Tobold's Blog
Monday, February 03, 2025
 
De Minimis hitting the fan

You might have read the headlines about Trump raising tariffs on China, Canada, and Mexico, effective tomorrow. What you probably missed, because it was in the small print nobody read, is that the same executive order also eliminated the “de minimis” shipment execption. On Tuesday. Without anybody being prepared. With millions of small parcels already on ships and planes, without the now necessary paperwork. With a current annual volume of small packages of 1.4 billion, which used to get into the country without controls, and which now need to be controlled. And yes, that volume is going to go way down, but not by tomorrow. If you work for U.S. Customs and Border Protection, tomorrow is going to be an “interesting” day.

Eliminating the de minimis execption makes a lot of sense for a country that wants to control foreign trade with tariffs. Europe has a similar exception, and is also thinking about eliminating it. If you have millions of small packages every day which you don’t control, there is a lot of cheating going on: In extremis some of these packages actually contain the fentanyl Trump says he wants to stop. But more likely is cheating about the value of goods, or sending goods that don’t comply with various safety regulations and consumer protection rules. One can easily imagine a country with good governance eliminating the control exception for small parcels with a few months of advance warning, while simultaneously hiring a lot of custom inspectors. Doing it without warning and no additional personnel is going to cause a state of utter chaos.

Working as intended is another consequence: A big hit on companies like Temu and Shein, who built their whole business model on this de minimis shipping exception. The same is true for every small drop shipper. Sending small parcels half way around the world isn’t inherently efficient, and only makes sense with that customs exception.

Comments:
So in the US it seems Shien at least has been working on building stock warehouses here. My wife purchases from there quite frequently and we noticed less and less comes from China and more often now it's shipped out of warehouses in a couple states.
 
Aliexpress has already been shipping from EU based warehouses since years ago. Not all products are eligible, but a lot of them are, which will make any change useless in practice.
 
I also saw a Temu ad the other day also mentioning an EU based warehouse.

Eliminating de minimis ONLY works when you calculate the cost of processing the packages against the net gain from increased tariffs.
The rule was introduced because it costs more to pay someone to open and process a small package only worth a few cents in duties.
The only thing an increased volume of packages is going to do is increase the amount of people you need to employ at a net loss.
The consumer might be unwilling to go through the hassle of paying duties but if the end price is way lower than domestic alternatives (which also need to exist in the first place), then they will just accept the increased price on imports.
 
I buy the occasional things from Ali Express and in every case the suppliers claimed to add relevant taxes including VAT. I have never yet had such a package stopped in customs nor had to pay any additional fees. This is in stark contrast to ordering things from post Brexit Britain which often get stuck and incur customs charges. Are the Chinese suppliers really fully compliant with all customs and tax or are they just abusing de minimis and similar loopholes?
 
@mbp A recent study in Europe opened a bunch of parcels and checked for full compliance. Only one third of the parcels were fully compliant. Cheating on the value to stay below Europe’s €150 limit was very common.
 
Makes me wonder why parcels from Britain never seem to get away with it. It is almost as if Irish customs officials have a particular grudge against the British. I wonder what ever could be the reason for that.
 
For me in Belgium, I can get British parcels under €150 without problem, but it requires the sender to use the IOSS portal for VAT payment. https://en.wikipedia.org/wiki/Import_One-Stop_Shop
 
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