When the U.S. eliminated its $800 de minimis exemption on August 29, 2025, DTC brands worldwide felt it immediately. Suddenly, even low-value orders shipped to the U.S. triggered new import taxes. Duties that once felt small or invisible became a meaningful share of total landed cost, creating a direct hit to profit margins and cash flow.
A typical DTC skincare brand shipping from Asia to U.S. customers may now face duty rates up to 25%, depending on the HTS classification and applicable Section 301 tariffs. These unexpected costs force brands to either absorb the expense or pass it to customers.
Key terms to know:
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De minimis is the value threshold below which imports can enter a country duty-free. The U.S. removed its $800 threshold, while most other countries still set far lower limits between $20 and $150.
Before this change, a $200 product shipped directly to U.S. customers entered duty-free. Now that same product can face $30 to $50 in duties, depending on its category.
Here’s how a typical product’s economics change:
At scale, that $7.50 per unit locks up working capital. A brand shipping 10,000 units per month now has $75,000 less cash available to reinvest.
“Duty engineering” involves legally structuring your supply chain to minimize import taxes. This strategy focuses on three key variables: where you manufacture, how you ship, and when duties are paid.
By shipping directly from manufacturers in strategic locations, brands can combine VAT refunds, lower-duty manufacturing options, duty deferral, and duty-efficient routing to meaningfully reduce their overall duty burden — something traditional hub-and-spoke models cannot achieve.
See examples of SHEIN and Temu
Bonded warehouses allow goods to be stored without paying import duties until export. China applies a 13% VAT rate on most goods, according to PWC’s Worldwide Tax Summaries. Exporters can reclaim this VAT when goods enter bonded channels, reducing cost of goods and duty base.
Bonded warehouses also defer duties until each item ships to the customer, freeing up working capital.
Learn the difference between bonded and non-bonded warehouse
The right fulfillment location can make as much difference as the right product category.
Suggested reading: A deep dive into why Vietnam has become the top diversification hub for DTC brands, including MFN tariff advantages, FTA access, and direct-fulfillment readiness.
Delivered Duty Paid (DDP) means the seller pays all duties before delivery.
Delivered Duty Unpaid (DDU) means the customer pays duties upon arrival.
DDP reduces surprise fees and improves fulfillment consistency by showing the full landed cost upfront. DDU lowers upfront costs but risks refusals and higher customer service burden when duties appear at delivery.
According to Baymard Institute’s 2025 survey of U.S. online shoppers, 39% abandon checkout because of extra costs (shipping, taxes, duties) and 14% abandon when they cannot see the total order cost upfront. Both issues are common with DDU shipments, where duties are revealed only at delivery.
Suggested reading: If you want a deeper breakdown of how landed cost is calculated, see our guide.
Many brands focus only on what duty rate they pay, not when they must pay. Using bonded warehouses, foreign-trade zones (FTZs) or duty-deferral programs allows you to delay duty payments until the goods sell or are released, improving cash-flow and reducing the inventory financing burden.
Just-in-time fulfillment, smaller initial imports for season launches, and alignment of customs entries with revenue cycles let you better match duty outflows with inbound revenue.
Accurate landed cost calculation and transparent duties disclosure make a big difference. A typical approach:
When duties are included upfront, shoppers are less likely to abandon carts due to hidden fees.
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How do cross-border duties specifically impact DTC brand cash flow?
Duties tie up cash in advance of sales, often requiring payment 30-90 days before you can sell the inventory. This creates a working capital gap that limits your ability to invest in marketing or product development.
Can DTC brands claim back duties paid on returned international orders?
Yes, through duty drawback programs, but the process requires detailed documentation and typically takes 6-12 months to process. Most brands find it's only worth pursuing for high-value returns.
How quickly can a DTC brand implement these duty reduction strategies?
Immediate savings start with your next shipment when using bonded warehouses or optimized routing. Trade agreement benefits may take 30-60 days to implement fully as you adjust supply chain documentation.
What specific documentation do DTC brands need to qualify for preferential duty rates?
You need certificates of origin, manufacturing records that prove compliance with rules of origin, and proper HS code classification. These must be maintained for at least five years after importation.
How can DTC brands calculate the ROI of switching to a DDP shipping model?
Compare the improvement in conversion that typically comes from showing full landed cost upfront, along with reduced refusals and customer service burden
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