Trump Speaks; Are There Loopholes?

Earlier this month, stock prices tumbled worldwide as President Trump announced an unprecedented — and unexpectedly broad — suite of tariffs on imported goods.

One tariff-related announcement was not a surprise: the Trump administration’s decision to close a duty-free exemption for low-value imports from China.

In an April 2 executive order, Trump announced that beginning May 2, commercial packages worth $800 or less would be subject to a minimum level of tariffs, starting at either a flat fee of $25 per postal item or 30 percent of the postal item’s value; on June 1 the flat fee figure would increase to $50 but the 30 percent figure would stay the same.

Then, on April 8 Trump announced that he would triple the tariff rates: Starting on May 2, the same packages would be subject to a flat fee of $75 per postal item or 90 percent of the postal item’s value; on June 1 the flat fee would increase to $150 but the 90 percent figure would remain the same (Executive Order 14259, Apr. 8, 2025).

On April 9 Trump increased the rates yet again. Now starting on May 2, the 90 percent figure will increase to 120 percent, and the flat fee will increase to $100 per postal item; on June 1 the flat fee will increase to $200 (Executive Order 14266, Apr. 9, 2025).

Those orders are the latest escalation in a fight that has rare collaboration and consensus from Republicans and Democrats. It’s not an exaggeration to say that there’s a deluge of low-value imports flooding global commerce. In 2018 China shipped $5.3 billion worth of low-value imports worldwide; by 2023 that number exploded to $66 billion (Karen M. Sutter and Michael D. Sutherland, “China’s E-Commerce Exports and the U.S. De Minimis Policies,” Congressional Research Service, IF12891 (Feb. 3, 2025)).

The problem for U.S. lawmakers is that the country receives a lot of those goods. Members of Congress overwhelmingly believe the de minimis exemption has turned into a loophole that is costing the United States untold revenue and is potentially allowing illicit goods to enter the United States undetected.

The executive orders say the policy change will help reduce the flow of synthetic opioids into the United States. But the reality is that the decision will hit fast-fashion companies like Shein and Temu hard because they account for a sizable number of the country’s de minimis imports.

A report by the U.S. House Select Committee on the Chinese Communist Party found that about 30 percent of the United States’ de minimis shipments come from Shein and Temu (“Fast Fashion and the Uyghur Genocide: Interim Findings” (June 22, 2023)). According to U.S. Customs and Border Protection, in 2024 the United States received more than 1.36 billion de minimis shipments (CBP, “CBP Proposes New Rule to Strengthen Enforcement and Limit Duty Exemption for Low-Value Shipments” (Jan. 17, 2025)). If 30 percent of those packages originated from Shein and Temu, they sent about 408 million packages to the United States that year.

Tariffs on small packages will certainly make production more difficult for China-based e-commerce retailers, but it may not be an immediate death knell. Some retailers are reportedly planning to move some production outside China to circumvent the recent tariffs (“China Advises Shein Against Shifting Supply Chain, Bloomberg News Reports,” Reuters, Apr. 8, 2025)).

This raises the question: What are the U.S. government’s ultimate goals on this issue? Does it want to force e-commerce companies to ship their parcels in bulk, rather than in small direct-to-consumer packages? Does it want to raise revenue based on these small shipments? Does it want to help boost U.S. domestic apparel manufacturing? Does it just want to reduce imports from China? Based on the answer or answers, the executive orders alone may not be enough. Congress may still need to act.

The History

Between 2015 and 2023, the number of de minimis shipments to the United States increased by a meteoric 600 percent, according to CBP. This could be for any number of reasons — the rise of e-commerce, the rise of fast fashion and low-cost e-retailers, or the fact that the United States has maintained a very generous de minimis exemption, making it an attractive market for foreign retailers. Importers are exempted from paying customs duties on packages valued under $800 under section 321 of the Tariff Act of 1930. Comparatively, the European Union’s de minimis exemption is €150 (about $170) and the United Kingdom’s is £135 (about $176).

No matter the reason, the increase in de minimis shipments has been so astounding that customs experts and lawmakers say it deserves investigation. In its June 2023 report, the U.S. House Select Committee on the Chinese Communist Party said Shein and Temu take advantage of the exemption. The problem, according to the report, is that most Shein and Temu packages are direct-to-consumer shipments, not bulk shipments. Consequently, they usually are worth less than $800 and can enter the country duty free.

Well before the select committee report, the first Trump administration in 2018 and 2019 imposed an escalating series of section 301 tariffs on Chinese imports, including a wide array of textiles, fabrics, and apparel. The decisions subjected those goods to additional tariffs ranging between 10 and 25 percent.

After the June 2023 report, it didn’t take long for Democratic and Republican lawmakers alike to start introducing legislation targeting the exemption. That same month, a bipartisan group of lawmakers introduced the Import Security and Fairness Act, a bill that would prevent goods from China and 17 other countries that are nonmarket economies or are on the U.S. trade representative’s “priority watch list” from using the de minimis exemption. Also that month, lawmakers introduced another bill — the De Minimis Reciprocity Act of 2023 — which would prevent shipments from China and Russia from using the de minimis exemption.

A March 2024 bill, the Americas Act, similarly targeted imports from China and Russia. The End China’s De Minimis Abuse Act, introduced in April 2024, sought to prevent firms from applying the de minimis exemption to any goods subject to section 301 trade enforcement tariffs. Sen. Ron Wyden, D-Ore., then-chair of the Senate Finance Committee, introduced similar section 301-related legislation — the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for America Act — in August 2024. That’s at least five bills introduced in a roughly one-year period.

In the final months of his administration, President Biden also asked Congress to remove the exemption for textile and apparel shipments. Biden indicated that he was willing to apply his executive power to the issue, but he said he wanted Congress to act first. Days before Biden left office, CBP issued a proposed rule that would remove the de minimis exemption for goods subject to a number of enforcement-related tariffs, including section 301 tariffs.

Then, on February 1, shortly after his inauguration, Trump released an executive order revoking de minimis treatment on all imports produced in China (Executive Order 14195, Feb. 1, 2025). That order announced that the United States would instead impose 10 percent tariffs on goods made in China. However, the tariffs from the February executive order never materialized. The White House suspended the order just a few days later so the commerce secretary could ensure that the government would be able to process and collect tariff revenue (Executive Order 14200, Feb. 5, 2025).

So Trump’s initial April 2 executive order was far from a surprise. The accompanying fact sheet says:

“Imported goods sent through means other than the international postal network that are valued at or under $800 and that would otherwise qualify for the de minimis exemption will be subject to all applicable duties, which shall be paid in accordance with applicable entry and payment procedures.

“All relevant postal items containing goods that are sent through the international postal network that are valued at or under $800 and that would otherwise qualify for the de minimis exemption are subject to a duty rate of either 30 percent of their value or $25 per item (increasing to $50 per item after June 1, 2025). This is in lieu of any other duties, including those imposed by prior Orders.

“Carriers transporting these postal items must report shipment details to U.S. Customs and Border Protection (CBP), maintain an international carrier bond to ensure duty payment, and remit duties to CBP on a set schedule.

“CBP may require formal entry for any postal package instead of the specified duties.”

Considering that the average value of a de minimis shipment into the United States is about $54, according to CBP figures (“Testimony of Executive Director Brandon Lord for a May 7 Hearing on [Intellectual Property Rights] Enforcement” (May 7, 2024)), the new customs regime could significantly increase costs for consumers, especially because Trump later raised the rates after his April 2 announcement.

The legislative rationale behind the section 321 de minimis exemption was to spare the U.S. government from spending more money on tariff enforcement than it received in resulting revenue (Christopher A. Casey, “Imports and the Section 321 (De Minimis) Exemption: Origins, Evolution, and Use,” CRS, R48380 (Jan. 31, 2025)). Over time, however, the government relied on the de minimis exemption to promote free trade. The Trump administration’s decision is pulling those two premises into a real-time experiment.

Enforcement Concerns

Well before Trump issued the executive orders, some customs experts worried whether CBP would have the capabilities to process such a large volume of shipments. Given that the Trump administration paused its February executive order because of CBP processing issues, it appears those concerns were well placed. According to the latest executive order, the commerce secretary has confirmed that the government can appropriately collect tariff revenue, although the secretary has not offered details on how that will be done. Meanwhile, CBP has stated that it is “uniquely positioned” to implement and enforce the new tariffs (CBP, “Official CBP Statement — Liberation Day” (Apr. 8, 2025)).

The enforcement question is important because there could be a lot of revenue at stake. House Ways and Means Committee Chair Jason Smith, R-Mo., said in a February 4 press release that the government has lost out on billions of dollars of revenue under the current de minimis system. Some figures from CBP provide insight. According to the agency and as reported by the CRS, the United States received about $228 billion worth of de minimis imports from China between 2018 and 2021 (Sutherland and Sutter, CRS, IF12891). According to the CRS, in 2023 alone, China reported that it sent $18.4 billion in de minimis exports to the United States. That year, the United States received about $54.5 billion in worldwide de minimis imports, meaning China accounted for roughly one-third of that amount. However, it is unclear how much it costs CBP to enforce tariffs, or whether the government would have earned revenue if it had applied tariffs against those shipments.

Potential Loopholes

How could companies bypass the executive order? One apparent goal behind closing the de minimis exemption is pushing manufacturers to mail their items in bulk shipments rather than smaller direct-to-consumer packages. However, it appears that some companies are trying to avoid this. Both Shein and Temu are reportedly moving or thinking about moving some of their production from China to locations like Vietnam to ensure they can still ship packages to the United States duty free; they reportedly have been strategizing for months (“Shein and Temu Aim to Move Production to Avoid US Tariffs,” Pymnts, Feb. 14, 2025).

Perhaps in anticipation of this, the April 2 executive order says the commerce secretary will review the impact of the de minimis revocation within its first 90 days. The secretary will also consider whether the de minimis revocation should apply to packages originating from Macau. It is unclear why the order specifically names Macau, but the broader point is that the administration is receptive to expanding the scope of the executive order, and companies are receptive to shifting their production sites. Therefore, it shouldn’t be a stretch to consider that other countries could fall within the administration’s crosshairs as the e-commerce landscape evolves in response to the executive orders. There’s proof of this based on manufacturers’ responses to the section 301 tariffs.

In 2023 the U.S. International Trade Commission released a comprehensive report, “Economic Impact of Section 232 and 301 Tariffs on U.S. Industries.” The report concluded that the tariffs reduced the volume of Chinese “cut and sew apparel” imports, from about $25 billion in 2018 to about $17 billion in 2021. However, imports from the rest of the world grew during that period; in 2021 alone, those imports grew by about 25 percent. U.S. domestic production increased by only about 6.3 percent that same year.

In this light, the executive order may not be enough to substantially shrink the volume of de minimis shipments or help boost domestic manufacturing. Proposed legislation that targets goods imported from a wider range of countries — like the Import Security and Fairness Act — may be more effective.

Conclusion

The policy change on the de minimis exemption, while expected, is certainly one of the strongest moves made by a government on the issue. However, the United States is not alone in its scrutiny of de minimis packages. Notably, South Africa is gearing up to remove special concessions for importers, as a result of frustrations that low-cost retailers like Shein and Temu have been flouting the rules. For years, South Africa allowed importers to pay a 20 percent rate on shipments valued at less than ZAR 500 (about $26) and did not apply VAT to those parcels.

In the fall of 2024, the South African Revenue Service announced that the exemption would no longer apply to low-value e-commerce shipments (South African Revenue Service, “Changes to Customs Import System” (Aug. 8, 2024)). Then, in a March 20 memo, the country’s revenue service said it was overhauling its customs regime and plans to remove all customs concessions (South African Revenue Service, “Intention of the SARS Commissioner to Formally Withdraw All Concessions” (Mar. 20, 2025)).

“Some concessions date back 20 years and were granted for a specific purpose at the time, that are no longer applicable. Many concessions have been overtaken by legislative, policy and procedure development and technological advances,” the memo said.

The European Commission and European Parliament are also thinking about removing the bloc’s €150 de minimis exemption or applying a handling fee to e-commerce imports. (Prior coverage: Tax Notes Int’l, Feb. 10, 2025, p. 972; Tax Notes Int’l, Mar. 3, 2025, p. 1467.) If the EU successfully removes its de minimis exemption, it plans to implement a new tariff system for low-value consignments. (Prior coverage: Tax Notes Int’l, Apr. 14, 2025, p. 260.)

In this light, the outcome of the Trump administration’s decision will be important not just for U.S. consumers but also for regulators worldwide who are considering how they should address their own de minimis regimes. It appears we are now in a new world where generous de minimis exemptions — or de minimis exemptions as a whole — are soon to be an item of the past.

This is the fourth article in a series. The first provided an overview of how fast-fashion companies are taxed globally and potential solutions. The second discussed rivalries within the growing fast-fashion industry, focusing on how this growth has been influenced by tax policy. The third discussed various legislative and regulatory solutions that have been introduced to address fast-fashion taxation in the United States.