*

Tariff exemption removal to disrupt e-commerce supply

chains

*

CBP collects duties on all global parcel imports

*

Retail analysts predict higher prices for e-commerce goods

By David Lawder and Andrea Shalal

WASHINGTON, Aug 29 (Reuters) - The U.S. tariff exemption

for package shipments valued under $800 ended on Friday, raising

costs and disrupting supply chain models for e-commerce

companies, small businesses using online marketplaces and

consumers alike.

The U.S. Customs and Border Protection (CBP) agency began

collecting normal duty rates on all global parcel imports,

regardless of value, country of origin, or mode of

transportation at 12:01 a.m. EDT (0401 GMT) on Friday. It

offered a flat-rate duty option of $80 to $200 per package

shipped from foreign postal agencies for six months.

The move broadens the Trump administration's cancellation of

the de minimis exemption for packages from China and Hong Kong

in May as part of an effort to halt shipments of fentanyl and

its precursor chemicals into the U.S.

"President Trump's ending of the deadly de minimis loophole

will save thousands of American lives by restricting the flow of

narcotics and other dangerous prohibited items, and add up to

$10 billion a year in tariff revenues to our Treasury," White

House trade adviser Peter Navarro told reporters on Thursday.

"This is a permanent change," a senior administration

official said, adding that any push to restore the exemptions

for trusted trading partner countries was "dead on arrival."

The de minimis exemption has been in place since 1938,

starting at $5 for gift imports and was raised from $200 to $800

in 2015 as a means to foster small business growth on e-commerce

marketplaces.

But direct shipments from China exploded after President

Donald Trump raised tariffs on Chinese goods during his first

term, creating a new direct-to-consumer business model for

e-commerce firms Shein and Temu.

The National Coalition of Textile Organizations called the

move a "historic win" for U.S. manufacturing by closing a

loophole that allowed foreign fast-fashion firms to avoid

tariffs and import apparel sometimes made with forced labor,

undercutting American jobs.

"The administration's executive action closes this channel

and delivers long overdue relief to the U.S. textile industry

and its workers," the group said.

CBP has estimated that the number of packages claiming the

de minimis exemption jumped nearly 10-fold from 139 million in

fiscal 2015 to 1.36 billion in fiscal 2024 - a rate of nearly 4

million per day.

HIGHER COSTS, MORE PAPERWORK

Retail analysts say that the end of de minimis will likely

raise prices for many goods sold through e-commerce companies,

as goods that previously avoided tariffs because of the

exemption will ultimately be charged duties. This may put such

firms on a par with costs for more established retailers like

Walmart, which tend to import merchandise in bulk containers

that are subject to tariffs.

CBP has collected more than $492 million in additional

duties on packages shipped from China and Hong Kong since their

exemptions were eliminated on May 2, another Trump

administration official said.

The official said that full tariff rates will apply to all

packages shipped by express carriers such as FedEx ( FDX ),

United Parcel Service ( UPS ) and DHL. These firms are better

set up to collect duties and process customs data than

traditional postal agencies.

Foreign postal agencies can opt to collect and process the

duties based on the value of the package contents, or opt for

the flat rate method by collecting a flat tax based on Trump's

"reciprocal" tariff rates currently in place on goods from the

country of origin.

Based on CBP guidance issued on Thursday, parcels would be

charged $80 from countries with Trump-imposed duty rates below

16%, such as Britain and the European Union, $160 from countries

between 16% and 25%, such as Indonesia and Vietnam, and $200

from countries above 25%, including China, Brazil, India and

Canada.

But postal services must shift to full "ad valorem" duty

collection based on the value of the shipments by February 28,

2026, the second official said.

This official acknowledged that some foreign postal services

have suspended mail to the U.S. but said the administration was

working with foreign partners and the U.S. Postal Service to

minimize disruptions.

Kelly Ann Shaw, a former senior White House trade official

during Trump's first term, said she expected the removal of the

de minimis exemption to cause some initial turmoil, but

expressed confidence it would be worked out over time.

"I think there will be growing pains as this unfolds, but it

is U.S. law," said Shaw, now with the Akin Gump law firm in

Washington. "There will be a bit of a transition time while CBP

figures out how to process these low-value shipments, which it

hasn't had to do in many years."