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US President Donald Trump's recent decision to suspend the 'de minimis exemption' for Chinese imports has drawn attention to a key mechanism in international trade. The move is part of a broader tariff crackdown aimed at curbing the flow of illicit fentanyl and reining in Chinese e-commerce giants.
What is the de minimis route?
The de minimis rule exempts low-value imports from customs duties and standard screening procedures. In the US, shipments under $800 qualify for duty-free treatment when sent directly to individual consumers. This is one of the most generous thresholds worldwide; the European Union, for instance, caps its de minimis exemption at €150 ($156).
Initially introduced in 1938 to reduce administrative burdens, the de minimis threshold was raised from $200 to $800 during President Barack Obama's tenure. This change facilitated a surge in small-value imports, particularly from e-commerce platforms.
Why did Trump shut down China's de minimis Route?
Trump’s administration cited national security concerns as the primary driver behind suspending the de minimis exemption for China, along with Canada and Mexico. The decision was motivated by:
1. Curbing fentanyl inflows
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The United States faces a severe opioid crisis, with fentanyl responsible for nearly 75,000 overdose deaths in 2023, according to the Centers for Disease Control and Prevention (CDC). Chinese chemical suppliers have reportedly exploited the de minimis rule to ship fentanyl precursors into the US, often rerouting them through Mexico for illicit drug production. By suspending the exemption, the US aims to enhance screening of incoming shipments and reduce the trafficking of these dangerous chemicals.
A Reuters investigation found that de minimis shipments were often subject to less rigorous checks, allowing illegal substances to enter the country undetected.
2. Targeting Chinese e-commerce giants
Platforms like Shein and PDD Holdings' Temu have benefited from the de minimis route by shipping low-value packages directly from China to US consumers without incurring tariffs. This competitive advantage has put pressure on American retailers. Blocking the de minimis route forces these companies to pay tariffs, levelling the playing field.
Impact on trade and e-commerce
The suspension will disrupt supply chains and increase costs for Chinese e-commerce firms, which may pass these expenses on to consumers. However, the scope of the suspension remains limited to China, Canada, and Mexico, leaving other trade partners unaffected.
Global de minimis practices
United States: $800 threshold
European Union: €150 ($156) threshold
Canada: CAD $20 threshold for non-US shipments
Australia: AUD $1,000 threshold
The US’s high threshold has encouraged massive growth in direct-to-consumer imports, surpassing 1 billion duty-free items in the 2023 financial year, according to Customs and Border Protection data.
Key takeaways and potential loopholes
Temporary measure: Trump's executive order does not call for a permanent suspension, meaning de minimis rules could be reinstated in the future.
Selective enforcement: Goods from countries other than China, Canada, and Mexico can still enter the US duty-free under de minimis rules.
Trade relations: The move is likely to strain US-China trade ties further, as well as affect relations with Canada and Mexico.
(With agency inputs)
