How Washington Ended Duty-Free Shipping for Small Packages

For most of a century, a shipment worth $800 or less could cross into the United States without a customs entry or a duty bill. That changed on August 29, 2025, when the exemption was suspended for goods from every country, and it has stayed changed through a Supreme Court ruling on tariffs, a new federal law and a court fight brought by an auto-parts company.

The result, confirmed most recently by a Customs and Border Protection rule in June 2026 and a trade court ruling in August 2026, is that small sellers, dropshippers and fashion brands that once shipped parcels tariff-free to individual U.S. customers now file customs paperwork and pay duty on nearly everything that crosses the border.

A Rule Built to Avoid Counting Pennies

The exemption, known as Section 321 or the de minimis exemption, dates to the Customs Administrative Act of 1938. It let the government skip collecting duty on shipments so small that collecting it would cost the government more than the duty was worth.

Congress raised the dollar threshold several times: to $5 in 1978, $200 in 1993, and $800 in 2016 under the Trade Facilitation and Trade Enforcement Act. Lawmakers said the higher cap would deliver “significant economic benefits to businesses and consumers.”

That 2016 change, combined with the growth of direct-to-consumer e-commerce, changed the exemption’s scale entirely. Customs and Border Protection reported that de minimis shipments grew from 139 million in 2015 to more than 1.36 billion in fiscal year 2024 — a shortcut built to spare customs officers from counting pennies had become the entry point for more than a billion packages a year.

How the $800 threshold grew
The duty-free threshold for small shipments rose from $1 in 1953 to $5 in 1978, $200 in 1993, and $800 in 2016 under the Trade Facilitation and Trade Enforcement Act, before being suspended for all countries in August 2025.

Two Executive Orders Suspend the Exemption

Starting February 1, 2025, President Trump issued a series of executive orders invoking the International Emergency Economic Powers Act to address fentanyl trafficking and border security, several of which withdrew de minimis treatment for goods from Canada, Mexico and China. On April 2, 2025, Executive Order 14256 formally ended the exemption for low-value imports from China and Hong Kong.

On July 30, 2025, Executive Order 14324 extended the suspension to every country, effective August 29, 2025. CBP said de minimis shipments accounted for 98% of its narcotics seizures by case count, 97% of counterfeit goods seizures — more than 31 million items — and 77% of health and safety seizures in fiscal year 2024, and that fentanyl found in international mail averaged more than 90% purity compared with under 10% at land borders.

“For too long, this loophole handed criminal networks a free pass to flood America with fentanyl, fake goods, and illegal shipments,” CBP Commissioner Rodney Scott said. “Those days are over.”

Congress Sets a Permanent End Date

While the executive orders relied on emergency powers that could in theory be reversed by a future administration, Congress moved separately. The One Big Beautiful Bill Act, signed July 4, 2025, statutorily repeals the de minimis exemption for commercial shipments effective July 1, 2027, with civil penalties of up to $5,000 for a first violation and $10,000 for each one after that.

The House Budget Committee noted that the 2027 repeal date was not meant to limit what the President could do with the exemption before then, writing that the provision should not be read to “diminish existing authorities of the President” to restrict it in the meantime. In effect, Congress and the White House were pursuing the same outcome on parallel, independent tracks.

A Tariff Ruling That Left the Suspension Alone

On February 20, 2026, the Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that the emergency-powers law does not authorize the President to impose tariffs, striking down both the fentanyl-related duties on Canada, Mexico and China and the broader “reciprocal” tariffs announced in April 2025. Chief Justice Roberts wrote that had Congress meant to hand the President the power to set tariffs, “it would have done so expressly.”

The ruling did not touch the de minimis suspension itself. The Court of International Trade later noted that the question of rescinding an exemption was “not at issue” in the Supreme Court case. The same day the ruling came down, the administration issued Executive Order 14389 ending the now-unlawful tariffs, while a separate order, Executive Order 14388, stated that the suspension of duty-free treatment for low-value shipments was unaffected and directed CBP to keep collecting duties on them. A companion proclamation imposed a temporary 10% surcharge on international mail parcels under a different statute, the Trade Act of 1974, to replace the tariff that had briefly applied to postal shipments before the ruling.

A shortcut built to spare customs officers from counting pennies had become the entry point for more than a billion packages a year.

A Family Auto-Parts Business Loses Its Court Fight

The suspension’s clearest legal test came from Axle of Dearborn, doing business as Detroit Axle, an auto-parts distributor. According to court filings, the company built a Juárez, Mexico, distribution center specifically to ship individual orders of Chinese-made parts to U.S. customers in amounts under $800, keeping the shipments duty-free under the old exemption.

Detroit Axle sued, arguing the President lacked authority to rescind the exemption and that the agencies implementing the rescission acted arbitrarily. On August 13, 2026, a three-judge Court of International Trade panel ruled against the company. The court reasoned that the law describes de minimis treatment as a “privilege,” and that the emergency-powers statute lets the President “nullify or void” the exercise of a privilege — a different and narrower power than the authority to impose new tariffs that the Supreme Court had rejected months earlier. The court also found that the agencies carrying out the rescission had no discretion of their own and were therefore not subject to the ordinary review courts apply to agency rulemaking.

The ruling did not resolve everything: the court declined to grant the government summary judgment on a separate claim, still pending, about the President’s broader tariff-making authority.

New Paperwork, and a Harder Landing for Small Sellers

On June 24, 2026, CBP issued a rule making the mail-shipment suspension indefinite under its own regulatory authority, independent of the executive orders, and replacing the temporary 10% flat charge on postal parcels with a full customs process. Filers must now use a licensed customs broker, post a bond, and submit a monthly worksheet with a full tariff classification for each shipment, so mail parcels are charged the same duty rates as other imports rather than a flat surcharge. CBP projected the new postal rule alone would increase collected duties by roughly $40 million to $247 million a year depending on the year measured.

The volume drop has been steep. Postal de minimis shipments fell from 74.8 million in fiscal year 2024 to an annualized pace of about 29 million in the three months after the August 2025 suspension took effect, according to CBP’s own projections. Exemptions for bona fide gifts, capped at $100, and for personal items carried by travelers, capped at $200, remain untouched.

For fashion sellers that relied on shipping directly to U.S. customers, the change has been costly. According to logistics firm Bleckmann, one apparel brand reported 30% tariffs on orders that had previously qualified for the exemption, affecting more than 10% of its sales, while Lululemon has projected a tariff bill of $240 million in 2025 rising to $320 million in 2026. Brands are responding by consolidating shipments, opening U.S.-based distribution and, in some cases, moving production closer to American customers. The European Union made a parallel move, ending its own €150 duty-free threshold on July 1, 2026.

Photo: CBP Photography · Public domain · via Wikimedia Commons