US Ends Tariff Exemption for Low-Value Packages, Facing Minor Issues and Rising Costs Ahead

U.S. Tariff Exemption Changes

• End of De Minimis Exemption: The U.S. has ended tariff exemptions for parcel imports, requiring normal duty rates on all package shipments valued under $800. This change is expected to increase costs for consumers and small businesses using e-commerce platforms.
• New Duty Rates: Importers can choose to pay a flat-rate duty ranging from $80 to $200 per package for the first six months, depending on the country of origin and the applicable tariff rates.

Impact on E-commerce and Trade

• Revenue Projections: The Trump administration estimates that the new duty requirements could generate an additional $10 billion in customs revenue annually.
• Surge in Package Claims: The number of packages claiming the de minimis exemption has increased nearly tenfold, from 139 million in fiscal 2015 to an anticipated 1.36 billion in fiscal 2024, averaging about 4 million per day.

Industry Reactions

• Support from Textile Organizations: The National Coalition of Textile Organizations has praised the move as a significant victory for U.S. manufacturing, as it closes a loophole that allowed foreign firms to avoid tariffs and potentially exploit labor practices.
• Logistics Preparedness: The U.S. Customs and Border Protection agency has indicated readiness to enforce the new duties, with logistics providers like FedEx and UPS having already adapted to previous changes.

Economic Implications

• Price Increases Expected: Analysts predict that the end of the de minimis exemption will likely lead to higher prices for goods sold through e-commerce, leveling the playing field with larger retailers like Walmart.
• Impact on Small Businesses: The new duties may hinder trade on peer-to-peer platforms such as eBay and Etsy, affecting small businesses that rely on these channels for selling secondhand or handmade items.

Customs Revenue Collection

• Duties Collected Since May: Since the elimination of exemptions for packages from China and Hong Kong on May 2, the customs agency has collected over $492 million in additional duties.
• Flat Tax Options for Foreign Postal Agencies: Foreign postal services can choose to collect duties based on package value or a flat tax determined by the tariff rate of the country of origin, with specific rates outlined for different countries.