Without the de minimis exemption for imports from critical U.S. trading partners, businesses are actively exploring strategies to navigate their supply chains effectively. This topic was recently discussed during a webinar featuring cross-border logistics experts, who emphasized that various pathways exist for companies, contingent upon their specific requirements. However, the landscape is complicated by a barrage of trade policy changes and ongoing uncertainties regarding future regulations, which are complicating decision-making processes for many.
Maggie Barnett, CEO of LVK Logistics, articulated the prevailing sentiment of fatigue among companies as they seek clarity on regulatory frameworks. “It’s just fatigue around the conversation because they just want to know what the rules are going to be,” she noted, highlighting the stress that uncertainty imposes on businesses.
The de minimis exemption has historically been a valuable tool for cross-border e-commerce shippers, allowing them to import goods valued below $800 into the United States without incurring additional duties. This exemption has played a significant role in limiting shipping costs. However, the Trump administration has indicated plans to permanently eliminate this exemption for products from China, pending the establishment of efficient systems for processing and collecting related tariff revenues. Furthermore, changes under executive orders are set to reduce de minimis eligibility for goods originating from Canada and Mexico.
In the current environment, Barnett suggests that utilizing a U.S.-based third-party logistics provider (3PL) presents a viable option. She anticipates that the scrutiny surrounding de minimis exemptions will persist, even after they no longer apply to shipments from China. Transitioning sourcing strategies aggressively to countries like Bangladesh or Vietnam could expose companies to future U.S. trade actions, making it a precarious move. “Why would they just close this for China?” Barnett questioned, alluding to the broader implications of trade policy that could extend beyond China alone.
To mitigate risks associated with rapidly evolving trade policies, companies must seek long-term fulfillment solutions that minimize exposure to such fluctuations. Barnett warns that frequent supply chain adjustments can be financially burdensome; for instance, brands with a substantial number of stock-keeping units (SKUs) could face costs exceeding $100,000 merely to relocate their inventory to a new 3PL.
Aaron Rubin, CEO of warehouse management system provider ShipHero, echoes Barnett’s sentiments and advises smaller brands to focus on U.S.-centric operations and domestic 3PLs. He also recommends that larger brands engage with competent customs brokers and legal advisors to effectively navigate tariff costs.
One concern among importers is the increase in brokerage fees as they adapt to new trade regulations. To counter this, some companies are attempting to streamline customs processes by consolidating products into fewer entries, organized by both client and applicable Harmonized System (HS) codes. “If you can do a formal entry and every line is going to be separate, you’re going to run into a lot of brokerage fees,” Rubin explained, noting that many businesses aim to save on costs, sometimes just a few dollars per package.
Labor costs are another critical factor to consider in response to the elimination of the de minimis exemption. Mexico remains a pivotal location for fulfilling U.S. orders, and while the removal of the exemption poses challenges, it does not entirely negate the advantages of lower labor costs in Mexico. Companies can still leverage this cost advantage for more labor-intensive processes, such as kitting shipments—where multiple items are combined into single packages—or fulfilling orders with more complex manufacturing requirements.
Experts have proposed the use of Type 11 entry as a potential alternative for importers who have relied on de minimis exemptions. However, this method necessitates more detailed information during the customs process. Type 11 entry is a simplified procedure allowing goods to clear customs without a bond, provided the shipment’s value remains below $2,500, or $250 for Chinese goods subjected to Section 301 tariffs. Portless CEO Izzy Rosenzweig reported positive results from testing the Type 11 process.
Importers may become more adept at utilizing Type 11 entries in the future, particularly after adapting to this approach during the recent temporary ban on de minimis shipping from China. Scott Sangster, general manager of global logistics service providers at Descartes Systems Group, indicated that companies are improving their ability to compare the information required for compliance across different filing types. “The Type 11 informal entry was the most natural entry for people to move to,” Sangster remarked, underscoring its potential as a preferred method moving forward.
In summary, as the landscape of cross-border trade continues to shift due to changes in de minimis exemptions and other regulations, businesses face the challenge of adapting their supply chains to meet evolving demands. By leveraging U.S.-based operations, engaging with knowledgeable partners, and exploring alternative customs entry methods, companies can navigate these complexities while minimizing financial impacts. As the rules of trade continue to evolve, staying informed and agile will be crucial for businesses seeking to thrive in this dynamic environment.
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