By Candace Sider
Matters related to global trade rarely fare prominently in election discourse. At time of writing, the most critical issues listed by the U.S. electorate are immigration, inflation and healthcare (though the ranking varies depending on party affiliation). Trade doesn’t appear in the top 15 issues.
That’s partially because the concept of global trade and its impact on everyday consumers is somewhat abstract. Few voters connect the dots between what they dole out of their bank accounts and the supply chain activity that takes place before a product is placed in their shopping cart (real and virtual).
But the post-election period could see new legislation considered that has a very direct impact on the prices consumers pay for goods purchased online and the investments made by American retailers in e-commerce. And here’s the kicker: it doesn’t matter which party wins.
What’s the news?
An existing request put forward earlier this year by a Democrat senator from Ohio and a Republican senator from Florida has the very real possibility of being implemented once the sensitivities of the election run-up have passed. The request is simple: use the executive power of the White House to remove the de minimis rule. For the uninitiated, de minimis is a fancy term used to describe something of insignificant value and, therefore, unworthy of the formal customs checks and entry documentation that takes place for high-value bulk shipments. It’s worth noting that the senators aren’t the only ones targeting de minimis. The House Ways and Means committee put forward a reform bill in April that would exclude from de minimis any items that would be subject to the Section 301 tariffs on bulk imports from China (pretty much all imports from China). Democrats within the Committee have shown weak support for the bill, believing it doesn’t go far enough. The reform bill is far narrower in scope than the senators’ request to do away with de minimis altogether, but still has the intended outcome of keeping goods coming in from China out of the U.S. market.
What is de minimis?
Today, any parcel under $800 in value can enter the U.S. without undergoing customs scrutiny (unless they are regulated goods, such as food products, drugs, chemicals, etc.). The threshold – which historically had been only $50 – was increased first to $200 and then to $800 by Congress during the final year of the Obama administration. The outcome has been an explosion in low-value shipments. In 2015, U.S. Customs and Border Protection (CBP) processed 134 million low-value shipments. By 2023, that number had grown to more than a billion, 58% of which comes from China (and a portion of the shipments making up the remaining 42% are also Chinese goods transhipped through other countries). De minimis shipments account for 83% of U.S. e-commerce purchases, so any tampering with de minimis will inevitably impact a consumer’s cost-benefit analysis of using e-commerce versus brick-and-mortar retail.
Why is it being opposed?
China hawks see the de minimis threshold as a loophole being used by businesses in the U.S. looking to circumvent the 25% tariff (in some cases more) imposed by the Trump administration in 2018. Those tariffs apply to bulk shipments for which formal customs entries are required. They also argue international drug traffickers have been using the lower scrutiny placed on low-value parcels to smuggle drugs into the country, contributing to the ongoing opioid crisis (though the lion’s share of illicit substances seized by customs officials has been overwhelmingly at land borders, whereas most e-commerce parcels arrive by air).
What’s interesting to note, however, is that while the volume of de minimis shipments has increased exponentially, the value of those shipments has remained quite low. In 2024, the average value of de minimis goods remains at about $50, the historical limit for the de minimis threshold before Congress raised it. In other words, lowering the de minimis to its historically low level wouldn’t necessarily counteract the volume of de minimis shipments as most would still fall within the threshold. As such, the senators opposing de minimis are asking for its complete abolition rather than simply lowering the threshold.
What would be the impact of its removal?
Predictably, retailers are opposed to the removal of the de minimis. It would mean a slower and far more cumbersome customs-clearance process and, in turn, longer delivery times and higher costs for e-commerce goods. Given the spike in e-commerce investment in the U.S. (global e-commerce represented $3.3 trillion in sales value in 2023) – much of which took place in 2020 and 2021 to accommodate for the surge in demand stemming from the pandemic – retailers want to ensure they receive a handsome return on that investment.
That’s an unlikely scenario should the de minimis threshold be eliminated. Retailers estimate the cost of that average $50 shipment will double due to customs-processing fees and duty outlay. Those costs will be passed down to consumers, contributing to inflation in e-commerce, making it less attractive to consumers. It would also put more strain on customs officials who would then have 2.5 million de minimis shipments to scrutinize every day, creating delays in the entry of e-commerce goods.
CBP has already put in place safeguards to ensure efficiency of processing the growing number of de minimis shipments while also guarding against criminal actors who may want to take advantage of the policy. That has come in the form of an electronic, advanced screening and the identification of patterns used by criminals to evade detection of illicit goods by customs.
A more moderate solution: Improved compliance
De minimis has become a convenient bogeyman for those in politics who oppose China’s rising economic power and competition with the U.S. The program’s detractors say the program is too lax in its screening of low-value goods, inviting misuse and negating the purpose of the Section 301 tariffs introduced in 2018 by the Trump administration and later maintained by the Biden administration.
For its part, CBP has put in place a robust system using a special entry type to identify e-commerce goods. Facilitators of e-commerce goods are well aware of it and have made wide use of it in collaboration with freight forwarders and customs brokers. Under this system, the customs broker assumes the role of importer of record and, therefore, must exercise reasonable care in ensuring goods are properly classified. The process can often be cumbersome, particularly when goods are regulated by agencies, such as the Food and Drug Administration, Environmental Protection Agency and others. Lax classification can often lead to non-compliance, which is precisely how bad actors can take advantage of the system.
To correct this and reduce the risk of non-compliance that allows detractors of de minimis to call its use into question, e-commerce facilitators must find ways to ensure accurate classification of goods. To achieve this on a consistent basis would require an automated process that reduces the work output for e-commerce facilitators and their brokers. Such a process would not only save countless hours of work associated with manually classifying goods, but would also protect brands and their e-commerce facilitators from enduring the reputational and financial risk that comes with goods being seized for non-compliance.
We could lose a good thing
The de minimis threshold and the new processes being used to ease the entry of low-value goods aren’t just a means of reducing administrative burden for border officers and importers. Rather, they’re a means of facilitating what is by all accounts the future of consumerism in the United States and globally. E-commerce sales are anticipated to grow to $6.8 trillion globally and $1.2 trillion in the U.S. by 2028. Removing the de minimis threshold would grossly eat into the U.S. share of the burgeoning e-commerce trend, putting the country at a disadvantage globally and curbing its potential for economic growth.
While there is understandable concern about the negative biproducts of the threshold, doing away with de minimis altogether (or restricting de minimis goods from China) would be tantamount to throwing out the baby with the bathwater.
Politicians on both sides of the aisle should use their bipartisan focus on de minimis to find common ground between their concerns and the economic value inherent in the informal processing of low-value goods. The alternative isn’t going to win anyone any votes.
Candace Sider is vice president of Government and Regulatory Affairs, North America, at trade-services firm Livingston International. She is a frequent speaker and lecturer at industry and academic events and is an active member of numerous industry groups and associations.