The Impact of Lowering De Minimis Threshold on E-commerce and How Managers can prepare for the Future
Surging volumes from ultra-fast fashion companies like Shein and Temu are exacerbating e-commerce growth, which has quickly become a major driver for air cargo industry. With U.S. lawmakers more intensely scrutinizing e-commerce goods from Asia in recent years, there’s a chance that the air cargo industry’s windfall may disappear if the de minimis exemption threshold is lowered, making companies avoid tariffs for shipments below $800 into the U.S. Regulations will have a tough time changing entrenched consumer habits that rely on the speed of air transportation. Air cargo demand will still be a requirement for transport needs, but lowering the threshold may prompt companies to question overall profitability.
The impact of a lower threshold on market dynamics will depend on where goods are bought. If goods are bought on the high street, then they are likely to be shipped via ocean because businesses can build up stock inventories. However, if goods are bought online, particularly fast-fashion items, the only way to get them to consumers in the West within the required timeframe is by air freight.
According to Xeneta Chief Airfreight Officer Niall van de Wouw, the primary aim of an e-commerce business model is not avoidance of import duties, but to directly connect consumers in the West with cheap manufacturing in the Asia-Pacific region. Therefore, regulatory changes to the de minimis threshold may not have a significant impact on overall profits among e-commerce businesses in the short to medium term.
However, lower de minimis exemptions will affect supply chain managers. With Congress looking to advance legislation that impacts the de minimis exemption, near-term contract negotiations and peak planning are now critical in preparation. Air cargo shippers should keep a constant eye on rate levels and use air freight platforms like Freightos or Xeneta to access spot rates and market updates regularly to help them lock in rates without exceeding annual transportation budget.
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