News #75 - How air cargo shippers can prepare for de minimis fallout

23.08.2024

Changes to the exemption threshold could be implemented soon. Here’s how supply chain managers can prepare.

Surging volumes from ultra-fast fashion companies like Shein and Temu are exacerbating e-commerce growth, which has quickly become a major driver for air cargo — and it’s not slowing down.

By 2027, e-commerce is expected to represent up to 30% of global air cargo volumes, compared to 20% in 2022, Alexis Boutet, VP and global head of airfreight at Flexport, told Supply Chain Dive in an email.

With U.S. lawmakers more intensely scrutinizing e-commerce goods from Asia in recent years, there’s a chance that the air cargo industry’s windfall may disappear, as a lowering of the de minimis exemption threshold — which enables companies to avoid tariffs for shipments below $800 into the U.S. — may be on the horizon.

However, new regulations will have a tough time changing entrenched consumer habits that rely on the speed of air transportation.

“The genie is out of the bottle regarding e-commerce,” Xeneta Chief Airfreight Officer Niall van de Wouw told Supply Chain Dive in an email. “Governments in the West may bring in tighter regulations - and e-commerce businesses will need to adapt - but this type of consumer offering is here to stay.”

The air cargo impact of a lower threshold

Companies all around the world can gain from the current de minimis threshold, Brian Bourke, global chief commercial officer at Seko Logistics, told Supply Chain Dive in an interview. The amendment isn’t just about low-value items — it’s also about speed and SKU variety. For instance, a $400 shirt that is considered a luxury item can still benefit from de minimis, according to Bourke.

As air cargo demand continues to be heavily influenced by e-commerce trends, how will lowering the threshold affect market dynamics? Van de Wouw said the answer depends on where goods are bought.

“If goods are bought on the high street then it is likely they will be shipped via ocean because businesses can build up stock inventories,” van de Wouw said. “If they are bought online — in particular fast-fashion items — then the only way to get them to consumers in the West within the required timeframe is by air freight.”

Changes to the threshold are not expected to have a dramatic impact on the air cargo market, van de Wouw added. In fact, the de minimis threshold is much lower in the European Union compared to the U.S., but large e-commerce volumes are still being transported into both regions, he said. Even if the U.S. lowered the threshold in line with the EU — at 150 Euros, for now — “these items are so cheap that most would still be exempt.”

Source: https://www.supplychaindive.com/news/air-cargo-industry-de-minimis-fallout-regulation-e-commerce-china/723659/