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    Home»Business & Economy»US cancels small-package duty exemption, transforming online shopping
    Business & Economy

    US cancels small-package duty exemption, transforming online shopping

    OMN AIBy OMN AIAugust 29, 2025No Comments4 Mins Read
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    The United States has ended a decades-old tariff exemption that allowed imports under $800 to enter duty-free, marking a major shift for global e-commerce.

    From Friday, parcels under this threshold must face customs inspections and pay tariffs. Millions of shipments each day will now be affected.

    Customs data shows that in 2023, nearly 1.4 billion packages worth over $64bn entered the US under the de minimis rule. Analysts warn the change will raise prices, reduce consumer choice, and challenge small businesses.

    Katherine Theobalds, founder of Buenos Aires shoe brand Zou Xou, said: “It might be the end for us.”

    How de minimis shaped global trade

    The de minimis exemption began in 1938 to avoid collecting tiny tariffs that were expensive to process.

    Over the decades, its rising threshold allowed e-commerce to flourish and enabled retailers to ship directly to American consumers.

    Chinese companies like Shein and Temu built fast-growing businesses by delivering low-cost goods straight from factories.

    Many other domestic and international businesses also relied on the exemption for supply chains and pricing strategies.

    Coach parent Tapestry expects a $160m hit to profits this year, with one-third linked to the rule’s removal.

    Officials report that over 90% of US-bound cargo previously entered duty-free under de minimis.

    Both Donald Trump and Joe Biden criticised the exemption, arguing it hurt domestic companies and allowed illegal goods to enter.

    Trump adviser Peter Navarro said the repeal will reduce fentanyl shipments and add $10bn annually to federal revenue.

    Trump accelerated the rule’s end via executive order, cancelling the planned 2027 expiry.

    Shippers must now either pay tariffs based on origin country or use a temporary flat fee of $80–$200 per parcel, available for six months.

    China and Hong Kong lost the exemption in May, forcing Temu to stop direct US sales. Gifts and letters under $100 remain exempt.

    Limited selection and slower shipping

    Consumers may face fewer products and longer delivery times as businesses adapt.

    Small exporters must now declare the origin of every material, said logistics consultant Tam Nguyen. This adds complexity and delays shipments.

    Some niche items may vanish from the market as sellers avoid costly compliance.

    Portland vinyl collector Christopher Lundell had a $5 UK record order cancelled. He called the suspension “political theatre” but recognised the need to protect US businesses.

    Postal services across Europe and Asia paused shipments to the US, citing uncertainty over the new rules.

    Prices on the rise

    Tariffs now vary by country of origin.

    Goods from the UK and Australia face 10%, while shipments from Brazil or India may reach 50%.

    Flat duties range from $80 for low-tariff countries to $200 for higher-tariff ones.

    Officials say the change strengthens the economy and improves safety for Americans.

    Some US companies welcomed the policy. Gap Inc. said closing the loophole ensures all importers pay fair duties.

    Trade expert Deborah Elms warned that small firms face expensive audits and may rely on costly couriers, raising prices further.

    UK-based Wool Warehouse paused US shipments, warning prices could rise up to 50%. The company will display tariffs online for transparency.

    At Zou Xou, Theobalds said she must rethink her strategy. “Even if prices remain stable, complex duties could discourage buyers,” she said.

    China positioned to benefit

    US retailers like Walmart and Target may gain if imported goods become more expensive.

    Chinese firms may adapt faster. Shein and Temu operate US distribution centres that mitigate tariff effects.

    Nguyen said Chinese exporters are months ahead in handling customs paperwork compared with other countries.

    For smaller businesses, the exemption’s removal closes a low-cost pathway to the US market. “That easy entry point is gone,” Nguyen said.

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    OMN AI

    This article was created with the assistance of OMN AI, the AI-powered editorial platform developed by OMN Group. Every article is reviewed, fact-checked, and approved by a human journalist before publication to ensure accuracy and editorial quality. Learn more at https://omngroup.com

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