De Minimis Suspension Shipping Costs: New Landed-Cost Math

Every example and amount on this page is illustrative. It shows the method and is not a benchmark, a quote or advice.

What the Policy Change Means for US Merchants

For US merchants, de minimis is an entry rule, not a shipping discount. Under 19 U.S.C. §1321, qualifying commercial shipments may enter without ordinary duties and with simplified entry treatment. The rule applies to the shipment and its eligibility, not automatically to every order, product, origin, or carrier method.

What De Minimis Suspension Shipping Costs Actually Measures

De minimis suspension shipping costs measure the additional cost of moving an order or unit through the import process after the exemption is suspended or no longer available. The measure is a change from a defined baseline, not the full cost of the product. It can include additional international shipping, import duties, customs brokerage, carrier handling, warehouse handling and other entry-related charges that arise under the post-suspension process.

For illustration only, assume the previous fulfillment path required $6 of shipping and no brokerage or duty. The new path requires $6 of shipping, $4 of duty, $3 of brokerage and $2 of handling. The post-change import cost is $15, but the incremental de minimis suspension shipping cost is $9: $4 + $3 + $2. If shipping also rises to $8, the incremental amount becomes $11. The result depends on the baseline and on how shared charges are allocated across units in an order.

This is not the same as total landed cost. Landed cost generally combines product cost with the costs required to bring the goods to the selling destination, including the relevant post-suspension import costs. A $20 product with $11 of incremental import costs may have a landed cost above $31 once all applicable freight and other costs are included. Product cost is only the supplier or manufacturing cost of the item; it does not describe the cost of importing it.

It is also not the customer-facing delivery charge. A merchant may charge the customer $12 for shipping while incurring $18, or charge nothing while incurring $18. The customer-facing amount affects collected revenue and pricing; the de minimis suspension measure explains the cost change behind the order economics. Use the incremental measure to assess the policy change, landed cost to set margin assumptions, product cost to evaluate sourcing, and the customer charge to evaluate delivery pricing and recovery.

The Landed-Cost Formula, in Plain English

Use two related calculations: unit landed cost for getting inventory into the country, and order-level contribution margin for deciding whether a sale earns money. The basic unit formula is:

Unit landed cost = product COGS + allocated international freight + import duty + allocated customs or brokerage fees.

COGS is the supplier cost of the product itself. Allocate international freight to units using a consistent basis, such as units, weight, volume or product value. Allocate shipment-level customs fees across the units or orders that created them. Duty belongs in the formula when it is charged; calculate it from the applicable customs basis and rate for that shipment rather than treating it as a percentage of retail price.

For an order, start with realized revenue from the delivered order, then subtract the landed cost of the units sold, domestic delivery, fulfillment, payment processing and any other variable order cost. A practical formula is: Order contribution = realized revenue − (quantity × unit landed cost) − domestic delivery − fulfillment − payment costs. If you want contribution after advertising, subtract the order's allocated advertising cost as a separate line. Contribution margin percentage = order contribution ÷ realized revenue × 100.

Do not hide every cost inside one landed-cost number. Keep product COGS, international freight, duty and customs fees visible for sourcing and import decisions. A supplier change may lower COGS while increasing freight; a routing change may lower freight while increasing duty or brokerage. Keep domestic delivery, fulfillment, payment processing and advertising separate for pricing and channel decisions because they depend on the order, customer, carrier or acquisition source rather than only on the product.

• Use unit landed cost when comparing suppliers, import routes, SKU economics and inventory cost.
• Use order contribution when setting a delivered price, evaluating free shipping or deciding how much acquisition cost an order can support.
• Use contribution after advertising when judging whether the sale remains profitable after customer acquisition.

A Worked Example Across Fulfillment Models

Consider a $48 apparel order with one unit, using the merchant’s trading currency throughout. The comparison below treats $48 as realized revenue from a delivered order. It excludes sales tax, payment fees, advertising and returns, so the gross profit shown isolates fulfillment and import economics.

With direct parcel shipping, the arithmetic is: $10 product cost + $8 international parcel shipping + $4 duty or tariff + $2 import processing = $24 total variable cost. Gross profit is $48 − $24 = $24, or $24 ÷ $48 = 50.0%. This model may be operationally simple, but the parcel and entry costs are attached to each order.

With bulk import and domestic fulfillment, the same product costs $10, but the shipment costs are allocated across inventory: $1.50 inbound freight per unit + $4 duty or tariff + $0.75 customs and receiving + $3.25 domestic pick-and-pack and postage + $0.50 storage. Total variable cost is $19.50, producing $28.50 gross profit and a 59.4% gross margin.

How the Change Reaches Margin, Pricing and Inventory

The first commercial effect is a higher unit landed COGS. If a product previously landed at $12 and the change adds $4, gross profit falls by $4 on every sold unit. At a $32 realized selling price, gross margin moves from 62.5% ($20 ÷ $32) to 50% ($16 ÷ $32). That change belongs in product and collection profitability, not only in a freight report. Returns also matter: a returned unit may reverse revenue while some import, handling or outbound costs remain unrecovered. See how returns reach profit.

The same $4 reduces the amount available for acquisition. If an order previously generated $18 before advertising and now generates $14, its break-even CAC falls from $18 to $14, assuming the other variable costs are unchanged. A campaign can therefore retain its attributed ROAS while producing less contribution. ROAS measures revenue against ad spend; contribution after advertising tests whether the order leaves money after the relevant costs. ROAS versus profit covers why those measures answer different questions.

Pricing decisions require a different test. A merchant can absorb the increase, pass through part of it, or preserve a target margin through a price change. For illustration only, replacing $4 of lost gross profit at a 60% target gross margin requires $10 of additional realized price, before considering any demand response. That arithmetic identifies the price needed to protect the target; it does not predict whether customers will accept it. AOV is not a substitute for profit per order: a larger basket can still carry less contribution after the added costs. See AOV versus profit per order.

Inventory decisions use the changed cost and the changed supply risk differently. Reorder points should reflect expected demand during replenishment lead time; safety stock should reflect uncertainty in demand and replenishment. A higher unit cost raises the cash required for the same reorder quantity, while longer or less predictable import paths can justify more protection against stockouts. That does not automatically mean carrying more units: the decision must weigh lost-sales risk against cash tied in stock and dead-stock exposure. Sourcing geography can reduce exposure to one route, tariff treatment or lead-time pattern, but splitting volume can create supplier concentration trade-offs, minimum-order constraints and different unit costs.

The formula, stated plainly

Use two formulas, because the cost of importing inventory is not the same as the profit from selling an order.

Unit landed cost = product cost + inbound freight and insurance + duty or tariff + customs and brokerage fees + other non-recoverable import charges. If a shipment contains multiple units, allocate shared charges consistently. For illustration only, a shipment costs $240 for 40 units in product, $80 in freight, and $40 in duty and brokerage. Unit landed cost is ($240 + $80 + $40) ÷ 40 = $9.00.

The change attributable to the suspension is: incremental landed cost = new unit landed cost − old unit landed cost. If the old cost was $7.00 and the new cost is $9.00, de minimis suspension shipping costs add $2.00 per unit. For an order containing three units, that adds $6.00 before considering any customer-facing shipping or selling costs.

Do not put every cost associated with a sale into landed cost. Outbound delivery to the customer, payment processing, discounts, returns, advertising and marketplace fees belong in the order-level profitability calculation. Keeping these categories separate prevents a tariff change from being hidden inside an unexplained fulfillment number.

Order contribution before advertising = realized revenue − product COGS at the relevant landed cost − outbound shipping − payment and selling fees − discounts and other variable order costs. Order contribution after advertising subtracts the advertising cost as well. A $75 delivered order with $27 of landed product cost, $8 outbound shipping, $3 in payment fees and $20 in advertising produces $17 after-ad contribution: $75 − $27 − $8 − $3 − $20 = $17.

Act on the unit landed-cost calculation when deciding whether a product can remain in the assortment, how much inventory is worth holding, or whether its price architecture still works. Act on order contribution when deciding whether a customer acquisition campaign, shipping offer or basket configuration earns money. A product can have an acceptable landed cost but still lose money after delivery and advertising. Conversely, an order can contribute cash while the underlying inventory economics are deteriorating.

This is also why revenue, ROAS and profit should not be treated as interchangeable measures; ROAS vs profit uses a different denominator and answers a different operating question.

General information only: tax, duty and import rules change and depend on your situation, so check with an accountant or the official source before acting.