What the End of the De Minimus Trade Loophole Means for Your Shopping

0:00Sarah Holder:When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, that isn't always easy. Risk can touch multiple parts of an organization at the same time, often in ways that aren't immediately obvious. It might involve property, liability, or cyber. It could stem from regulatory requirements or challenges tied to a specific industry or the scale of an operation. At that level, managing risk becomes an ongoing discipline, not a one-time decision. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive.

0:34Sarah Holder:That means working with companies to identify where they're exposed, decide what matters most, and put practical standards in place so risk is managed as part of day-to-day operations. And when losses do happen, the Hartford can pair that risk control work with insurance coverage grounded in underwriting, risk engineering, and claims experience developed over time. Learn more at thehartford.com slash risk mitigation. Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups.

1:06Sarah Holder:There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app. Be smart. Get wise. T's and C's apply. Whatever your goal, trade show giveaways, client gifts, or team gear, 4imprint has the promo products to match. With thousands of options, from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget, with standout choices at every price point.

1:43Sarah Holder:And with their 360-degree guarantee, you can be 4imprint certain your order will show up just right, right on time. Explore more at 4imprint.com. 4imprint. 4certain. Bloomberg Audio Studios. Podcasts. Radio. News. Every day last year, 4 million packages of cheap or cheap-ish foreign goods arrived in the U.S. duty-free. Fast fashion, kids' toys, even e-bikes. And as long as those packages were valued at less than$800, no tariffs, no problems at the border. But now, that's changing. Why is nobody talking about the de minimis shipping exemption ending at the end of August? Canadian brands shipping to the United States are absolutely screwed.

2:34Just letting all my American customers know that I have now stopped U.S. shipping. If you're an American customer and you want to place an order, you need to do it before the 29th. Well, we started to see at the end of last week different countries' postal services, like Australia Post, Singapore Post, the Royal Mail, Denmark. All of these different services were announcing that they would stop taking certain packages that were bound for the U.S.

3:04Sarah Holder:Laura Curtis covers global trade for Bloomberg. They have never had to handle this amount of paperwork before. There's no mechanism for them to collect the tariffs and remit them to U.S. customs authorities. So they're just saying at this point, like, listen, we don't have the ability to comply with this, so we're just not going to take the packages until we have some clear guidance and some clear procedures in place. The reason for all this confusion is a Trump administration policy change that's finally going into effect on Friday. The U.S. will close a loophole that granted cheap goods tariff-free passage into the country.

3:41Sarah Holder:A loophole called the de minimis exemption. The term comes from a Latin phrase, which roughly means too small to matter. Small as they may be, these packages collectively represented$1 billion in trade last year. And that value has been climbing, up from just$140 million a year a decade ago.

4:08Sarah Holder:I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, the end of the de minimis exemption. Why a carve-out for goods that were seen as too small to matter is actually a really big deal.

4:25Sarah Holder:The de minimis exemption has been around since the late 1930s. Back then, it applied to all goods coming into the country that were worth a dollar or less. Some countries argue that these low-value packages, it costs more to collect tariffs on them than it does to let them in without. Bloomberg Global Trade reporter Laura Curtis says the U.S. exemption stayed at a dollar for decades before rising to$5 in 1990. It climbed to$200 in 1993 and then jumped to$800 in 2016 during the Barack Obama presidency. Lots of other countries have a similar exemption, but at much lower thresholds. China generally waives duties on packages worth$7 or less.

5:10Sarah Holder:It's about$40 in Canada and around$150 in the eurozone. The administration says that in line with the rest of its tariff policy, the U.S. has been taken for a ride, taken advantage of, right? And this is one large loophole they say that they're closing to make things more fair for domestic businesses. Another justification from the administration is around fentanyl. So part of his justification anyway is that because these packages are fast-tracked and avoiding customs scrutiny, we don't know what's in them. And it very well could be, you know, that this is a route for fentanyl into the country.

5:48Sarah Holder:Trump isn't the only president who's targeted the de minimis loophole. Joe Biden's administration also took steps to crack down on what it called de minimis abuses in 2024. for. Trump took up the cause again at the start of his second term, announcing that he'd end the exemption on lower-value packages coming into the country from mainland China and Hong Kong. And on May 2nd, those went into effect. We have seen a big crackdown on those packages, so things like Xi 'an, Timu, those fast-fashion e-commerce straight-to-consumer shipments have already stopped from China, and that was the bulk of these types of shipments.

6:25Sarah Holder:In July, Trump announced that he'd also be ending the exemption for all countries' imports. And that has set off a panic for foreign postal services around the world. Because, like many of Trump's trade policies, they've been rolled out without the clearest of action plans. So as of Friday, every package that enters the United States must have with it a customs declaration that says the contents of the package, the value, the country of origin of those goods. So not just where this thing is shipping from, but where the thing was made and sometimes even down to its component parts. So you're looking at a huge compliance burden that wasn't there before for some, you know, oftentimes quite low value goods.

7:13You know, think about the last thing you bought on Etsy or a widget from Thailand that you need to replace your part of your pizza oven or whatever it is. You know, you're looking at a whole new layer of complexity in terms of importing these types of things.

7:31Sarah Holder:Another challenge will be processing the money. Traditionally, tariffs are collected at the U.S. border. But it's unclear who exactly will collect these tariffs and where. That's left foreign postal services confused. The guidance, as it's written, says that they can either do it or they can use an approved authority. but that was not very well defined and so none of them really know what you know who who that would be and then as we as we move forward customs has said they're going to be approving more and more third-party software companies for example to start handling these packages on behalf of of national postal services we saw two announced at the end of last week and actually Canada said that they were partnering with one of them a company called Zonos and that's that's sort of like your your web platform that will handle the payments.

8:26You know, probably the consumer will be mostly unaware, but they will have the higher fees.

8:35Sarah Holder:So who wins and who loses when the de minimis exemption ends? That's after the break.

8:46Sarah Holder:This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT Work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening, as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.

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11:59Sarah Holder:For the first time in nearly 90 years, there will no longer be a de minimis exemption for low-cost packages entering the U.S. There is still one small loophole. Person-to-person shipments of gifts worth less than$100. If your Canadian grandma wants to ship you the scarf she knit, that can still enter the country duty-free. But that exemption doesn't apply to any packages shipped by companies. I asked Bloomberg's Laura Curtis about some of the companies this change might impact most. I think first we're going to see the small and medium-sized companies that are importing, you know, toys, books, custom apparel, shoes.

12:44Folks who bring in really specialty products that they have spent a long time sourcing from other countries will often use the de minimis loophole. The other thing I think we should keep an eye on is what happens to the intermediate goods. You know, things that U.S. manufacturers need and often buy as they go to make the products that they sell domestically and export. But as the cost of those things rises or become, you know, even unavailable in some cases, I think we'll see that kind of knock-on effect in our, you know, here at home as well.

13:21Sarah Holder:Closing the loophole will also create new challenges for e-commerce platforms that connect buyers and sellers all over the world. Platforms like Etsy. So Etsy at the end of last week put out guidance saying that they were suspending an international postal label service that they provide, you know, pending the change. And they pointed their sellers to commercial carriers that already have the capability of processing these tariffs. How big of a deal is it for Etsy to stop issuing these shipping labels for packages sent from countries like Canada? How much will that impact its business and the business model of these small business owners who rely on a platform like Etsy to sell their goods?

14:08Well, I think in the short term, these sellers will likely use services that are already in place from commercial carriers for a higher fee. And that fee will likely get passed on to U.S. consumers buying the goods.

14:22Sarah Holder:Laura says that's the big headline here. Like Trump's other tariffs, they may be intended to support U.S. businesses, but they're also expected to have an impact on the prices U.S. consumers pay. You know, I think with a policy like this, it's likely to hit lower-income folks who relied on, you know, cheaper goods, just like a lot of these trade policies. With the additional fees attached and tariffs to goods, it's likely to hit those people who have tighter budgets. Some people have blamed or credited the de minimis exemption for fueling the rise of fast fashion brands like Shein or Temu. Does the closing of this exemption mean that the kinds of businesses that will be created and that will flourish will change?

15:13Sarah Holder:I think we're going to have to see, you know, what are consumers in the U.S. willing to pay for? How long are they willing to wait? You know, I think part of the sort of TikTok hauls and, you know, these types of consumer trends we've seen over the last few years may change. I think we're starting to see that already. But to the extent that the U.S. consumer is going to change their taste for cheap, quick goods, I don't know. They just might not be as quick or as cheap. If fewer of these lower value goods are being sent into the U.S., are they going to go to other countries? One of the things we're keeping an eye on now, you know, me and my colleagues around the world, we're starting to see other countries reevaluate their own de minimis type policies.

16:05So once the U.S. curbed all these packages coming in from China, those goods are starting to find their way to other markets. So we've seen some countries already in Latin America reduce or scrap their low value exemptions altogether. And that conversation is also starting in the UK and in the EU. I think Mexico and Chile, who have already changed their own de minimis type policy to keep some of these low value goods from China out from flooding their own economy. So, you know, just because the U.S. is no longer accepting these goods from China doesn't mean that they won't end up somewhere else.

16:44And I think, you know, a lot of a lot of particularly smaller economy countries are concerned that that this will flood their domestic markets.

17:14Sarah Holder:listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

17:29Sarah Holder:When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation.

18:04Sarah Holder:Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Whatever your goal, trade show giveaways, client gifts, or team gear, 4imprint has the promo products to match. With thousands of options, from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget, with standout choices at every price point. And with their 360-degree guarantee, you can be 4imprint certain your order will show up just right, right on time. Explore more at 4imprint.com. 4imprint. 4certain. Some people use ChatGPT to answer questions.

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