The repeal of the de minimis rule on August 29, 2025, as noted here, This is what you will have to pay in taxes with the end of the De ‘Minimis’ exemption for imports of less than $800 as of August 29 is one of the most massive trade policy shifts in American history and has the potential to impact more U.S. businesses than any single tariff growth. What began as an esoteric side provision would become the linchpin of modern e-commerce, with the rule handling over 4 million packages each day and constituting 92% of all cargo entries into the U.S. For small and medium-sized businesses depending on duty-free items under $800, this could be far more disruptive than the usual proposition of tariffs targeting specific products.
Understanding the trading mechanism of the de minimis rule
Once an influx of $800 or less worth of goods came into the U.S., the goods were spared from payment of customs duties, taxes, or paperwork, as theory has its exemption well linked to English words meaning “about minimal things.” In fact, its threshold was dramatically expanded from $200 to $800 in 2016 by the Trade Facilitation and Trade Enforcement Act, TFTEA, and this was essentially the most generous de minimis threshold in the world.
The qualifying shipment was given up under Section 321 of the Tariff Act of 1930, and the method bypassed formal customs clearance procedures. The provision allowed one shipment per person per day to be entered duty-free, which, in turn, streamlined the process and lightened the administrative load on both importers and USCBP. This rule played a crucial role in e-commerce platforms serving on a direct-to-consumer business model, where items were shipped directly from overseas factories to customers’ doors without bearing any tariff.
The eruptive growth that brought about its demise
The magnitude of de minimis usage accelerated rapidly after the massive increase in the threshold in 2016. As per CBP records, de minimis shipments shot up phenomenally in FIGO 2015; they were at around 139 million packages, but the count skyrocketed to over an estimated 1.36 billion packages during FY 2024, representing a nearly 10-fold increase. This translates to more than 4 million packages processed every day under the exemption.
Chinese e-commerce platforms like Shein and Temu became the biggest beneficiaries as detailed here, Goodbye to the minimis – This is the new rule that will cause price increases for Shein and Temu orders placed by millions of Americans, with these two companies alone shipping approximately 600,000 packages daily to the United States under the de minimis provision. Before the May 2025 exclusion of China and Hong Kong, roughly 60% of all de minimis shipments originated from China. The White House reported that these low-value shipments had an estimated total value exceeding $61 billion in 2024.
The expressed reasons for elimination by the Trump administration
According to President Trump, the de minimis exemption was eliminated for various reasons, concentrating on national security and economic fairness concerns. The administration contended that the exemption had become “a big scam” that hugely benefited foreign companies—mostly big China-based retailers—while rendering American business houses disadvantaged.
Security concerns weighed heavily on the decision. According to information from the White House, de minimis accounted for 90% of all seizure of cargo made in FY 2024 by U.S. Customs, with its shipments being used as a cover for 98% of opioid drug seizures and 97% of counterfeit seizures. The administration specifically emphasized the use of such deliveries for drug interdiction: “De minimis shipments have been used to smuggle large quantities of fentanyl and other synthetic opioids into the United States.”
Economic arguments were centered on trade fairness. Critics argued that the exemption created an unfair competitive advantage for foreign e-commerce companies over U.S.-based retailers, who were required to pay duties on their imported goods, regardless of value. Traditional retailers like Walmart and Target already factor tariff costs into their pricing, making them more expensive compared to direct-shipped items from platforms like Shein and Temu.
Implementation timeline and current status
The elimination was carried out in several phases. On May 1, 2025, items shipped from China and Hong Kong ceased to receive de minimis treatment. The items originating from these two territories earlier enjoyed a duty-free status, but now they are subject to rates at 30-120% or flat fees of $100 per package. This first phase would reduce overall de minimis volume by an estimated 30-35%.
The global elimination aimed at eliminating duty-free treatment to all countries and took effect from August 29, 2025. Under the new legislation, all shipments acting separately from the value or country of origin will be required to pass through formal customs entry procedures and pay the appropriate duties, taxes, and fees. Postal shipments will have to pay percentage-based rates or flat fees, ranging between $80 and $200 per package, depending on the country’s tariff level, albeit the option for flat fees will be removed after six months.
The impact on small and medium sized businesses
Indeed, while larger e-commerce platforms and big retailers may find it easier to adjust through larger economies of scale and diverse sourcing strategies, small and medium enterprises are likely to face much greater hurdles to adjust performance. Small and medium businesses are low-margin operations and so are likely to have placed many orders for items priced below the $800 threshold.
Jacob Bennett, CEO of small business banking platform CruxAnalytics, adds, “For a significant number of small businesses, the customs fees could double their expense.” The changes force companies to become “accidental trade policy experts overnight,” thereby complicating operations that were simple before.
Instantly, the shock has been felt by online marketplaces, supporting millions of small sellers, like Etsy, eBay, and Poshmark. Nearly a 20% reduction in the stock of Etsy and 10% in eBay followed the announcement. These platforms are the primary sales channels for several small businesses as they involve international trade.
The situation small businesses are being confronted with includes completion of Customs entries, precise classification in the HS codes, comprehensive commercial invoices, and potentially higher inventory carrying costs as they transit to larger orders with less frequent ones to achieve better economies of scale. Additionally, new relationships with customs brokers will have to be forged and investment levels in trade compliance systems increased for the smaller entrepreneurial enterprises.
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