San Francisco Frontiers - US ends tariff exemption for small packages shipped globally

President Donald Trump's administration cited the use of low-value shipments to evade tariffs and smuggle drugs in ending duty-free treatment for parcels valued at or under $800.

Instead, packages will either be subject to the tariff level applicable to their country of origin, or face a specific duty ranging from $80 to $200 per item. But exclusions for personal some personal items and gifts remain.

Trump's trade adviser Peter Navarro told reporters that closing this "loophole" helps restrict the flow of "narcotics and other dangerous and prohibited items" while bringing fresh tariff revenues.

But the monthlong lead time Trump's order provided has sparked a frenzy.

Postal services, including in France, Germany, Italy, India, Australia and Japan, earlier said most US-bound packages would no longer be accepted.

The UK's Royal Mail, which took a similar step, announced new services Thursday for customers to continue sending goods to the United States.

On Tuesday, the United Nations' Universal Postal Union said 25 member countries' postal operators had suspended outbound postal services to the country.

"Foreign post offices need to get their act together when it comes to monitoring and policing the use of international mail for smuggling and tariff evasion purposes," Navarro added Thursday.

US officials maintain that just five percent of duty-free small package shipments arrived via the postal network, while most went through express couriers.

Yet, the impending change has brought confusion and concern to small businesses.

- Delays, cost hikes -

UK retailer Liz Nieburg told AFP she had stopped shipping products to US customers while the Royal Mail worked out a system to honor the changes.

US buyers form about 20 percent of sales at her online business SocksFox, which sells socks, undergarments and sleepwear.

She sees little choice but to hike prices if new duties are here to stay: "Our margins are too tight to be able to absorb that."

The Trump administration has imposed tariffs in rapid succession this year.

Cornell University professor Li Chen warned that it takes time for postal services to establish systems for duty collection: "It's not like there's a switch you can turn on and turn off."

"On the consumer side, there will be potential delays, because now all the parcels have to clear customs," Chen added. Prices may also rise if businesses pass on the tariffs.

He expects the impact on small businesses to be "much greater," as larger firms can absorb shocks.

These include businesses like Chinese-founded consumer platforms Shein and Temu, which were hit when Washington ended the exemption for China-origin products this year.

They might have to raise costs, Chen said, but they are not fully dependent on US consumers.

Ken Huening, whose California-based business CoverSeal manufactures outdoor protective covers in China and Mexico, has had to eliminate free shipping for customers.

While he had benefited from the duty-free exemption, the hit to China and now Mexico is posing challenges.

"Textile and manufacturing is not available in the US currently," Huening said. "It might be in the future, but by that time, we're all out of business."

- Confusion -

"It's a super confusing time for our customers," said Haley Massicotte, who runs Canada-based cleaning products company Oak & Willow.

She said US consumers do not always understand how tariffs work, and how they might have to bear added costs.

"We are going to do everything in our power to not raise prices," she stressed.

Similarly, ceramics retailer Sarah Louise Jour in Bangkok is trying to keep shipping costs down after facing issues with Thailand's postal service.

This forced her to tap more expensive services for shipments to US buyers, constituting some 90 percent of her business.

"I don't have time to worry, because I have to think about my team," she said. "I have rent I need to pay for the office."

While she expects sales to hold up over the holidays, the outlook is murkier afterwards.

Massicotte said: "This tariff war is just going to hurt the American and the Canadian consumer, especially small business owners."

G.Collins--SFF