President Donald Trump on Wednesday signed an executive order to eliminate the de minimis exemption that allowed packages worth less than $800 from China and Hong Kong to enter the United States without having to pay a tariff or duty.
- The stated reason for ending this provision is that such exemptions make it easier for fentanyl to enter the country.
Several suppliers in the promotional products industry, particularly those offering on-demand or direct-to-consumer fulfillment, rely upon the de minimis exemption for small-batch imports directly from overseas to deliver to U.S. end users.
- As of May 2, these imports will be fully subject to tariffs.
- On average, U.S. Customs and Border Protection processes over 4 million de minimis shipments into the U.S. each day.
Under the executive order, shipments sent through means other than the international postal network (e.g., FedEx and UPS) and that previously qualified for the de minimis exemption must be formally entered into CBP’s Automated Commercial Environment and are subject to all applicable duties.
Meanwhile, shipments sent through the international postal network (e.g., China Post) that previously qualified for the de minimis exemption are subject to a duty rate of either 30% of their value or $25 per item (increasing to $50 per item after June 1, 2025).
- This is in lieu of any other duties, including those imposed by prior executive orders.
Carriers transporting these postal items must report shipment details to CBP, maintain an international carrier bond to ensure duty payment and remit duties to CBP on a set schedule.
- CBP may require formal entry for any postal package instead of the specified duties.
Howard Lutnick, the U.S. Secretary of Commerce, will submit a report within 90 days assessing the executive order’s impact and considering whether to extend these rules to packages from Macau.
Promo Perspective
The announcement wasn’t exactly a surprise, given that an executive order in February already mandated an end to the de minimis exemption.
However, due to the immense amount of these shipments coming in, customs officials weren’t prepared to flip off the switch right away, according to Rachel Zoch, public affairs and research editor for PPAI.
“Our research shows that small distributors process an average order size under $600, well under the $800 threshold,” Zoch says. “Small operators collectively accounted for almost half of U.S. distributors’ sales volume last year, so we anticipate that many promo orders will definitely be affected going forward.”
Rachel Zoch
Public Affairs & Research Editor, PPAI
At the same time, several PPAI 100 firms report pricing disadvantages as high as 40% due to competitors exploiting the loophole. Now that yesterday’s order effectively ends the practice for shipments from China, the promo industry may see a more level playing field.
However, even firms not using de minimis now may need to tighten compliance processes, especially around country-of-origin labeling and Harmonized Tariff Schedule classifications, given the increased scrutiny and new enforcement mechanisms.
Going forward, promo companies must ensure to have:
- Proper HTS classification
- Documentation for country-of-origin verification
- Awareness of CBP reporting rules and potential bond requirements
PPAI, along with our lobbying partners in Washington, D.C., Thorn Run Partners, will continue monitoring these developments and outline a clear compliance process, particularly to support small and mid-sized firms navigating these new rules.
- Trump signed the executive order after unveiling a 10% baseline tariff for all imports into the U.S. and reciprocal tariff rates specific to roughly 60 countries.
- Tariffs are one of the issues that PPAI members and staff will be discussing with members of Congress on Capitol Hill during PPAI’s Legislative Education and Action Day next week.
For questions or suggestions on regulatory or government affairs issues, please contact Rachel Zoch at RachelZ@ppai.org.
