On February 2, the Trump administration imposed a 10% tariff on all products imported from China and a 25% tariff on all products from Canada and Mexico. (Mexico’s government negotiated to delay their tariffs by 1 month, while Canada and China’s tariffs will go into effect as soon as Tuesday, February 4th.) As part of these orders, the administration also ended the De Minimis Exemption from shipments from these countries.
The De Minimis Exemption is a threshold that allows low value shipments to be imported into the United States without being subject to customs duties, taxes, or formal entry procedures. This allows shipments valued at less than $800 to enter the United States with minimal paperwork and customs screening.
The removal of the De Minimis Exemption will likely lead to shifts in sourcing strategies, delays in customs clearance, and increased costs and complexity to low value shipments. With low value shipments being subject to customs duties, importers will need to consider changes in sourcing strategies, including sourcing domestically and consolidating smaller shipments.
Beyond the sourcing and logistical challenges the closure of the de minimis loophole represents, companies should also be aware of the increased scrutiny customs will conduct on low value shipments. The closure of De Minimis means that shipments under the value of $800, will for the first time be subject to CBP’s enforcement of US forced labor regulations. This change will result in thousands of shipments being subject to screening and detained for suspicion of forced labor by customs officials. Since 2022, nearly $3.7B worth of goods have been detained. Detentions are expected to increase now that low value goods from China, Mexico and Canada will be subject to the rebuttable presumption, and businesses operating primarily in the DTC space are scrambling to establish the strict supply chain due diligence measures that many companies put in place in 2022.
As a result, it has never been more important to have complete visibility into one's supply chain. Knowing your supply chain to the N tier will reduce the administrative burden required to adjust to the closure of the De Minimis exemption, allow greater transparency, and prevent detentions of shipments at the border. → Read more
