Over the weekend of 22nd and 23rd February 2025, I read an article from the CATO Institute, a public policy organisation based in Washington DC, who attempted to look at the recent impacts of the di minimis changes in the US, what it meant to the ordinary American and what impact future changes would have.

I’ve summarised the article and find it really refreshing to read the real view impact of potential US Tariffs and how it will affect the UK eCommerce retailer and the average American, who currently derive the most benefit from the existing import structure.

There is a lot to lose in the short term and I do struggle to see how even a medium-term rebalancing of tariffs will benefit any side, with American consumers losing access to value goods and retailers diversifying to new markets, as the USA becomes an overly restrictive market to sell in.

But the institute puts it better than I can and from the American point of view, this is what they have to say:

The Current Situation

In early February, the Trump administration announced it would immediately eliminate the “de minimis exemption” for low-value shipments arriving from China, effectively raising taxes on American consumers and dramatically increasing shipping times.

Within days, US ports of entry were overwhelmed with a backlog of packages. Realizing Customs and Border Protection (CBP) was unprepared to deal with the deluge of packages, the administration quickly backed off and instead announced it would create a process for eventually eliminating the exemption for China. Likewise, policymakers in Congress seem intent on eliminating the exemption. Such moves have serious implications for average Americans.

Background

The United States provides three customs processes by which foreign goods can arrive in the country: formal entry, informal entry, and de minimis exemption.

Formal entry applies to shipments valued above $2,500 and requires comprehensive documentation and oversight (think container ships arriving in US ports). Importers must file customs paperwork summarizing the shipment and its contents, including its valuation and country of origin. A customs surety bond must be posted to guarantee payment of duties and compliance with regulations. The process requires using a licensed customs broker to prepare and submit documentation, and importers pay an ad valorem merchandise processing fee of about 0.35 percent of the shipment value. Formal entries require proper classification using Harmonized Tariff Schedule codes, and detailed commercial documentation, and may face intensive customs examination.

Informal entry provides a simplified process for shipments valued between $801 and $2,500. While still requiring a summary of the contents and payment of applicable duties, the documentation requirements are less stringent. Instead of an ad valorem fee, informal entries pay a fixed merchandise processing fee. A customs broker is still required, but no surety bond is needed. While these shipments remain subject to customs review, the process is typically faster and less intensive than formal entry.

Finally, US law allows low-value shipments to bypass this process altogether. For nearly 90 years, Section 321 of the Tariff Act of 1930 (known as the de minimis exemption), as amended, has allowed customs officials to waive import duties and customs paperwork for low-value foreign packages entering the United States. A former assistant Treasury Secretary once told a congressional committee that the goal of the de minimis exemption was to ensure customs officials were not “spending a dollar to collect fifty cents.” Since 2016, the de minimis exemption law allows American businesses or individuals to buy up to $800 worth of goods each day duty-free.

Items such as alcohol, perfume, cigarettes, and those goods subject to antidumping and countervailing duties cannot be shipped using the de minimis exemption.

According to 2024 congressional testimony from a CBP official, the average value of a de minimis shipment during Fiscal Year 2023 was $54. In 2018, China was the country of origin for about 75 percent of all de minimis shipments; in 2023, China accounted for about 60 percent.

In 2013, a little more than 100 million foreign packages were sent to American businesses and individuals under the de minimis exemption, and in 2016, the first year under the new $800 threshold, 255 million packages were sent using the exemption. CBP recently announced that it processed more than 1.3 billion de minimis shipments in 2024 or more than 3.8 million packages per day.

What is driving this explosion? Perhaps Congress raising the threshold to $800 in 2016 (from $200) played a part. From small, one-person operations to major corporations, direct-to-consumer e‑commerce business models have rapidly developed in recent years. Consumer goods giants Temu and Shein, platforms connecting foreign producers to buyers in the US and around the world, have seen a major export boom in recent years. But the average de minimis shipment value ($54) is significantly lower than the $800 threshold, and given that Temu and Shein sell very low-priced items, there’s a strong implication that something else is the major driver of the explosion in de minimis shipments.

The dramatic expansion of de minimis shipping can be directly traced to the 2018 US-China trade war. As Reuters recently detailed, when the United States imposed aggressive tariffs on Chinese imports—most of which remain in place today—it fundamentally altered shipping patterns

Prior to the tariffs, Chinese suppliers typically shipped low-cost consumer goods like clothing and accessories in bulk through traditional customs channels. However, the new duties prompted both Chinese exporters and US importers to restructure their operations around direct-to-consumer shipping to take advantage of the de minimis exemption.

The impact was dramatic: de minimis imports grew from just 0.7 percent of U.S. consumer goods imports and 1 percent of e‑commerce sales before the trade war to over 7 percent and 5 percent respectively by 2023.

Rather than reducing Chinese imports as intended, the tariffs largely redirected trade flows from traditional bulk shipping to individual package delivery through the de minimis channel

However, it is not just the United States experiencing a massive surge in low-value shipments. In 2023, more than 2.3 billion packages were sent throughout the European Union under its €150 exemption threshold—more than double the volume in 2022. Now the EU is considering revoking its exemption.

Economics

Eliminating de minimis shipments entirely—or only for China— would have far-reaching negative effects for Americans, particularly poorer consumers. A 2024 National Bureau of Economic Research paper by Pablo Fajgelbaum and Amit Khandelwal found that lower-income consumers are more likely to purchase de minimis imports, particularly from China. The authors also find that “73 percent of direct shipments imported by the poorest zip codes are de minimis compared to 52 percent for the richest zip codes.”

China is the country of origin for 48 percent of de minimis shipments to the poorest zip codes compared to 22 percent for the richest zip codes. Eliminating de minimis entirely, the authors find, would increase average tariffs faced by the poorest zip codes to nearly 12 percent versus 6.5 percent for the richest zip codes. On top of the tariffs, the per-package administrative fee would increase to over $23. Add to that a customs brokerage fee, which estimates show can range from about $8.50 to $30 per parcel depending on a number of factors, and the fees could easily cost more than the product itself.

Administrative Nightmare

Eliminating the exemption entirely or even for just China and Hong Kong would also be an administrative nightmare. Requiring an informal customs entry process—with an entry summary, a fixed merchandise fee, and utilizing a customs broker—for the approximately 1.3 billion packages arriving in the United States would overwhelm CBP resources and create large inefficiencies. In early February, the Trump administration temporarily paused de minimis shipments from China and Hong Kong. After just a few days, more than a million packages were piled up at New York’s JFK airport alone, according to Reuters.

Using the agency’s Workload Staffing Model which it reported to Congress in 2023, Oxford Economics estimates that CBP is already nearly 5,000 officers short. It is likewise estimated that eliminating the de minimis exemption entirely would necessitate hiring and training an additional 22,000 CBP officers. The additional paperwork burden would be immense—not to mention the additional wait times for consumers.

Likewise, eliminating the exemption for China will create stronger incentives to mislabel packages and route even more Chinese-origin goods through warehouses in Mexico—the “Tijuana Two-Step” that Anne O. Kreuger described.

Privacy Concerns

On top of the economic costs and administrative headaches, eliminating de minimis shipments would be a significant expansion of government surveillance into private commercial activities. Buyers and sellers would have to disclose detailed customs documentation for every small dollar international shipment, forcing individuals to provide significantly more personal information to government databases. Indeed, requiring more detailed information requirements for all shipments would create vast repositories of data about Americans’ purchasing habits and other personal consumer choices.

Conclusion

The de minimis exemption serves as a crucial trade facilitation tool that particularly benefits lower-income consumers. Rather than eliminating it, a more effective solution would be to address the underlying incentives by eliminating tariffs on clothing and footwear—the primary product categories using the exemption. This would maintain consumer benefits while removing the incentive for shipping workarounds, simplify customs enforcement, and end what amounts to a regressive tax on basic consumer goods. Such a targeted approach would preserve the efficiency of legitimate trade while allowing customs resources to focus on genuine threats.

Source: https://www.cato.org/blog/high-costs-eliminating-de-minimis-shipping