The US de minimis exemption for packages from China and Hong Kong ends today, with air cargo waiting to see how much of an impact it will have on the market.
The end of the exemption means that from 2 May, packages from China and Hong Kong worth less than $800 will no longer be able to enter the US duty-free and with minimal customs scrutiny.
They will now have to pay a 120% tariff rate or a flat fee of $100, due to rise to $200 at the start of June.
Last year, as many as 4m packages a day were entering the US under the de minimis exemption, up from 2.8m per day in 2023.
Online retailers such as Shein and Temu have been exploiting the loophole to sell goods cheaply to US consumers.
According to data firm Xeneta, approximately 50% of air cargo shipments on the China–US route is e-commerce, accounting for around 6% of global volumes.
“A sharp drop in demand is likely to challenge carriers’ capacity planning, with early signs already pointing to freighter flight cancellations and potential redeployments to other trade lanes,” it said.
“This is a double-edged sword. A decrease in demand on one of the key airfreight lanes between Asia Pacific and North America will have a big impact, but so too will the redeployment of capacity on a global level,” said Xeneta head of airfreight Niall van de Wouw.
“This may be a year when we grow weary of seeing the word ‘unprecedented’ in market performance statements. The macroeconomic picture will depend on how long the uncertainty lasts and what will be at the end of it, but the outlook currently looks quite daunting.
“This is not about one industry being affected. This is about major trade lanes being affected, and we haven’t seen anything on this scale before,” van de Wouw added.
Overall, he said it was too early to predict how large of an impact the development will have. The picture will be clearer when demand figures for May are released.
Forwaders have also warned of the administrative burden of processing the shipments.
”Customs duties aside, all shipments will, as of 2 May, be subject to a standard customs clearance process, with this in itself presenting an administrative nightmare,” Scan Global Logistics said in a market update.
”With elevated tariffs of 145% currently in place for China, the elimination of the de minimis exemption will significantly influence pricing strategies for e-commerce platforms and consumer purchasing behaviour” the forwarder added. “Companies such as Shein and Temu, which previously leveraged the de minimis threshold to offer low-cost goods, have already announced price increases.”
Ahead of the end of the exemption, the move already seemed to be having an impact on the market, although the US has also implemented tariffs of 145% on Chinese imports – other than some other tech products that have been exempt – making it hard to distinguish how much of an impact each of the two developments are having.
Figures released today by data provider WorldACD show that in the week running to 17 April, cargo volumes from China and Hong Kong to the US were down by around 15% year on year.
Meanwhile, sources indicate that spot market rates from Hong Kong to the US have fallen by just under $1 per kg since the end of April to around $4.40 per kg today.
At the start of this week, freight forwarder Dimerco reported that from the end of April, several freighter charters have been cancelled, while further cancellations are expected in the coming weeks.
“Overall, e-commerce shipment volume has dropped by approximately 50% since mid-April compared to the same period last year,” Dimerco said.
The company said major Chinese carriers were also considering cancelling services, although a final decision is still pending.
“If these cancellations go through, the already limited capacity from China to the US will be further reduced,” Dimerco said.
There are also concerns that any capacity withdrawn from China-US services could end up in other markets, risking pulling down rates on those trades if supply outstrips demand.
Indeed, Dimerco Express vice president, global sales and marketing Kathy Liu said that much of the freighter capacity from China/Hong Kong removed in recent weeks has been shifted to destinations like Nuevo Laredo in Mexico and other parts of Latin America, where demand has actually gone up, especially out of Mexico.
Demand out of Southeast Asia and Taiwan has stayed relatively stable – that’s likely due to the 90-day tariff exemption granted by the US government, which is giving some breathing room to shippers in those regions.
The US had tried to end the exemption in February, but customs did not have the systems in place to handle the number of packages being brought into the country and had to backtrack on its decision within a couple of days.
Last year, around 1bn packages were transported into the US under the exemption, with around 800m of these shipments arriving through international mail; express courier services such as UPS, DHL, and FedEx; or were transported as cargo on commercial airline flights.
Washington argues that criminals are using the exemption to smuggle illegal items, such as illicit drugs and weapons, or evade paying duties.