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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Every day last year, four million packages of cheap or

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Speaker 2: cheap ish foreign goods arrived in the US duty free,

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Speaker 2: fast fashion, kids, toys, even e bikes, and as long

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Speaker 2: as those packages were valued less than eight hundred dollars,

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Speaker 2: no tariffs, no problems at the border. But now that's changing.

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Speaker 3: Why is somebody talking about the Deminimus shipping exemption ending

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Speaker 3: at the end of August. Canadian brands shipping to the

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Speaker 3: United States are absolutely screwed.

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Speaker 1: Just letting all my American customers know that I have

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Speaker 1: now stopped US shipping. If you're an American customer and

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Speaker 1: you want to place an order, you need to do

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Speaker 1: it before the twenty ninth.

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Speaker 3: Well, we started to see at the end of last

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Speaker 3: week different countries postal services like Australia Posts, Singapore Posts,

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Speaker 3: the Royal Mail, Denmark, all of these different services were

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Speaker 3: announcing that they would stop taking certain packages that were

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Speaker 3: bound for the US.

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Speaker 2: Laura Curtis covers Global Trade for Bloomberg.

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Speaker 3: They have never had to handle this amount of paperwork before.

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Speaker 3: There's no mechanism for them to collect the tariffs and

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Speaker 3: remit them to US Customs authorities. So they're just saying

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Speaker 3: at this point, like, listen, we don't have the ability

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Speaker 3: to comply with this, so we're just not going to

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Speaker 3: take the packages until we have some clear guidance and

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Speaker 3: some clear procedures in place.

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Speaker 2: The reason for all this confusion is a Trump administration

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Speaker 2: policy change that's finally going into effect on Friday. The

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Speaker 2: US will close a loophole that granted cheap goods tear

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Speaker 2: a free passage into the country, a loophole called the

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Speaker 2: deminimous exemption.

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Speaker 3: The term comes from a Latin phrase which roughly means

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Speaker 3: too small to matter.

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Speaker 2: Small as they may be, these packages collectively represented one

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Speaker 2: billion dollars in trade last year, and that value has

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Speaker 2: been climbing up from just one hundred and forty million

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Speaker 2: dollars a year a decade ago. I'm Sarah Holder, and

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Speaker 2: this is the big take from Bloomberg News today on

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Speaker 2: the show, the end of the dominimous exemption. Why a

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Speaker 2: carve out for goods that were seen as too small

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Speaker 2: to matter is actually a really big deal. The deminimus

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Speaker 2: exemption has been around since the late nineteen thirties. Back then,

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Speaker 2: it applied to all goods coming into the country that

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Speaker 2: were worth a dollar or less.

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Speaker 3: Some countries argue that these low value packages it costs

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Speaker 3: more to collect tariffs on them than it does to

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Speaker 3: let them in without.

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Speaker 2: Bloomberg Global Trade reporter Laura Curtis says the US exemption

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Speaker 2: stayed at a dollar for decades before rising to five

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Speaker 2: dollars in nineteen ninety. It climbed to two hundred dollars

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Speaker 2: in nineteen ninety three, and then jumped to eight hundred

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Speaker 2: dollars in twenty sixteen during the Barack Obama presidency. Lots

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Speaker 2: of other countries have a similar exemption, but at much

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Speaker 2: lower thresholds. China generally waives duties on packages worth seven

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Speaker 2: dollars or less. It's about forty dollars in Canada and

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Speaker 2: around one hundred and fifty dollars in the Eurozone.

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Speaker 3: The administration says that in line with the rest of

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Speaker 3: its tariff policy, the US has been taken for a ride,

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Speaker 3: taken advantage of right, and this is one large loophole.

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Speaker 3: They say that they're closing to make things more fair

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Speaker 3: for domestic businesses. Another justification from the administration is around

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Speaker 3: fence andal, so part of his justification anyway is that

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Speaker 3: because these packages are fast tracked and avoiding customs scrutiny,

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Speaker 3: we don't know what's in them, and it very well

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Speaker 3: could be you know that this is a route for fencemil.

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Speaker 1: Into the country.

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Speaker 2: Trump isn't the only president who's targeted the dominimus loophole.

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Speaker 2: Joe Biden's administration also took steps to crack down on

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Speaker 2: what it called deminimous abuses in twenty twenty four. Trump

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Speaker 2: took up the cause again at the start of his

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Speaker 2: second term, announcing that he'd end the exemption on lower

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Speaker 2: value packages coming into the country from mainland China and

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Speaker 2: Hong Kong, and on May second, those went into effect.

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Speaker 3: We have seen a big crackdown on those packages. So

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Speaker 3: things like she and Timu, those fast fashion e commerce

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Speaker 3: straight to consumer shipments have already stopped from China, and

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Speaker 3: that was the bulk of these types of shipments.

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Speaker 2: In July, Trump announced that he'd also be ending the

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Speaker 2: exemption for all countries' imports, and that has set off

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Speaker 2: a panic for foreign postal services around the world because,

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Speaker 2: like many of Trump's trade policies, they've been rolled out

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Speaker 2: without the clearest of action plans.

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Speaker 3: So as of Friday, every package that enters the United

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Speaker 3: States must have with it a customs declaration that says

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Speaker 3: the contents of the package that value the country of

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Speaker 3: origin those goods. So not just where this thing is

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Speaker 3: shipping from, but where the thing was made and sometimes

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Speaker 3: even done.

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Speaker 1: To its component parts.

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Speaker 3: So you're looking at a huge compliance burden that wasn't

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Speaker 3: there before for some, you know, oftentimes quite low value goods.

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Speaker 1: You know, think about the last thing you bought on Etsy.

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Speaker 3: Or a widget from Thailand that you need to replace

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Speaker 3: your a part of your pizza oven or whatever it is.

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Speaker 3: You know, you're looking at a whole new layer of

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Speaker 3: complexity in terms of importing these types of things.

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Speaker 2: Another challenge will be processing the money. Traditionally, tariffs are

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Speaker 2: collected at the US border, but it's unclear who exactly

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Speaker 2: will collect these tariffs and where that's left foreign postal

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Speaker 2: services confused.

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Speaker 3: The guidance says it's written, says that they can either

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Speaker 3: do it or they can use an approved authority, but

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Speaker 3: that was not very well defined and so none of

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Speaker 3: them really know.

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Speaker 1: What you know, who that would be.

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Speaker 3: And then as we as we move forward, customs is

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Speaker 3: that they're going to be approving more and more a

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Speaker 3: third party software companies, for example, to start handling these

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Speaker 3: packages on behalf of national postal services. We saw two

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Speaker 3: announced at the end of last week, and actually Canada

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Speaker 3: said that they were partnering with one of them, a

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Speaker 3: company called Zonos, And that's that's sort of your like

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Speaker 3: your web platform that will handle the payments. You know,

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Speaker 3: probably the consumer will be mostly unaware, but they will

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Speaker 3: have the higher fees.

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Speaker 2: So who wins and who loses when the deminimus exemption ends.

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Speaker 2: That's after the break. For the first time in nearly

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Speaker 2: ninety years, there will no longer be a dominimous exemption

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Speaker 2: for low cost packages entering the US. There is still

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Speaker 2: one small loophole person to person shipments of gifts worth

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Speaker 2: less than one hundred dollars. If your Canadian grandma wants

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Speaker 2: to ship you the scarf she nit, that can still

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Speaker 2: enter the country duty free, but that exemption doesn't apply

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Speaker 2: to any packages shipped by companies. I asked Bloomberg's Laura

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Speaker 2: Curtis about some of the companies this change might impact most.

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Speaker 3: I think first we're going to see the small and

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Speaker 3: medium sized companies that are importing, you know, toys, books,

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Speaker 3: custom apparel, shoes. Folks who bring in really specialty products

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Speaker 3: that they have spent a long time sourcing from other

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Speaker 3: countries will often use the deminimous loophole.

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Speaker 1: The other thing I think we should keep an eye

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Speaker 1: on is.

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Speaker 3: What happens to the intermediate goods, you know, things that

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Speaker 3: US manufacturers need and often buy as they go to

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Speaker 3: make the products that they sell domestically and export. But

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Speaker 3: as the cost of those things rises or become you know,

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Speaker 3: even unavailable in some cases, I think we'll see that

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Speaker 3: kind of knock on effect in our in you know,

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Speaker 3: here at home as well.

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Speaker 2: Closing the loophole will also create new challenges for e

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Speaker 2: commerce platforms that connect buyers and sellers all over the world.

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Speaker 2: Platforms like Etsy.

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Speaker 3: So Etsy at the end of last week put out

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Speaker 3: guidance saying that they were suspending an international postal label

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Speaker 3: service that they provide, you know, pending the change, and

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Speaker 3: they pointed their sellers to commercial carriers that already have

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Speaker 3: the capability of processing these tariffs.

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Speaker 2: How big of a deal is it for Etsy to

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Speaker 2: stop issuing these shipping labels for packages sent from countries

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Speaker 2: like Canada. How much will that impact its business and

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Speaker 2: the this model of these small business owners who rely

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Speaker 2: on a platform like Etsy to sell their goods well.

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Speaker 3: I think in the short term, these sellers will likely

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Speaker 3: use services that are already in place from commercial carriers

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Speaker 3: for a higher fee, and that fee will likely get

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Speaker 3: passed on to US consumers buying the goods.

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Speaker 2: Laura says that's the big headline here. Like Trump's other tariffs,

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Speaker 2: they may be intended to support US businesses, but they're

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Speaker 2: also expected to have an impact on the prices US

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Speaker 2: consumers pay.

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Speaker 3: You know, I think with a policy like this, it's

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Speaker 3: likely to hit lower income folks who relied on, you know,

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Speaker 3: cheaper goods, just like a lot of these trade policies,

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Speaker 3: with the additional fees attached to tariffs to goods, it's

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Speaker 3: likely to hit those people who have tighter budgets.

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Speaker 2: Some people have blamed or credited the deminimous exemption for

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Speaker 2: fueling the rise of fast fashion brands like Shan or Temu.

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Speaker 2: Does the closing of this exemption mean that the kinds

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Speaker 2: of businesses that will be created and that will flourish

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Speaker 2: will change.

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Speaker 1: I think we're going to have.

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Speaker 3: To see, you know, what are consumers in the US

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Speaker 3: willing to pay for how long are they willing to wait?

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Speaker 3: You know, I think part of the the sort of

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Speaker 3: TikTok halls, and you know, these these types of consumer

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Speaker 3: trends we've seen.

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Speaker 1: Over the last few years may change.

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Speaker 3: I think we're you know, starting to see that already,

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Speaker 3: but to the extent that the US consumer is going

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Speaker 3: to change their taste for, you know, chief quick goods,

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Speaker 3: I don't you know, I don't know, they just might

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Speaker 3: not be as quick or as cheap.

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Speaker 2: If fewer of these lower value goods are being sent

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Speaker 2: into the US, are they going to go to other countries?

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Speaker 3: One of the things we're keeping an eye on now,

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Speaker 3: you know, me and my colleagues around the world, we're

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Speaker 3: starting to see other countries reevaluate their own diminish miss

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Speaker 3: type policies. So once the US curved all these packages

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Speaker 3: coming in from China, those goods are starting to find

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Speaker 3: their way to other markets. So we've seen some countries

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Speaker 3: already in Latin America reduce or scrap their their low

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Speaker 3: value exemptions altogether. And that conversation is also starting in

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Speaker 3: the UK and in the EU. I think Mexico and Chile,

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Speaker 3: who have already changed their own deminimus type policy to

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Speaker 3: keep some of these low value goods from China out

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Speaker 3: from flooding their own economy. So, you know, just because

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Speaker 3: the US is no longer accepting these goods from China

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Speaker 3: doesn't mean that they won't end up somewhere else. And

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Speaker 3: I think you know a lot of particularly smaller economy

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Speaker 3: countries are concerned that this will flood their domestic markets.

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Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.

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