News / De minimis-induced ecommerce demand slump could cripple freighter operators

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The US’s considerable de minimis fee and tariff hike will “cripple the [air cargo] industry”, as regular ecommerce shipments become no longer economically viable, according to industry experts. 

It had been previously reported by The Loadstar, and other media outlets, that countries mulling a change to their de minimis exemption – such as the EU and US – would have little impact on the ecommerce consumer.  

Data platform Rotate revealed back in September that over 80% of survey respondents agreed that if the US de minimis was lowered, or a new policy created constraint, “[ecommerce] will find another way”. 

“If the de minimis is decreased from $800 to, let’s say $165, how much impact is that actually going to have on the volumes? Most [low-value ecommerce shipments] will still fit there,” CEO of Rotate, Ryan Keyrouse, told The Loadstar at the time.  

However, no one predicted that the US administration would not simply lower the de minimis threshold or abolish it altogether, but rather tax $75 per postal shipment from 2 May and $150 from 1 June.  

“Postal based e-commerce tends to be mostly used by smaller e-commerce platforms and individuals who cannot access bulk transport solutions. Considering the relatively low value of many of these purchases, this is likely to impact this activity significantly, possibly obliterating it completely,” director general of Tiaca, Glyn Hughes told The Loadstar. 

“A $10 item could cost 1,500% more, and will probably no longer be financially attractive,” he said.  

Additionally, air cargo, express or maritime-based ecommerce will now be subject to the full application of the respective tariff in place, currently 125% from China, but without a fixed fee per item. 

Xeneta’s chief airfreight analyst, Niall van de Wouw, warned that if the de minimis fees are introduced as promised on 2 May, it would dampen ecommerce demand with the same force as Covid, leaving a significant glut of capacity. 

Indeed, ex-Emirates Cargo exec Ram Menen told The Loadstar: “After all the gains the air cargo industry has made since Covid, the supply/demand equation is going to be tipped, and it will be back to a possible blood-bath in the coming months.” 

Mr van de Wouw predicted that around half of the 100-plus freighter flights a day from China and Hong Kong would become redundant – excess capacity that would have “a pretty high impact on market rates”, according to Mr Menen, who added that freighter operators, in particular Asia-Pacific freighter operators, “will struggle to operate profitably”.  

These carriers will “have to compete heavily with the belly operators”, he highlighted.  

However, Mr Menen, Mr Hughes and Mr van de Wouw all agreed that there was currently enough demand elsewhere for freighters to be redeployed rather than parked, possibly on trades to Latin America, within Asia, or to Canada and Mexico. 

And one silver lining for airlines noted by Xeneta today, although unlikely to provide much solace, was that yields on the front-haul and back-haul routes ex-Asia “won’t be as imbalanced as they are now”.