the secretary of commerce to the president that adequate systems are in place to fully and expediently process and collect tariff revenue”.
How long it will take for the systems to be in place is anybody’s guess right now, it could be days, weeks, months or even a year or two. The situation will undoubtedly be a concern for Chinese e-commerce businesses, but also for US and worldwide retailers using this loophole to sell in the US market.
That said, when the loophole is closed, it may also be a big leveller for those businesses that currently import in more traditional methods and already pay duty.
If you have any questions regarding the above, then Westbound are here to help. So, please do not hesitate to contact us.
