In a significant policy shift, President Donald Trump issued an executive order this week that will close the “de minimis” loophole, a trade provision that has allowed foreign e-commerce giants to ship low-value packages to U.S. consumers without incurring import duties or being subject to stringent customs scrutiny. This move, which comes amid a larger tariffs-focused effort by the Trump Administration, is poised to disrupt the operations of the likes of Shein and Temu, ultra-fast-fashion retailers that have leveraged this exemption to offer low-cost products directly to American shoppers.
A Bit of Background: The de minimis loophole permits goods valued under $800 to enter the United States duty-free, bypassing extensive customs inspections and import taxes. Originally established to reduce administrative burdens on low-value imports, the threshold was increased from $200 to $800 in 2015 at the direction of Congress, which had found that “[h]igher thresholds for the value of articles that may be entered informally and free of duty provide significant economic benefits to businesses and consumers in the United States and the economy of the United States.” This change led to a surge in tax-free package shipments, escalating from an estimated 139 million in 2015 to over 1.36 billion in 2024.
Fast-Fashion Retailers & Broader Industry Implications
Companies like Shein and Temu have relied heavily on the de minimis provision, shipping inexpensive apparel and accessories directly from overseas manufacturers to consumers in the U.S. By avoiding import duties, these retailers have been able to offer products at prices significantly lower than domestic competitors, and thus, the discontinuation of this loophole means that shipments previously exempt from duties will now be subject to tariffs, which could serve to potentially upend the cost structures that have enabled their rapid growth.
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