Days after ending duty-free entry of small Chinese goods into the United States, the U.S. government suspended the order after more than a million packages piled up at New York’s John F. Kennedy International Airport.
It was the result of a hasty and confusing policy change that proved unworkable in a short period of time. Administration officials are now working to implement the order in a way that doesn’t undercut the U.S.’s super-efficient import system.
The U.S. government’s executive order targets a little-known trade rule called the “small package duty-free policy.” Under the rule, goods with a total value of less than $800 can enter the United States duty-free and with minimal inspection. The number of goods entering the United States through this duty-free channel has surged in recent years, reaching nearly 1.4 billion packages last year, driven primarily by online shopping. Currently, more than 90% of all packages entering the United States enter through the small package duty-free policy, and about 60% of those packages come from China, especially direct-to-consumer retailers like TEMU and SHEIN.
In an executive order on February 1, the U.S. government announced a 10% across-the-board tariff on all Chinese imports and ended the de minimis exemption for previously duty-free small packages from China. The White House gave only three days for the policy to take effect. However, on February 7, the portion of the U.S. government order involving de minimis packages was suspended because the relevant departments responsible for implementing the order did not have enough time to prepare. At this time, packages piled up at ports of entry, including Kennedy Airport.
Logistics experts say it is impossible for major package carriers, e-commerce platforms, USPS and U.S. Customs and Border Protection (CBP) to fully adjust their operations in just a few days and begin collecting tariffs on previously duty-free goods, especially considering that millions of packages are already on the way from China.
“You can’t just snap your fingers … that doesn’t work,” said John Leonard, a former senior CBP official who will retire from the agency in 2024. “Such major changes typically take months to implement and rely on close collaboration between CBP and the private sector.”
The U.S. “de minimis” rule, which dates to 1938, has been under increasing criticism from both Democratic and Republican lawmakers. Some see the rule as a loophole that allows cheap Chinese products to flood into the United States, undercutting U.S. industry and providing cover for smuggling illegal drugs and their precursor chemicals.
Six private logistics experts, former customs officials and politicians told Reuters that while there is growing consensus that the number of small packages passing through should be reduced, the sheer volume of packages means any regulatory changes must be well thought out and implemented within a reasonable time frame to give shippers and CBP enough time to adjust.
