De Minimis is gone! (No kidding! Let’s show you how your competitors are cutting their costs and keeping prices the same…without hurting their profit margins!)
Since President Trump scrapped the De Minimis exemption, we’ve seen many e-commerce brands based outside the US pause US sales to US customers due to spiking fulfillment costs.
We’ve read and heard numerous stories from real people, shared across social media, and even in the news.
The feeling we’ve heard is that it has taken food out of the mouths of thousands of business owners and their employees.
However, while new costs and paperwork requirements—set up to discourage offshore manufacturing and selling to US customers—are being introduced, we’re seeing some smart non-US ecommerce and retail brands adopt new ways to manage their costs, in many cases keeping them almost the same.
We’ve spent the past three weeks looking into the details and asking questions from those who know better, and we have now gathered close approximates of the real numbers, so let’s break down what this cost-saving method is and why it works below:
First, the facts:
The De Minimis removal has completely changed the landscape of doing business for most e-commerce brands, dropshippers, and everyone else involved, because:
- Non-US brands have lost much of their competitive advantages, and
- American customers will have to choose between paying more for items from their favorite foreign brands or opting to buy from local alternatives.
And the reasons for this are due to the new things your business must now do:
- More paperwork (a lot of paperwork): All packages must now be declared with full Harmonized Tariff System (HTS) code specifications and origin declarations.
- Spend more to fulfill: All goods coming into the US must now pay an import duty corresponding to the type of item and origin.
Thanks to this, most e-commerce businesses will now need to:
- Hire customs brokers to process their paperwork;
- And, therefore, pay brokerage fees on every shipment.
All these are added to the new duties they must also pay on every product.
Now that we’ve laid out all the boring (and triggering) details, here’s how we see brands keeping costs low:
- They’re shipping their goods in bulk.
- Hence, instead of shipping individual items and paying brokerage fees for each separate item (from $50-$200 in Broker’s fees), they’re only paying for one brokerage service per shipment.
- (Switching from one item per shipment to as many as 1,500 units per shipment, for example, will cut your costs from a possible $300,000 down to under $1,775 in one instance we saw.)
- They’re switching from shipping through air parcel to ocean freight.
- Again, this follows the logic of shipping in bulk. Ocean freight costs only a small fraction of air parcel costs.
- (In one case, we saw savings of up to $4k, all things considered—including warehousing, final delivery, etc.)
And because they’ve shipped and warehoused their goods in the US ahead, they have even shortened the time to fulfill orders!
Let’s consider this case of a Swedish e-commerce store that manufactures Sports Jerseys in China. They manufacture each jersey for $6 and sell it for $85.
If this business warehouses its goods outside the US, here’s a breakdown of the costs they will incur to fulfill 1,500 orders under the new rules (conservative estimates):
- Duties: $62 per shirt ($93,900 total).
- Brokerage: approx. $50 per shirt (unless they have a special relationship with a broker; at $50, it sums up to $75,000) – this is conservative; it can rise to $187,500.
- Air parcel: $20 per shirt (again, keeping it conservative), totaling $30,000 for 1,500 orders.
The total cost of fulfilling those orders comes to $198,900, or $133 per unit. Add that to the shirt’s price…
And if you plan to pass that cost to the customer, it means that you’re asking them to pay an extra $218 bill to buy an $85 shirt from you.
By implementing the changes we’ve detailed here, however, the store cut the fulfillment costs down to around $33 per unit!
That’s $150,000 in business costs that your business doesn’t have to worry about…
Or $100 in new fees that you don’t have to “surprise” your customers with!
You keep your prices and profits the same…and your customers are as happy as ever!
What’s more surprising?
Because the paperwork is simpler with jerseys, this was actually one of the least outrageous instances we reviewed!
Some products require more to clear customs because they must be reviewed by what are called Partner Government Agencies.
This extra step requires more paperwork to be filed by your Broker, for which they charge every single time.
We saw one of such cases where implementing this switch dropped the total unit cost for a $159 product from $395 if they kept the old model under the new rules, to $202 when they adopted the new model—that’s $193 in savings!
Bear in mind, some of these costs cannot be avoided:
- You must now pay duties.
- Unless you’re a big retail brand with an internal compliance unit with a customs brokerage license, you must now also pay brokerage fees.
- And of course, you must ship the product to the customer.
These new crazy costs are the point of the tariffs!
The new rules were set up to make business hard for you if you manufacture outside the US, or if your business is not based in the USA.
But no one says you must continue to operate the same way as before, either!
Besides, by adopting these cost-saving mechanisms, you can still keep your costs lower than products manufactured in the USA—meaning you remain competitive!
And we can help you with that.
How Hermeslines can help you:
At HermesLines, we provide storage and packing.
But that’s all boring information, here’s what we can do for you right away:
- We have built a model to estimate the possible savings. If you email us today, we can provide you with a breakdown of the costs and savings for your specific products via email for free. (You’ll see how to keep your costs the same, and can verify the numbers by yourself.)
- We can provide you with a checklist of questions to ask your Broker, so you’re armed with the right tools when you make enquiries.
- And after you’ve seen the true cost savings, we can provide 3PL services for you, including flexible storage, all at low prices (and we don’t do any gimmicks with our pricing either. You can get the full list too. Just ask in the email.)
- Help you make more savings by connecting your goods with domestic shipping options, reducing shipping costs for you and your customers.
Reach out to us here to start getting specific answers.
Or email us at stines@hermeslines.com
Authored by: Augustine Uzoeto
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