De Minimis rule scrapped: US President Donald Trump has signed an executive order to terminate the long-awaited de minimis trade rule for China and Hong Kong, as per a report by Reuters. Under this, duty-free access for millions of low-value parcels has now been scrapped. The decision, which came into effect on May 2 at 12:01 am ET, is a crucial escalation in Trump’s broader push to overhaul trade policy and target the unfair practices by foreign sellers.
What is the De Minimis rule?
Under the de minimis rule, goods that are valued $800 or less could enter the US without incurring duties or a stringent inspection process. This loophole resulted in a boom in direct-to-consumer imports, particularly from Chinese e-commerce giants like Shein and Temu. Around 1.4 billion packages were arriving duty-free last year. As per the latest Trump executive order, these shipments, even those that are routed outside the international postal network, will be subject to tariffs.
New tariff rules
Goods transported through the postal network will have to pay duty rates of 30% of their value or $25 per item, increasing to $50 after June 1. Carriers will now have to report detailed shipment data to US Customs and Border Protection (CPB), maintain a carrier bond, and remit duties on a fixed schedule. CBP will also have jurisdiction to require formal customs entry of any parcel.
Commerce Secretary Howard Lutnick verified that systems are in place to collect duties efficiently, a necessary precondition for the executive action. ‘’De minimis is being stripped from China,’’ a source familiar with the decision stated to Reuters. He also pointed out that over 60% of duty-free packages come from there.
Trump has for long linked the crackdown to broader concerns, including China’s role in supplying chemicals that are used in fentanyl production. ‘’They figured it out, ‘’ the US president stated regarding the logistical challenges that have delayed the policy since February. A Reuters investigation earlier disclosed how drug traffickers manipulated the rule for shipping illicit substances.
The White House has mentioned that a 90-day review will evaluate the impact of the order and explore extending the restrictions to Macau.
(With inputs from Reuters)