Author: Maria Pechurina, MA, Director of International Trade @ Peacock Tariff Consulting
Executive Summary:
De minimis is widely criticized as a “trade loophole” that lets goods enter duty-free, even if tariffs (e.g., 145% import tariff against China) or national security duties apply. CBP says the exemption is “built on a false premise that low value means low risk.” This also gave an unfair advantage to foreign e-commerce firms and eroded U.S. domestic retail. The increase in low-value exports from China ($5.3 billion in 2018 to $66 billion in 2023) is directly tied to the trade war and China’s adoption of parcel-by-parcel shipment strategies. Larger platforms like Shein and Temu are diversifying supply chains and building U.S. warehouses, but consumers should expect rising prices and longer shipping times. The surge in packages strains USPS and CBP infrastructure, and eliminating the exemption would require hiring 22,000 additional CBP officers, since the agency is already 5,000 short. De minimis shipments have increased from 153 million in 2015 to over 1 billion in 2023, creating an administrative nightmare.
The exemption has fueled fast fashion and fast consumption, enabling poor labor conditions in “Shein Villages” as workers race to fulfill rapid demand, and fostering environmental harm through textile waste and emissions. The high volume of small parcels, which CBP cannot sufficiently inspect, was frequently used to smuggle drugs, notably fentanyl. The rise in E-commerce plus regulatory loopholes have upended international drug trafficking logistics, but even with advanced screening, it’s hard to detect fentanyl and precursors, diverting resources from more important enforcement, and the system is now under extreme strain. Costs for consumers will rise: brokerage fees and administrative charges could exceed the value of the goods themselves, driving shoppers offline and potentially ending the era of “killer deals.”, but low prices inevitably create overconsumption; the true cost is borne elsewhere. This article highlights the profound complexities of international trade, consumerism, and global business models.
Introduction:
During the Liberation Day chaos, US President Donald Trump announced that as part of the ongoing decoupling, competition and trade war with China, the administration would be cracking down on several beloved Chinese e-commerce giants like Temu and Shein that have unfairly profited from a duty free de minimis treatment of low value imports from China. Both companies have sought to beat the tariffs through bulk importing, which has overwhelmed US customs and overstressed port capacity with backlog orders, resulting in a gradual implementation strategy with the complete elimination of the exemption scheduled for August 29th.
On April 2, 2025, the administration eliminated the duty-free de minimis exemption for goods valued less than $800 from China, Hong Kong, and Macau, imposing 30% tariffs on shipments valued under $800 (effective May 2, 2025), $25 tariff per postal item entered between May 2 and June 1, 2025, and $50 tariff per postal item entered on or after June 1, 2025. When President Trump first announced that de minimis exemptions would no longer apply to low-cost goods imported into the US, Temu and Shein announced that they would be raising their prices in light of this change. Arguably, this will negatively affect US consumers, especially those in lower income brackets.
History of De Minimis, Section 321 of the Tariff Act of 1930
The Tariff Act of 1930 (Smoot-Hawley Tariff Act) protected US farmers and manufacturers and created customs provisions still in place today. Initially, in 1938, dollar thresholds for duty-free imports were set: $1 for personal items, $10-$25 for gifts, with the intention to save customs officers time rather than collecting negligible amounts. Over the years, the de minimis threshold rose: $200 by early 2000s, and $800 by 2016 under the Trade Facilitation and Trade Enforcement Act of 2015 signed by President Obama. This threshold aligned with the value US travelers could bring from abroad without declaring, and the 2015 change aimed to allow Americans who could not afford frequent international travel to reap the same benefits for duty-free entry of goods as those who could bring goods from abroad under $800 in value back to the US without claiming them at Customs. Now, more than half of all goods entering via de minimis are from China, and over 30% from Shein and Temu. A Congressional report from February 2025 noted that the cost of low-value exports from China entering the US soared from $5.3 billion in 2018 to $66 billion in 2023.
The United States provides three customs processes for foreign goods: formal entry, informal entry, and de minimis exemption. Formal entry (over $2,500) requires documentation, surety bonds, and customs brokers. Informal entry (worth $801 to $2,500) needs less paperwork and often uses brokers. De minimis (up to $800 per day, since 2016) evades duties and paperwork entirely for individuals and businesses.
Although many now accuse de minimis of being a loophole for drug trafficking and substandard goods, its original purpose was to minimize the burden on customs workers, reduce admin expenses, and facilitate trade of low-value items.
Benefits of Section 321:
- Enabled B2B trade by streamlining clearance and border delays.
- Reduced customs paperwork and entry costs.
- Facilitated access to new markets and greater competitiveness by allowing lower prices.
Items imported under the de minimis exemption are not taxed, overwhelming systems like USPS funded by U.S. taxpayer dollars since Shein and Temu shipments do not add tax revenue, burdening postal facilities and workers. In FY2023, the average value of shipments under de minimis exemption was $54, but the value of goods was $66 billion USD, which equates to about 1.2 billion small packages.
Rise of E-Commerce
The rapid technological growth and expansion resulted in a notable rise in e-commerce over the past two decades. As defined by McKinsey & Company: “electronic commerce is the buying and selling of goods and services over the internet, on websites, mobile apps and social media.” E-commerce enables sellers to attract more customers and enter more markets at lower costs, transforming consumer shopping. Shopping time is shortened, and the thrill of purchase stretches from transaction to unboxing, giving consumers the extra addicting boost of endorphins. E-commerce exploded during the COVID-19 pandemic as physical shopping became impossible. Between 2019 and 2020, online retail in the U.S. grew from 16% to 35%, a doubling in just one year; similar growth was observed in China and the UK. Spending patterns shifted dramatically: according to the US Census Bureau, clothing store revenue dropped by $68.1 billion, depressing many traditional retailers.
Negative impacts of trends fueled by De Minimis on Labor, Environment, and Fentanyl trade
The business model of the fast fashion behemoth Shein business model has given rise to the “Shein village” phenomenon in China, where workers labor under grueling conditions to meet the platform’s rapid production cycle. Environmental costs are equally severe, as fast fashion generates enormous textile waste and carbon emissions. The de minimis exemption also facilitated the entry of illegal goods, most notably fentanyl. The massive volume of small parcels makes it nearly impossible for CBP to inspect every package. Fentanyl now represents one of the most pressing threats tied to this loophole.
The exemption for de minimis facilitated the entry of illegal goods, particularly fentanyl, by overwhelming CBP with small parcels. Fentanyl now represents one of the most pressing threats tied to this loophole. “Fully 90% of all shipments now enter the country this way, and most arrive by air, according to U.S. Customs and Border Protection.” In practice, the sheer volume of over 1 billion packages in FY2023 means authorities cannot inspect every item. Traffickers exploit this surge in e-commerce, using regulatory tweaks from a 2016 U.S. trade law supported by major parcel carriers and e-commerce platforms, which enables easier entry of imported goods, including fentanyl ingredients. Anti-narcotics agents say this has made the U.S. a transshipment point for Chinese-made chemicals used by Mexican cartels to manufacture the fentanyl devastating communities.
“Transporting goods is largely an honor system that’s easy for bad actors to exploit. Senders are supposed to tell the truth about what’s inside the boxes they export. But shipping documents are easy to falsify, and contraband fairly simple to camouflage. Authorities can’t inspect every box without bringing global commerce to a halt.” (Homeland Security Investigations, the agency tasked with disrupting illicit fentanyl supply chains.)
Consumerism and Fast Fashion
U.S. consumers are almost entirely out of touch with the impact of their shopping. Fast fashion brands like Shein promote a culture of thoughtless consumption, and unbelievably low prices encourage buying with little reflection. “I don’t care if I never wear it, I got it on Shein.” describes a common sentiment. If the consumer doesn’t pay the price, someone else does: workers, the environment, USPS, and small businesses. All clothing is made by human hands, and these practices and business models force other retailers out. The low cost encourages consumers to buy things they don’t need, with little sense of responsibility.
Silver Lining of the Elimination of De Minimis
While Shein and Temu will raise prices due to new regulations, affecting consumer shopping habits, there may be hope for the consumers yet. The rollback of de minimis could change behavior. Could higher costs steer consumers toward more conscious shopping? Could curiosity grow about where clothes come from, spurring ethical brands and a revival of domestic apparel manufacturing? Maybe this is unlikely, but in a world growing more turbulent by the hour, perhaps creative, human-centric solutions could emerge.