May 2 Brings End to Duty-Free Imports from China to U.S.

A loophole that for years has allowed companies in China to ship low-value packages into the U.S. duty-free ends on May 2, as businesses brace for the possibility of delays, higher costs, and a world of uncertainty across global supply chains.

Moving forward, import charges for shipments from mainland China and Hong Kong will vary based on how goods are delivered, with packages from express carriers like DHL or FedEx subject to tariffs as high as 145%, while U.S. Postal Service shipments will be charged 120% duties or a fee of $100 per package (whichever is higher). The per-package fee will also increase to $200 starting in June.

So-called "de minimis" rules in the U.S. were first devised in the 1930s so that American tourists wouldn't have to pay duties on items they bought while abroad. At the time, the exemption applied to shipments under $5 for gifts, and under $1 for an assortment of other items. That ceiling was raised to $5 for all items in 1978, then to $200 in 1993 with the implementation of the North American Free Trade Agreement, and finally to the current threshold of $800 in 2016. That put the U.S.'s limit among the highest in the world (European Union countries, for example, set a de minimis limit of € 150, or around $170). De minimis shipments are also subject to less scrutiny from customs agents, making it a "major pathway for illicit drugs," according to U.S. Customs and Border Protection (CBP). 

De minimis imports have surged dramatically since 2018, with China accounting for nearly two-thirds of 2.3 billion duty-free shipments between 2018 and 2021, and Chinese e-commerce giants Temu and Shein combining to account for 30% of 2022's total alone, according to the U.S. International Trade Commission. As economic think tank The Cato Institute notes, that can be traced back to 2018's trade war between the U.S. and China, when the U.S. began to implement aggressive tariffs on an array of Chinese imports. That pushed many suppliers in China that had previously shipped low-cost consumer goods in bulk to restructure their operations by using de minimis exemptions to get around U.S. levies.

"The impact was dramatic," said Cato Institute fellow Clark Packard in a February 21 blog post. "De minimis imports grew from just 0.7% of U.S. consumer goods imports and 1% of e‑commerce sales before the trade war, to over 7% and 5% respectively by 2023."

Closing that loophole was a priority for President Joe Biden while he was in office, when he directed CBP to make changes to how it collected data on de minimis shipments as part of a new "enhanced entry" process, and proposed that CBP exclude products subject to tariffs or antidumping duties from de minimis exemptions. President Donald Trump took an even more aggressive approach within weeks of taking office, when he fully revoked U.S. de minimis rules for all imports from China on February 3, before pausing the move days later to allow for more time to set up the systems needed to collect the new tariff revenue and process shipments.

When Trump revoked de minimis exemptions for China in February, there were widespread reports of packages piling up in customs facilities, as CBP struggled to handle the sudden flood of shipments that could no longer be quickly processed without duties or added scrutiny. It's unclear whether CBP has since built out the necessary staffing and capacity to avoid a repeat of February, although the agency says it is "uniquely positioned to implement and enforce the president's tariffs."

Read More: U.S. Customs Faces ‘Huge Task’

In the meantime, Shein and Temu have already started to increase prices for American customers, with Temu adding "import charges" of up to 150% for select items, and Shein hiking prices for some products by as much as 377%. Rumors also circulated on April 29 that Amazon was going to start listing import charges for its own customers, which the company later refuted, clarifying that it had considered the idea for its low-price "Amazon Haul" store, but ultimately had no plans to make the change for its main site.