Trump’s big blow to Indian online sellers’ US dream

If you’re a young e-commerce business owner in India selling to the US, you are in for a rude shock. US President Donald Trump has just scrapped ‘De Minimis exemption,’ that is tax-free entry for small parcels under $800, for all countries.

Tax on non-postal packages
According to a White House statement, effective August 29, imported goods sent through means other than the international postal network, that are valued at or under $800 and that would otherwise qualify for the de minimis exemption, will be subject to all applicable duties.

Treatment for postal packages

The statement says that for goods shipped through the international postal system, packages will instead be assessed duties according to one of the following methodologies:

Ad valorem duty

A duty equal to the effective tariff rate imposed under the International Emergency Economic Powers Act (IEEPA) that is applicable to the country of origin of the product. This duty shall be assessed on the value of each package.

Specific duty
A duty ranging from $80 per item to $200 per item, depending on the effective IEEPA tariff rate applicable to the country of origin of the product. The specific duty methodology will be available for six months, after which all applicable shipments must comply with the ad valorem duty methodology.

US rationale for ending ‘De minimis’
Justifying the move, the Trump administration has argued that this withdrawal will close the “catastrophic loophole” used to, among other things, evade tariffs and funnel deadly synthetic opioids in the US. It also said that unsafe or below-market products that harm American workers and businesses will now not be allowed into the United States.

History of de minimis exemption

The decision taken by the Trump administration ends a policy that has been in place since 1938. The policy allowed packages valued at $800 or less to enter the US duty-free with minimal customs processing.

De minimis, a Latin term meaning "about minimal things", exemption was created for packages under $1 in 1938. Gradually, it was increased to $8 in 1978, $200 in 1993, and finally $800 in 2016.The dramatic increase to $800 in 2016 coincided with the boom in Chinese e-commerce platforms like Shein and Temu, which used this exemption to offer ultra-competitive prices to American consumers.

De minimis withdrawal: The impact

Apart from helping brands like Shein capture a sizeable chunk of US markets, the exemption also helped small direct to consumer (D2C) e-commerce players from various countries such as India.

Until now, products, whether jewellery, handicrafts, or fashion, sold by small Indian e-commerce brands could land duty-free in the US. But starting 29 August, every parcel will face import duties.

As the White House statement says, the tax rate depends on the country of origin. For India, that is a whopping 50% from August 27. So, a $100 earring will attract a $50 duty.

That means higher prices for American buyers, squeezed margins for Indian businesses, and tougher competition from US sellers.

If you want to stay in the game, you’ll need to rethink your strategy. The options that you have include warehousing in the US, adjusting your pricing, or even exploring new markets.