{"id":15125,"date":"2025-04-18T05:09:37","date_gmt":"2025-04-18T05:09:37","guid":{"rendered":"https:\/\/dmsretail.com\/RetailNews\/the-complicated-calculation-of-ending-de-minimis\/"},"modified":"2025-04-18T05:09:37","modified_gmt":"2025-04-18T05:09:37","slug":"the-complicated-calculation-of-ending-de-minimis","status":"publish","type":"post","link":"https:\/\/dmsretail.com\/RetailNews\/the-complicated-calculation-of-ending-de-minimis\/","title":{"rendered":"The complicated calculation of ending de minimis"},"content":{"rendered":"<p> <p><a href=\"https:\/\/dmsretail.com\/online-workshops-list\/\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-496\" src=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png\" alt=\"Retail Online Training\" width=\"729\" height=\"91\" srcset=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png 729w, https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90-300x37.png 300w\" sizes=\"auto, (max-width: 729px) 100vw, 729px\" \/><\/a><\/p><br \/>\n<\/p>\n<div>\n<div class=\"text-to-speech\">\n    <button class=\"text-to-speech__button button\"><\/p>\n<p>            <img decoding=\"async\" class=\"text-to-speech__button__icon\" src=\"https:\/\/www.retaildive.com\/static\/images\/audio_icon.svg?482016190122\" alt=\"\"\/><\/p>\n<p>        Listen to the article<br \/>\n        <span class=\"text-to-speech__button__audio-length\">9 min<\/span><br \/>\n    <\/button><\/p>\n<div class=\"text-to-speech__controls\">\n        <audio controls=\"\" class=\"js-text-to-speech\" preload=\"none\"><source src=\"https:\/\/res.cloudinary.com\/dmgi9movl\/video\/upload\/q_1\/v1744811655\/news\/text_to_speech\/de-minimis-challenges-drawbacks-loophole-china-hong-kong_g0ub5d.wav\" type=\"audio\/mp3\"><\/source><\/audio><\/p>\n<div class=\"text-to-speech__controls__text\">\n            This audio is auto-generated. Please let us know if you have feedback.\n        <\/div>\n<\/p><\/div>\n<\/div>\n<p><span><span><span><span><span><span>Some companies that manufacture fast fashion goods in Asia may need to develop new strategies in order to accommodate U.S. consumer demand while also regulating prices.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>The White House announced on April 4 that <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span><span>the U.S. de minimis exemption will no longer apply<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span> to products from China and Hong Kong as of May 2. Other countries also may be slated for de minimis elimination, although no additional details have been released.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>The closure of the de minimis loophole means that imported goods sent \u201cthrough means other than the international postal network <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span><span>that are valued at or under $800<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span>\u201d will be subject to all applicable duties once the new policy begins, according to a fact sheet released by the White House.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Goods that are sent through the international postal network and that are valued at or under $800 will be subject to a duty rate of either 30% of their value or $25 per item, increasing to $50 per item after June 1, per the fact sheet. These duties are in lieu of any other duties, although the White House did not clarify how the duty rate would be applied.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Companies <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span><span>such as Shein and Temu<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span> have historically <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span><span>benefitted from the de minimis loophole<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span>, because their lower-priced products have allowed them to avoid duties incurred by more expensive brands.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>A de minimis closure as part of the White House\u2019s tariff rollouts has long been anticipated and began to take shape when <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span><span>the previous administration was still in office<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span>. In addition, as President Donald Trump <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span><span>shifts his international trade policies<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span>, there\u2019s no way to predict what could change in regards to the de minimis closure in the coming weeks.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Already in motion<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span>\u201cAll the brands we work with understood that [de minimis] was going away when Biden made the announcement,\u201d Izzy Rosenzweig, CEO of logistics firm Portless, said in an email. He added that its elimination \u201cis no shock to us, and we have been preparing for it.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>In the e-commerce logistics space, companies \u201care already hearing that the wheels are in motion\u201d for fast fashion firms to begin shifting production, said Alison Layfield, director of product development at shipping services firm ePost Global, in an email.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Layfield said that supply chains for Shein, Temu and similar companies might move to regions outside China \u201cthat are not currently facing the same level of scrutiny.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Layfield noted that while shifting supply chains outside China could help mitigate the immediate impact of the de minimis elimination, there would still be challenges.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cShifting production requires coordinating with new suppliers, setting up production and navigating a host of logistical complexities,\u201d Layfield said. \u201cEven once the business transition is complete, there may be ongoing cost implications for product production. And, of course, there\u2019s always the possibility that the U.S. government could eventually remove de minimis benefits for these alternative countries as well.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Fashion customers pay the price<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span>As companies navigate these challenges, consumers may end up paying the price, said Brian Ehrig, partner in the consumer practice of Kearney, a global consulting firm.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cClosing this loophole and requiring brands such as Shein and Temu to pay duties on imports will have a detrimental effect on sales for these brands because they will have no choice other than to significantly raise prices,\u201d Ehrig said in an email.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>It won\u2019t only be the fast fashion brands that may raise prices, Layfield said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201c[Some retailers] have relied on the exemption to import smaller quantities of fast-moving inventory due to quick turnover of new trends while avoiding duties,\u201d Layfield said. \u201cNow, even inexpensive items will be subject to tariffs, leading to increased costs.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Layfield added that for U.S. consumers, a de minimis closure could directly contribute to higher prices. \u201cIn order to absorb these new costs, these retailers may raise prices for their customers,\u201d she said, adding that price hikes could make certain items less attractive to budget-conscious consumers.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Delays and other drawbacks<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span><span>There also may be supply chain issues, at least in the short term, as companies scramble to navigate these new complexities.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<section class=\"storylines-carousel-wrapper hide-small show-large\" id=\"desktop-carousel\"\/>\n<p><span><span><span><span><span><span>\u201cCompanies like Shein and Temu, which thrive on fast, cost-effective turnaround times, will likely experience delays in shipping as they navigate new customs procedures for smaller shipments,\u201d Layfield said. \u201cThis could slow down the rapid inventory turnover that they depend on.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>However, Rosenzweig of Portless said larger and more established international firms may be better-suited to handle these challenges.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cWhile removing [de minimis] will level the playing field for import tax, Shein and any company that uses the direct supply chain model still has major advantages like better cashflow and now tax deferment,\u201d Rosenzweig said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>He added that the removal of de minimis duties might not even have a significant effect on some of the China-based companies the policy appears to target.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cTariffs were never Shein\u2019s primary advantage,\u201d Rosenzweig said. \u201cTheir real advantage lies in tariff deferment and agile inventory management. Unlike traditional retailers who pay duties upfront, Shein and Temu only pay duties after the goods are sold. Consequently, higher tariffs give Shein and Temu a greater advantage.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Rosenzweig said that this business model also applied to direct-to-consumer brands in the U.S. that have adopted a similar approach.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201c[They will] continue to flourish, while traditional retailers will struggle financially,\u201d Rosenzweig said. He added that removing de minimis tariffs \u201cmay level the playing field to some extent, but the underlying financial loophole remains wide open.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Rosenzweig also noted that any company using a direct supply chain model \u201cstill has major advantages like better cashflow and now tax deferment.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<section class=\"storylines-carousel-wrapper show-small hide-large\" id=\"mobile-carousel\"\/>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Benefits and outlook<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span>The de minimis loophole closure could impact dupes in the fashion market.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Vidyuth Srinivasan, co-founder and CEO of luxury authentication platform Entrupy, said in an email this change could disrupt what he called \u201cthe shadow economy of counterfeit goods that often move through the same low-friction channels\u201d as fast fashion items.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cLong term, it could force both legitimate and illegitimate players to reassess their logistics strategies,\u201d Srinivasan said. \u201cWhile some fast-fashion brands may localize distribution or adjust sourcing, counterfeiters \u2014 who\u2019ve long taken advantage of low-declared values and minimal customs scrutiny \u2014 may look for alternate routes or new tactics.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cThe loophole\u2019s closure won\u2019t eliminate counterfeiting, but it raises the cost of doing business for bad actors and adds a layer of friction to an otherwise seamless pipeline.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Srinivasan cautioned that there are also possible drawbacks.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cOne major risk is consumer pushback, especially when it comes to fast fashion,\u201d Srinivasan said. \u201cHigher prices and longer delivery times may drive shoppers away or toward alternatives like resale or domestic discount retailers.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>The domestic resale and recycle market may benefit not only from increased consumer interest, but also from a reduction in low-quality goods coming in from fast fashion brands, according to <\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span><span>Rachel Kibbe, CEO of American Circular Textiles and Circular Services Group.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span><span>She said in an email that recyclers face specific challenges because some fast fashion garments are \u201cmade of unknown or mixed materials, with no transparency around chemical content or fiber composition \u2014 making safe, effective recycling nearly impossible.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span><span>Kibbe <\/span><\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span>said eliminating the de minimis exemption could support a more circular economy when it comes to secondhand goods and certain raw materials destined for U.S. manufacturers.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cWe support keeping de minimus in place, or providing trade preferences for the resale market (i.e., buying a used handbag from Europe) and for the raw materials necessary to support \u2018made in the USA\u2019 fashion manufacturing,\u201d she said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>However, Kibbe added that ending de minimis wouldn\u2019t solve every problem. \u201cWe\u2019d like to see smarter trade policy (plus incentives to onshore and nearshore) that distinguishes between products that support domestic and circular manufacturing, including reuse and recycling, and those that exploit the system to flood the U.S. with disposable, unregulated goods.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/p><\/div>\n<p><p><a href=\"https:\/\/dmsretail.com\/online-workshops-list\/\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-496\" src=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png\" alt=\"Retail Online Training\" width=\"729\" height=\"91\" 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