The De Minimis Exemption: Everything You Need to Know
There’s a term floating around that you might be hearing more often lately: the de minimis exemption. If you’ve been following us for a while, you're aware that this little-known tax policy plays a significant role in how fast fashion companies like Shein and Temu flood the US market with inexpensive, unregulated clothing. Recently, the de minimis exemption has become more relevant (and controversial), so we’re here to break down what’s going on with it and how it could impact consumers, small businesses, and the future of sustainable fashion.
What is the de minimis exemption?
The de minimis exemption is a U.S. tax rule Congress passed in 1938. It allows shipments coming to the U.S. valued at under $800 (per person, per day) to enter the country without paying tariffs, duties, or taxes.
The de minimis exemption was created by a bipartisan US Congress to make it easier for small businesses and individuals to receive goods from other countries. By cutting through customs red tape, it streamlined international trade on a small scale and made global shopping more accessible.
However, in the era of online shopping and fast fashion, what began as a well-intentioned policy has evolved into a significant loophole.
The fast fashion of it all:
Fast fashion giants like Shein and Temu have made their fortune capitalizing on the de minimis exemption. These two companies alone are responsible for more than 30% of all packages shipped to the United States daily under the de minimis exemption. Nearly half of all de minimis shipments to the U.S. originate from China.
By shipping low-cost goods directly to individual consumers in small packages, these companies avoid taxes and skirt regulations that would otherwise apply to imported goods. That means:
- No import duties
- No inspections for product safety or ethical sourcing
- No accountability under U.S. labor or environmental standards
This is more than just a trade issue. It’s a human rights and environmental issue, too.
Forced Labor and the Xinjiang Crisis:
Here’s where it gets especially troubling: many of the products shipped under the de minimis exemption are suspected to be made with forced labor, specifically from China’s Xinjiang Uyghur Autonomous Region (XUAR).
There’s a long explanation of what’s going on in the Xinjiang Uyghur Autonomous Region (XUAR), but for this post, the TL;DR version is that the Chinese Communist Party has subjected the predominantly Muslim ethnic minority groups in this region to genocide, state-imposed forced labor, and crimes against humanity since 2016. Needless to say, we do not want to fund this system by purchasing goods made by forced labor.
The United States passed the Uyghur Forced Labor Prevention Act (UFLPA), which bans imports of goods connected to forced labor in the region. But because companies like Temu are using the de minimis exemption to bypass customs, there is little to no enforcement of this law. Temu has publicly stated that it “does not expressly prohibit third-party sellers from selling products based on their origin in the Xinjiang Autonomous Region.”
Therefore, we can be reasonably certain that products made by forced labor are entering our country daily. It’s a human rights violation we simply cannot abide.
Why is Trump targeting the de minimis exemption?
In April 2025, Trump announced a new trade policy eliminating the de minimis exemption for goods made in China and Hong Kong, effective May 2. This move is part of a broader economic strategy aimed at punishing China, reducing the U.S. trade deficit, and bringing manufacturing back to the United States. By eliminating this loophole, the administration hopes to:
- Combat China’s role in the opioid crisis
- Disrupt China’s ability to flood the U.S. market with cheap goods
- Level the playing field for American businesses
- Enforce labor and environmental regulations on imported goods
As with any policy, there are many opinions on how closing the loophole will impact Americans.
What are the impacts of closing the de minimis loophole?
The Pros:
- Reduces forced labor imports: subjecting all packages to customs policies will make it harder for companies to evade the UFLPA.
- Encourages more sustainable consumption: If fast fashion becomes more expensive, demand will fall. We’re already seeing it happen in Shein and Temu’s monthly reports. As a natural consequence, we expect to see less waste, pollution, and overconsumption.
- Supports ethical businesses: Helps sustainable fashion brands compete on a more level playing field by requiring fast fashion companies to raise their costs.
- Improves U.S. oversight: Increases visibility into what’s entering the country and under what conditions.
The Cons:
- Higher costs for consumers: The loophole benefits people in rural and low-income households who don’t have the same access to goods that other consumers have. Everyday essentials like chargers, clothing, and household items may become more expensive for people who rely on affordable goods.
- Increased prices for small businesses: Businesses that source parts or products from overseas could face higher import costs.
- Shipping delays and red tape: Closing the loophole could create customs backlogs and logistical challenges, especially for small shipments. It may require pulling Customs and Border Patrol resources from critical projects, like intercepting drugs entering our country.
Will the policy change the fast fashion industry?
Since the policy change, we’re already seeing major effects. As of June 2:
- Temu and Shein slashed ad spending in the U.S.
- Temu and Shein reported sharp declines in U.S. sales
- Temu has reportedly lost more than half of its daily U.S. users
Honestly, we love to see it. Ultra-cheap, super-fast fashion has increasingly dominated the market at the expense of people and the planet. If prices go up and demand goes down, that’s a win for ethical fashion, sustainability, and human rights.
So, where are we on closing the de minimis exemption?
As of this writing (June 5, 2025), the de minimis exemption appears to be reinstated. While the de minimis provision was eliminated on May 2 for goods made in China and Hong Kong, a federal trade court decision in late May struck down President Trump’s tariffs, seemingly bringing back the de minimis exemption. It’s unclear what the long-term legal outcome will be.
Like many headlines coming out of this administration, the status of the de minimis loophole is evolving quickly. We’ll keep you updated!
Our final thoughts:
The de minimis exemption may seem like an obscure trade rule, but its impact is massive. It affects everything from human rights and labor practices to environmental sustainability and consumer habits.
Closing the loophole won’t change the fast fashion game overnight, but it could be an important step toward a system where cheap goods no longer come at such a high cost.
Sources:
https://www.nftc.org/de-minimis-a-vital-tax-exemption/
https://www.investopedia.com/de-minimis-exemption-rule-11715853
https://www.dol.gov/agencies/ilab/against-their-will-the-situation-in-xinjiang
https://www.nytimes.com/2025/05/15/podcasts/the-daily/tariff-shein-temu-china-fast-fashion.html
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