Most of us do not really know much about the mechanics of shipping, expect for many goods that used to come from China are now coming from Southeast Asia including Vietnam and India. The goods which come from very large container ships are designed to have a reasonably seamless flow from the manufacturer to the shipping container to the ship to ports to rail and trucks to a distribution center to the store and eventually the consumer. There are regulations along the way and one regulation being looked at is duty-free packages.

In an article by Kevin Freking of the Associated Press, under current US law, most imports valued at less than $800 enter duty free as long as they are packaged and addressed to individual buyers. The rule has many benefits. It speeds up the pace of commerce and lowers the cost for consumers. It allows for US Customs and Border Protection to focus its resources on bigger ticket items that generate more tariff revenue for the federal government.

In 2016, the dollar requirement was changed from $200 to $800 and the volume has soared. The volume has increased from 220 million packages to 720 million in 2021 and 685 million in 2022. From a regulatory point of view, no one really knows what is in the packages. almost 2 million packages a day and 60% coming from China.

Last year, the Biden administration wanted to lower the number, but US business groups and key Republican members of Congress said no and would not support it.

If you know someone that shops with retailers Temu and Shein which ship directly to consumers, the retailers ship directly to consumers and avoid the duty free tax. Meanwhile the Gap and H&M with different business models paid $700 million and $205 million in tariffs in 2022.

The reason why business groups are against lowering the amount, is to import the goods they would have to hire a customs broker to process their shipments. Given the low amounts, lowering the amount would not collect a great deal of tax money, but cause considerable extra work.

Linking to dividend paying stocks, everyone wants a relatively smooth flow of goods which is the goal. Wat is the appropriate levels to raise revenues and allow for the flow. There is no one answer, however most investors believe the larger companies have the capability to implement whatever the government determines is the correct number for their needs. As investors in large companies we expect, they can adjust to government regulations, if you find the large companies are leading the fight against regulations it is good time to find alternatives.

There are more questions than answers, till the next time – to raising questions.