De Minimis Day is Here

"Tax holiday" has a whole new (and terrible) meaning.

Photo by Karolína Maršálková on Unsplash

To the dismay of billions (yes, billions) of consumers around the world, De Minimis Day is here. As President Trump specified in a July 30 Executive Order, tariff-free importation of goods valued at $800 or less will end on August 29. In one fell swoop, the daily mountain of small packages arriving at consumers’ doorsteps will now be hit with import taxes.

In anticipation of this grim day, postal services around the world are suspending their services to the U.S. The list is growing by the hour. In a previous post, I argued that the taxpayer-funded Universal Postal Union (UPU) should be hurriedly getting all these countries together and cobbling together some kind of compromise to get the mail flowing again. That still hasn’t happened.

However, the UPU has belatedly entered the fray. On Tuesday, the UPU penned a letter to U.S. Secretary of State Marco Rubio expressing alarm at the hasty imposition of new tariffs and corresponding duty collection and transmission requirements. The UPU also released the following statement:

Recognizing that the short implementation timeline poses a significant challenge for the international postal network, particularly for the delivery of e-commerce items, the UPU is working with the relevant U.S. authorities to ensure that information on the operational requirements of the measures is communicated effectively.

The UPU further stated it is “working with relevant postal stakeholders on network-wide and sustainable solutions [such as] a scalable delivered duty paid solution that will facilitate duty collection and remittance across the UPU network.”

But without a substantive agreement between member countries on tariff rates for inexpensive items, further postal boycotting is very likely. The good news is the UPU could (in theory) propose significant reforms to try and persuade the U.S. to ditch this reckless tariff tantrum. As I wrote earlier this week, the UPU moved a few years ago from fixed terminal dues—which benefited China and developing countries—to U.S.-friendly self-declared postage rates. Now, when China comes knocking with incoming shipments, the U.S. Postal Service has more discretion to charge China what it deems reasonable for taking said shipments the last mile to U.S. addresses.

The problem is these new self-declared rates are only flexible to a point. Countries are generally limited to demanding 70 percent of equivalent domestic postage, meaning that imports still have an artificial advantage and domestic producers will still be paying more for in-country shipments than their Chinese-based competitors shipping across the Pacific. Meanwhile, this cap is based on prior year domestic postage rather than current year rates. That creates an artificially large gap between domestic and foreign inbound rates when USPS rates have lately been changing twice a year.

Reforming the system to allow more fully self-declared rates would be a significant boon to the U.S. and maybe even cause the Trump administration to think twice before ending the de minimis exception. But first, the UPU needs to get everyone back to the negotiating table. It’s been six years since the last significant UPU agreement. It’s time for another accord to stave off De Minimis Day.