Impact of US De Minimis Rule on India US Trade

Withdrawal of the Exemption

Impact of US De Minimis Rule on India US Trade: On 29 August 2025, the United States officially scrapped its De Minimis exemption, a century-old facility that allowed duty-free entry of low-value parcels under $800 per person per day. This development disrupted cross-border e-commerce and postal deliveries, creating immediate hurdles for Indian exporters and consumers.

Static GK fact: The US has been India’s top trading partner since 2019, overtaking China.

Significance of the Earlier System

The exemption was designed to reduce customs formalities for small consignments, cutting paperwork and speeding up parcel clearances. In FY 2024 alone, over 1.36 billion shipments entered the US under this provision. It encouraged small businesses, especially in India, to access the American market with ease.

Reasons for Ending the Facility

The US administration withdrew the rule to strengthen import regulation and increase tariff collection. The government cited undervaluation of goods and potential security risks as key concerns. The announcement by Donald Trump on 30 July 2025 left exporters with only a month to adjust.

Static GK Tip: In contrast, India’s import threshold for courier parcels is fixed at ₹1,000.

India Post and Service Suspension

Ahead of the US decision taking effect, India Post suspended parcel services to America from 25 August 2025, continuing only documents and low-value gifts. In hubs like Coimbatore, where nearly 15% of parcels were destined for the US, this caused significant disruption. Lack of a clear duty collection mechanism prevented carriers from processing shipments.

Challenges for Indian Businesses

Indian MSMEs, particularly in electronics, textiles, pharmaceuticals, and jewellery, now face stricter compliance demands. These sectors together contribute more than 60% of India’s exports to the US. The older Entry Type 86 system has been replaced with Entry Type 11, which requires detailed product classification, valuation, and extensive paperwork. This not only increases costs but also slows down deliveries.

Static GK fact: India is one of the largest global suppliers of gems and jewellery, with the US as its biggest market.

Rising Costs and Strategic Shifts

Exporters are under pressure to either absorb the new duties or pass them to US buyers. While absorbing cuts into profits, passing them on could dampen demand. Many MSMEs with limited margins face the risk of losing competitiveness. However, the change also pushes Indian businesses to adopt modern compliance and digital documentation practices, which may strengthen long-term trade readiness.

The Road Ahead

The Department of Post is in talks to streamline procedures for resuming full services. Exporters and industry bodies are calling for clearer frameworks on data exchange and duty collection. Though the short-term impact is disruptive, the transition could drive greater transparency and efficiency in India-US trade relations.

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Impact of US De Minimis Rule on India US Trade: