Background
The economic impacts of the trade disputes between the most critical world economies, the US and China, could be witnessed in most countries. The inception of this trade confrontation has its roots in the imposition of additional tariffs enacted by the US President on goods shipped from China, among other countries.
One constant in the last months concerning the trade policies introduced by the US towards shipments from China and vice versa is the continuous change of the tariff rates. This unpredictability additionally burdens all stakeholders who are part of the US-China trade.
US and Chinese E-Commerce Giants
In the last ten years, we have witnessed the staggering growth of e-commerce marketplaces and their international potential. Some of the most influential e-commerce platforms are Chinese-based, even if their headquarters or parent companies have a place of residence elsewhere.
Electronic marketplaces with origins in China, such as Shein or Temu, have built a successful global business model that is conquering all-important world economies step by step through an online-based retail, direct B2C model.
The most fruitful business model that Chinese e-commerce platforms have established is the one that is US-focused. Shein or Temu, among other e-marketplaces, supply mostly low-value goods. Most countries worldwide have introduced a so-called de minimis rule through their domestic tax code, which allows low-value goods from different parts of the world to be free of import tax and import duty when the conditions are met.
US De Minimis Framework
The United States has one of the highest values for tax-free imports of low-value goods. Currently, the de minimis is fixed at USD 800. De minimis entry under Section 321 of the Tariff Act of 1930 permits an importer to import goods into the US with expedited clearance and without needing to pay import taxes or import duties if the total daily value of the imported goods (per importer) is below USD 800.
During Obama’s administration, the de minimis increase was from USD 200 to USD 800. The modernization of the de minimis system in the US started in the late 90s. The rapid growth of e-commerce retail has additionally pushed for modernization and led to a staggering fourfold jump in the de minimis daily quota.
For the last twenty years, the main users of the de minimis threshold have been online merchants, and more precisely, international e-commerce platforms. De minimis provisions permit foreign suppliers to provide goods at lower prices than local retailers, mostly VAT-registered.
US de minimis rules have permitted Chinese e-commerce platforms to leverage the possibility of selling low-value goods without paying sales tax or import duties, and with fast customs clearance procedures to reach their customers expeditiously.
As mentioned above, during Obama’s administration, the de minimis threshold was increased four times, from USD 200 to USD 800. This permitted the likes of Shein, Temu, and most recently Amazon Haul to reach staggering growth, diminishing the market share of local retailers.
Following the U.S. Customs report, de minimis imports exceeded expectations after the threshold modification. The same report indicates that imports of low-value goods grew from USD 9.2 billion in 2016 to USD 54.5 billion in 2023, whereas Chinese e-commerce suppliers had more than 60% of all shipments to US customers.
Shein and Temu, besides other Chinese e-commerce platforms, established an astonishing economic force and influence on the entire retail industry in the United States, leveraging the de minimis section 321 and the loophole that derives from it. From May 2, 2025, US suspends section 321 shipments for goods originating from China.
US import tax changes for online marketplaces made a significant impact from day one on all stakeholders that are part of the e-commerce industry.
Shortfall of De Minimis for Chinese E-Commerce Giants
Starting May 2, 2025, the de minimis rule will no longer apply to goods shipped from China. From that date, all low-value goods shipped from China and mainly managed by e-commerce marketplaces will be exposed to a clearance procedure, import taxes, tariffs, or fees.
Removing the de minimis benefit for low-value goods shipped from China will reshape the international e-commerce ecosystem. First, this change will affect US customers, electronic marketplaces that manage these supplies, and US customs officials, who will experience a significant administrative burden with new clearance procedures piling on to their already considerable workload.
The decision of the US President to make obsolete the de minimis import benefit for e-commerce vendors for goods shipped from China will unquestionably impact the manufacturing processes and inventory strategies for businesses profiting from this loophole all this time. The impact of the de minimis ban on e-commerce transactions from the day of its enforcement has led to significant price rises.
Customs loophole closure for Chinese sellers, which they have counted on for a long time, will need to be addressed by all parties involved in the e-commerce supply chain. Direct-from-China retail restrictions are focused exclusively on the B2C business model, which is the principal source of revenue for Temu and Shein, among other platforms.
We are already witnessing that some e-commerce vendors have left the direct B2C sales strategy of shipping the goods in bulk to US-based sellers, which will later make the final sales to US-based customers. Few of the e-commerce strongholds are mentioning the strategies of opening various warehouses across the US to reduce the administrative burden, tariffs, and fees that they are going to face from the removal of de minimis for their supplies.
The enforcement of the import tariff for all goods originating from China, along with the specifically designated framework of different import tariffs on low-value-based parcels, caused a China de minimis imports crackdown.
US Tariffs for China Imports – Latest
From this February, the trade confrontation between the two largest world economies, respectively China and the US, has one thing in common: continuous change with the specifically designed trade policy. The US administration has enforced several orders with different general import tariff rates on all goods from China. Alongside these retaliatory tariff measures, it has enforced specific tariffs against low-value parcels from China.
On May 12, 2025, the US and China administrations signed a broad trade deal that will, at least for 90 days, incorporate some certainty. Indeed, it hasn’t been the case in the last months in the bilateral trade relationship between the US and China, and this has impacted other countries that are part of this business sector as well.
What type of certainty has the US-China trade deal introduced?
Starting May 12, 2025, the US will apply import taxes on all Chinese goods at 30% (previously 145%). De minimis abolishment stays in place, but President Trump has also issued an executive order to lower the tariffs on B2C low-value parcels from China.
Starting May 14, 2025, a 54% import tariff will be imposed on low-value parcels (based on their value). Until a different decision is made, the per-package flat-fee option will remain at USD 100. An important guideline to bear in mind when making calculations of import tariffs of low-value parcels coming from China is to consider the chosen route/carrier that will intermediate in the import, which will determine, to some level, the import tariff.
What does this practically mean?
- When the USPS handles imports, the import tariff rate will be 54%(for all imports);
- When private carriers like DHL, FedEx, or UPS process imports, the tariff rate is 30%(even for low-value parcels).
Practically speaking, most e-commerce marketplaces handle their imports into the US via commercial carriers, so they will “only” experience the 30% import tariff on the value of low-value parcels or a flat fee fixed at USD 100.
Temu and Shein tariff changes are being experienced and handled in different ways. The e-commerce giants are witnessing a significant drop in US sales from the first day the tariffs became effective. Temu temporarily paused its shipments from China and moved its selling policy to unload first their US warehouses’ inventory that they had compiled before the tariff enactment.
The cross-border e-commerce tariff updates are one of the principal points of focus for the entire online retail world community. The enforcement of US import tariffs for various countries, as well as the removal of the de minimis exemption for low-value parcels for goods originating from China, is of substantial importance for all participants in this international supply chain.
The general trade deal between the US and China will undoubtedly bring some temporary certainty when it comes to tariffs, but in what way the US and the rest of the world’s tariff policies will remain a big mystery. The import tariffs impact a broad spectrum of stakeholders, from customs officials to end customers.
Aleksandar Delic
1stopVAT Indirect Tax Manager – E-Commerce