US President Donald Trump’s move to expand the country’s de minimis exemption is set to shake up the way Australian businesses sell into the North American market.
From August 29 this year, all shipments to the US market with a dutiable value below US$800, regardless of manufacturing origin, will be subject to duties on importation into the United States.
When this comes into effect, RMIT University professor Vinh Thai, who specialises in supply chain management and logistics, says the immediate impact will hit US shoppers, who will pay more for low-value goods.
Other impacts include longer lead time due to customs compliance checks, and US shoppers will also have fewer online deals for those shipments as well, given the increased costs of cross-border e-commerce.
Thai says the US is an important trade partner for Australia, ranked the fifth largest partner destination for Australian goods exports, and the second largest trading partner for Australian goods imports, according to the latest statistics from the Australian Bureau of Statistics.
“Although the specific statistics for commercial parcel trade are not available, the removal of the US's de minimis exemption will certainly affect local businesses, given the significance of the two-way trade between Australia and the US, in that export of commercial parcels from Australia will be less time and cost competitive,” Thai says.
According to Thai, small and medium-sized firms in Australia – or those Australian brands exporting from other countries in Asia such as China or Vietnam – via online platforms, will face more complex compliance costs and documents, leading to increased landed costs and longer delivery times for their parcels.
“Those who have already been operating stores in the US may be less affected by this new trade policy,” Thai adds. “However, their competitive advantage compared to those exporting via online platforms may not be enhanced too significantly once those online exporters adapt their strategies – ie: using local bonded warehouses in the US to delay duty payment, consolidating shipments to reduce the parcel unit costs, etc.”
The Australian Fashion Council CEO Jaana Quaintance-James also weighed in, saying the changes represent a serious escalation for Australia’s fashion and textile industry.
"Our competitiveness is already under pressure from rising costs and trade uncertainty, and these new rules will disproportionately impact small businesses, particularly those relying on direct-to-consumer models," Quaintance-James says. "These are brands built on tight margins and long lead times, absorbing sudden cost increases at this scale is unsustainable.
The AFC CEO added that Australian fashion and textiles contribute $28 billion to the economy and support nearly half a million jobs. "This is not a niche sector," she says.
"This is a critical moment for the government to treat fashion and textiles as a national priority, and deliver fit-for-purpose policy and support that reflects our structure, scale and economic significance."
Speaking with Ragtrader, Bond-Eye Group CEO Steve Philpott says that despite the challenges it may pose to his plans to scale in the United States this year, Trump’s move was expected.
“I can see the logic in the new de minimis laws in its application to fast fashion low-cost shipments, but there is no doubt that it’s going to affect quality and sustainable brands, their US DTC business models and profitability,” Philpott says.
“We have planned ahead and are servicing our US customers from our US 3PL. We have managed the impact on our US business and customers and did not want to pass on extra cost or hassle.
“Thankfully, with a great deal of Bond-Eye being made here in Australia, we are not as exposed, although we are with Sea Level, Artesands and Nip Tuck.”
Philpott adds that the last period of tariff turmoil – including the trade war with China that saw tariffs hit triple-digits – made it very difficult to plan margins, profitability and strategy in the US market.
He says that businesses need a healthy margin to survive, but he thinks that walking away from an “incredible market” like the US by passing on tariffs is not the right medium to long-term decision.
“As difficult as it is, these times are an opportunity for those who think that way and develop a business plan to manage it,” he says. “Stability and the transmission of that to the market, whether it be wholesale or DTC, is key.
“Protecting our customers and staying on brand is vital, and this very much applies to today's de minimis law changes.
“Our internal narrative here is that it is the same playing field for everyone, and herein lies the opportunity. We are gaining market share right now while other brands are losing it, and we are playing the long game.”
On a global level, Thai says small exporters of goods to the US with a thin profit margin will find their cost-competitiveness eroded.
But that’s not all. Thai lists three other shake-ups, including a disruption to and the reconfiguration of global e-commerce models, the overhaul of logistics and supply chains, and cascading effects on global trade policy.
“Given the increased costs and lead time, major e-commerce platforms, especially those from China, may need to change their fulfilment strategies in the US – i.e. moving toward using facilities such as warehouses locally,” Thai says. “Meanwhile, they may consider implementing promotion campaigns to stimulate demand in other markets to offset the decrease in the US, and actively seek to expand to other potential markets.”
Just this week, Ragtrader’s sister publication AdNews confirmed that Shein and Temu have bumped up marketing spend in Australia.
Alongside this is the impact on postal and courier service providers, which will experience longer delivery times amid heightened customs compliance checks.
“Therefore, foreign exporters to the US may choose to stock their commodities at local US warehouses and deliver to their customers from these facilities,” Thai says. “This leads to the reconfiguration of logistics and supply chains in the US, where local facilities for inventory holding and last-mile delivery are established, whereas the demand for customs brokers in the US may also be on the rise.”
Meanwhile, on a macro level, the trade volume of low-value products exported from some countries to the US, especially from Asia, may slow down. Thai says this can lead to a possible drop in those countries’ GDP growth, as well as other macro indicators such as the employment rate.
Other major economies may also consider implementing the same policy as the US, pushing global trade closer toward trade protectionism.
Regarding the huge possibility of US exporters of low-value goods targeting new potential markets, including Australia, Thai says this may lead to an increase in commercial parcel trade imports, creating opportunities for local third-party logistics service providers and cross-border trade platforms, as well as potential competition with local manufacturers.