The United States has ended the duty-free exemption on low-value imports effective from August 29, 2025. This move affects goods valued up to $800 per person per day. Previously, these goods entered the country without tariffs under the de minimis rule. The change particularly targets imports from China, which accounts for over half of such shipments. This policy shift is part of a broader strategy to reduce the US trade deficit and protect domestic industries.
About the De Minimis Regulation
The de minimis rule originated from Section 321 of the 1930 Tariff Act. Initially, it allowed tourists to bring souvenirs without paying taxes. Over time, it evolved into a trade facilitation tool. In 2016, the exemption limit was raised from $200 to $800 to ease trade and reduce administrative burdens. This led to a surge in low-value imports, rising from 134 million in 2015 to 1.36 billion in 2024. About four million parcels were processed daily under this scheme.
Impact of the US Policy Change
Removing the duty-free exemption means tariffs will now apply to many small shipments. This affects e-commerce giants like Temu and Shein, which rely heavily on low-cost imports from China. Critics argue the change will reduce consumer welfare by $11-$13 billion and disproportionately hurt lower-income groups. The policy aims to curb counterfeit goods, intellectual property theft, and the trade deficit.
Relation to International Agreements
The policy change follows a 2019 agreement with the Universal Postal Union (UPU). The US successfully pushed for higher postal rates for exporters from developing countries. Washington argued that previous postal rates were unfairly low and encouraged a flood of cheap Chinese goods. The UPU concession was part of efforts to level the playing field for American businesses.
Global Parallels in Trade Regulation
The European Union has introduced similar measures. It now charges handling fees on low-value imports and requires e-commerce platforms to provide detailed customs data. The EU also ended its €150 duty-free threshold to combat illegal goods and protect local markets. These actions reflect a global trend towards tightening controls on small parcels to safeguard domestic industries.
Implications for the Post-War Trade Order
The US and EU moves signal challenges to the post-war multilateral trade system. The World Trade Organization’s influence appears weakened as major powers adopt unilateral measures. Recent bilateral negotiations have struggled to produce unified responses to these policies. This trend may reshape global trade dynamics and rules in the coming years.
Questions for UPSC:
- Critically discuss the impact of tariff regulations on global e-commerce and consumer welfare.
- Examine the role of the Universal Postal Union in international trade and how recent changes affect developing countries.
- Analyse the implications of the weakening World Trade Organization framework on multilateral trade relations and global economic stability.
- Point out the challenges and opportunities presented by bilateral trade agreements in the context of rising protectionism.
