The “de minimis” rule, part of Section 321 of the Tariff Act, allows duty-free importation of goods valued under $800 per day, per individual shipment. While this rule was designed to streamline low-value imports, there is evidence suggesting it’s now being exploited by overseas retailers, like Temu and Shein, to flood the US market with goods that avoid customs duties.
How the Loophole Works
Retailers, especially from China, split large shipments into smaller ones valued under $800 to skirt American tariffs and customs duties. This practice lets them offer extremely low prices on goods while evading the fees that domestic competitors would typically pay.
In addition, shipments that should go through formal entry – especially those requiring compliance with regulations from agencies like the Consumer Product Safety Commission (CPSC) – avoid scrutiny because of their de minimis status.
Key Regulatory Details
Regulations like 19 CFR Section 10.151 govern the entry of duty-free merchandise under Section 321, specifying conditions where the exemption doesn’t apply, such as splitting shipments or importing goods subject to oversight from partner government agencies like the CPSC or FDA. Specifically:
Subject to the conditions in § 10.153 of this part, the port director shall pass free of duty and tax any shipment of merchandise, as defined in § 101.1 of this chapter, imported by one person on one day having a fair retail value, as evidenced by an oral declaration or the bill of lading (or other document filed as the entry) or manifest listing each bill of lading, in the country of shipment not exceeding $800…
The Hidden Financial Impact of the De Minimis Loophole
Although consumer protection is often cited as a concern, the real issue lies in lost revenue from duties that would otherwise be collected.
Goods imported under de minimis are not only exempt from customs duties but also from Section 301 tariffs, which are typically imposed on Chinese imports to address unfair trade practices. The loophole lets retailers dodge tariffs designed to level the playing field between US and foreign companies.
While de minimis shipments avoid Section 301 tariffs, products regulated by the CPSC, for example, must still go through formal entry procedures regardless of value.
The US Government Response
Recognizing this loophole’s exploitation, the Biden-Harris administration has initiated several steps to curb it. The US Customs and Border Protection (CBP) has announced plans to tighten de minimis regulations with two notices of proposed rulemaking (NPRMs).
The first aims to reduce the volume of de minimis shipments, while the second seeks to enhance CBP’s enforcement capabilities by improving data collection and compliance from these importers.
The administration is also pressuring Congress to act, proposing legislation like the Import Security and Fairness Act and the End China’s De Minimis Abuse Act, which could impose stricter limits on de minimis imports, particularly from China. These changes would give CBP more tools to regulate low-value shipments, ensuring they comply with customs laws and partner government agency regulations.
What’s Next?
The US government is ramping up efforts to close the de minimis loophole.
For businesses relying on this exemption, it’s crucial to monitor regulatory changes and anticipate how tighter rules may affect their operations. As agencies like CBP, CPSC, and Congress work together to close this gap, the days of avoiding customs duties on low-value shipments may be numbered.
For now, businesses that exploit this loophole face the risk of increased scrutiny, potential penalties, and changes to how de minimis rules are applied, particularly for imports from overseas retailers like Temu. The trade community is bracing for a significant shift in how low-value imports are regulated and enforced.
Want to make sense of de minimis or how changes to the law could impact your business? Contact us at O’Meara & Associates and we’ll work with you to bring you in line with trade law.
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