U.S. Scraps 'De Minimis' Exemption for Hong Kong Imports: Implications for Residents
New Duty Rules for Hong Kong: What's Changed and How Are Local Businesses Reacting?
Washington bids goodbye to the "de minimis" exemption for imports from mainland China and Hong Kong, effective from May 2, 2025. It had previously allowed duty-free shipping of products worth US$800 or less to the US. So, what's the impact on Hong Kong and what's the response from local businesses? Let's dive in.
Shifting Costs and Trade Practices
The de minimis provision enabled companies to dodge US import duties by shipping low-value goods directly to consumers via air cargo. With the provision's elimination, those products now face a whopping 120% tax or a flat fee of US$100 (which will rise to US$200 in June).
Before you start thinking this won't affect you, consider this. According to U.S. Customs and Border Patrol, shipments under the exemption made up a staggering 92% of the total cargo entering the US. To avoid burdening consumers, Hong Kong businesses face the challenge of absorbing the increased costs, or they'll have to change their trade practices.
Changing Landscape for Product Delivery
In anticipation of these new charges, Hong Kong's postal service has already suspended service to the US, leaving businesses scrambling to find alternative routes or shoulder higher fees from private carriers.
Relative Trade Disadvantages
The U.S. has kept the de minimis exemption for other countries, giving a competitive edge to traders from Vietnam, India, and Mexico. Alas, our beloved city of Hong Kong will fall behind in the race for export-import dominance.
Soaring Prices and Decreased Accessibility
Platforms like Shein and Temu, popular for their Chinese manufacturing, have already announced U.S. price hikes. Brace yourself, fellow Hong Kong-ers, because you might see rising prices when snagging cross-border bargains. Additionally, independent online sellers, who rely on U.S. customers, may experience a shrink in operations due to tariff burdens, decimating product options for niche shoppers.
Wider Economic Ramifications
The revocation of the de minimis exemption intensifies U.S.-China trade tensions, with the former viewing it as a "big scam" detrimental to domestic retailers. Hong Kong's future as a re-export hub could be at risk if the U.S. extends similar tariffs to other regions. Moreover, U.S. officials' concerns about fentanyl component smuggling might increase scrutiny on all low-value shipments from our region.
Stay tuned as we navigate the evolving economic landscape and help you navigate the changes too!
- As the de minimis exemption for Hong Kong and China is eliminated, local businesses are faced with the challenge of dealing with increased costs due to potential tariffs of up to 120% on previously duty-free products.
- In response to the new charges, Hong Kong's postal service has suspended its service to the US, forcing businesses to find alternative routes or bear higher fees from private carriers.
- With the U.S. maintaining the de minimis exemption for other countries, businesses from Vietnam, India, and Mexico may gain a competitive edge in trade, potentially causing Hong Kong to fall behind in terms of export-import dominance.
- The removal of the de minimis exemption could lead to price hikes on popular platforms like Shein and Temu, as well as decreased accessibility for niche and independent online sellers due to the increased burden of tariffs.
- The termination of the de minimis exemption could have wider economic ramifications, intensifying US-China trade tensions, and potentially endangering Hong Kong's status as a re-export hub. This could also lead to increased scrutiny on low-value shipments from the region due to concerns about fentanyl component smuggling.
