On July 30th, US President Trump signed an executive order terminating the tax exemption for small packages (De Minimis) sent from all countries/regions. Previously, the US had already ended tax exemptions for small packages from China and Hong Kong.
The White House stated that the order will take effect on August 29th, and all goods valued at $800 or less imported to the US will be subject to tariffs. Any goods shipped through the international postal network will be taxed based on the package value and its country of origin.
According to the White House, other countries have exploited the loophole of small tax-exempt packages to smuggle drugs and evade tariffs.
Initially, small packages will be taxed in two ways. Some goods will be subject to an ad valorem tax reflecting the tariffs of the country of origin, while others will be subject to a “per piece tax” ranging from $80 to $200. The White House document stated that the latter method is only effective for six months, after which all products will be taxed according to the ad valorem rate. Goods brought into the US by travelers valued at $200 or less will remain tax exempt.
In May, the Trump administration ended the tax exemption loophole for small packages from China and Hong Kong. On Monday, a federal trade court refused to block the government from implementing the tax exemption ban on small packages.
In recent years, with the increasing popularity of online shopping, the use of tax-exempt small package provisions has surged. Ultra-low-cost online retailers like Temu and Shein have exploited this loophole, sending tax-free packages directly from China to US shoppers. The stock price of PDD Holdings, the parent company of Temu, dropped after the White House announcement.
The White House stated that packages entering the US using tax-exempt privileges for small packages are usually subject to less scrutiny than traditionally imported goods, and these packages may pose health, safety, national, and economic security risks. The number of small packages entering the US increased from 134 million batches in 2015 to over 1.36 billion batches by 2024. The US Customs and Border Protection processes over 4 million batches of such packages entering the US every day.