Duty-Free No More? U.S. Proposes Changes to the De Minimis Exemption
Trade Update • Dec 19, 2024
he de minimis exception has long served as a cornerstone of U.S. trade policy, allowing duty-free entry for goods valued at $800 or less. This rule simplifies low-value imports, benefiting e-commerce and cross-border trade. However, recent announcements from the Biden Administration signal significant reforms aimed at addressing trade enforcement priorities, which may reshape the landscape for businesses utilizing this exemption.
Policy
The de minimis exemption has led to a sharp increase in low-value shipments, rising from 140 million shipments in 2013 to over 1 billion annually by 2023—nearly 4 million per day. This surge has fueled the growth of China-based e-commerce firms like Temu and SHEIN, which use the exemption to bypass tariffs on nearly 40% of imports from China, including Section 301 tariffs. This flood of shipments has also overwhelmed U.S. Customs and Border Protection (CBP), hampering efforts to intercept narcotics, counterfeits, dangerous goods, and products made with forced labor.
New Reforms
Exclusions for Tariffed Goods
On September 13, 2024, the Biden Administration announced plans to eliminate the de minimis exemption for goods subject to Section 201, 301, and 232 tariffs. This change in policy primarily targets goods imported from China, including those subject to Section 301 tariffs. It also applies to steel and aluminum products covered by Section 232 tariffs and various other industries impacted by Section 201 safeguard tariffs. By excluding these goods from the de minimis rule, the Administration seeks to curtail tariff circumvention and bolster protections for domestic industries.
Strengthened Information Requirements
The Administration also introduced plans to strengthen information collection for de minimis shipments. Importers will be required to provide the 10-digit tariff classification number for each good shipped under the exemption. Additionally, the individual or entity claiming the exemption must be clearly identified. These changes are designed to increase transparency and accountability, enabling authorities to better monitor compliance and prevent misuse of the de minimis threshold.
Consumer Product Safety Commission (CPSC) Actions
To enhance consumer safety, the Consumer Product Safety Commission (CPSC) announced a complementary rule. Importers of consumer products, including those qualifying for the de minimis exemption, will soon be required to file electronic Certificates of Compliance (CoC) at the time of entry. This new requirement ensures that goods entering the U.S. market meet safety standards, reducing the risk of unsafe or non-compliant products reaching consumers.
Protecting Domestic Textile and Apparel Manufacturers
The Administration also aims to bolster the domestic textile and apparel industry, which has been significantly affected by de minimis imports. Planned efforts include increasing government procurement of U.S.-made textiles, enhancing customs audits of small shipments, and expanding the UFLPA Entity List to target entities linked to illicit practices. These initiatives align with the Administration’s 2024 PTI: Textiles brochure.
Implications for Businesses
Increased Compliance Burdens
The proposed changes will require importers to submit more detailed documentation, including tariff classifications and compliance certificates. Meeting these requirements will necessitate significant adjustments to trade processes and increased investments in compliance systems.
Heightened Enforcement Risks
Goods excluded from the de minimis exemption—particularly those subject to tariffs under Sections 201, 301, and 232—will face stricter scrutiny. Importers of these goods may experience higher risks of shipment detention or rejection, as well as greater penalties for non-compliance.
Higher Costs
For goods no longer eligible for the de minimis exemption, importers will face additional tariffs and fees. These costs may prompt businesses to reevaluate their pricing strategies, sourcing decisions, and overall supply chain management to mitigate financial impacts.
Preparing for the Future
To adapt to these changes, businesses should take proactive measures. Strengthening trade compliance programs is critical, including ensuring accurate tariff classifications and proper documentation. Importers should evaluate their supply chains to identify potential cost implications and explore alternative sourcing strategies. Staying informed about updates from U.S. Customs and Border Protection (CBP) and the CPSC will also be essential for maintaining compliance and avoiding disruptions.
The Biden Administration’s reforms to the de minimis exception mark a significant shift in U.S. trade policy, emphasizing enforcement, safety, and transparency. While the $800 threshold remains a vital tool for facilitating trade, these changes present new challenges for businesses. By understanding and adapting to these developments, importers can navigate the evolving regulatory environment and maintain compliance in an increasingly complex trade landscape.
Questions or concerns about how to prepare for these proposed changes to the de minimis exception on your goods? Contact us today! gts@ghy.com, or call +1 (800) 667-0771.
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