de minimis

Turning Tariffs into Refunds: How Duty Drawback Helps Brands Win in the Post–De Minimis Era

ByAnnik Sobing

The recent elimination of the U.S. de minimis exemption—the long-standing rule that allowed low-value shipments to enter the country duty-free—has sent shockwaves through the import and trade landscape. Starting August 29, 2025, every commercial shipment entering the U.S., regardless of value, is subject to tariffs, duties, and full customs procedures. This new reality presents critical challenges and cost pressures for global brands, especially in consumer goods and e-commerce.

However, savvy companies are turning to the duty drawback program as a powerful tool to reclaim much of the tariff cost and maintain profitability amid rising import duties.

What Is the De Minimis Exemption and Why Did It End?

For years, the U.S. allowed packages valued under $800 to enter without duties or taxes under the de minimis policy (§ 321 of the Tariff Act of 1930). This facilitated fast, low-cost imports of small parcels that powered the direct-to-consumer boom and e-commerce growth.

However, the surge in volume—more than 1 billion de minimis shipments in 2024—and reports of misuse, including undervaluation, smuggling, and illegal goods trafficking, led policymakers to conclude that this exemption had become a loophole exploited to avoid customs duties.

Consequently, President Trump signed an executive order in July 2025 suspending de minimis treatment for all countries, with full enforcement commencing on August 29, 2025. This new policy subjects all parcels to tariffs and customs formalities regardless of value.

The Duty Drawback Program: A Strategic Refund Solution

With the end of de minimis, importers face higher upfront costs. The duty drawback programoffers a critical remedy by allowing importers to recover up to 99% of duties paid on imported goods that are subsequently exported or destroyed under CBP supervision.

This reimbursement covers:

  • Section 301 reciprocal tariffs and ongoing China tariffs
  • Section 232 and Section 201 trade duties
  • Other import tariffs paid on goods that do not remain in the U.S. market

The drawback program turns tariffs from sunk costs into recoverable expenses, enabling companies to maintain competitive pricing and reduce effective landed costs when goods are returned or re-exported.

How Duty Drawback Works in 2025

  1. Registration and Authorization: Importers must register with U.S. Customs and Border Protection (CBP) and obtain necessary authorizations, which can take several months.
  2. Recordkeeping & Compliance: Precise documentation linking imported goods to exports or destruction, including invoices, Bills of Lading, Classification codes (HTS), and export records, is required to qualify.
  3. Claim Submission: Drawback claims are filed electronically within five years of importation, with the use of CBP Forms like 7553.
  4. Special Tariff Codes: Importers should use appropriate tariff classifications (including Chapter 99 “drawback eligible” lines) to avoid denials.
  5. Third-Party Assistance: Many companies engage specialized brokers or consultants to navigate the complex process and maximize refund amounts.

Why Duty Drawback Matters More Than Ever

  • Mitigating Higher Costs: With tariffs now unavoidable on all shipments, drawback reduces the net duty burden when goods are re-exported or processed for export.
  • Supporting Supply Chain Flexibility: Drawback incentivizes multi-national supply chains and supports circular trade flows, vital for consumer goods and manufacturing industries.
  • Enabling Competitive Pricing: By recouping tariffs on returned goods or inventory, brands can keep prices more stable and protect profit margins despite rising tariff rates.
  • Encouraging Compliance: Thoughtful drawback planning aligns with increased customs scrutiny and reduces the risk of penalties for misclassification or underpayment.

The Post-De Minimis Trade Landscape: Challenges and Opportunities

The repeal of the de minimis exemption means all goods imports face duties, inspections, and paperwork, increasing costs and complexity. Brands cannot merely absorb these changes but must adapt through improved trade compliance systems, strategic sourcing, and diligent tariff recovery programs like drawback.

Companies well-versed in the drawback process are expected to gain a clear competitive edge by leveraging refunds to offset tariff hikes and streamline cross-border logistics.

Duty Drawback

Duty Drawback Webinar – Earn Credits

What is a Duty Drawback? It is the refund of duties paid on goods imported into the U.S. that are subsequently exported from the U.S. or destroyed in the U.S. Similar to U.S. tax returns, you may claim a duty refund of U.S. duties paid on goods that are imported into the U.S. and then either subsequently exported to another country or destroyed in the U.S.

Learn More

Sources:

  1. JM Rodgers, “De Minimis Ends for China and Hong Kong: What U.S. Importers Should Know” — https://www.jmrodgers.com/de-minimis-ends-for-china-and-hong-kong/
  2. FlavorCloud, “The End Of The US $800 De Minimis Rule And What It Means For International Ecommerce” — https://flavorcloud.com/the-end-of-the-de-minimis-rule-and-what-it-means-for-international-ecommerce/
  3. FTI Consulting, “End of Duty-Free Low-Value Imports: What Companies Must Do Now to Prepare” — https://www.fticonsulting.com/insights/articles/duty-free-low-value-imports-companies-prepare
  4. Tradlinx Blog, “How to File a Duty Drawback Claim in 2025 (Reciprocal & Section 301 Tariffs)” — https://blogs.tradlinx.com/how-to-file-a-duty-drawback-claim-in-2025-reciprocal-section-301-tariffs/
  5. NPR, “De minimis is ending. What does that mean for U.S. consumers?” — https://www.npr.org/2025/08/28/nx-s1-5519361/de-minimis-rule-tariffs-consumers-imports-trump

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