Excluding China From de Minimis Could Shake Up Supply Chains, Experts Say
Expect upheaval as companies that previously imported goods from China under the de minimis exemption face President Donald Trump's ban via executive order on using de minimis for those goods, members of the trade community told International Trade Today.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
That's because the vast majority of shipments that used de minimis consisted of goods made in China. The order means that CBP will have to process significant additional volumes using informal or formal entry rather than Type 86 or clearing shipments off manifest.
It also might translate into changing the way that imported goods from China are transported to the U.S., according to sources.
"We don't know yet [what the effects will be], but all indications are that it could have an adverse impact on air freight volumes," said Brandon Fried, executive director of the Airforwarders Association.
The ban on de minimis was part of Trump's executive order calling for an additional 10% tariff on goods from China that took effect just after midnight on Feb. 4 (see 2502030034). According to a Feb. 3 CSMS message, "The filer/importer has the option of filing an appropriate formal or other informal entry and paying all applicable duties, taxes and fees," it said. Furthermore, all mail shipments from China will not be released by CBP unless there is a formal entry filed, CBP said in the Federal Register notice announcing the China tariffs.
"If China's lost de minimis treatment of its low-value goods, then that could very well change the transportation strategy for a lot of these online retailers," Fried said. "Maybe what they'll do is, as opposed to using air cargo to expedite shipments quickly, maybe they'll adopt the strategy of consolidating them, putting them on a boat, sending them to U.S. warehouses, and dispatching them from there within the U.S."
Consultant and customs broker Cindy Allen echoed Fried's sentiments in a January LinkedIn post published just after the notice of proposed rulemaking on low-value shipments came out (see 2501130006).
"If the option to utilize de minimis was eliminated for goods, large marketplaces may structure the transactions differently for transportation, sale, and entry declaration to reduce costs," Allen said. "They would consolidate the merchandise on one entry per conveyance. They would establish a U.S. based entity, and a U.S. warehouse location, which some of the large online companies have already done. They would then structure the sale to be between the foreign online retailer as the seller, their own U.S. company as the buyer, and the goods would be delivered to the U.S. based warehouse."
Consultant and customs broker Tom Gould sees a number of potential issues that companies could now be facing. That includes "obtaining the additional data needed to clear the shipment as an informal or formal entry. If the shipment is imported by truck or the manual clearances, they may not have the [Harmonized Tariff Schedule (HTS)] or other data required to file a formal or informal entry," Gould said.
Furthermore, "who will be the importer of record and who will pay the duty? With most e-commerce shipments fulfilled via de minimis the platform has no way of naming the consumer as the importer of record and no way to charge them for duty," he continued.
Still another issue that might come up is naming the customs broker as the importer of record in situations where a platform has multiple de minimis shipments on one plane or truck, according to Gould. An importer may decide to file one entry for each shipment or one entry for all of the shipments in the conveyance. The benefit of filing only one entry for all shipments on a conveyance is lower merchandise processing fees and lower broker fees, Gould said.
Another uncertainty is what happens if an order contains both China and non-China products, Gould added.
This change in de minimis policy comes at a time when some members of Fried's association -- mostly freight forwarders, but also ground handlers and trucking companies -- have made significant investments in handling e-commerce-related goods, Fried said.
Despite all this uncertainty, "One thing is certain: the online ordering craze is up and running. The American consumer wants these goods; now the question is, how much will the American consumer be willing to pay when the tariffs are levied against those goods?" Fried said. "Because in the end, despite what you might hear out of Washington and certain people in the White House, it is the consumer that pays those tariffs."