U.S. Ends 'De Minimis' Trade Loophole, Reshaping E-Commerce

Additional Payments by Customers    Additional Net Revenues to Government

Companies and Consumers Face Higher Costs

Trump administration closes nearly century-old tariff exemption for small packages as billions in government revenue and thousands of jobs hang in the balance

President Donald Trump on Thursday eliminated the "de minimis" exemption that allowed packages worth less than $800 to enter the United States duty-free, ending a nearly century-old trade rule and fundamentally reshaping the economics of cross-border e-commerce.

The sweeping policy change, which takes effect Friday at 12:01 a.m. EDT, will subject previously exempt shipments to tariffs and formal customs processing, potentially raising costs for millions of consumers while generating an estimated $10 billion annually in federal revenue.

The move extends tariffs globally after similar restrictions imposed on China and Hong Kong in May led to dramatic declines in user traffic for discount retailers like Temu, which saw a 58% drop in daily U.S. visitors, and Shein, which experienced a 25% decline.

Impact on Major Platforms and Retailers

The policy shift promises to substantially alter the competitive landscape for major e-commerce platforms. Amazon stands to benefit as competitors that relied heavily on direct international shipping lose their price advantage, while marketplaces like eBay and Etsy face significant disruptions to their global seller networks.

"It is going to have a huge impact on my business," said one international seller quoted in recent reports, reflecting widespread concern among the millions of small businesses that have built operations around the de minimis threshold.

eBay warned in its latest earnings report that elimination of the de minimis exemption could impact revenue guidance, though CEO Jamie Iannone expressed confidence that the company was "well suited" to navigate the changing trade environment. Etsy has already announced it would no longer process purchases sent via Australia Post, Canada Post, and certain UK services in anticipation of the changes.

Online retailers specializing in secondhand goods, including ThredUp and Etsy's Depop platform, may find unexpected opportunities as higher import costs make domestic and used goods relatively more attractive to price-conscious consumers.

Government Revenue and Enforcement

The elimination of de minimis represents a significant revenue opportunity for federal coffers. U.S. Customs and Border Protection processed more than 1.36 billion de minimis shipments in fiscal 2024, with packages averaging $54 in value. Senior administration officials projected the policy change would generate approximately $10 billion annually in tariff revenue.

Peter Navarro, the Trump administration's senior counselor for trade and manufacturing, said ending the exemption would "bring in billions in revenue, create thousands of jobs, boost U.S. businesses and save lives by restricting the flow of drugs, contraband and unsafe products."

The policy change addresses what officials described as widespread abuse of the system. In fiscal 2024, de minimis shipments accounted for 90% of all cargo seizures, including 98% of narcotics seizures and 97% of intellectual property violations totaling 31 million counterfeit items.

CBP's enforcement efforts have intensified, with the agency completing 71 audits in March 2025 that identified $310 million in unpaid duties and fees.

Consumer Cost Impact

The policy shift will likely increase costs for consumers purchasing goods internationally, with the burden falling disproportionately on lower-income households that derive greater financial benefit from duty-free imports, according to economists.

A FlavorCloud analysis projected significant price increases across product categories: $30 slippers from China would cost approximately $45 (a 51% increase), while $37 nutritional supplements from Canada would jump to $60 (a 60% increase).

Economists Pablo Fajgelbaum of UCLA and Amit Khandelwal of Yale University estimated the end of de minimis could cost U.S. consumers at least $10.9 billion, or $136 per family annually.

International Response and Supply Chain Disruption

The policy has triggered widespread international reaction, with postal services in numerous countries—including the United Kingdom, Canada, Australia, and Mexico—suspending or reducing shipments to the United States. Mexico's postal service announced Thursday it was halting package deliveries entirely due to the pending changes.

Many retailers have moved proactively to cancel orders or suspend U.S. shipments rather than navigate the new compliance requirements. Wool Warehouse, a UK-based company, estimated additional charges would average 50% more and decided to suspend U.S. shipping entirely.

"They just said they were nervous about following the law," said one consumer whose order from a German music retailer was canceled due to the policy uncertainty.

Logistics Industry Under Pressure

The changes pose significant challenges for logistics giants UPS, FedEx, and DHL, which face reduced package volumes as the cost advantages of small international shipments evaporate. UPS, with its 7.39% dividend yield but 86.62% payout ratio, may struggle to maintain dividend payments amid declining business volumes.

The policy particularly impacts drop-shipping models and direct-to-consumer businesses that previously relied on the simplified customs procedures for small packages. Industry experts warn of potential delays as customs systems adapt to processing millions of additional declarations.

Implementation Details

Under the new rules, non-postal shipments must comply with standard customs requirements and pay applicable duties through formal entry procedures. Postal shipments receive temporary relief through a six-month transition period with flat-rate duties ranging from $80 to $200 per item before full customs rules apply.

The Trump administration previously eliminated de minimis treatment for China and Hong Kong effective May 2, 2025, as part of broader trade enforcement measures targeting fentanyl trafficking and trade deficit concerns. The global expansion represents the culmination of policies that began with targeted restrictions on Chinese goods.

The One Big Beautiful Bill Act, signed in July 2025, provides statutory authority to permanently eliminate de minimis treatment starting July 1, 2027, though the current executive order accelerates the timeline significantly.

Legal challenges to the president's authority under the International Emergency Economic Powers Act continue in federal court, with the Federal Circuit appearing skeptical of the administration's position during oral arguments in July.

The policy represents the most significant change to U.S. import procedures in decades, effectively ending what trade experts called the "Tijuana two-step"—the practice of repackaging larger shipments into smaller, duty-free parcels to circumvent tariffs.

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SIDEBAR: The Rise and Fall of 'De Minimis'

Origins of the Rule

The de minimis exemption traces its roots to the Tariff Act of 1930, designed as a practical administrative measure when international trade volumes were a fraction of today's levels. The Latin phrase "de minimis" means "about minimal things," reflecting the original intent to avoid the bureaucratic cost of collecting small tariff amounts.

The goal was simple: The government would save the expense of processing a tariff fee that is lower than what it costs to collect it, according to trade policy experts. The average de minimis entry in 2023 averaged $54, well below the $800 threshold that was raised from $200 in 2016.

How E-Commerce Exploited the Loophole

The explosion of international e-commerce, particularly from Chinese platforms, transformed de minimis from an administrative convenience into a major trade issue. Between 2015 and 2024, the volume of de minimis shipments entering the U.S. increased from 134 million shipments to over 1.36 billion shipments annually.

In 2023, the House Select Committee on the Chinese Communist Party released a report saying that Shein and Temu were "likely responsible for more than 30 percent of all packages shipped to the United States daily under the de minimis provision".

International sellers developed sophisticated strategies to exploit the exemption:

• Direct-to-Consumer Shipping: Companies like Shein and Temu bypassed traditional import/export chains by shipping individual orders directly from overseas warehouses
• The "Tijuana Two-Step": In warehouses in Northern Mexico, goods imported from China are repackaged into smaller parcels, each valued at less than $800, allowing them to enter the US tariff-free
• Value Manipulation: Some sellers allegedly understated package values or split larger orders into multiple small shipments to stay under the threshold

Why It's Being Closed Now

The Trump administration cited multiple justifications for ending the exemption:

National Security Concerns: 90% of all cargo seizures in FY24 originated as de minimis shipments, including 98% of narcotics seizures and 97% of intellectual property rights seizures. Officials argued the simplified customs procedures created opportunities for drug trafficking and counterfeit goods.

Economic Fairness: Countries exploited this system to flood the American market with cheap goods that undercut American manufacturers and cost American jobs. The administration argued that foreign companies gained unfair competitive advantages over U.S. businesses subject to standard import duties.

Revenue Recovery: Officials said Thursday that the end of the de minimis loophole will amount to around $10 billion a year in revenue, representing a significant opportunity to reduce federal deficits.

Reciprocity Issues: While the U.S. previously offered a generous de minimis exemption, China enforces strict import restrictions and tightly limits de minimis exemptions, showing no similar leniency toward U.S. shipments.

The policy change represents the most dramatic shift in U.S. import procedures since the creation of the Department of Homeland Security, effectively ending what had become a cornerstone of the modern cross-border e-commerce economy.

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Sources

1. The White House. "Executive Order 14324: Suspending Duty-Free De Minimis Treatment for All Countries." July 30, 2025. https://www.whitehouse.gov/presidential-actions/2025/07/suspending-duty-free-de-minimis-treatment-for-all-countries/
2. The White House. "Fact Sheet: President Donald J. Trump is Protecting the United States' National Security and Economy by Suspending the De Minimis Exemption for Commercial Shipments Globally." July 30, 2025. https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-is-protecting-the-united-states-national-security-and-economy-by-suspending-the-de-minimis-exemption-for-commercial-shipments-globally/
3. NBC News. "U.S. shoppers' orders canceled as world shuts down some American-bound shipments." August 28, 2025. https://www.nbcnews.com/business/business-news/de-minimis-exemption-ending-canceled-orders-shipping-us-what-to-know-rcna227794
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7. The Hill. "Trump to lift de minimis exemption Friday: What to know." August 29, 2025. https://thehill.com/business/5476144-de-minimis-exception-to-be-lifted-friday-what-to-know/
8. U.S. Department of Homeland Security. "President Trump Ends Unfair 'De Minimis' Tariff Exemption, A Major Victory in Securing the Homeland." July 31, 2025. https://www.dhs.gov/news/2025/07/31/president-trump-ends-unfair-de-minimis-tariff-exemption-major-victory-securing
9. Avalara. "The de minimis exemption is ending: Is your business ready?" Updated August 25, 2025. https://www.avalara.com/blog/en/north-america/2024/11/de-minimis-exemption-changes-coming.html
10. Hogan Lovells. "De minimis customs exception for small packages entered into the United States to end in August 2025." 2025. https://www.hoganlovells.com/en/publications/de-minimis-customs-exception-for-small-packages-entered-into-the-united-states-to-end-in-august-2025
11. FlavorCloud. "The End Of The US $800 De Minimis Rule And What It Means For International Ecommerce Merchants." August 2025. https://flavorcloud.com/the-end-of-the-de-minimis-rule-and-what-it-means-for-international-ecommerce/
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13. What does the end of 'de minimis' mean for investors? (AMZN:NASDAQ) | Seeking Alpha