Published by Global Banking and Finance Review
Posted on February 5, 2025
By Lisa Baertlein and Helen Reid
LOS ANGELES/LONDON (Reuters) -The U.S. Postal Service said on Wednesday it would again accept parcels from China and Hong Kong, reversing a 12-hour suspension after President Donald Trump scrapped an exemption used by retailers including Temu, Shein, and Amazon to ship low-value packages duty-free to the United States.
The about-face added to the growing confusion among retailers and express shipping firms over how to deal with Trump's new 10% tariff on imports from China and his closure of the "de minimis" duty exemption for packages valued at under $800, with the stated aim of stopping the flow of fentanyl and precursor chemicals into the United States.
Major international shippers promised to maintain deliveries, but disruptions may still occur as the USPS works out how tariffs on small packages would be collected in tandem with the U.S. Customs and Border Protection department.
FedEx, meanwhile, suspended its money-back guarantee on overseas shipments.
"We're all running around like headless chickens at this moment in time, trying to second-guess what's going to happen. And in two weeks' time we may be back to normal," said Martin Palmer, co-founder of Hurricane Commerce, a cross-border ecommerce data provider.
"There has really been absolutely zero time for anyone to prepare for this," said Maureen Cori, co-founder of New York-based consultancy Supply Chain Compliance. "What we really need is direction from the government on how to handle this."
About 1.36 billion shipments entered the United States using the de minimis provision in 2024, up 36% from 2023, according to CBP data. Reuters reporting has found that drug traffickers have exploited the exemption to bring fentanyl and its precursor chemicals into the country unscreened.
The USPS said it was working with the CBP to institute an efficient way to collect the new tariffs on China to "ensure the least disruption to package delivery," it said in a statement.
The USPS did not comment on whether its temporary suspension had been tied to Trump's order ending de minimis shipments from China, which was announced on Saturday and came into force on Tuesday.
"The problem is not with the Postal Service. The problem is with Customs. They are not prepared for what's happening," said one postal industry expert, who requested anonymity for fear of retribution. "The trillion-dollar question," the expert said, is who will collect the duties and who will pay them.
The swift change puts an added burden on the CBP to use its already limited resources to focus on collecting duties for the flood of small packages that enter the country, said Kate Muth, executive director of the International Mailers Advisory Group (IMAG), which represents the U.S. international mailing and shipping sector.
Making the change through the traditional federal rule-making process would have allowed affected parties to provide input and adjust in the months-long period before implementation, she said.
"We don't have that luxury. Everything's happening immediately without preparation," she said.
There is also the potential that the CBP could see a net revenue loss if the cost to collect those duties is higher than the revenue that's collected, she said.
INDIVIDUAL CLEARANCES
Currently, de minimis parcels are consolidated so that customs can clear hundreds or thousands of shipments at once, but they will now require individual clearances, significantly increasing the burden for postal services, brokers and customs agents, Cori said.
The provision was initially intended as a way to streamline trade, and its use has surged with the increase in online shopping, fueling the growth of fast-fashion retailers Shein and online dollar-store Temu, both of which sell products ranging from toys to smartphones.
The two firms together likely accounted for more than 30% of all packages shipped to the United States each day under the provision, according to a June 2023 U.S. congressional committee on China that also found nearly half of all packages shipped under de minimis come from China.
Shein and Temu did not reply to requests for comment.
GREATER SCRUTINY
Some international couriers including FedEx and SF Express, China's largest express delivery company, said they will continue to send packages to the United States.
But FedEx said it had suspended its money-back guarantee for U.S.-inbound shipments effective Jan. 29, citing recent regulatory changes, according to a notice on its website.
Deutsche Post-owned DHL said it was working to avoid disruption to supply chains and limit negative impacts on customers and consumers.
UPS said in a statement that it was working with customers as they "evaluate their needs and adjust their supply chains." UPS, FedEx and DHL have systems in place to collect duties and can switch customers over to those services, shipping experts told Reuters.
Logistics provider Easyship warned clients who regularly send sub-$800 shipments to the United States that they are likely to face much greater scrutiny and advised them to set up distribution centers within the country or partner with a local warehouse or U.S. fulfillment center.
YunExpress said in a notice to customers that shipments would be subject to the new 10% duty plus prior 25% duties on steel and aluminum and Trump's Section 301 duties of 7.5% to 25% on certain Chinese goods.
As of Wednesday afternoon there was still no call scheduled between Trump and Chinese President Xi Jinping to discuss the new U.S. tariffs and Beijing's retaliatory measures, a person familiar with the matter told Reuters.
(Reporting by Chandni Shah in Bengaluru, Casey Hall and Brenda Goh in Shanghai, Lisa Barrington in Seoul, Lisa Baertlein in Los Angeles, Anne Marie Roantree, Clare Jim, James Pomfret and Jessie Pang in Hong Kong, Greg Bensinger and Trevor Hunnicutt in Washington and Helen Reid in London; Writing by Miyoung Kim and David Lawder; Editing by Mark Porter and Nick Zieminski)
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