de minimis: "Trump closed a loophole for low-cost imports ‒ until all hell broke loose"

From Reuters, February 14:

• *Executive order to end duty-free entry for cheap Chinese goods caught package carriers off guard
• *U.S. Postal Service has no system in place to collect tariffs or remit them to U.S. government
• *As packages piled up, White House had to pause its own order

Days after U.S. President Donald Trump ended duty-free entry for cheap Chinese goods entering the U.S., his administration put the order on hold after more than a million packages piled up at New York's John F. Kennedy International Airport.

 

It was the result of a rushed, confusing policy change that proved unworkable on short notice. Government officials are now scrambling to implement the order in a way that won't cripple America's hyper-efficient import system.

 

Trump's executive order took aim at a little-known trade rule called "de minimis." Merchandise with a value totaling less than $800 is allowed to enter the country duty-free and with minimal inspections. The number of shipments entering the U.S. through this tax-free channel has exploded in recent years, reaching nearly 1.4 billion packages last year, due largely to online shopping. More than 90% of all packages coming into the U.S. now enter via de minimis. Of those, about 60% come from China, led by direct-to-consumer retailers such as Temu and Shein.

 

Trump campaigned on a promise to punish China for the role it has played in the synthetic opioid crisis that has killed more than 450,000 Americans in the last decade. Chinese chemical makers are the top suppliers of raw materials purchased by Mexico's cartels to produce the deadly drug, U.S. anti-narcotics officials say. A Reuters investigation last year detailed how traffickers often route these chemicals through the United States by exploiting the de minimis rule. China has repeatedly denied culpability.

 

In a February 1 executive order, Trump announced an additional 10% across-the-board tariff on all Chinese imports and ended the de minimis exemption for Chinese low-value packages that had previously entered duty free. The White House gave just three days for the policy to take effect. On February 7, the portion of Trump's order affecting de minimis parcels was paused because those responsible for carrying out the order had not been given sufficient time to prepare. Packages were stacking up at ports of entry, including at JFK Airport.

 

Logistics experts say it was impossible for major parcel carriers, e-commerce platforms, the U.S. Postal Service and U.S. Customs and Border Protection (CBP) to overhaul their operations in a matter of days to begin collecting tariffs on previously exempt goods, especially with millions of de minimis packages already en route from China.

 

"You just can't snap your fingers….it doesn't work that way," said former senior CBP official John Leonard, who retired from the agency in 2024.

 

Leonard said these types of major changes have traditionally taken months to implement, and they involve close collaboration between CBP and the private sector.

 

The U.S. de minimis rule, which dates back to 1938, has been the target of growing criticism from both Democratic and Republican lawmakers. Some have derided it as a loophole that allows cheap Chinese products to flood into the U.S. and undercut American industries, while also serving as cover for smuggling contraband such as illegal drugs and their precursor chemicals. A Reuters series last year penetrated the supply chain for fentanyl-making chemicals and showed how traffickers take advantage of the massive volume of de minimis packages in order to sneak precursors into the country.

 

Despite growing consensus for the need to reduce the number of packages coming in through de minimis, the sheer volume means that any changes to the regulations need to be well considered and implemented on a time frame that gives shippers and CBP time to adjust, a half-dozen private logistics experts, former customs officials and politicians told Reuters....

....MUCH MORE, it's a pretty big deal.

Previously:

• Temu's Disruptive Business Model
• "How China took over the world’s online shopping carts" + "What is this thing? Guess Temu’s weirdest gadgets"
• "Shein, Temu Are Swamping Airfreight Capacity, Sending Rates Soaring"
• Tariffs: But What About Temu?
• "Trump’s China tariffs are shutting the big loophole that make Shein and Temu so cheap" (plus some Amazon history) 

In unrelated news I heard a guy refer to House Minority Leader Hakeem Jeffries as "Temu Obama" which is the unfortunate sort of nickname that can stick with a fellow.