The Rule That Built Cross-Border E-Commerce
For the past decade, the US de minimis provision — Section 321 of the Tariff Act — allowed any shipment valued at $800 or less to enter the US duty-free, with minimal documentation. This threshold, raised from $200 to $800 in 2016, became the structural foundation for the business models of Shein, Temu, and thousands of smaller China-based direct-to-consumer merchants who shipped individual packages to US consumers without paying any import duties.
In 2023, CBP estimated that over 1 billion Section 321 shipments entered the US annually — roughly 3 million packages per day. By 2024, that number had grown further as Chinese platforms scaled their US operations.
What Changed: The 2025 IEEPA Orders
In February 2025, President Trump signed an executive order under IEEPA eliminating the de minimis exemption for goods from China and Hong Kong, effective May 2, 2025. The order specifically targeted the fentanyl supply chain argument — that cheap de minimis shipments were being used to traffic synthetic opioids and precursor chemicals.
Under the new rules, packages from China valued under $800 are no longer exempt from duties. They are subject to:
- All applicable MFN duty rates
- Section 301 tariffs (7.5–25%)
- IEEPA additional tariffs (125%)
- A flat option: $75 per package (or $150 for postal shipments), increasing to $150/$300 after June 2025
The flat-rate option was introduced to simplify customs processing for low-value packages that would otherwise require full formal entry documentation.
The Impact on Shein, Temu, and Chinese E-Commerce
The business models of Shein and Temu were explicitly built around the de minimis loophole. Both companies operated ultra-fast fashion and general merchandise models predicated on shipping individual orders directly from Chinese warehouses to US consumers, avoiding all import duties.
After the elimination:
- Shein announced US price increases of 8–30% across categories and began accelerating sourcing from non-Chinese suppliers
- Temu shifted from a direct-shipping model to a "local fulfillment" model, pre-importing inventory into US warehouses — but this requires paying full tariffs upfront
- Both platforms have reduced US marketing spend and product selection
Could De Minimis Be Eliminated for All Countries?
Legislation has been introduced in Congress multiple times to lower or eliminate the $800 threshold for all countries, not just China. The FIGHTING for American Retail Act (proposed) would lower the threshold to $200 or $0 for countries that do not provide reciprocal de minimis treatment for US exports.
The 90-day pause on country-specific tariffs (April–July 2025) was used in some negotiations to pressure trading partners on de minimis reciprocity. US brick-and-mortar retailers and domestic manufacturers have lobbied aggressively for threshold reduction, arguing the current rules create an unfair competitive advantage for foreign e-commerce.
What De Minimis Elimination Means for US Businesses
E-Commerce Sellers Using Chinese Dropshipping
Any business model based on dropshipping directly from Chinese suppliers to US customers must be fundamentally restructured. Options:
- Switch to non-Chinese suppliers (Vietnam, India, Turkey) where de minimis still applies
- Pre-import inventory to a US warehouse — pay duties once, fulfill domestically
- Accept higher prices and lower margins as tariffs pass through
US Consumers Buying Directly from Chinese Sites
Personal purchases from sites like AliExpress, Alibaba, and Chinese-based marketplaces now incur duties at the mail point of entry. For a $50 item, the flat $75 duty option exceeds the item's value — effectively a 150%+ effective rate. Consumer behavior has shifted sharply away from direct China purchases.
Legitimate Importers
For companies that had been using de minimis for legitimate low-value commercial samples or spare parts, the elimination creates new compliance burden. These shipments must now be entered formally with full documentation and duty payment.
How to Adapt Your Import Strategy
- Audit your shipment patterns: Identify what percentage of your imports relied on de minimis treatment
- Use our tariff calculator to compute duty costs for previously exempt shipments
- Explore Free Trade Zone (FTZ) options: Goods admitted to an FTZ are not subject to duty until they enter US commerce — useful for consolidation and re-export
- Negotiate with suppliers: Suppliers competing for US business may be willing to absorb some cost via price reduction
Bottom Line
The de minimis exemption was a significant structural advantage for China-based e-commerce, and its elimination is causing genuine disruption to established business models. Any importer or e-commerce operator who has not yet adapted their cost model to a post-de-minimis world needs to do so urgently. Use our HTS code lookup to find your products' duty rates and model the full cost impact.