U.S. consumers and merchants who rely on relatively low-value ecommerce shipments from China and Hong Kong woke up to a different world today — and plenty of questions.
The exemption that allowed ecommerce packages from China and Hong Kong worth less than $800 to avoid duties and tariffs ended at midnight, upending a lucrative business model for Chinese merchants and a key supply line for small, independent retailers who sell items produced in China through their North American online stores.
How does ending the import fee exemption affect retailers?
The change, which the Trump Administration enacted and then withdrew three months ago and then reenacted May 2, is likely to ripple through the ecommerce ecosystem and result in disputes between customers and merchants over delayed packages and sticker shock. And while the exemption has so far ended only for products originating in China and Hong Kong, the Trump Administration has promised to eventually end it for all countries.
What does all this mean for online retailers? Like so much about the tariff era, it depends.
If you’re a retailer that ships some items directly to consumers — using a Chinese manufacturer essentially as a drop shipper — your cost of doing business just got a lot higher. Those items that once entered the U.S. for free will now be taxed:
- Up to 145% of the order’s value if delivered by an express carrier, such as FedEx or DHL
- 120% of the order’s value if delivered by the U.S. Postal Service, or $100, set to rise to $200 next month.
While the carrier is responsible for paying the tariff, it’s likely that some or all of that cost will be passed on to the merchant who will pass all or some of it on to the consumer.
Does ending the de minimis exemption affect retailers selling U.S.-made goods?
For merchants who sell items produced in China that are shipped in bulk to U.S. warehouses or who don’t sell items produced in China, little will change because of the end of the de minimis exemption.
Most items shipped from China will still be subject to the 145% tax, which is to be paid by the importer under the new tariffs. Most items shipped from most other countries will be subject to the current 10% tariff (until further notice). Items produced in the U.S., of course, will not be subject to tariffs.
What does “de minimis” mean?
Besides higher costs, the new regulations could cause delays and disruptions at customs. While de minimis is Latin describing something so small as to not be worth consideration, it turns out de minimis is a big deal. Last year, 1.4 billion packages entered the U.S. under the de minimis exemption, the overwhelming majority from China.
Retailers like Temu, Shein, Amazon Haul and others created huge businesses shipping bargain-priced products directly from China under de minimis, making them even better values. And U.S. consumers loved it. U.S. merchants competing with the Chinese giants did not.
Will ending de minimis mean slower fulfillment times?
When the de minimis exemption was first lifted in February, the astronomical increase in packages being routed through customs highlighted the fact that customs officials were overmatched.
“And in the two days that the exemption was suspended for China, something like a million packages sort of piled up at JFK,” Clark Packard, a Cato Institute research fellow told PBS.
Customs officials have said they’re ready for the deluge this time, but retailers who rely on cross-border packages being delivered in the U.S. should brace themselves for questions and complaints from consumers wondering where their orders are.
Customs delays can be puzzling for consumers — and merchants
U.S. Customs says it’s ready for the sharp increase in ecommerce packages that they’ll now need to process. We’ll soon find out. Signifyd was fortunate enough to catch up with Forrester’s Suchartia Kodali, a leading retail and ecommerce expert, at Signifyd’s FLOW Summit 2025. She shared some of her thoughts on the end of de minimis in the video below.
While it is too early to tell how dramatically the additional packages from China will affect fulfillment times, retailers will also want to watch for a spike in item not received claims and return requests.
History provides a sense of the potential challenges, though based on slightly different circumstances. In 2019, when the Trump Administration raised tariffs on China, the Chinese government held up ecommerce shipments into the country. The disruption led Chinese consumers to file chargebacks on the orders. Some Signifyd customers saw chargebacks increase by as much as five times during the dispute. All that to say, trade wars can produce some unexpected circumstances.
Is there good news for retailers in the end of de minimis?
Retailers that have not relied on the de minimis loophole should benefit from the closing of it for packages from China and Hong Kong. For years, policymakers have talked about limiting or getting rid of the exemption for the very reason that it had grown into a massive competitive advantage for Chinese mega-retailers at the expense of U.S. merchants selling similar goods.
Several ecommerce companies based in China rapidly built huge businesses based on the ability to ship directly to consumers without being subject to tariffs. Between 2015 and 2024 the number of packages arriving in the U.S. under the exemption increased from 134 million to 1.4 billion.
The trend became woven into American pop culture with haul videos exploding on social media outlets like TikTok.
The online apparel vertical is highly competitive
U.S. apparel retailers had a hard time competing on price. Those retailers rely heavily on clothing produced in other countries and shipped in bulk into the United States, subject to prevailing tariffs and customs procedures. Eliminating the de minimis exemption eliminates the advantage that Chinese businesses had on import costs.
Ending de minimis will benefit retailers who’ve been disadvantaged under it
Like so much in the tariff era, whether the tariffs are good news or bad news depends. Signifyd caught up with Rainbow Shop’s David Cost at last week’s Signifyd FLOW Summit. Cost explained the leg up Rainbow’s competitors have had by shipping items one-by-one from China to consumers under de minimis as opposed to retailers like Rainbow that receive goods by the container and are required to pay taxes and duties.
“Tariffs kind of affect everybody at the same level and we can talk about what those effects may or may not be,” said David Cost, vice president of digital and ecommerce at apparel retailer Rainbow Shops. “But changing the de minimis loophole and changing the loophole around how those companies ship, we think it’s going to make a dramatic change in the business.”
What will the end of de minimis mean for consumers?
In general, consumers can expect to pay a lot more or find a lot fewer of the items they order directly from China. Applying the new rules to ecommerce items that have been exempt would increase their cost by about 1.5 times or, in some cases, $100 or more, spending on how they are shipped.
The new tax resulting from the end of the de minimis exemption is not the consumer’s responsibility directly. The carrier that brings those items to a customer’s home is responsible for paying the tax, but more likely than not at least some of that cost will be passed along to the consumer.
U.S. shoppers also might also have trouble finding some products they are used to buying from Chinese-based manufacturers — at least until alternative production operations are up and running in countries with lower tariffs. Temu, one of the largest beneficiaries of de minimis has reportedly stopped shipping goods from China, instead relying on products already in U.S. warehouses.
Retailers who relay on standard shipping — say by cargo ship — have also reportedly turned ships around or canceled orders coming to the U.S. from China.
Photo by Getty Images
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