What Is the De Minimis Exemption?
A trade loophole known as the de minimis exemption is set to expire on May 2, 2025, possibly driving up the cost of packages for U.S. shoppers who purchase goods online from China.
The de minimis exemption is a rule that allows foreign companies to avoid paying tariffs and taxes on small packages shipped to the U.S. Shipments worth less than $800 qualify for the duty-free exemption, simplifying the customs procedures. This exemption was created by the U.S. Congress in 1938 to streamline purchases and shipping of inexpensive goods for small businesses and individual consumers.
The Trump administration is eliminating the de minimis exemption for packages arriving from China and Hong Kong. Those packages will be subject to three-figure tariffs on their value (or a per postal item fee of about $100 starting May 2 or $200 after June 1). Additionally, mail carriers will be required to provide information about the package to Customs and Border Protection.
Key Takeaways
- The de minimis policy exempts packages worth less than $800 from China from U.S. taxes.
- Starting on May 2, the policy will change.
- Packages will be subject to a $100 tax per parcel beginning on May 2, and a $200 tax per parcel beginning on June 1.
Why Is The De Minimis Exemption Important?
E-commerce retailers—like Shein and Temu—take advantage of the de minimis exemption by directly shipping low-value packages to U.S. customers. Temu and Shein comprise nearly half of all de minimis shipments to the U.S. from China, according to a 2023 U.S. House Select Committee report.
However, some retailers have already taken steps to minimize the impact of these new changes on consumers. According to CNBC, Temu has promoted more products on its app that are shipped from U.S. warehouses instead of directly from China.
The number of Chinese exports subject to the de minimis exemption has skyrocketed in recent years. According to a Congressional Research report, in 2023, small-value Chinese exports were $66 billion, compared to just $5.3 billion in 2018.
This could be, in part, because the exemption increased from $200 to $800 in 2016, allowing more packages to qualify for it. The de minimis exemption was first proposed by the Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act.
The Trump administration has claimed that eliminating the de minimis exemption with China will help stem the flow of drugs from China into the U.S.
Fast Fact
This isn’t the first administration to take aim at the exemption. In 2024, the Biden administration proposed rules that would have made certain products ineligible for the exemption and required more specific data on de minimis packages.
However, some argue that getting rid of the exemption would harm lower-income consumers. In a recent NBER working paper, economists analyzed data from millions of international shipments to the U.S., finding that lower-income zip codes were more likely to receive de minimis exempt packages from China. According to the researchers, eliminating the exemption “would disproportionately hurt low-income and minority households.”
The Bottom Line
The de minimis exemption enables retailers in foreign countries to send packages worth less than $800, to U.S. consumers without paying tariffs, taxes, or duties. In the past few years, the number of packages subject to the exemption have increased substantially. However, lawmakers on both sides of the aisle have sought to tighten the loophole.
If you purchase goods online from Chinese retailers in the coming months, you may notice a higher cost, as the Trump administration has eliminated the exemption for packages from China and Hong Kong.
Beginning May 2, those shipments will have a 120% tariff on the value of the package or a per postal item fee of $100. This fee will increase to $200 after June 1.
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