What to know about the "de minimis" exemption that Trump is now ending
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The de minimis exemption will end on August 29, the White House said on Wednesday. Photo: MARTIN LELIEVRE/AFP via Getty Images
President Trump revoked on Wednesday an exemption on tariffs for global packages worth less than $800.
Why it matters: The "de minimis" loophole has been an important protection for businesses overseas and U.S. customers, and getting rid of it will make low-price goods from around the world more expensive for Americans.
- The suspension has been in place for China since April, and has had a serious impact on major Chinese retailers like Shein and Temu.
What's next: After months of an on-and-off trade policy, Trump is moving ahead with his Friday deadline to raise, or put into effect, tariffs on both key goods and major allies.
Here's what to know:
When the suspension goes into effect
State of play: The de minimis exemption will end on Aug. 29, the White House said.
What the de minimis exemption is
Packages valued under $800 have enjoyed an exemption from added duties, which has previously enabled foreign online retailers like Temu and Shein to sell super-cheap items to American consumers.
By the numbers: The number of de minimis entries has grown to more than 1 billion in 2023 from 153 million in 2015, according to Congress.
Context: Congress initially enacted the exemption in 1930 "to improve administrative efficiency and to avoid expense and inconvenience to the government," according to Congress' website.
How the exemption will impact international products
Zoom in: International shipments will taxed one of two ways:
- An "ad valorem" duty equal to the tariff rate set by the International Emergency Economic Powers Act (IEEPA), or
- A "specific duty" with a temporary tax between $80 and $200 per item.
After six months, however, "all applicable shipments must comply with the ad valorem duty methodology, " according to the White House statement.
American travelers can still "bring back up to $200 in personal items and individuals can continue to receive bona fide gifts valued at $100 or less duty-free," however.
How the suspension will impact U.S. businesses, consumers
De minimis critics say the loophole has hurt U.S. businesses, such as fashion retailer Forever 21, which began liquidating its U.S. stores after blaming the rise of Shein and Temu in part for its downfall.
- "The ability for non-U.S. retailers to sell their products at drastically lower prices to U.S. consumers has significantly impacted the Company's ability to retain its traditional core customer base," Forever 21 co-chief restructuring officer Stephen Coulombe said in a court filing.
The other side: Free-market think tank Cato Institute has argued that eliminating the exemption means "effectively raising taxes on American consumers and dramatically increasing shipping times."
- Representatives from Temu and Shein have not previously responded to Axios requests for comment on the de minimis issue.
How the suspension has affected Chinese products
Americans' use of Temu and Shein have slowed significantly since Trump closed the loophole for China, according to data shared with CNBC by market intelligence firm Sensor Tower.
- Temu's U.S. daily active users dropped 52% in May versus March, before the tariffs were announced.
- Daily active users were down 25% at Shein.
