What does U.S. repealing the De Minimis Exemption mean to Indian MSME exporters

India Post said on August 22 that due to recent regulatory changes introduced by the U.S., it was suspending from August 25 booking and transmission of all categories of mail items destined for the U.S., except documents/letters and gift items up to $ 100 in value. The U.S. withdrew the de minimis exemption with effect from August 29.

What is De Minimis Exemption ?

The De Minimis Tax Exemption is almost a century-old law in the U.S. that allowed shipments bound for American businesses and consumers valued under $ 800 (per person, per day) to enter the U.S. free of duty and taxes. The U.S. Customs and Border Protection (CBP) screens the low-value shipments just as it would screen higher-value entries coming through other modes.

According to the U.S. CBP, during the fiscal year 2024, de minimis shipments rose to over 1.36 billion.

The U.S. President Donald Trump announced on July 30, 2025 that he was withdrawing the exemption.

How does it affect the postal customers in India?

India Post said it had to suspend postal bookings and transmission to the U.S. as the U.S.-bound carriers expressed their inability to carry postal shipments in the absence of fully defined mechanisms for duty collection and data exchange, as required by U.S. CBP.

It said the Department was closely monitoring the situation and making efforts to restore services at the earliest.

In the industry hub of Coimbatore, on an average, for every 100 parcels booked by the Department of Post, 15 are bound to the US. “With so many Indians living in the US, families send gifts and household items to the US. They are willing to pay more. But, they are unable to send goods now because systems are not in place,” said an official of the Department.

What happens to MSMEs in the e-commerce sector?

The Global Trade Research Initiative recently said that now all in-bound parcels in the U.S. will attract tariffs. But International postal shipments will remain duty-free until the U.S. CBP establishes a new entry process and publishes it. After that, such shipments will face one of two duty structures: Ad valorem duty based on the effective tariff rate under IEEPA, or a flat rate duty—$80, $160, or $200 per item —depending on the country’s tariff bracket (under 16%, between 16–25%, or above 25%, respectively).

According to Anil Paranjape, General Manager of India Operations at Avalara, suspension of the De Minimis Exemption will greatly affect exporters, particularly those who benefited from the flexibility and cost savings of the $800 duty-free threshold. For many businesses, particularly those selling online directly to American consumers, the new mandate is likely to influence how they operate.

Smaller exporters and entrepreneurs are likely to be the most affected, many of whom run e-commerce businesses in sectors such as electronics, pharmaceuticals, textiles, and jewellery. These categories account for more than 60% of India’s exports to the US, with a significant portion relying on the quick, cost effective Entry Type 86 process. This process has now been replaced by the more demanding Entry Type 11 system, which requires extensive documentation—from ten-digit Harmonized Tariff Schedule (HTS) codes to detailed product and valuation records.

Even unintentional misdeclarations can cause delays at the U.S. customs, adding demurrage costs for exporters. Further, duties will now apply to every shipment. If exporters choose to absorb these costs, margins will fall; if they pass them on to customers, sales prices will rise and demand may drop. Hence, Indian exporters must reassess shipping, pricing, and compliance strategies. However, this also presents an opportunity for Indian exporters to modernise compliance practices and build resilience in global trade, he said.