Fashion’s global supply chain is experiencing a seismic shift. The decades-old ‘de minimis’ rule — a seemingly innocuous trade provision allowing low-value individual parcels to be imported into the US duty free — has become ground zero for a high-stakes economic and political confrontation with China.
On 28 January — a week after President Donald Trump took office for the second time — Congressman Greg Murphy reintroduced the End China’s De Minimis Abuse Act, aiming to curb China’s ability to bypass tariffs. This followed a plea from 126 House Democrats in September, urging then-President Joe Biden to use his executive authority to tackle the issue of 4 million packages entering the US daily without inspection.
Of primary concern is that the rule, which was originally intended to reduce the administrative burden on American customs agents, has instead been used by Chinese-owned companies like Shein and Temu to flood the US with low-value goods, by importing them as individual parcels.
Just like President Trump’s tariffs execution, uncertainty is the only constant for the future of de minimis shipping. Trump issued an executive order on 1 February imposing a 10 per cent tariff on Chinese imports and suspending the de minimis rule for individual parcels originating from China until further notice — sending shockwaves through fashion. On 5 February, Trump signed yet another executive order that would temporarily reinstate the de minimis exemption, until the Secretary of Commerce decides that “adequate systems are in place to fully and expediently process and collect tariff revenue”. While it’s back for now, its future is far from secure. What should the industry do?
From tourist perk to trade loophole
The de minimis provision, once a small concession permitting Americans to bring back souvenirs without incurring taxes, has evolved dramatically. The original threshold, set in 1938 at either $1 or $5 depending on how the imported goods were to be used, was intended to avoid burdening customs with low-value imports that generated minimal tax revenue. In 1994, the Customs Modernization Act raised the threshold to $200 because the cost of processing low-value imports outweighed the potential revenue from the duties. In 2016, Congress raised the threshold again from $200 to $800.
“It was US Customs, rather than foreign companies, that historically pushed for a de minimis exception and for raising the level,” says Greg Husisian, chair of the international trade and national security practice at law firm Foley Lardner.
It wasn’t until the Covid pandemic that de minimis became a key driver of the rise of ultra-fast fashion. Shein’s gamified shopping experience captured the attention of millions during lockdown, as did Temu’s marketplace model, and de minimis allowed the retailers to grow quickly in the US.
The scale of packages imported under de minimis rules has exploded. In 2023, over 1 billion shipments were processed, valued at $54.5 billion — a stark contrast to just 110 million shipments worth $50 million in 2012, according to Robert Khachatryan, CEO of Freight Right Global Logistics. Chinese exports of low-value single packages surged from $5.3 billion in 2018 to $66 billion in 2023, according to Congressional Research Service data.
The lack of compliance enforcement has only intensified the imbalance, allowing foreign sellers to circumvent US regulations while domestic businesses must adhere to stringent safety and quality standards. Product safety testing — from flammability checks on apparel to chemical and allergen screening for cosmetics — can be costly, especially under California’s Proposition 65 (a law that requires businesses to warn consumers about the presence of any harmful chemicals in their products). Labelling and packaging regulations, such as fibre content disclosures and multilingual ingredient lists, further add to expenses for companies that produce in the US. On top of that, brands must navigate customs classifications, tariffs and forced labour laws, with audits required to ensure ethical sourcing. “This compliance gap can lead to costs of up to $10,000 per SKU,” says Khachatryan.
Meanwhile, Amazon recently launched Amazon Haul in an apparent bid to compete with Shein and Temu, capitalising on consumer demand for low-priced goods dispatched from China and utilising the de minimis shipping allowances. Other clothing brands like US-based Cider also leverage de minimis to deliver inexpensive, trendy fashion to US shoppers. But the model of importing low-value products via individual parcels from China brings with it logistical challenges and longer delivery times. Shein is able to offset this because of its fast, ‘just-in-time’ inventory management system; most US fashion companies require the economies of scale that come from bulk shipping product for onshore or nearshore warehouse storage.
Enforcing the suspension
Experts note that suspending de minimis is just a first step, with many uncertainties remaining about whether the rule will be fully repealed. As de minimis only applies to low-value items, the duties collected on these products may not cover the costs of collecting them, points out Dr Sheng Lu, director of the department of fashion and apparel Studies at the University of Delaware.
Companies could, in theory, ship goods from China to an intermediate destination before importing them into the US to avoid the duties, says Lu — a practice called transshipment. Hong Kong has been used as a transshipment workaround for Chinese operators in the past, which is why the city has been rolled up in Trump’s de minimis suspension. Some companies might still transship through countries like Vietnam or Malaysia, although this will result in the trade-off of longer transit times.
Angela Santos, partner and customs practice leader at law firm Arentfox Schiff, suggests that de minimis changes may face legal challenges, citing precedents like the broad lawsuit during Trump’s first term, which attracted thousands of companies seeking duty relief amid the 2018 US-China trade war. However, she’s doubtful that companies like Shein and Temu will have the “appetite” to sue, particularly when the court system tends to defer to the federal government. (Shein and Temu both declined to comment for this article.)
Working against de minimis is a general shift in political sentiment. Once a largely uncontroversial trade provision, the rule has increasingly come under scrutiny from both sides of the political spectrum. As concerns about supply chain security, fair competition, the fentanyl epidemic and trade imbalances grow, policymakers are reconsidering de minimis’s place in the broader economic landscape. This shift is reflected in recent trade discussions, signalling a fundamental change in its perception and application.
“De minimis used to enjoy bipartisan support; now, it has bipartisan criticism,” says Husisian. “Its inclusion in recent trade announcements is less about shaping the debate and more about reflecting the shifting consensus.”
Trump’s executive order has intensified federal-level enforcement. “The government even went so far as to stop packages in the mail, which was obviously very disruptive,” says Congresswoman Chellie Pingree, founder of the Congressional Slow Fashion Caucus. “This illustrates their commitment to enforcing the de minimis suspension.”
Pingree critiques Trump’s approach: “This is typical of how Trump operates — make a bold move, then figure out the implementation later.” The US Postal Service’s (USPS) announcement on 4 February that it was temporarily suspending shipments from Hong Kong and China — which has since been reversed — has heightened consumer awareness of de minimis and could accelerate permanent reform. “Constituents may struggle with hypothetical legislation,” Pingree notes, “but they understand when their individual purchases are caught in broader national disruption.”
USPS and US Customs are working to establish an efficient collection mechanism for the new China tariffs to minimise disruptions, according to Maria Vanikiotis, counsel in the International Trade Group at law firm Crowell Moring. However, the reality is that a large volume of shipments that once moved through customs with minimal oversight will now face duties, additional procedures and greater scrutiny. “We’re likely to see backlogs and delays at US ports as customs grapples with the increased burden,” Vanikiotis warns.
The fallout for fashion
The apparel sector is expected to bear the brunt of de minimis reform. PWC estimates that tariffs on non-dutiable goods, currently valued at $2.3 trillion, could increase from zero to $550 billion annually. For apparel and accessories, annual tariff costs could double from $13 billion to $26 billion. Brands will either have to absorb these costs or pass them onto consumers, says Ali Furman, PWC’s US consumer markets industry leader.
This shift in pricing dynamics poses particular challenges for smaller online businesses that are heavily reliant on Chinese vendors.
“Losing de minimis benefits would devastate hundreds of thousands of US small and medium-sized e-commerce businesses,” warns Lu. Unlike large corporations with diversified supply chains, SMEs often depend on China as their primary sourcing hub. Additional tariffs and compliance costs could overwhelm them, leading to price hikes or even business closures.
Some domestic brands, however, could benefit. “The closure of the de minimis loophole will make our US brand more attractive to customers, retailers and specialty lingerie boutiques,” says Bridget Mollner, co-founder and COO of size inclusive intimates brand Iteration. She notes a boutique owner who, expecting price increases for Canadian brands affected by Trump’s duties, is now considering stocking more US labels that won’t be impacted by the tariff shift.
Luxury resale in the lurch?
The de minimis suspension could disrupt the luxury resale market in the US, experts warn, because secondhand designer goods shipped from or passing through China will be subject to duties.
This shift will have a significant impact on resale platforms, says Albert Varkki, co-founder of luxury leather goods brand Von Baer. While the resale sector is largely dominated by Europe and the US, China plays a critical role in authentication, restoration and resale, particularly for high-value items like watches and handbags.
“Many resale platforms rely on Chinese hubs for logistics, and the removal of duty free privileges will drive up operating costs, deterring sellers from routing goods through China,” Varkki explains.
Beyond authentication and logistics, some resale platforms also source excess luxury inventory from Asia, including liquidation stock from South Korea, Japan and Hong Kong. Higher import taxes could lead suppliers to scale back shipments to the US, tightening inventory and driving up resale prices. Even though China isn’t the primary supplier of pre-owned luxury goods, many US resellers depend on bulk purchases from Asian markets. New tariffs could slow turnover and dampen foreign participation in the American resale market.
While the immediate impact will likely be felt across pricing and supply chain disruptions, the long-term consequences could see higher resale prices, reduced inventory fluidity and a weakened ability for luxury resale to compete with domestic retail — ultimately limiting access to affordable pre-owned designer goods for consumers.
What happens next
With the regulatory landscape in flux, fashion brands are reassessing their supply chain strategies to stay ahead of potential disruptions. From recalibrating sourcing decisions to restructuring logistics, companies are weighing their options to maintain efficiency and protect margins.
“Finance teams are digging deep into unit economics and the effects on customer behaviour,” says Brendan Heegan, founder and CEO of third-party logistics provider Boxzooka.
Boxzooka’s smaller fashion clients are considering the viability of bringing fabric into the US for onshore cutting and sewing to mitigate potential trade disruptions, Heegan explains. Meanwhile, mid-market and larger clients are rethinking their reliance on China, exploring alternative manufacturing hubs in Southeast Asia and India — regions seen as less likely to be caught in future US trade disputes.
For global brands, the shifting trade landscape presents more of an opportunity than an obstacle. Heegan notes that many international brands, particularly those that have traditionally relied on direct-to-consumer shipments from overseas under the $800 de minimis threshold, are now exploring bulk imports of finished goods into US fulfilment centres to streamline domestic distribution.
For brands like Shein, the loss of de minimis could result in price rises. Lu’s analysis reveals that Shein’s average selling price for dresses in 2024 is $17, which is 27 per cent higher than in 2023 and 40 per cent higher than in 2022. For bottoms, the price increase is even steeper — 74 per cent over a two-year period. In contrast, prices at Zara and H&M have remained relatively stable. Lu suggests that Shein’s reliance on Chinese suppliers is already driving up costs, and the loss of de minimis will only intensify this.
US-based fashion companies may need to reconsider their business models to remain competitive in a post-de minimis landscape, should congress move to permanently amend the trade provision. With the potential weakening of price-driven competition from China-centric ultra-fast fashion giants, some brands could adjust pricing strategies or place greater emphasis on e-commerce, says Neil Saunders, managing director of retail at data analytics firm Globaldata.
However, the impact remains uncertain. “The low-cost advantages of marketplaces like Shein aren’t solely reliant on de minimis — they also stem from low-cost manufacturing and fewer regulatory constraints than those imposed in the West,” Saunders explains.
Shein, for its part, may explore alternative strategies to maintain its foothold in the US market. Saunders suggests the ultra-fast fashion giant could pursue a more traditional retail route by acquiring a US-based retailer, such as Forever 21, in which it already has a minority stake through a joint venture with Sparc Group, the partnership between Authentic Brands Group and Simon Property Group.
Higher prices resulting from the loss of de minimis could also reshape consumer behaviour, says PWC’s Furman. She anticipates a shift towards slower, more quality-driven consumption, potentially fuelling growth in the resale and rental markets. (This could benefit the likes of Poshmark and The RealReal.) Khachatryan predicts that the fashion industry could see a meaningful shift towards domestic brands and subscription models, ushering in a new era of global trade.
At the same time, brands may accelerate their adoption of AI-driven manufacturing, robotics and automated textile production in order to cut the cost of sourcing domestically or from other established regions, says Furman. “Some retailers may struggle to adapt, leading to a wave of M&A activity as companies consolidate, streamline operations and optimise their portfolios in response to evolving cost structures and supply chain dynamics,” she adds.
Heegan argues that the suspension of the de minimis rule isn’t catastrophic. He says: “Loopholes are usually temporary and perhaps the next wave of creative options for global fashion will develop out of this chaotic situation.”
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