President Trump on Wednesday ordered the closure of a loophole that allows retailers to send clothes and other goods from China directly to American shoppers without paying tariffs.
But the order could raise prices for consumers and create delays as delivery companies and the United States Postal Service are forced to verify the value of many more packages than they do now, trade and logistics experts said.
The loophole, known as the de minimis exemption, currently applies to goods worth less than $800. Such goods are allowed to enter the United States tariff free. Mr. Trump’s order, which takes effect on May 2, removes the exemption from packages from China, the largest source of de minimis shipments, and Hong Kong. Items bought and shipped this way also require far less customs paperwork.
By ending the exemption, Customs and Border Protection will now collect tariff revenue on shipments worth less than $800. Mr. Trump also said his order would help prevent drug smuggling. He and others have claimed that fentanyl and its precursor ingredients are sometimes shipped to the United States as de minimis shipments.
Shippers in China “hide illicit substances and conceal the true contents of shipments sent to the United States through deceptive shipping practices,” Mr. Trump’s order said.
Lawmakers from both parties have called for reform to the de minimis provision.
“For too long, this customs loophole has let foreign exporters flood our market with cheap goods and helped drug traffickers move fentanyl past our borders — resulting in factory closures, job losses and deaths,” Representative Rosa DeLauro, a Democrat of Connecticut, said in a statement.
The National Council of Textile Organizations, a trade group that represents U.S. manufacturers, welcomed Mr. Trump’s move. The group said in a statement that it is pushing for an end to the loophole for all imported goods, not just those from China and Hong Kong.
But Mr. Trump’s order will likely push up costs for American consumers, some trade analysts said. Research has found that eliminating the provision entirely would cost Americans between $11 billion and $13 billion, and those higher costs would disproportionately hurt lower-income and minority households.
“This is going to be pretty unpopular with a lot of Americans,” said Clark Packard, a research fellow at the Cato Institute, a research organization that generally favors free trade.
Mr. Packard questioned whether closing the loophole would help drug detection efforts, saying that customs officials already screen packages entering the country, including de minimis shipments.
“By flooding the customs process with more paperwork, it probably detracts from C.B.P.’s ability to try to ferret out illegal drugs traffic across borders,” Mr. Packard said.
Shein, the fast-fashion retailer that sends most of its products directly from China under the provision, has in recent years become very popular. The company relies on factories in China that make many different items in small quantities, said Sheng Lu, an apparel business professor at the University of Delaware. “There’s no realistic alternative to make their products,” he said.
Shein and Temu, which also relies on Chinese vendors, have diversified by working with more American sellers and opening warehouses in the United States, which could limit the impact of Mr. Trump’s orders on them. The companies did not immediately respond to requests for comment.
“This is not going to kill them off by any means,” said Aaron Rubin, the chief executive of ShipHero, a warehouse management software firm. “This will just change the business model.”
But small and medium U.S. retailers that rely on the de minimis provision for Chinese goods are poised to be hit even harder, said Professor Lu. Having to cover the extra costs, he said, could threaten the survival of smaller businesses, if customers are unwilling to pay higher prices or deal with delivery delays.
Mr. Trump had ordered the end of the exemption in February, but reinstated it within a few days. Logistics experts said the short closure caused a pileup of packages at the borders — logjams that they said could happen again when the president’s new order goes into effect.Without the exemption, shippers will have to file much more detailed paperwork on more packages, which would lead to delays and higher costs for courier services like FedEx, UPS and DHL.
Mr. Trump’s order seemingly seeks to simplify the situation for the United States Postal Service, which, unlike private couriers, does not have its own global network. Instead, it receives packages from the postal services of other countries. Under the order, packages coming through the international postal network will either be subject to a fee of 30 percent of the value of the goods, or $25, rising to $50 in June. Packages delivered by private couriers would be subject to whatever tariffs the United States has imposed on China or Hong Kong.
Asked whether it was ready to process and check more packages, Hilton Beckham, the assistant commissioner at the Customs and Border Protection said: “Our automated systems are fully updated to capture, assess and administer all new duties, and clear guidance will be provided to support uniform enforcement across the nation.”
