“Logistics Pulse” is your cheat sheet and to-do list for everything about trade, the supply chain and logistics. We dive deep into the latest news headlines and industry trends and equip you only with actionable insights you can use to improve your business—no matter your industry or role in the supply chain. Presented by Mothership.

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The de minimis exemption allows foreign shipments valued at $800 or less to enter the U.S. without paying duties, tariffs or other taxes, and with minimal review and paperwork. Some companies, such as the e-commerce giants Shein and Temu, have built their entire business models around the rule, which critics have called an unfair tax loophole. We break down whether the de minimis exemption will survive as the U.S.-China trade war intensifies, and examine the signs that this shipping loophole might end sooner rather than later.

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What is the de minimis exemption for shipping?

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Host 1 00:00

If you're involved in selling online, shipping things internationally, it feels like things have been pretty chaotic lately, right?

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Host 2 00:06

Definitely, yeah, it's a lot to keep track of, especially with some of the recent news flying around.

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Host 1 00:11

Exactly. So today, we wanted to really dig into something specific: These new surcharges popping up on shipments from China, and how that connects to the whole de minimis rule conversation.

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Host 2 00:38

We've been looking at some, well, some key details on this. And just quickly, for anyone, maybe less familiar, de minimis, that's basically the rule, the threshold that lets goods under $800 come into the U.S., duty-free, and with, you know, minimal customs fuss. The idea, originally, was just to make things simpler, especially for smaller stuff. But, well, its impact now is it's anything but simple.

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The de minimis exemption: How U.S. shipping companies are targeting Chinese imports

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Host 1 01:01

Yeah, that seems like an understatement. So our mission here is to unpack these changes for you. We're talking about the new fees from FedEx, from UPS and all this political buzz around de minimis. We want you to get what's going on and, honestly, why it matters. Because the number of packages we're talking about here, it's actually pretty staggering.

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Host 2 01:19

It really is. So let's jump right into those surcharges, because what's really striking is how targeted they are. FedEx and UPS, they're specifically going after these lower-value shipments coming into the U.S., but only from China.

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Host 1 01:32

Right. It's not across the board.

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Host 2 01:32

No, exactly. It's very focused.

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Host 1 01:32

Okay, so what are the specifics?

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Host 2 01:33

First up, FedEx, they've got this thing called a demand surcharge for shipments from China, Hong Kong and the Philippines to the U.S. It started Tuesday.

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Host 1 01:36

Okay, and how much are we talking?

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Host 2 01:38

It's 45 cents per pound, but with a $1 minimum per shipment.

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Host 1 01:53

45 cents a pound, okay.

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Host 2 01:54

But here's the interesting part: It's listed as ending May 2, pretty short term.

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Host 1 01:59

Yeah, that is short. Maybe just reacting to a current spike, or maybe, or maybe it's just phase one.

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Host 2 02:04

Could be, because right after that, on May 2nd, they're introducing another fee, a disbursement fee.

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Host 1 02:11

Okay, and what's that one about?

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Host 2 02:13

This one specifically targets those shipments valued at $800 or less, the ones usually covered by de minimis.

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Host 1 02:19

Right. The ones that used to slide through customs more easily.

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Host 2 02:21

Exactly. And the fee is the greater of $4.50 or 2% of any duty and tax that might apply.

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Host 1 02:28

So wait, if the first surcharge ends, May 2nd, but this new one starts. What's the total hit then for these smaller packages?

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Host 2 02:36

Well, adding the minimum $4.50 disbursement fee to the base costs, FedEx's own example suggests a total fee, including other potential base fees, of at least $8.50 or more, if it's 2% of duties and taxes.

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Host 1 02:49

Wow! Okay, so that $1 minimum demand surcharge gets replaced by something potentially much higher for these low-value goods.

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Host 2 02:56

Seems like it. It definitely adds a cost layer where there wasn't much before.

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Host 1 02:59

It really signals there may be anticipating changes to how those sub-$800 shipments are processed, doesn't it?

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Host 2 03:05

Yeah, feels like it. Now, what about UPS? They're in on this, too, right?

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Host 1 03:08

They are. They've brought back their surge fee.

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Host 2 03:11

Reinstated it. Okay, from China, Hong Kong and Macau to the U.S.

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Host 1 03:15

Correct. And theirs started a bit earlier, actually.

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Host 2 03:18

And the rate?

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Host 1 03:18

It's 29 per pound, so a bit lower per pound than the initial FedEx one.

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Host 2 03:23

29 cents. But what's the catch, or the difference compared to FedEx?

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Host 1 03:27

Well, two big things stand out. First, UPS hasn't mentioned an end date.

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Host 2 03:32

So, potentially more permanent?

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Host 1 03:33

Seems that way. And second, their surge fee is also subject to UPS's fuel surcharge.

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Host 2 03:39

Oh, okay, so that 29 cents isn't necessarily fixed. It could go up depending on fuel prices.

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Host 1 03:45

Exactly. It adds another layer of variability to the cost, more uncertainty there.

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Host 2 03:50

So both major carriers are adding fees, slightly different approaches, but focused on these specific routes. What's the underlying reason we're seeing this now?

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Host 1 03:58

All signs really point towards that de minimis exemption we mentioned. There's just so much political and regulatory noise around it lately.

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Host 2 04:06

Especially concerning goods from China, right?

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Host 1 04:08

Yes, there's a lot of pressure to change the rules, maybe even eliminate the exemption, specifically for shipments from certain countries like China.

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Host 2 04:17

And companies like Shein and Temu, their whole model kind of relies on shipping tons of small, inexpensive packages directly to consumers.

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Host 1 04:26

Leveraging that de minimis rule to avoid duties and speed up customs. It's been incredibly effective for them, but it's also drawn a lot of criticism.

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Host 2 04:35

From domestic businesses feeling the competition and policy-makers worried about oversight?

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Host 1 04:40

Right. So, if that rule changes or if tariffs go up, the cost and complexity for carriers handling these packages could increase significantly.

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Host 2 04:47

So are these surcharges basically the carriers trying to, like, get ahead of the curve, building in costs they expect to face soon?

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Host 1 04:53

That seems like a very strong possibility. It could be buffering against future costs, dealing with current capacity strains, or even a strategic move anticipating a fundamental shift in trade policy.

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How carrier surcharges on Chinese imports will impact U.S. consumers

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Host 2 04:54

Okay, so, bringing it back to the folks listening, what does this actually mean for them? These are carrier fees, right?

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Host 1 05:09

They are initially charged to the shippers, but realistically, those costs often get passed down the line.

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Host 2 05:15

So, the price of that, you know, $10 gadget shipped directly from overseas, might start creeping up.

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Host 1 05:21

It's very likely, especially for goods coming directly from these regions, that the price advantage might shrink a bit, or maybe shipping options change.

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Host 2 05:28

It feels like these are the first steps, but the bigger picture involves potential shifts in trade roles that could have wider effects.

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Host 1 05:35

Definitely, this is about more than just a couple of surcharges. It reflects the tension in global trade right now. Like you said, it's crucial. This isn't just a general rate hike. It's zeroed in on those, you know, high-volume, low-value packages, the very ones that have been benefiting hugely from that de minimis rule, skipping the standard customs process.

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Host 2 05:53

So, it directly eats into the cost advantage they had. It starts to chip away at it immediately.

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Host 1 05:58

Which, yeah, brings us right back to de minimis itself, that $800 number—below that, no duty, minimal checks, sounds simple enough.

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Host 2 06:06

Sounds simple, but it's become, well, a major pathway. Think about this, over a billion packages—that's with a "B"—entered the U.S. under de minimis rules just in 2023.

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Host 1 06:18

A billion. Wow!

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Host 2 06:19

Yeah. And when you hear that something like 60%, maybe more, of those started in China.

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Host 1 06:24

60%? Okay.

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Host 2 06:25

And, often, they end up using services like, you know, the regular US Postal Service, or even FedEx and UPS for that last little bit of delivery.

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Host 1 06:32

Right. The final mile.

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Host 2 06:33

Exactly. It just shows how huge the impact could be if anything changes with that rule even slightly.

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Why the U.S. may end the de minimis exemption for shipping

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Host 1 06:39

It really does paint a picture. And like we were saying, these surcharges from the carriers, they aren't just happening randomly, are they? They're kind of popping up while there's all this political talk about changing de minimis specifically for China.

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Host 2 06:51

Yeah, it definitely doesn't feel like a coincidence. Our sources suggest the Biden administration was already kind of looking into tweaking the rule.

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Host 1 06:57

Okay.

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Host 2 06:58

But it's really the more, let's say, forceful stance from the Trump administration that's turned the volume up, framing it as you know, national security, trade fairness,

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Host 1 07:09

Interesting. So this has got legs, regardless of who's in charge, maybe?

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Host 2 07:12

It seems that way. There's this unusual agreement across party lines that maybe something needs to be done about de minimis, at least for China, which suggests changes are pretty likely down the road.

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Host 1 07:24

And did we see that Trump was calling for getting rid of it entirely for China and other countries they consider adversarial?

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Host 2 07:31

Exactly, a complete elimination. That would be a massive shift, obviously, and it fits right into that larger push for, you know, bringing manufacturing back, changing trade dynamics.

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Host 1 07:40

And it's not just him, right? Congress is involved, too.

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Host 2 07:42

Oh yeah, there's bipartisan support in Congress for laws to either limit or just stop these de minimis shipments from countries seen as, you know, risky or playing unfair.

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Host 1 07:55

So, okay, if these political wins actually turn into real policy, what happens then? What are the ripple effects?

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Host 2 08:02

Well, the implications could be pretty big. You're talking about goods that just sailed through before, suddenly, they'd face duties.

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Host 1 08:07

Taxes, basically.

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Host 2 08:09

Yep, and much tougher inspections, more paperwork. It would definitely shake up e-commerce, logistics, and, you know, almost certainly impact the prices we all pay as consumers. It's like, if suddenly you had to pay sales tax on a whole category of stuff you didn't before.

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Why U.S. shipping and logistics companies are charging more for Chinese imports

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Host 1 08:24

Yeah, okay, I can see that, which brings us back to FedEx and UPS. Why are they making these moves now? Are they just anticipating this policy change?

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Host 2 08:32

That's one theory, you know, getting ahead of potential government action. Or maybe it's simpler. Maybe it's just their own internal costs catching up with them. Handling millions and millions of these low-margin packages, it takes a toll on their networks.

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Host 1 08:47

Right. It can't be cheap, even if the value is low.

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Host 2 08:49

Exactly. So, it could be a bit of both—anticipating the future and dealing with the present reality of their own costs.

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Host 1 08:57

Or maybe it's even a way for them to signal, like, hey, prices need to adjust here.

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Host 2 09:01

That's plausible, too. These surcharges, they might subtly nudge shippers from China towards more traditional customs clearance methods, which are, of course, more expensive.

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Host 1 09:10

Gotcha. Or it forces platforms like Shein and Temu to maybe rethink their own pricing. Pass some of that cost on.

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Host 2 09:16

Precisely. It puts pressure back on them.

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What businesses can do if the de minimis exemption for shipping ends

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Host 1 09:19

Okay, so there's a lot going on. What are the practical things to think about?

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Host 2 09:21

All right, let's translate this.

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Host 1 09:23

So, first off, if your business does any kind of cross-border shipping or you import smaller items, you really need to look at who you're using for logistics.

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Host 2 09:33

Absolutely. That's number one. Rates are definitely shifting, and these kinds of surcharges, as we saw, can pop up pretty quickly. So, reassess your providers.

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Host 1 09:41

And maybe shop around a bit.

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Host 2 09:43

Definitely shop around. Just because FedEx and UPS added these specific surcharges doesn't mean everyone has. You might find better deals, maybe with regional carriers or some of the newer logistics platforms trying to grab market share. Don't assume the big guys are the only option.

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Host 1 09:58

That makes sense.

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Host 2 09:59

Yeah.

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Host 1 09:59

What about dealing with suppliers, especially if you're buying from China or using sellers overseas?

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Host 2 10:04

Yeah, that's another key point. Talk to your suppliers, negotiate. Maybe now's the time to push for better terms.

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Host 1 10:10

Like, what kind of terms?

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Host 2 10:11

Well, maybe a landed cost agreement, where the seller handles all the shipping and potential duties right to your door, or looking at FOB shipping terms, where the responsibility shifts at a certain point, or even just having a clear agreement on how you'll split any new duties or these surcharges if they arise.

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Host 1 10:27

So get proactive with suppliers.

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Host 2 10:29

And, probably the biggest thing, stay plugged in. Keep an eye on what's happening with de minimis regulations because changes seem, well, likely. And start thinking now about the cost implications. What if those goods you import suddenly have duty slapped on them? What if they face more inspections? Run some numbers. Plan for it.

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Host 1 10:49

It sounds like planning for uncertainty is key.

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Host 2 10:51

It really is. And that leads to the last major point, which is just about building more resilience into your whole supply chain.

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Host 1 10:58

How so?

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Host 2 10:58

Diversifying where you source from, maybe not relying solely on one country or region, holding a bit more inventory, perhaps as a buffer, just having backup plans for when—not if—disruptions happen, whether they're regulatory, like this, or something else entirely.

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Host 1 11:13

Right. Don't put all your eggs in one basket!

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Host 2 11:15

Basically. Yeah, it's becoming essential, not just, you know, nice to have.

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Host 1 11:19

Okay, so let's quickly recap. We've looked at these new, very specific surcharges hitting low-value goods from China.

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Host 2 11:26

And we've connected that to the growing political heat around the de minimis rule itself, especially for those Chinese imports with real potential for changes coming down the line.

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Host 1 11:35

And it's clear these two things together could really change the game for e-commerce, for anyone involved in international trade, really.

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Host 2 11:43

Absolutely, maybe something to chew on.

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