OPINION:
Every small-business owner dreams of growth and success, but rising costs and persistent inflation have made that path far more difficult. Now, a proposed policy targeting the de minimis exception threatens to impose even greater financial burdens on small businesses, driving up costs and hindering growth at a time when the economy can least afford it.
The de minimis rule is a cornerstone of small-business success globally. It allows goods valued under $800 to enter the U.S. with minimal customs paperwork, no need for a broker and streamlined processing.
For small businesses, this simplified process is a lifeline. It makes global trade possible and helps businesses manage their supply chains without excessive regulation and cost. The potential removal de minimis will hurt small businesses and ultimately hurt customers.
Yet the White House and some in Congress support measures such as the End China’s De Minimis Abuse Act and the FIGHTING for America Act, which would restrict this crucial exception for products subject to Section 301 tariffs under the Trade Act of 1974. It might seem like a small technical change, but it’s a policy shift for small businesses that could have far-reaching consequences.
Without access to de minimis, small businesses would face skyrocketing costs. Routine imports and returns would require added paperwork, broker fees and compliance hurdles, creating delays that could cripple inventory management.
Unlike large corporations with dedicated compliance teams, small businesses lack the resources to absorb these new expenses. Every extra dollar spent on logistics is a dollar not invested in growth, hiring or product development.
The impact of these changes would ripple across the economy. Consumers would feel the pinch as businesses pass higher costs along through higher prices. This would hit low-income Americans the hardest, effectively acting as a regressive tax. A new study by Yale and the University of California, Los Angeles, found that weakening de minimis would affect the poorest ZIP codes the most by imposing higher costs on low-income communities that are more likely to buy goods from overseas. By increasing customs prices, the policy effectively raises costs for consumers who can least afford it.
Even the government would bear unintended costs. Processing more low-value shipments through traditional customs procedures would create significant administrative bottlenecks, forcing U.S. Customs and Border Protection and other agencies to allocate more resources to an already overburdened system. Because of increased government spending, this approach could result in higher costs for taxpayers.
This policy represents a step in the wrong direction at a time when small businesses are still recovering from the pandemic and battling inflation. Instead of adding barriers, lawmakers should focus on reducing costs and streamlining processes to support entrepreneurship and economic recovery.
The de minimis rule is not a loophole to be closed; it’s a crucial tool for small businesses navigating the complexities of international trade. Weakening it would harm entrepreneurs, raise consumers costs and undermine economic growth. Congress and the White House must reconsider this proposal and consider the real-world impacts on small businesses. Let’s build an environment where small businesses can thrive, not one weighed down by unnecessary hurdles.
• Economist Spencer Cohen specializes in regional economic analysis, international trade research and U.S.-China relations.
Please read our comment policy before commenting.