‘De minimis’: the trade perk Trump ended as part of China tariffs

WASHINGTON: The Trump administration ended US duty-free access for low-value shipments from China and Hong Kong on May 2, removing the “de minimis” exemptions used by Shein, Temu and other e-commerce firms as well as traffickers of fentanyl and other illicit goods.

Following talks in Geneva between China and the US aimed at cooling a trade war, the White House on May 13 released its latest tariff rates for small packages valued at up to $800.

These items sent from China to the US via postal services are now subject to a tax of 54 per cent of the package’s value, or a flat fee of $100 per package. This is significantly lower than the 120 per cent tariff that had been levied on packages from May 2.

Trump accuses China of unfair trade practices and blames it for a crisis over the deadly drug fentanyl.

WHAT IS DE MINIMIS?

De minimis, a legal term referring to matters of little importance, describes the U.S. waiver of standard customs procedures and tariffs on imported items worth less than $800 that are shipped to individuals.

It is one of the most generous such exemptions in the world: the EU de minimis threshold, for example, is 150 euros ($156).

The U.S. has used de minimis since 1938 to reduce administrative burdens. During Barack Obama’s presidency, Congress quadrupled the waiver from $200, facilitating an explosion in the number of exempted packages entering the country. Shipments claiming de minimis have soared more than 600 per cent over the past decade to over 1 billion items in fiscal 2023, according to Customs and Border Protection data.

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WHY IS DE MINIMIS CONTROVERSIAL?

Contentions largely concern U.S. trade imbalances and the synthetic opioid fentanyl – which is fuelling a national epidemic that killed nearly 75,000 people in 2023.

Reuters reporters last year found they could easily import the core precursors for at least 3 million fentanyl tablets – with a potential street value of $3 million – at a cost of $3,607.18. The shippers mislabelled the packages as, for instance, electronics.

Legitimate products, too, are controversial as Trump ramps up his rhetoric against China, with which the U.S. has its largest bilateral trade deficit, at $279 billion as of 2023.

Big beneficiaries of de minimis include online retailers that ship goods mainly from China, such as Shein, PDD Holdings-owned PDD.O Temu and Alibaba’s 9988.HK AliExpress. Their growth prompted U.S. rival Amazon AMZN.O to start its own discount service, Haul, allowing marketplace merchants to ship $5 accessories and other items directly from China using de minimis.

Shein declined to comment on possible changes to U.S. de minimis policy. In 2023, the company called for de minimis reform “to create a level, transparent playing field – where the rules are applied evenly and equally”. Temu, AliExpress and Amazon did not respond to requests for comment.

Critics of de minimis also say it lets companies evade tariffs on Chinese goods and customs inspections under a law banning products made with forced labour.

CHINA GDP IMPACT

China exported $240 billion in direct-to-consumer goods benefiting from de minimis worldwide last year, accounting for 7 per cent of its overseas sales and contributing 1.3 per cent of gross domestic product, according to Nomura estimates.

The brokerage forecasts that eliminating the U.S. threshold would slow Chinese export growth by 1.3 percentage points and GDP growth by 0.2 point, with a significantly bigger hit if Europe and Southeast Asia also removed their minimum requirements for customs duties.

China’s most exposed sectors include apparel, which makes up 35 per cent of China’s direct-to-consumer exports by value, consumer electronics at 22 per cent, home decor at 17 per cent and beauty products at 7 per cent, Nomura reckons.

($1 = 0.9639 euros)

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