Air Thee Well: How Losing the De Minimis Exemption is Impacting the Air Freight Market

Recent changes in U.S. trade policy have ended the de minimis exemption, which until last month, allowed shippers to import goods valued under $800 into the U.S. marketplace quickly, inexpensively, and duty free. However, the removal of the exemption has caused e-commerce companies to rethink their business model.

Almost immediately after the exemption was terminated, e-commerce businesses targeted their air freight strategy as a way to reduce costs. Before August 29, air freight had been an attractive option to move inexpensive goods to market quickly. One month later, that is no longer the case as  experts are projecting this year’s air cargo volume growth to be only  0.6%, significantly lower than earlier expectations of at least 5% growth.

“Air freight has long been the lifeblood of fast, affordable e-commerce. The De Minimis exemption was a major reason it was economically feasible to use air freight to meet insatiable consumer demand to receive low value goods quickly,” said Anthony Fullbrook, president of OEC Group’s North American region. “Now that the exemption is gone, e-commerce companies need to develop a new cost-effective supply chain strategy in order to satisfy consumer expectations and maintain profitability.”

Companies that relied heavily on the De Minimis exemption are already adjusting their strategies. Many organizations are looking to shift to U.S. warehousing models, move inventory closer to consumers (especially into U.S. based fulfillment centers), and rebrand as hybrid fulfillment platforms. Other companies are looking to increase their strategic reliance on third-party logistics providers, and domestic shipping networks.

“Even though e-commerce demand for air freight has weakened, high-value and time-sensitive shipments remain strong,” said Alan Dong, OEC Group’s Regional Air Freight Manager. “While things look bleak for air freight, the reality is that consumer expectations for fast delivery of products remains high, and  air freight is still the only viable mode for rapid fulfillment.”