Trade distortion and protectionism
Level the playing field now: Protect de minimis not through tariffs, but reform and equal treatment
Published 18 February 2025
Over the years, de minimis significantly helped the promotion of global trade, particularly benefiting consumers and SMEs globally. Its benefits are now at risk from proposed tariffs, exploitation, trade tensions, and contraband. Preserving this valuable tool requires a delicate balance to strengthen its original intent, maintain its benefits, address its weaknesses, and ensure its long-term viability.
The de minimis provision, allowing duty-free import of low-value goods, was introduced a century ago for American tourists returning home. Over the years and with the advent of e-commerce, de minimis provisions have significantly helped the promotion of global trade, particularly benefiting consumers and small and medium-sized enterprises (SMEs) globally.
But all its benefits are now at risk from proposed tariffs, exploitation by powerful foreign retail platforms, escalating trade tensions, and contraband. Preserving this valuable tool requires a delicate balance, whilst maintaining its benefits and addressing its weaknesses.
Originally established in the United States in 1938 as part of the Tariff Act of 1930 to simplify duty collection on negligible-value items, the de minimis threshold has evolved over time. The 2016 Trade Facilitation and Trade Enforcement Act raised the limit to US$800 from US$200, ironically making the provision more attractive to exploitation.
De minimis offers undeniable advantages. It provides American consumers with greater product variety and competitive prices, streamlines international trade for SMEs, and reduces administrative costs for governments. Its value is underlined by the simple fact in 2023, the US processed approximately one billion de minimis shipments, totalling a staggering US$54.5 billion. It empowers small businesses, both in the US and globally, by reducing administrative burdens, lowering costs, speeding up shipping times, fostering e-commerce growth, and creating a more level playing field against larger corporations. The system helps support American jobs by creating more import and export opportunities for these smaller firms.
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However, the system is under attack. Recent tariff policies, coupled with increased customs filing requirements and processing times, directly contradict the core purpose of de minimis. These added costs ultimately burden consumers, limit product availability, and inflate customs oversight expenses. Suspending de minimis temporarily for goods originating from countries subject to tariffs is a necessary consideration, albeit a partial and imperfect long-term solution.
It is also being exploited by e-commerce platforms like Temu and Shein, which used the allowance to fuel their own explosive growth by aggregating and shipping directly or through third-party countries, which poses a grave threat to the program's intent and integrity.
To safeguard the benefits of de minimis while mitigating its risks, a multi-pronged reform strategy is critical. The following measures are urgently needed:
- Reduce and review de minimis limits: Reduce the current $800 limit to $300 per shipment, with a daily limit of one shipment per person per supplier. A supplemental consideration and a more reciprocal solution is to implement a tiered system which aligns the de minimis threshold with the exporting country's own de minimis regulations. For example, other nations offer a wide variety of de minimis thresholds including: China (CNY50, or about US$7, with a special allowance for e-commerce of CNY5,000, or about US$684), Japan (varies by tariff line items but with a maximum of JPY10,000, or about US$66), Canada (CAD20, or about US$14, with an allowance of CAD150, or about US$105, for customs duties and CAD40, or about US$28, for taxes under the US-Mexico-Canada Agreement), and Australia (AUD1,000 or about US$630).1
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- Country-level compliance: Require exporting countries to meet compliance standards before their businesses can participate in the de minimis program. Non-compliance must result in the suspension or revocation of de minimis privileges for all shippers from that country.
- Verified shipper identification: Mandate that all de minimis shipments originate directly from the manufacturing facility, with the shipper's full street address and registered name clearly displayed.
- Daily shipping limits: Restrict each shipper to a maximum of 10 de minimis packages per day to prevent bulk exploitation and circumvention of trade laws. This should be taken into consideration against the proposed reduction in the de minimis allowance, as it would cap how much SMEs can sell.
- Mandatory application and tracking: Implement a mandatory application process for manufacturers and shippers seeking to utilize de minimis. Approved shippers should receive a machine-readable QR code for all shipments to facilitate real-time tracking and enforcement.
- Immediate revocation for non-compliance: Impose immediate and severe penalties, including revocation of de minimis shipping privileges, for any factory or shipper found in violation of these regulations.
These targeted reforms will strengthen the original intent of the de minimis provision and ensure its long-term viability.
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De minimis shipping to the United States is a privilege, not a right. It is designed to facilitate legitimate trade, not to provide cover for those seeking to evade tariffs, exploit loopholes, or engage in illicit activities.
Without immediate and decisive action, the de minimis provision will continue to be abused, undermining US economic security and national interests. The time for action is now.
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Author
Merle A. Hinrich
Merle A. Hinrich has dedicated his 60-year career to promoting global trade, as the Founder and Executive Chairman of Global Sources, and as the Chairman of the Hinrich Foundation. His work is driven by the belief that sustainable and mutually beneficial global trade can bring stability in international relations and growth.
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