News / No ‘last hurrah’ expected for US de minimis as legal challenge advances

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After the US Supreme Court nixed Washington’s tariffs, the administration now faces a legal challenge to its ending of the de minimis exemption that dealt a massive blow to the tsunami of ecommerce parcels entering the country.

Parcel experts are not expecting a front-loading surge if the lawsuit prevails.

The Supreme Court’s ruling that the White House did not have authority to impose tariffs on imports using the International Emergency Economic Powers Act (IEEPA) opened the door to a challenge on the ending of de minimis.

A lawsuit filed by auto parts retailer Axle of Dearborn, claiming that the government likewise overstepped its legal authority on de minimis that had been halted while the Supreme Court was scrutinising the broader tariff challenge, is now moving forward in the Court of International Trade.

According to the plaintiff, which operates as Detroit Axle, the abrupt ending of de minimis severely affected its business, as its imported car parts have since been subject to tariffs as high as 52.5%, which its customers are averse to shouldering. It notes that the reasons cited by the administration for the end of de minimis were the same as those used to justify the IEEPA tariffs.

In addition, the lawsuit argues that the ending of de minimis was arbitrary, and in violation of the Administrative Procedures Act because it ignored the impact on those that rely on the exemption, that it failed to consider related economic costs and benefits, did not take reasonable alternatives into consideration, and “has no articulated or apparent link to the problem the government cited as justification”.

On the day the Supreme Court issued its decision on the tariffs, President Trump signed a new executive order instructing the Customs & Border Protection agency (CBP) to continue the suspension of duty-free treatment of shipments that meet de minimis criteria.

The White House subsequently issued a statement that “the president has lawfully exercised the powers granted to him by Congress to suspend de minimis exemptions, and the administration will vigorously defend this policy shift to safeguard our national and economic security”.

If the Court of International Trade rules in favour of Detroit Axle, the case will likely head to the Supreme Court.

Nobody is expecting a full return of de minimis. Last year, Congress – which has the legal authority to impose tariffs – voted for the ending of the exemption, but it set up a two-year window before implementation to give businesses time to adjust to the new regime, a point Detroit Axle has stressed in its lawsuit.

The company said it paid tens of millions of dollars on imports that should have been exempt from tariffs and duties, including levies targeting automotive products.

If the courts rule in favour of the challenge, this would open a window for de minimis imports that could spark another surge of parcels entering the US, primarily using air transport. Washington’s impetuous and shifting tariff moves over the past year triggered several bouts of front-loading as importers rushed to bring in goods at lower tariff levels.

Parcel industry and retail experts are not holding their breath.

“If the Supreme Court rules in favour of the challenge, I think the government would find another way to kill it by either lowering the de minimis minimum or another way to discourage it from being used as much as it was in the past,” commented Cathy Morrow Roberson, founder and head analyst of Logistics Trends & Insights.

Rick Watson, founder and CEO of RMW Commerce Consulting, has “not heard retailers chomping at the bit” to revive de minimis flows. The administration would find a way to keep the lid on parcel imports, he believes.

Washington’s pivot to alternative legislation to maintain import levies suggests there is little chance of a temporary return to the old regime.

“I think retailers are cautiously pessimistic – they’ll believe it when they see it,” Mr Watson said.

The large Chinese ecommerce platforms that were driving the parcel tsunami have adjusted to the new situation, and had been successful in attracting US brands, he observed.

A temporary return to the old de minimis regime would be an ironic twist for US merchants that have faced challenges with their international sales since the US ended the exemption. Products that are returned by international customers now face hurdles.

Some postal carriers have stopped handling returns to the US because of the required paperwork and duties involved, according to cross-border platform FlavorCloud.

CBP requires documentation to prove that the returning shipment was exported, was rejected by the consumer, and is the same item that was sent out. On top of that, it is subject to the tariff and processing fees. Together with the cost of return shipping, this may exceed the value of the product, FlavorCloud warned.