De Minimis Exemption Ends: What E-Commerce Businesses Must Know

The de minimis exemption has officially ended, eliminating the $800 threshold that allowed international shipments to enter the U.S. duty-free. This change immediately impacts every e-commerce business importing products from overseas, requiring formal customs procedures for all shipments and adding duties, taxes, and processing fees that can increase import costs by 15-40% across common product categories.

This guide explores the de minimis exemption and its implications for e-commerce businesses, drawing on insights from Matt Grattan, Head of Sales and Partnerships at Zamp.

What Is the De Minimis Exemption?

The de minimis exemption allowed imported goods valued below a set threshold to enter a country without paying customs duties and taxes, and with simplified entry procedures. In the United States, the de minimis threshold was set at $800—among the highest in the world—under the Trade Facilitation and Trade Enforcement Act of 2016.

Goods valued at $800 or less per person per day could enter duty-free and without full customs clearance, provided they were not subject to specific exclusions such as restricted products or punitive tariffs. By contrast, the European Union exempts imports up to €150, and Canada sets its threshold as low as CAD $20 for many goods.

The de minimis definition applied to the declared value of goods per shipment, excluding shipping and insurance costs. Importantly, the threshold applied per shipment rather than per recipient, allowing businesses to structure multiple smaller orders to remain under the limit. 

The de minimis safe harbor provision allowed automatic qualification without pre-approval processes or complex documentation. Businesses simply declared shipment values below $800 and benefited from streamlined customs processing, avoiding the formal entry procedures, bonds, and broker requirements that applied to higher-value imports.

How De Minimis Elimination Impacts E-Commerce Businesses

The end of the de minimis exemption creates immediate operational and financial challenges that force fundamental changes in e-commerce business models, supply chain strategies, and competitive positioning.

Direct Cost Impact on Import Operations

E-commerce businesses are seeing import costs climb as duties and processing fees erode margins. A $200 electronics accessory that once cleared duty-free may now incur duties of $12-$20, plus an additional $25-$50 in processing and brokerage charges. That's a 15-25% increase in landed cost that you either absorb or pass along to customers.

"The removal of the de minimis exemption has introduced new costs for international merchants. Packages shipped into the U.S. are now subject to tariffs, import duties, and additional fees associated with customs processing. The magnitude of these costs depends largely on the tariff rate of the country of origin," explains Matt Grattan, Head of Sales and Partnerships at Zamp.

The impact has been immediate and substantial.

"Many of these costs are passed on to buyers, while merchants also face increased operational expenses to support compliance with the new requirements. For example, small packages handled via postal services into the U.S. have dropped by over 80% since the de minimis exemption went into effect at the end of August," Grattan notes.

Operational Complexity and Compliance Burden

E-commerce businesses must now establish relationships with licensed customs brokers or develop internal customs capabilities. This represents a fundamental operational shift from simplified import processes to formal trade compliance requirements.

"The elimination of the de minimis exemption is raising costs, complicating compliance, and introducing new delivery challenges for cross-border e-commerce. In response, international sellers are adjusting pricing, reconfiguring fulfillment strategies, including establishing U.S.-based operations and, in some cases, scaling back or exiting the U.S. market entirely," says Matt Grattan.

The timeline for adaptation is immediate and unforgiving.

"The de minimis exemption ended on August 29, meaning that technically, every package imported into the U.S. with a value under $800 is now subject to duties and customs processing," Grattan explains.

Every product requires accurate HTS classification at the 10-digit level, demanding detailed knowledge of composition, function, and intended use. Classification errors trigger penalties of 10-40% of shipment value, making professional expertise essential for consistent compliance.

"Cross-border dropshippers and international D2C brands shipping from overseas warehouses are likely to be most heavily impacted. Their business models depend on high volumes of low-value orders with slim margins, and many lack in-house compliance and fulfillment expertise—creating significant potential for downstream compliance issues," Grattan notes.

Documentation requirements expand dramatically, including commercial invoices, packing lists, bills of lading, country-of-origin certificates, and supplier correspondence. Records must be maintained for five years and remain readily available for customs audits.

Supply Chain and Inventory Management Changes

The new cost structure forces many e-commerce businesses to abandon frequent small-shipment strategies in favor of consolidated imports to achieve economies of scale in customs processing. However, consolidation requires increased working capital for larger inventory purchases and expanded warehouse capacity.

Businesses must evaluate trade-offs between customs cost savings and inventory carrying costs, demand forecasting accuracy, and stockout risks. Products with predictable demand patterns benefit from consolidation, while seasonal or trend-driven items require more flexible approaches.

Many companies are exploring supplier diversification to mitigate the increased costs, but this approach carries its own challenges.

"There can be compliance risks. These risks may arise from changes in suppliers, as there could be regulatory issues depending on the regions involved. Additionally, the cost of switching—such as moving to a new supplier or command—can require a significant upfront investment to implement," notes Margarita Bello, the Vice President of Client Strategies and Solutions at Izba.

The shift particularly impacts dropshipping and print-on-demand business models that relied on suppliers handling customs compliance for individual orders. These models may become economically unfeasible under formal entry requirements and associated costs.

Sales Tax Implications and Strategic Response to De Minimis Changes

While primarily affecting customs duties, the elimination of de minimis creates significant sales tax compliance considerations for e-commerce businesses adapting their operational structures and inventory management strategies.

Navigating New Sales Tax Nexus Requirements

Higher import costs may force businesses to restructure fulfillment operations, potentially creating new sales tax nexus obligations. Consolidating inventory in specific states to optimize customs processing could trigger economic nexus thresholds requiring sales tax registration and compliance in new jurisdictions.

Businesses transitioning from dropshipping models to consolidated inventory management must assess the sales tax implications of maintaining physical inventory across different states. Each state maintains unique nexus thresholds, registration requirements, and filing obligations that add compliance complexity.

Immediate Operational Strategies

Successful adaptation requires immediate action across multiple areas. Analyze your product portfolio to identify consolidation opportunities that minimize per-unit customs costs while maintaining inventory efficiency. Fast-moving products with predictable demand often benefit from larger, less frequent shipments.

Evaluate alternative sourcing options that leverage preferential trade agreements. The United States-Mexico-Canada Agreement (USMCA), CAFTA-DR, and other agreements provide duty advantages for qualifying products from member countries.

Technology Integration and Compliance

Invest in customs management software that integrates with existing e-commerce platforms to automate classification, duty calculation, and documentation generation. Manual processes become impractical for businesses with extensive product catalogs.

"Integrating a duty calculator into the e-commerce checkout process helps prevent surprise costs by including duties and tariffs in the final order price," advises Matt Grattan. "Merchants can also leverage trade compliance software to automate the assignment of Harmonized System (HS) codes. Manual classification is error-prone, and misclassification can lead to delivery delays or penalties."

Strategic Planning and Professional Support

Reassess pricing strategies to account for increased import costs while maintaining competitive positioning. Some businesses may need to absorb cost increases initially while evaluating long-term sourcing alternatives.

"It's only been a few weeks since the change took effect, but the most common pitfalls will probably be related to incorrect HS code classification, incomplete customs documentation, and failing to update checkout workflows to reflect the added landed costs for buyers," observes Matt Grattan.

For businesses considering U.S. operations as an alternative, Grattan warns: 

"For international businesses that depend heavily on the U.S. D2C market for small parcel sales, relocating operations into our country will be an option they might consider. Doing so eliminates many cross-border shipping and tariff challenges, but it also opens the door to a new set of obligations. Companies entering the U.S. must navigate federal and state registrations, income tax, and sales tax compliance. In other words, while the nature of the compliance burden changes, it doesn't disappear—it's simply unavoidable."

Wrapping Up

The end of the de minimis exemption creates significant challenges but also opportunities for businesses that adapt strategically with appropriate professional support. While customs compliance becomes more complex, maintaining accurate sales tax compliance across all states remains essential for continued e-commerce success.

As you restructure operations, modify fulfillment strategies, and adapt to new import costs, don't let sales tax compliance become another burden. Zamp is here to take sales tax compliance completely off your plate, from registrations to filing and everything in between.

Book a call to speak with our expert team today. You have enough complexity to manage—sales tax shouldn't be one of them.

About the author

Emily Kordys

Emily Kordys is a Content Marketing Manager with seven years of experience in the sales tax, auto, and real estate industries. She currently resides in North Carolina.