De Minimis & Section 321: The $800 Loophole and What Killed It in 2025–2026

For nearly a decade, US de minimis — the $800 informal entry threshold under Section 321 of the Tariff Act — was the foundation of an entire e-commerce business model. Chinese sellers could ship low-value parcels directly to US consumers, with no duty, no tariff, and minimal customs friction.

That ended in May 2025. This guide is the practical 2026 picture: what changed, what still works, what's coming next, and how to operate.

What de minimis was

The Section 321 de minimis provision allowed informal customs entry for parcels under $800 (raised from $200 in 2016). For these parcels:

• No duty owed
• No formal customs entry required
• Minimal documentation
• Faster clearance

For e-commerce parcels (typically $20–$200 in value), Section 321 made cross-border DTC essentially free of customs friction. This enabled:

• Shein, Temu, AliExpress, and similar Chinese e-commerce platforms shipping directly to US consumers
• US dropshippers ordering individually from China to consumer addresses
• Subscription boxes shipping monthly from China to US subscribers
• Many small Amazon FBM (Fulfilled by Merchant) sellers shipping individual orders direct from China

The volume was enormous: by 2024, ~1.4 billion parcels per year were entering the US under de minimis, mostly from China.

What changed in 2025

In February 2025, the Trump administration ordered the elimination of de minimis treatment for goods of Chinese origin. After implementation delays, the change took full effect in May 2025.

For goods of Chinese origin entering the US:

• De minimis no longer applies regardless of parcel value
• Full duty + tariff (including Section 301) is owed
• Formal customs entry required
• Customs broker typically needed

The change applies to goods of Chinese origin — not Chinese sellers. A Chinese seller shipping Vietnamese-origin goods is unaffected. The point of origin determines duty status, not the seller's location.

What still works

Non-Chinese-origin goods still benefit from Section 321 de minimis. So:

• Vietnamese-origin parcels under $800: still de minimis eligible
• Mexican-origin parcels under $800: still de minimis eligible
• Indian-origin parcels under $800: still de minimis eligible

For sellers genuinely sourcing from these origins, the de minimis benefit is preserved.

The complication: CBP has tightened scrutiny on transshipment — goods of Chinese origin shipped through Mexico, Vietnam, or other countries to disguise the origin. CBP is increasingly auditing such patterns, and importers caught misrepresenting origin face significant penalties.

True manufacturing in non-China origins (real production with substantial transformation, not just relabeling) qualifies for that origin's treatment. Pure rebadging doesn't.

Why this matters for sourcing strategy

The DTC-from-China model that worked in 2018 doesn't work in 2026. The economics:

For a $40 retail item with $15 COGS:

2018 model (Section 321 valid):

• Ship directly from China to consumer: no duty
• Total landed cost to customer: $15 COGS + $5 international shipping = $20
• Margin at $40 retail: $20 = 50%

2026 model (Section 321 not valid for Chinese origin):

• Ship directly from China to consumer: duty + Section 301 tariff applies
• Duty + 25% Section 301: $4
• Total landed cost to customer: $15 COGS + $5 international shipping + $4 duty = $24
• Margin at $40 retail: $16 = 40%
• Plus formal customs entry processing fees and broker overhead per parcel

The math has gotten worse but the model can still work — just with thinner margins and more operational complexity.

What businesses are doing

The major patterns we see:

1. Bulk import + US-based fulfillment

Chinese-origin sellers move from per-parcel direct shipping to:

• Bulk freight to a US 3PL or warehouse
• Pay full duty on the bulk shipment (lower per-unit duty due to commercial classification)
• Fulfill individual orders from US-based inventory

This is what Shein and Temu have done — operationally complex but compliant under the new rules.

2. Switch to non-Chinese origin

For categories where alternative origins exist:

• Vietnam for basic apparel, footwear (where Vietnam is genuinely a strong source — see our China vs Vietnam guide)
• Mexico for bulky goods, automotive (Mexico has genuine manufacturing capability — see our China vs Mexico guide)
• India for textiles, leather (where India is competitive)

The shift is partial — most consumer goods are still cheaper from China even with full tariffs than from alternatives.

3. Accept lower margins

For products where alternatives don't exist (electronics, specialty goods), accept the higher landed cost. Pass through to consumers via higher prices.

4. Exit unprofitable categories

Some marginal products that worked under de minimis no longer have viable economics. These exit the market.

Section 321 mechanics in 2026

For non-Chinese-origin parcels still using Section 321:

The process:

• Parcel value under $800
• Manifested correctly with origin country
• Imported by mail or low-value parcel courier (USPS, UPS, FedEx, DHL)
• Cleared through informal entry

What CBP scrutinises:

• Country of origin verification
• Value declaration (under-declaring to stay under $800 is fraud)
• Multiple-shipment patterns (deliberately splitting orders to stay under threshold)
• Transshipment patterns

For genuine non-Chinese-origin parcels, Section 321 still works. For Chinese-origin disguised parcels, CBP enforcement has tightened materially.

The $800 threshold itself

The $800 threshold was raised from $200 to $800 in 2016 (under the Trade Facilitation and Trade Enforcement Act). It's been politically unpopular since, primarily because:

• It facilitated mass parcel volumes from Chinese sellers
• Domestic retailers argued it created an uneven playing field
• The de minimis system facilitated some illicit goods (counterfeits, fentanyl precursors) entering the US

In 2026, several legislative proposals are under consideration:

• Lower threshold (back to $200 or lower)
• Full elimination of de minimis across all origins
• Tighter origin verification requirements

The political consensus appears to favour further restriction. Importers should plan for the possibility of full elimination by 2027 or 2028.

EU and UK comparison

For comparison, EU and UK have different de minimis structures:

EU: €150 duty-free threshold (still in effect in 2026, though under review). Below €150: no duty. Below €22 was VAT-free until 2021 — now no VAT exemption. The €150 threshold has been reviewed periodically; possible reduction in coming years.

UK: £135 VAT-paid-by-platform threshold post-Brexit. Different mechanism than US — VAT is collected by the e-commerce platform at sale, not at customs. Duty applies on value above £135. No equivalent of US Section 321 elimination.

European DTC e-commerce from China continues largely unchanged. US is the outlier in 2025–2026.

Implications for current importers

If you're a current importer affected by the de minimis change:

Stop the parcel-shipping model. It's no longer compliant for Chinese-origin goods.

Move to bulk import. Order-fulfilment from US-based inventory rather than per-parcel from China.

Verify origins of any "Vietnamese" or "Mexican" sourcing. If you're using transshipment, expect scrutiny. Genuine origin requires substantial transformation.

Use a customs broker. Full duty entries require formal customs processing.

Update pricing. The landed cost has increased; pass-through to consumer prices is necessary unless margins were generous.

If you're a new importer thinking about sourcing strategy:

Don't plan around Chinese-direct parcel shipping for tariff avoidance. It's not viable in 2026.

Plan for full duty + Section 301 in your landed cost model. See our tariffs guide for the math.

Consider alternative origins where genuinely competitive (Vietnam, India, Mexico for specific categories).

Bulk import + US fulfillment is the operational model for serious importers.

What to track in 2026

Several open issues that could change the picture:

Further de minimis restrictions. Proposed legislation may extend the elimination to non-Chinese origins, lower the threshold, or require origin verification at parcel level.

Transshipment enforcement. CBP is auditing more aggressively. Pure rebadging operations are being discovered and penalised.

EU/UK changes. Both have been considering de minimis changes. EU's €150 threshold may drop to €22 or be eliminated. UK's £135 may be revised.

Section 301 changes. The underlying tariff schedule that makes Chinese imports expensive can change. Both up and down — review periodically.

The bottom line

The $800 de minimis exemption for Chinese-origin goods is gone. The DTC-from-China parcel model that powered a generation of e-commerce sellers no longer works.

The alternatives are operational rather than legal: bulk import, US-based fulfillment, customs brokerage, and full-duty payment. Margins are tighter; complexity is higher; the businesses that adapt continue.

For most serious importers, the de minimis change is a forcing function toward proper supply chain operations rather than parcel-arbitrage business models. In the long run, this may be healthier for the industry — but the transition has been painful for businesses built on the old rules.

If you'd like our team to advise on supply chain restructuring after the de minimis change — including bulk import setup and customs broker introductions — get a quote.

Related: China import tariffs 2026 · Source for Amazon FBA from China · China vs Vietnam manufacturing 2026 · China vs Mexico nearshoring 2026