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Tariff exemption for packages under $800 halted

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US criticizes Canada over small fentanyl shipments

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China's Shein, Temu e-commerce firms face problems

By David Lawder

WASHINGTON, Feb 2 (Reuters) - President Donald Trump's

new tariff orders against Canada, Mexico and China all contain

clauses suspending a duty-free exemption for low-value shipments

below $800 that is widely seen as a loophole that has allowed

shipments of fentanyl and its precursor chemicals into the

United States.

Staunching that flow was a primary motivation cited by Trump

in imposing sweeping import taxes on goods on the three largest

U.S. trading partners. Absent a fully global end to the

so-called "de minimis" exemption, it is not clear how effective

Trump's approach will be at curbing the flow of fentanyl.

The suspension of the exemption is due to last as long as

Trump's tariffs are in place. It also could cause problems for

Chinese e-commerce companies, including Shein and PDD Holdings'

Temu, which have exploited the exemption to ship

individual consumer goods packages directly from China to avoid

previous U.S. tariffs on Chinese imports.

Such small shipments often are not screened at ports of entry,

allowing shipments of drugs and their ingredients to enter

undetected. A Reuters investigation last year revealed how

Chinese chemical traders are using the de minimis exception to

sneak shipments of precursors into the United States, from where

they are conveyed across the border to fentanyl labs in Mexico.

Overdoses of fentanyl, a powerful and addictive painkilling

drug, killed nearly 75,000 Americans in 2023, according to the

U.S. Centers for Disease Control and Prevention.

In announcing the punitive duties of 25% on goods from

Canada and Mexico and an additional 10% on Chinese imports,

White House officials said on Saturday that the de minimis halt

applied specifically to Canada. The officials criticized Canada

for not cracking down on fentanyl trafficking shipments.

But the orders for all three countries contain the same

language addressing the de minimis exemption: "For avoidance of

doubt, duty-free de minimis treatment under 19 U.S.C. 1321 shall

not be available for the articles described in subsection (a) of

this section." That subsection of each order broadly identifies

the imports subject to tariffs.

Trump's orders do not contain any language suggesting a

global or permanent suspension of the de minimis status, leaving

open the possibility that fentanyl shipments could still arrive

unchecked as long as they do not originate from China, Canada or

Mexico.

A White House spokesperson did not immediately respond to

requests for comment on the exemption.

"These executive orders appear to eliminate de minimis

entries for all three countries, which will have broad impacts

on many businesses and industries, said Tim Brightbill, co-chair

of Wiley Rein's trade practice. "The de minimis provisions have

been abused by a variety of importing industries - a problem

well recognized by Congress as well as the current and prior

Administrations."

While suppliers in China and criminal gangs in Mexico have been

long accused of trafficking fentanyl into the United States,

Trump's tariff order against Canada included a long preamble

saying that drug trafficking from Canada is growing.

"The challenges at our southern border are foremost in the

public consciousness, but our northern border is not exempt from

these issues," the order reads. "Criminal networks are

implicated in human trafficking and smuggling operations,

enabling unvetted illegal migration across our northern border.

There is also a growing presence of Mexican cartels operating

fentanyl and nitazene synthesis labs in Canada."

Nitazenes are similar to fentanyl.

The order added that drug trafficking via the de minimis

exemption "has created a public health crisis in the United

States."

SHIPMENTS GROW

De minimis shipments into the United States have grown

significantly since 2015, when the threshold for duty-free

treatment was raised to $800 per shipment from $200 previously.

The U.S. Customs and Border Protection agency now estimates

that it process more than 1 billion such shipments per year, and

Census Bureau data shows that estimated low-value shipments were

the eighth-largest U.S. import category from China at $4.7

billion in 2023, more than doubling since 2014.

Former President Joe Biden's administration in January issued

last-minute proposed rules to curb the de minimis exemption

globally, denying it to goods under other punitive tariff

orders, and requiring shippers to identify the package contents

by their 10-digit tariff codes.

It is unclear if Customs and Border Protection, now under

Trump's direction, will act to finalize that rule.