A few years ago I was speaking with a brand founder telling us about their magic trick to help boost margins. It wasn't a hot influencer collab, affiliate scheme or a TikTok ad hack. It was a shipping label and an address in Mexico.
For years, U.S. brands leaned on the de minimis exemption: the rule that said if you imported something worth less than $800, you didn't have to pay duties or tariffs. That little quirk turned into a quiet best friend for many ecommerce operators.
Every $799 box slipping through customs duty-free was like finding spare change in the couch cushions. Only the couch was the global economy, and the change could add up to hundreds of thousands of dollars.
Now the trick's gone. Policymakers have shut down the loophole, and the fallout is going to hit mid-market brands right where it hurts: the margin line.
But here's the upshot. This isn't just a story about Washington pulling the rug. It's also an opportunity to finally take those margins back for brands that have long relied on marketplace relationships for the bulk of their sales.
What Changed (and Why Now)
The de minimis exemption was never built for ecommerce. It was meant for a traveler shipping home a rug from Mexico or a box of chocolates from Paris. Not container-loads of merchandise sliced into $799 parcels and marched across the border in convoys of UPS trucks.
Lawmakers caught on. With protectionism rising and governments hunting for tax revenue, the loophole is done. That means tariffs and duties now apply. Even on the low-ticket imports many operators depended on. Think Shein, and Temu.
The result? A margin cliff for many brands. And like cliffs, you don't notice until you're standing at the edge.
The Margin Math
Margins rarely disappear in one cinematic explosion. They leak, slow and steady. A few bucks here, a few points there, until your P&L starts looking suspiciously thinner than it used to.
Let's do the back-of-the-envelope math:
Apparel (AOV: $50)
Before: duty-free.
After: 16.5% duty = $8.25 gone per unit.
At 100,000 units a year: $825,000 in margin gone.
Home Goods / Furniture (AOV: $250)
Before: free up to $800.
After: 10% duty = $25 per unit.
A $10M brand selling 40,000 units: $1M erased.
Consumer Electronics (AOV: $120)
Before: free pass.
After: 4% tariff = $4.80 per unit.
At 100,000 units: $460,000 vaporized.
For a $10M–$20M brand, losing half a percent to two percent of margin isn't "just accounting." It's the difference between:
funding customer acquisition or pulling back,
expanding your team or cutting headcount,
staying profitable or going hat-in-hand to outside capital.
The Marketplace Habit
If you're already hooked on marketplaces, the pain doubles.
Amazon, Walmart, Wayfair, Target: they control the customer, the checkout, the rules. You rent their reach while they keep the lifetime value. And let's not forget the marketing dollars they're extracting from you week-after-week.
" De minimis used to make the tradeoff ("lose margin, gain volume") at least pencil out. Without it, the math looks uglier. "
If marketplaces are your growth engine, you're not just borrowing fuel. You're renting the whole car.
The Strategic Reset
Here's the good news: the end of de minimis doesn't have to be a death knell. It's more like a forced reset button.
Every dollar lost to tariffs is also a dollar that could be rerouted into your own direct-to-consumer channel. That's where you control your data, capture repeat sales, own your customer relationships, and build defensible economics that don't change because a policymaker in D.C. sharpened a pencil.
Think of nearshoring plus DTC as an insurance policy: fewer policy risks, steadier margins, and tighter customer relationships.
The DTC Readiness Playbook
The end of de minimis isn't just a marketing problem. It's an operating model problem. Surviving the reset means thinking like a CFO, a supply chain exec, and a brand builder all at once.
Here's what the playbook really looks like:
1. Get forensic with your landed cost model
Generic audits won't cut it. Build SKU-level landed cost sheets that account for duties, tariffs, freight, and surcharges. Most commerce platforms are rubbish at this, so lean on experience platforms and systems to get your data right.
Run scenarios for 5–10% tariff hikes or freight spikes. When merchandising, finance, and ops all work from the same numbers, you avoid surprises that show up months too late in the P&L.
2. Engineer tariffs out of your product
Small changes can drive big savings. Shift HS code classifications by adjusting packaging, importing components instead of finished goods, or rethinking final assembly locations. Trade compliance specialists can pay for themselves 50x over if you're moving real volume.
3. Use bonded warehouses & Foreign Trade Zones (FTZs)
These let you defer duty payments until goods are sold into commerce. For operators running both wholesale and DTC, FTZs keep cash in your pocket longer, reduce working capital drag, and add agility when demand swings seasonally.
4. Renegotiate supplier & freight terms
Don't just absorb tariffs. Share the load.
Push suppliers for FOB terms that give you more control, ask for longer payment terms, and negotiate multi-year contracts to stabilize cost of goods. Explore nearshoring partners in Mexico or LatAm to cut duty exposure and lead times simultaneously where possible.
5. Build pricing flexibility into your storefront
Margins shift faster than your catalog usually does. Build in pricing bands or rules that let you adjust quickly without a full re-merch. For wholesale/B2B, consider "tariff contingency fees." For DTC, transparency messaging ("tariff surcharge") are hit or miss, but we've seen it soften price changes with customers.
6. Protect your cash conversion cycle
Tariff shocks hit cash flow before they hit EBITDA. Audit supplier terms, accelerate settlement of DTC payments, and consider working capital financing. Even a few days of additional float can offset the new duty drag.
7. Expand AOV and retention to claw back margin (Easier said than done)
If tariffs cut into unit economics, one answer is to earn more per customer. Drive subscription programs, bundle SKUs to ship higher AOV per parcel, and invest in loyalty mechanics that reduce reacquisition spend. These are all UX mechanics that modern commerce platforms do a fantastic job with. Between your commerce platform and the right partner, you can design delightful upsell/cross-sell experiences that actually move the needle without peppering your site in obnoxious CRO eyesores.
8. Rebalance your channel mix to win back margin + data
Marketplaces still matter for discovery, but every order there is margin lost and data you'll never own. With tariffs in play, that tradeoff looks worse than ever.
Shift marketplaces to top-of-funnel only where possible. Then use packaging, post-purchase flows, and loyalty hooks to drive customers to your DTC site. Incentivize the move with bundles, perks, and subscriptions they can't get on Amazon. Run the math by SKU: keep commodity products in marketplaces, but funnel high-margin hero SKUs to DTC.
Every order you convert direct isn't just more margin. It's another line of first-party data to fuel retention and lifetime value.
Bottom line
Generic "go build DTC" advice won't save operators from tariff shocks. The winners will be the ones who treat this as a holistic finance, supply chain problem first, and marketing problem. Get the mechanics right, and your DTC stack will actually have room to protect, and even grow, your margin.
Ready to build your unfair advantage?
Fraction Studio helps brands do just that. Let us be your unfair advantage in a landscape that's constantly changing. You have more important things to focus on.