New Tariff Rules Under Sec. 321 “De Minimis” and What They Mean for Your eCommerce Business
On September 13th, the Biden administration made waves by proposing new regulations targeting Chinese eCommerce giants like Shein and Temu. These changes focus on closing a loophole that allows goods under $800—commonly referred to as de minimis imports—to enter the U.S. without taxes or duties. If you’re in the eCommerce space, you’re probably wondering what these changes mean for your business. Let’s break it down.
What Exactly is Section 321?
Under Section 321 of the Tariff Act of 1930, goods valued under $800 are exempt from import duties and taxes when shipped directly to U.S. consumers. This provision, originally designed for low-volume imports, has become a loophole for foreign eCommerce companies, especially from China, to ship low-cost items to the U.S. at unbeatable prices. Platforms like Shein and Temu have capitalized on this by flooding the market with inexpensive goods, cutting into the profits of U.S.-based retailers.
But, with these new proposed regulations, the landscape is about to shift—especially for those who’ve been benefiting from this loophole.
What’s Changing?
The proposed regulations aim to exclude products already subject to tariffs (like textiles, apparel, and footwear under Section 301) from being eligible for de minimis exemptions. Additional data will also be required for these shipments, along with certificates of compliance, to ensure these goods meet U.S. standards.
The idea is to crack down on “unfair competition” from Chinese eCommerce platforms, which have taken significant market share by avoiding the tariffs that U.S.-based retailers have had to navigate. For perspective, de minimis shipments surged from 636.7 million in 2020 to 1 billion in 2023, driven largely by these platforms.
So, what does this mean for your eCommerce business? Here’s how you can assess the impact and take action.
If Your Business Doesn’t Rely on De Minimis Imports—Congrats!
If you’re not sourcing low-cost, duty-free goods from China, these changes could actually benefit your business. With some of your competitors facing higher costs, you may be able to capture more market share. As their prices increase, customers will be looking for alternatives, and if you’ve built a solid, reliable supply chain, you’re in a great position to win over those customers.
It’s the classic “slow and steady wins the race” scenario—those who didn’t rely on the loophole are in a stronger position now.
If You Do Rely on De Minimis Imports—Here’s What to Do
If your business has been benefiting from de minimis imports to keep costs down, you’ll need to take a hard look at your supply chain and strategy. Your cost structure has shifted, and that will impact your margins. But it’s not all bad news—there are ways to mitigate the impact.
1. If Price is the Only Differentiator:
Let’s say you’ve been importing generic goods where cost is the main factor. Now’s the time to explore alternative suppliers, especially in countries with friendlier trade relations with the U.S.
Consider shifting your supply to South or Southeast Asia, where manufacturing costs are often comparable or even cheaper than in China. Countries like Vietnam, Indonesia, or India could offer similar pricing without the 15-25% tariffs you’ve been paying for Chinese imports.
Better yet, if you can nearshore your supply chain to Latin America, you’ll benefit from duty-free trade under agreements like USMCA (United States-Mexico-Canada Agreement). Plus, shorter transit times mean less inventory tied up in transit, improving your cash flow and service levels. Here at FlexChain, we excel at helping businesses transition to LATAM nearshoring solutions. If you’re considering making the switch, let’s talk.
2. If Your Chinese Suppliers Are Strategic:
If the goods you’re importing are differentiated and your supply chain in China is critical to your business, you may not have the flexibility to simply change suppliers. In this case, it’s worth considering a price adjustment to offset the higher costs.
You can also look into stocking more inventory locally. While this increases your upfront inventory costs, it can improve service levels and reduce your reliance on de minimis exemptions. As your business evolves, focus on maintaining consistency and availability for your customers—even if it means slightly higher prices.
General Advice for Navigating Geopolitical Uncertainty
One of the biggest lessons from these changes is that geopolitical risks are real, and they can disrupt business models that seem secure. If your entire company is built around exploiting a loophole, you’re vulnerable to shifts in policy like this one.
It’s tempting to focus on cutting costs wherever possible, but building a sustainable business means factoring in global trends. We’re seeing a rise in protectionism, and the U.S.-China relationship will likely remain tense. The key takeaway? Make sure your business plan considers these risks. The more diversified and adaptable your supply chain is, the better positioned you’ll be to handle unexpected changes.
Looking Ahead: What’s Next for the De Minimis Rule?
While these changes are just proposals for now, they signal a clear intent by the U.S. government to crack down on de minimis abuse. There’s growing bipartisan support for reform, with multiple bills in Congress aimed at tightening regulations on low-value imports.
One thing is clear: eCommerce businesses will need to adapt. Whether that means finding new suppliers, adjusting prices, or revisiting your business model, now’s the time to act. The retail landscape is shifting, and businesses that can navigate these changes with agility and foresight will be the ones that thrive.
Final Thoughts
At FlexChain, we’re here to help eCommerce retailers, private equity firms, and 3PL companies navigate the ever-evolving supply chain landscape. If the de minimis changes have you rethinking your strategy, we can guide you through the transition—whether that means nearshoring, optimizing your freight logistics, or simply offering a fresh perspective on your current setup.
Reach out to us today to explore how we can help your business stay ahead of the curve.
