De Minimis Rule Changes: Explanation and Impact On Shipping

If you’re an importer or exporter, you may have heard rumors about upcoming changes to de minimis rules. Whether you’ve used the de minimis exemption or not, and whether you ship air or sea, these rules can have far-reaching effects on imports to the US. 

So what is de minimis, how does it work, and what changes are in the works?

Read on to find out. 

What Is the De Minimis Rule and Why Does It Matter?

The de minimis rule exempts goods valued at $800 or less from duties and formal customs filings when imported into the U.S. It’s part of Section 321 of the Tariff Act, designed to ease the burden on low-value shipments. For SMBs, this translates into:

• Cost savings: De minimis shipments avoid tariffs, but more significantly they avoid having to file formal customs entries, which can be quite costly 
• Simplified processes: Shipments under the threshold bypass lengthy customs procedures, which reduces the necessary labor to get shipments to their destination
• Faster delivery: Goods clear customs quickly, which means consumers get their goods in days instead of weeks 

The de minimis exemption has been a major contributor to the rapid rise of fast fashion. When companies can avoid tariffs and customs filings, they can ship low-cost goods directly to consumers, fast.

And that’s exactly what they’ve been doing – so much so that a real backlash has begun. 

Why the De Minimis Rule is Under Scrutiny

In the last decade, the number of de minimis shipments to the US has increased from 140 million to more than a billion per year. In 2023, nearly four million de minimis shipments were imported every day. 

That means US Customs and Border Protection has had a hard time enforcing trade laws, as well as requirements dealing with health, safety, intellectual property, and more, on a massive amount of goods. 

The influx of cheap goods to the US has also presented challenges to local markets. 

For all these reasons, attitudes toward the de minimis exemption are shifting.

New De Minimis Rules and Enforcement

Adam Lewis, CEO of Clearit, explained in a recent Freightos webinar that over the past year, the USCBP has already increased inspections of de minimis imports, with some ports conducting hundreds of spot checks daily.

In addition, the Biden administration proposed stricter requirements to de minimis, including:

• 10-digit HS (HTS) codes instead of the current 6-digit requirement.
• Detailed item descriptions to avoid vague labels like “clothing” or “accessories”
• Certificates of Compliance to prevent unsafe items from entering the US

In September, President Biden also announced intent for comprehensive reform to the de minimis rules via executive order. This would essentially bar a large share of Chinese imports from entering the US via de minimis.

Some of the steps needed for this order to go into effect have picked up speed in recent weeks, with the possibility that US Customs and Border Protection could announce the intended rule change soon, which would trigger the review process that precedes implementation. 

With the change in administration, these rules could see greater enforcement – or President Trump may implement even stricter regulations. As Lewis points out, the incoming president may eliminate this de minimis loophole altogether. 

How Would de Minimis Changes Impact SMBs?

If your business has been using the de minimis exemption, tighter enforcement could affect your business in the following ways:

• Higher costs: New requirements may increase compliance expenses
• Longer transit times: More frequent inspections could delay shipments, especially during peak seasons
• Strategic shifts: Businesses might need to explore alternative import strategies, such as ocean freight or fulfillment centers close to their customers

How Would de Minimis Changes Affect Freight?

Even if you haven’t been using de minimis, you may have felt its effects when shipping goods for your business. 

That’s because de minimis shipments have been clogging up space for freight on airplanes, which has constrained capacity and raised costs. 

Tighter enforcement or laws closing de minimis to many types of imports from China could mean some businesses shift to ocean freight, freeing up air freight space and capacity.

In fact, according to Judah Levine, Head of Research at Freightos, there have already been signs that some Chinese exporters and US e-commerce importers are shifting some inventory to ocean. Any additional sudden changes to de minimis could mean a faster shift to sea freight.

However, Lewis thinks these changes will be slow and gradual, rather than dramatic. Nevertheless, he warns that “SMBs should prepare for a future where stricter enforcement becomes the norm.”

Practical Tips for SMBs to Navigate Potential de Minimis Changes

Whether you’ve been shipping de minimis or not, here are some steps SMBs can take to navigate any upcoming changes:

1. Review your HS codes and product descriptions: Accurate HS codes and descriptions will always smooth your shipping process. And once in a while it’s worth reviewing your HS code with your freight forwarder or customs broker to make sure your classification maximizes savings, as some products can have multiple classifications.
2. Work with reliable providers: Partner with freight forwarders and customs brokers familiar with changing rules and requirements 
3. Diversify shipping strategies: Consider splitting your cargo into air and sea shipments to balance cost and speed. The flexibility to ship on different modes and lanes is especially important in such a rapidly shifting freight landscape. 
4. Monitor regulatory updates: Stay informed about proposed changes and their potential timelines. (Want to get the latest freight updates? Sign up for our newsletter here.)
5. Use technology to your advantage: Digital tools and platforms like Freightos.com can help you streamline paperwork and compliance, track shipments efficiently, and troubleshoot issues that come up promptly. 

For a more in-depth look at de minimis, as well as other potential tariff changes, watch our full webinar here.