Author | Yangzi

At the age of 78, mischief is afoot. Presidential orders come and go swiftly.

In just three days, the customs clearance for packages under $800 via the T86 mode (a U.S. Customs and Border Protection method exempting imports valued at $800 or less from tariffs) was temporarily reinstated.

The restoration was necessitated by implementation difficulties. The sudden presidential executive order, which revoked the tax exemption for low-cost Chinese packages (under $800) and their corresponding T86 clearance mode effective February 4, required customs to swiftly transition from the streamlined T86 process to the traditional T1 process. The additional inspection procedures and required information (origin, commodity codes, tariff categories, proof of value, etc.) were overly complex, causing chaos among logistics professionals, customs inspectors, postal and express services, and online retailers in both China and the U.S.

Cross-border trade volumes are immense, with over 4 million low-value goods entering the U.S. daily (according to U.S. Customs and Border Protection data). Over the past decade, the number of packages entering the U.S. through the "de minimis" exemption has surged nearly tenfold, from 139 million in fiscal year 2015 to over 1.3 billion in 2024.

Based on past experience, the cancellation of the "de minimis" exemption policy had early signs. However, given the vast volume of small-value tax-exempt imports in the U.S., policy adjustments typically allowed both parties several months to prepare. This time, the presidential executive order went into effect just 72 hours after being signed, leaving logistics professionals in both China and the U.S. unable to respond promptly.

While seemingly a minor policy change, it bears a strong "Trumpian" flair – promoting by first exaggerating.

Notably, the revised executive order states that although the tax exemption remains in place, it will be revoked for Chinese packages under $800 entering the U.S. once the Secretary of Commerce notifies the President that relevant preparations are complete.

The arrow is on the string, and it's only a matter of time before it's released. This three-day farce serves as a wake-up call for all global practitioners during the first week of work post-Spring Festival.

The T86 "De Minimis" clause originated in the 1930s, when the U.S. Congress established exemptions for small packages to ease the burden on American tourists bringing souvenirs home. In 2016, Congress adjusted it, raising the de minimis threshold from $200 to $800. Over the past two years, the rapid rise of Temu and SHEIN has pioneered a new model for Chinese cross-border e-commerce enterprises. By 2024, 48% of Chinese goods entering the U.S. did so through the "de minimis" exemption.

In the three days following the executive order, many cross-border e-commerce practitioners sought solutions:

Some believed in the adage, "Where there are policies, there are countermeasures." The head of a customs clearance company told Xiaguang News that many have long been adept at navigating "gray areas," such as discrepancies between declared and actual values of Chinese goods, despite lax inspections.

Others immediately halted shipments to the U.S., choosing to wait and observe the reactions of logistics providers and peers before making decisions.

Some suggested using the "package within a package" approach for small-batch shipments, consolidating 20-30 small packages into one large package sent to a small transit warehouse. However, this poses risks of unclear cargo information, failing to meet U.S. Customs declaration requirements.

Overall, two feasible strategies emerge. Firstly, in the short term, accepting increased logistics costs and testing alternative customs clearance methods. Besides T86, other options like T01 (formal entry) and T11 (informal entry, limited to goods under $2,500 with an additional $2.60 handling fee per order) are viable but come with higher costs and longer timelines. Switching from T86 to T01 or T11 is expected to add 3-5 days to customs clearance, according to Yugo Network reports. Some logistics providers have already implemented T11, successfully clearing 1,000 miscellaneous goods.

Secondly, actively localizing operations and strengthening capabilities in destination countries. Some merchants proposed changing packaging, rerouting trade through third countries, and continuing to use T86 for customs clearance. However, the European Commission also seeks to abolish tax exemptions for packages under €150, and it's possible that countries like Japan, South Korea, and Southeast Asia will follow suit. In an era of "heavy tariffs," optimal global resource allocation becomes the core competitiveness for overseas enterprises.

From a long-term perspective, the "shoe will eventually drop." Logistically, the cancellation of T86 directly impacts dropshipping and direct mail small packages, with lesser effects on semi-managed and Amazon FBA merchants. Adopting the "sea/air freight + overseas warehousing + distribution" fulfillment method, reducing main transportation costs, and focusing resources on fully-managed overseas warehouse and semi-managed shipments are better strategies to mitigate risks.

Recently, the State Taxation Administration announced the implementation of the "tax refund upon departure" policy for goods exported by taxpayers via cross-border e-commerce to overseas warehouses, effective January 27. This policy promotes overseas warehouse development, providing merchants with relief from high tariff-induced cash flow and inventory management issues.

The Spring Festival has passed, and while the changes demonstrate the challenges of global expansion, they also foster momentum and resilience, promoting the long-term compliant operation of globalized brands. As Chinese products' competitiveness transcends mere "low prices," the core competitiveness in trade wars remains the product itself. Global consumers will vote for truly exceptional products.

Chinese products, local brands, facing global consumers – this may be the right path for merchants to embrace the "heavy tariff" era.