News / Shippers warned de minimis rule changes could 'cost them millions'

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Shippers have been warned that the White House’s recent executive order on de miminis exemptions could cost them “millions”, with changes potentially on their way before the Black Friday bumper online shopping weekend. 

Flexport CEO Ryan Petersen warned: “If your brand is importing goods into the US duty-free under de minimis rules, last week’s executive order is going to be a big deal that may cost you millions.” 

The de minimis rules, which allow goods valued at up to $800 to enter the US duty-free, could be denied for products subject to Section 301, 201 and 232 duties. Standard import entries would be required instead.  

Section 301 tariffs allow the president to remove unfair trade practices which discriminate against US products, and could, according to Flexport, affect 85% of products imported from China. Section 201 tariffs cover additional duties, similar to anti-dumping rules, but with a higher burden of proof. Section 232 tariffs allow the US to put trade restrictions on some commodities to protect national security, such as on steel and aluminium. 

Flexport warned that the Biden administration intends to issue a ‘Notice of Proposed Rulemaking’, which could take between two and four months to implement – meaning it could, theoretically, lead to changes before Black Friday at the end of November. 

“If the administration proceeds quickly with implementation, last-minute holiday shipments could be severely limited,” warned Flexport. It added that the process was complex, requiring a public comment period, but “the Biden administration appears to be committed to enforcing this quickly”.

However, it acknowledged that “pro-trade groups will likely take every legal action to try to delay or weaken the implementation”. 

Flexport said companies should take immediate steps.

“In the short-term, businesses will be required to start providing HTS classifications down to the 10-digit level for all products, if they hadn’t done so before. So, the most immediate step for businesses is to start classifying 10-digit HTS codes.” 

However, Niall van de Wouw, chief airfreight officer for Xeneta, was more sanguine about the proposed changes, claiming that the impacts would be relatively small in a huge industry. 

“Shein and Temu were not set up to expose a loophole in de minimis regulations. The cornerstone of the ecommerce business model is the massive and seemingly insatiable consumer demand in the west for low-cost fast-fashion, apparel and textiles. 

 “More than a billion shipments now enter the US under de minimis exemption each year, the majority originating from Chinese ecommerce platforms. This extraordinary level of demand is not going away, and the genie cannot be put back in the bottle.”  

Shein and Temu certainly have become commonplace for shoppers, with a recent survey for DHL Ecommerce showing that, while 51% of global consumers shop with Amazon, Shein’s share has risen to 24% and Temu’s to 18%. Download charts show Temu’s app was downloaded 36 million times in July. 

And Mr van de Wouw said these businesses would be able to adapt quickly. 

“Companies like Shein and Temu have known for a long time that changes to US import regulations are inevitable, and I don’t think they will be overly concerned by the latest announcement. 

“Even if the new de minimis regulations cause prices to rise slightly on ecommerce platforms, they will still be very low-cost. The US government is trying to level the playing field for American retailers and manufacturers, but the price differential is so big that they aren’t playing on the same field as Chinese ecommerce.” 

Concerns about illegal goods entering the country, whether produced by forced labour or containing illicit products such as fentanyl, could mean more checks and therefore delays, he added, and were thus unlikely. 

 “Stringent checks on every shipment entering the country would cause massive delays and hurt ecommerce businesses far more than any changes to de minimis regulations, and the resources required for this level of enforcement would be very costly. It would also have major repercussions for other businesses importing goods into the US by air freight,” said Mr van de Wouw.