US Postal Service U-turn on China parcels sows confusion among retailers, shippers

LOS ANGELES/LONDON - The US Postal Service (USPS) said on Feb 5 that it would again accept parcels from China and Hong Kong,

reversing a 12-hour suspension

after President Donald Trump scrapped an exemption used by retailers including Temu, Shein and Amazon to ship low-value packages duty-free to the United States.

The about-face added to the growing confusion among retailers and express shipping firms over how to deal with Mr Trump’s new 10 per cent tariff on imports from China and his closure of the “de minimis” duty exemption for packages valued at under US$800 (S$1,080), with the stated aim of stopping the flow of fentanyl and precursor chemicals into the US.

Major international shippers promised to maintain deliveries, but disruptions may still occur as the USPS works out how tariffs on small packages would be collected in tandem with the US Customs and Border Protection (CBP) department.

FedEx, meanwhile, suspended its money-back guarantee on overseas shipments as disruptions rippled through the supply chain. Indeed, one logistics executive said CBP at New York’s John F. Kennedy (JFK) International Airport is putting a hold on all incoming shipments from China until further notice.

“We’re all running around like headless chickens at this moment in time, trying to second-guess what’s going to happen. And in two weeks’ time, we may be back to normal,” said Mr Martin Palmer, co-founder of Hurricane Commerce, a cross-border e-commerce data provider.

Ms Maureen Cori, co-founder of New York-based consultancy Supply Chain Compliance, added: “There has really been absolutely zero time for anyone to prepare for this. What we really need is direction from the government on how to handle this.”

About 1.36 billion shipments entered the US using the de minimis provision in 2024, up 36 per cent from 2023, according to CBP data. Reuters reporting has found that drug traffickers have exploited the exemption to bring fentanyl and its precursor chemicals into the country unscreened.

The USPS said it was working with the CBP to institute an efficient way to collect the new tariffs on China to “ensure the least disruption to package delivery”, it said in a statement.

The USPS did not comment on whether its temporary suspension had been tied to Mr Trump’s order ending de minimis shipments from China, which was announced on Feb 1 and came into force on Feb 4.

“The problem is not with the Postal Service. The problem is with Customs. They are not prepared for what’s happening,” said one postal industry expert, who requested anonymity for fear of retribution. “The trillion-dollar question,” the expert said, is who will collect the duties and who will pay them.

Ms Kate Muth, executive director of the International Mailers Advisory Group, which represents the US international mailing and shipping sector, said making the change through the traditional federal rule-making process would have allowed affected parties to provide input and adjust in the months-long period before implementation.

“We don’t have that luxury. Everything’s happening immediately without preparation,” she said.

There is also the potential that the CBP could see a net revenue loss if the cost to collect those duties is higher than the revenue that is collected, she added.

Individual clearances

Currently, de minimis parcels are consolidated so that Customs can clear hundreds or thousands of shipments at once, but they will now require individual clearances, significantly increasing the burden for postal services, brokers and Customs agents, Ms Cori said.

The provision was initially intended as a way to streamline trade, and its use has surged with the increase in online shopping, fuelling the growth of fast-fashion retailers Shein and online dollar-store Temu, both of which sell products ranging from toys to smartphones.

The two firms together likely accounted for more than 30 per cent of all packages shipped to the US each day under the provision, according to a June 2023 US congressional committee report on China which also found that nearly half of all packages shipped under de minimis come from China.

Shein and Temu did not reply to requests for comment.

Greater scrutiny

Some international couriers including FedEx and SF Express, China’s largest express delivery company, said they will continue to send packages to the US.

But FedEx said it had suspended its money-back guarantee for US-inbound shipments effective from Jan 29, citing recent regulatory changes, according to a notice on its website.

Deutsche Post-owned DHL and UPS said they were working with customers to limit negative impacts for them and consumers, and to avoid disruption to supply chains.

UPS, FedEx and DHL have systems in place to collect duties and can switch customers over to those services, shipping experts told Reuters.

Other air freight, however, could be more vulnerable to delays.

Customs officers in telephone calls on Feb 5 alerted Mr Ram Radhakrishnan that all shipments coming from China and Hong Kong would be held at JFK until further notice. The chief executive of Silq, which manages quality control, logistics and Customs clearance for clients, said sweaters for his clients are being held, even though duties on those products are paid.

“It is a little gnarly,” said Mr Radhakrishnan, whose company does not handle de minimis and is being swept up in the chaos following Mr Trump’s order.

Representatives from CBP and JFK did not immediately respond to requests for comment.

Mr Radhakrishnan said he was not aware of CBP holds on inbound China cargo at other US airports.

As at the afternoon of Feb 5, there was still no call scheduled between Mr Trump and Chinese President Xi Jinping to discuss the new US tariffs and Beijing’s retaliatory measures, a person familiar with the matter told Reuters. REUTERS