Retail’s Growing Challenge – The “De Minimis Rule” Isn’t So Minimis Anymore

Last June, I wrote an article entitled “Retail Competition, direct to you from the other side of the world.” Here is what I wrote:

Before e-commerce, a retailer competed with the store down the street or at the mall. With the advent of digital shopping, competition could be from anywhere in your country. Now, it can come from the other side of the world.

Retail Competition, direct to you from the other side of the world, Richard Gottlieb, Global Toy News, June 17, 2021

Why would a consumer buy directly from a retailer in China? They do because U.S. customs laws allow the importation of goods with a value of less than $800 to come into the U.S. customs-free. In other words, as a consumer, you can purchase directly from the Chinese source at incredibly low prices without having to pay the tariff. However, if a company were to buy those same products in amounts over $800, they would have to pay duty.

I am bringing the issue up again because of an April 25, 2022, Wall Street Journal article by Josh Zumbrun, “The $67 Billion Tariff Dodge That’s Undermining U.S. Trade Policy.” Here is how the report describes the issue:

The rule that allows American tourists to bring back souvenirs from overseas duty-free is now being used by companies to avoid billions of dollars in tariffs—and it’s perfectly legal.

Known as the de minimis rule, the exemption has been around for decades, deriving its name from the Latin term for something too small to fuss with…

The known value of de minimis imports soared to over $67 billion in 2020 from an estimated $40 million in 2012

The $67 Billion Tariff Dodge That’s Undermining U.S. Trade Policy, Josh Zumbrun, wall street
journal, April 25, 2022

According to the Wall Street Journal, the rise came as a result of the tariffs imposed under the Trump administration. Consumers began avoiding the elevated tariffs by buying directly from China. Chalk this one up under the “law of unintended consequences.”

Though this is not a problem for the toy industry, which is essentially duty-free, it is a challenge for our retail community, which suddenly finds itself in unfair competition with digital retailers a world away.

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