Small businesses facing new charges as Trump ends exemption

Small businesses are facing crippling charges as Donald Trump ends a little-known exemption for imports to the US. The US President signed an executive order last month ending the tax exemption on low-value parcels, which comes into effect today.

The $800 ‘de minimis’ exemption allowed businesses to ship parcels to the US under the threshold, without paying any duties on imports. In 2021, goods worth $5 billion were shipped from the UK to the US under the de minimis exemption, according to the British Chambers of Commerce, the vast majority of which was clothing.

The rule allowed small UK businesses to send single, low-value items without dealing with complex paperwork. Its end could spell disaster for small businesses in the UK. Trump’s tariffs are causing a headache for the stock market and businesses in the UK, even with a lower baseline tariff than other countries.

Now there is confusion over what changes to the de minimis rules will mean for businesses from today. While gifts worth less than $100 (£74) remain duty-free, other parcels sent to the US will face a charge, or a 10 per cent tariff paid by the seller when paying for postage.

Businesses will have to declare each shipment in the Automated Commercial Environment, usually by a customs broker, and duties and fees will apply. Last week, Royal Mail said it would suspend deliveries to the US until it had a system in place to comply with the new rules.

For small business owners, it’s yet another challenge in an era of rising costs. Gareth Austin Jones, co-founder of shoe brand Cocorose London says the rule change ‘feels like another kick in the shins’ following changes to EU import fees. Businesses will need to decide whether they charge customers a duty fee at checkout, or put their prices up across the board to recoup costs. Either option risks US consumers turning their back on UK products entirely.

Jones says: ‘I feel this is going to significantly increase the cost per acquisition of new customers in the US. First-time customers will need to think harder about buying from UK brands, so they’ll need to spend more to acquire the same number of customers.’ He predicts that an order of $100 could have additional costs of up to $50 depending on the rate of sales tax, with extra shipping fees.

Sam Kirk, managing director of J-Flex Rubber Products says he is carefully considering hich international terms he uses when shipping products. ‘At present, all of our exports to the US are on an ‘ex works’ basis, which means the buyer is responsible for arranging shipping and the subsequent duties and tariffs that are payable on entry.’ Even with higher fees for consumers, the change means ‘disaster’ for small businesses, says hat designer Gaynor Lockwood Edwards.

‘I’d say 95 per cent of my hats go to the US. After a very quiet time sales wise, the week before this ridiculous announcement I had a few orders which was great… [but now] when I send them I’ll have to pay an extra 10 per cent of the total cost of these items plus postage and tariff fees. This will be upwards of £150.

‘This is on top of the Etsy fees which are 15-30 per cent. It gets even more complicated if any of your supplies come from elsewhere. ‘I’ve already had to increase my prices to cover the tariffs. Trump may believe that he’s bringing in more money, but in reality, he’s making Americans pay more for everything.’