US Customs Tightens Rules on Low-Value Imports, Affecting Many Retailers

As of this week, U.S. customs regulations are undergoing significant changes, particularly affecting low-value imports. Under the new directives issued by the Trump administration, items valued at $800 or below will no longer enjoy the previous duty-free status. This shift is part of a broader initiative aimed at reducing reliance on foreign products and modifying international trade dynamics through imposed tariffs. The recent executive order marks the end of the "de minimis" exemption, a provision that has allowed many low-cost international shipments to bypass customs duties since its inception back in 1938. Starting Friday, the new regulations will require all shipments under this value to be assessed for potential tariff rates, which may vary significantly from 10% to 50% based on their country of origin. For the next six months, shipping carriers have the option to apply a flat duty fee ranging between $80 to $200 per package instead of relying on the traditional value-based assessment. In light of these regulatory changes, numerous national postal services have announced plans to temporarily suspend shipments to the U.S. This decision has been fueled by the uncertainty surrounding the updated processing and payment requirements. Countries including Japan, Switzerland, Australia, and several European nations have joined in this pause, which reflects the complexities introduced by the new policies. According to the Trump administration, the de minimis rule has been misused, facilitating tariff evasion by foreign companies and allowing the entry of illicit goods, including dangerous and counterfeit products. This perspective is echoed by multiple congressional discussions regarding the exemption and its implications on U.S. security. While comparable exemptions exist in other countries, such as the $175 limit in the Eurozone and £135 limit in the U.K., the U.S. had up until now set a relatively high threshold. Over the years, the de minimis cutoff has evolved from $1 in 1938 to $800 in 2015, resulting in a substantial increase in shipments utilizing the exemption—from 134 million packages in 2015 to 1.36 billion in the previous year alone, according to U.S. Customs and Border Protection data. The potential economic impact on small businesses and consumers is significant. Many smaller U.S. retailers that depend on importing goods under the exemption are now faced with the prospect of increased costs. For instance, Kristin Trainor, owner of Diesel and Lulu's, a boutique in Connecticut, has expressed concern over rising prices due to added customs fees on the European-made apparel she sources. She anticipates that the wholesale price of a popular linen sundress could increase from $30 to $43, leading her to reconsider her pricing strategy and even contemplate closing her store. Further complicating matters is the effect on businesses like CoverSeal, which manufactures protective covers for vehicles and outdoor equipment. Ken Huening, the company's owner, states that while trade agreements alleviate some tariff burdens for goods from Mexico and Canada, the new de minimis rule introduces taxes on products shipped from Mexico to the U.S., prompting a need to either increase costs or reduce services like free shipping. Shannen Knight, who manages an online store specializing in hard-to-find sports eyewear, is also bracing for significant price hikes, especially on imported items from Europe. With the upped charges, she estimates that consumer prices for rugby goggles could jump by around 50%. Knight emphasizes that certain products are inherently challenging to produce domestically, as they require specialized skills and resources not currently available in the U.S.