For years, the “de minimis exemption,” which allows low value goods to enter the U.S. duty free, has made life easier for direct-to-consumer (D2C) businesses. However, with the exemption no longer applying to goods from China and Hong Kong as of May 2, 2025, the global e-commerce landscape is shifting. How will the move affect D2C brands? Let’s explore the possibilities.
What is the De Minimis Exemption, and What Does It Mean in e-Comm?
The de minimis exemption is a rule that allows low-value imported goods to enter a country without incurring customs duties or taxes. It’s become a critical component of e-commerce and cross-border trade. Since 2016, the U.S. has had a high de minimis threshold of $800. This means that shipments of $800 or less (per person, per day) are exempt from customs duties and most taxes. This exemption applies to most goods, though there are some exceptions.
The de minimis exemption is based on the idea that low-value goods are usually not worth the cost or effort of processing. This is significant for the e-commerce industry, as it has enabled international sellers to keep prices low for consumers and speed up delivery times. Take D2C giant Temu, for example: Per Statista, its gross revenue grew by 239% between 2023 and 2024, with the U.S. far and away its biggest market. Much of this success can be attributed to the de minimis exemption, which has acted as a loophole, allowing Temu to bypass costly duties and other fees on most of its products, which are shipped directly to individual consumers and usually fall below the $800 de minimis threshold.
What Changes Were Made to the de Minimis Exemption?
On April 2nd, 2025, President Trump signed an executive order ending the de minimis exemption on packages originating from China and Hong Kong, effective Friday, May 2nd. According to an official White House statement, the move was made in part to “target deceptive shipping practices by Chinese-based shippers, many of whom hide illicit substances, including synthetic opioids, in low-value packages to exploit the de minimis exemption.”
The move is expected to directly impact D2C businesses that import goods from China. This includes large marketplaces like Shein and Temu, whose generally lower-cost products are typically shipped to individual consumers, rather than in large quantities inside shipping containers. Packages that were previously included in the exemption will now be subject to duties of 120% or a flat fee of $100, increasing to $200 in June. This is in addition to tariffs of 145% that have already been placed on Chinese goods.
It remains to be seen how Temu and Shein will respond. According to a recent CNBC report, for example, Chinese online retailer Temu had already “started adding ‘import charges’ of about 145% in response to President Donald Trump’s tariffs.”
How Might This Change Affect D2C Businesses?
D2C is a business model in which a company sells its product directly to consumers without going through wholesalers, retailers, or distributors. Popular U.S. D2C companies include Dollar Shave Club and eyewear brand Warby Parker. Globally, online marketplaces like Shein and Temu also operate on a D2C model, by connecting consumers worldwide directly with manufacturers, mostly based in China. The elimination of the de minimis exemption for China and Hong Kong could potentially raise costs for D2C businesses that rely on low-cost imports from those places.
Can D2Cs Marketers Take Measures To Prepare for This Economic Shift?
The elimination of the de minimis exemption may present major challenges for D2C businesses that have relied on low-cost, cross-border shipping of Chinese goods. This means marketers have a critical role to play in preparing their brands for this economic shift. This includes:
Communicating Clearly With Customers
Your messaging strategy matters more than ever. If delays or price increases are on the horizon, proactive, transparent communication can help maintain customer trust. If you communicate clearly, customers are more likely to be understanding, so marketers should work closely with their customer experience team to create messaging that explains the “why” behind any changes, and act quickly before customers feel the impact. If you deliver clear updates via email, social media, and your website, with empathy, you can preserve customer loyalty.
Positioning Supply Chain Changes as Brand Value
If your company decides to diversify its supply chain due to the de minimis changes, try to position this as a brand strength. For example, you could highlight a shift from China to Vietnam, India, or Mexico as a commitment to resilience, quality, or sustainable sourcing. Internally, it might feel like a simple logistical change, but you can make it part of your brand story with customers.
Adjusting Pricing if Necessary
Some businesses may temporarily absorb the additional import costs, but your company may eventually need to raise its prices. If so, you can soften the impact by framing the change as a value-add. Let customers know that they’re gaining, whether it’s through additional services, loyalty programs, or product bundles.
Other De Minimis Questions Answered
Is the $800 Threshold for Shipments From China and Hong Kong Completely Gone, or Are There Any Exceptions?
Yes, as of May 2, 2025, the de minimis exemption of $800 has ended for all goods coming into the U.S. from China and Hong Kong. The exemption remains in place for other countries.
How Will the Increased Customs Scrutiny — And Potential Delays as a Result — Affect My Shipping Times and Customer Satisfaction?
According to FreightAmigo, the new U.S. Customs regulations “may lead to longer transit times for some shipments. This could impact delivery promises and customer satisfaction for e-commerce businesses.” As such, it’s critical to look for workarounds for your business. This includes resetting expectations with customers and identifying alternative supply chains.
Will Shipping Carriers Increase Their Fees in Response to the New Tariffs and Increased Processing?
Yes, several major shipping companies have begun increasing their fees in response to the tariffs and changes to de minimis rules. Per software company Alavara, FedEx increased its disbursement and duty and tax forwarding fees on May 2nd, 2025, on all packages with a customs value of $800 or less. Meanwhile, UPS has implemented a $0.29 per-pound surge fee.
Should I Absorb the Tariff Costs To Maintain My Current Pricing? If So, How Will It Impact My Profit Margins?
Individual businesses must assess their capacity to absorb increased costs from tariffs and de minimis rule changes. Without increasing prices, profit margins could tighten unless they can create other efficiencies or source lower-priced products elsewhere.
How Will This Affect My Competitiveness Against Domestic Sellers, or Those Sourcing From Countries Still Under the de Minimis Exemption?
While many variables are at play, D2Cs that can still operate under the de minimis exemption may gain a competitive advantage. This is something you’ll want to consider as you assess your supply chain options.
Should I Consider Shifting My Sourcing or Manufacturing to Countries Unaffected by These Changes?
If you foresee an increase in your cost of goods, slower delivery times, or other supply chain disruptions, you should look for alternative sourcing from countries still under the de minimis exemption.
Is Bringing Fulfillment Operations to the U.S. Viable To Reduce Exposure to Tariffs?
Moving your product fulfillment to the U.S. may or may not be viable, depending on your situation. For example, you may save money by importing in bulk and shipping domestically to U.S. customers. Once the goods are in the U.S., you can likely ensure faster delivery. However, you may face increased storage and labor costs, inventory forecasting challenges, and more complex logistics. You’ll have to consider the pros and cons and determine what’s best for your business.
Key Takeaways
The end of the de minimis exemption for Chinese and Hong Kong imports ushers in a new era of global trade regulation, specifically in the e-commerce sector. D2C businesses that rely on low-cost international shipping from Chinese manufacturers are likely to face higher duties, longer shipping times, and increased border scrutiny.
To remain competitive, marketing teams must respond quickly by creating clear messaging around pricing and delivery changes, and reinforcing brand value through compelling stories. Whether your company is considering new manufacturing centers, changing fulfillment processes, or adjusting prices, your efforts will influence how customers perceive and respond to the changes. Ultimately, brands that act quickly and communicate clearly won’t just survive the shift — they’ll build strong customer loyalty and become more resilient.
Frequently asked questions (FAQs)
What is a “de minimis threshold”?
A de minimis threshold refers to the minimum value below which a company can import goods into a country without triggering customs duties or taxes. In the U.S., the de minimis threshold has been $800 (per person, per day) since 2016, when the U.S. Congress increased it from $200.
What is de minimis in tax reporting?
When filing taxes, de minimis refers to small amounts of income or benefits that are considered too small to report or tax. Examples include small employee perks, such as holiday gifts under a specific dollar amount. Small mistakes in tax forms, such as rounding errors, may also be considered de minimis and not penalized.
What is Section 321?
Section 321 is a specific U.S. Law (Tariff Act of 1930) provision that authorizes the de minimis exemption. The two terms are related, but de minimis is used globally, while Section 321 is U.S.-specific.
