In September 2024, the Biden Administration announced significant changes to thse US de minimis program that allows orders valued at $800 or less to be imported without paying duties, taxes, or requiring extensive documentation. The de minimis changes are part of a crackdown on non-compliant goods, and it could create challenges for start-ups, small businesses, and growing companies that rely on the $800 exemption for duty-free imports. It is critical for all businesses to now to review their supply chain to assess how they will be impacted.
The de minimis threshold allows imports valued under $800 to enter the U.S. duty-free. This is supported by Section 321of the Tariff Act of 1930, which simplifies customs procedures for low-value shipments. The Type 86 program further streamlines clearance by enabling electronic filings for de minimis shipments, making it easier for businesses to process international e-commerce imports efficiently.
Businesses that ship directly from their manufacturer or supplier to the consumer benefit, from a dropshipping model, and will be directly impacted by the changes to the de minimis program. Companies that make low-value orders, often those shipping smaller shipments via air or express carriers, will also be impacted.
Summary of Changes to De Minimis
Important changes that will take effect include:
- Certain Products Will No Longer Qualify for De Minimis: Products subject to tariffs under Section 301 (products from China), Section 201 (solar panels and washing machines), and 232 (some steel and aluminum products) will no longer qualify for de minimis treatment. This move affects about 40 percent of U.S. imports. The goal is to close loopholes allowing certain Chinese imports to bypass duties and stringent regulations.
- Stricter Documentation Requirements: More detailed data will be required on commercial documentation for de minimis shipments, including tariff classification numbers, product descriptions, and importer information. This measure aims to improve enforcement of US health and safety standards, and prevent imports linked to forced labor or counterfeit goods.
- Additional Compliance Rules: Consumer product importers may soon need to file Certifications of Compliance for all de minimis shipments, tightening the regulatory framework around these low-value imports.
These changes are set to roll out in stages later in 2024, with the first proposed rulemaking expected within 60-120 days. Businesses relying on the de minimis exemption, especially dropshippers, will need to adjust their operations to account for the potential added costs and compliance requirements.
Impact of De Minimis Changes on Businesses and Recommended Action
The changes will impact start-ups, small businesses, and growing businesses that import in several ways:
- Increased Duty Costs for Imports: Start-ups and small businesses often rely on the de minimis rule to import small quantities of goods without incurring duties or complex documentation requirements. Excluding many products from the de minimis exemption, particularly those from China, could lead to higher costs for these businesses, as they would now have to pay duties on previously exempt shipments. This increase in costs might squeeze tight margins, especially for companies in industries like apparel, electronics, and consumer goods.
> Recommended action: Review your current HTSUS classification to understand your duty obligations and to ensure accuracy. Need help with the review? Submit an HTS Review request on Supply Chain Shark and check out our article: The Importance of Using Correct HTSUS Codes - Enforced Compliance Requirements: Businesses that rely on importing low-value items from overseas, especially through platforms like Alibaba, will face more compliance requirements and higher costs. Companies will now be required to do the appropriate certification and testing to meet US regulatory requirements. The additional burden of filing certifications of compliance and providing detailed documentation for each shipment could overwhelm small teams, potentially discouraging new businesses from importing.
> Recommended action: Review the compliance requirements for all products you currently import. Proactively check with your customs broker to see what government agencies may require additional documentation (wood products require documentation Lacey Act Declaration Form, for example.) Submit a Compliance Review on Supply Chain Shark to get a better understanding of the compliance requirements for your products. - New Documentation Requirements: Companies will now be required to include the full HTSUS codes, country of origin, and more detailed product descriptions on commercial documents including invoices and packing lists. Failure to do so may lead to delays in the import process.
> Recommended action: Review the format and information included on your commercial invoices and packing lists for accuracy and make sure they include all of the required information. Make sure to proactively communicate with your customs broker to make sure you are providing all of the necessary documentation. - Increased Timelines and Delays: For growing businesses that depend on the fast turnover of imported goods, especially during peak seasons like the holidays, delays in shipping due to increased regulatory oversight could disrupt supply chains. Smaller businesses that lack the resources to quickly adapt to compliance measures may struggle to meet customer demand in a timely fashion, affecting their competitiveness.
> Recommended action: Plan ahead, and if possible, issue orders earlier to ease the impact of possible delays due to increased regulatory reviews. - Shifts in Sourcing Strategy: To avoid these additional costs and regulatory burdens, many businesses may need to rethink their sourcing strategies. For start-ups, this could mean looking for suppliers outside of China or negotiating better terms with existing suppliers to offset the new costs. However, switching suppliers or changing sourcing practices can be time-consuming and expensive, adding yet another challenge for smaller companies.
> Recommended action: Review your current geographic footprint of your supply chain, and consider identifying potential suppliers outside of regions like China that may not be impacted by increased duties. We recommend submitting a Supplier Identification request on Supply Chain Shark.
Opportunities for Growth in Response to De Minimis Changes
Despite these challenges, the changes could also push small businesses to innovate in their sourcing and logistics practices. For instance, businesses may find new suppliers in other countries with more favorable trade terms or streamline their supply chain to reduce the number of shipments subject to tariffs. Additionally, businesses that successfully navigate the new compliance requirements could gain a competitive advantage over those slower to adapt.
In summary, while these changes present hurdles, particularly for start-ups and small businesses with limited resources, they also offer an opportunity for strategic adaptation in the evolving trade landscape.