Recent changes in U.S. law have significantly altered the landscape for dropshipping, particularly for businesses that rely on sourcing low-cost goods from overseas. While dropshipping as a business model is not "dead," these new regulations have made the traditional approach nearly unsustainable and require a major shift in strategy.

The primary change impacting dropshipping is the elimination of the de minimis exemption for packages imported from China and Hong Kong.

What is the De Minimis Exemption?
Previously, the de minimis exemption allowed goods valued at $800 or less to enter the U.S. duty-free and with minimal customs scrutiny. This rule was a cornerstone of the traditional dropshipping model, enabling businesses to sell inexpensive products from overseas suppliers without the added costs and delays of tariffs and extensive customs checks.

The New Law and Its Impact on Dropshipping
As of May 2, 2025, and with a further increase in June, this exemption has been eliminated for goods from China and Hong Kong. This means:

Increased Costs: All parcels, regardless of value, are now subject to import duties. From June 1, 2025, carriers must charge a flat fee of $200 per item or a 120% ad valorem duty, whichever is higher, for all small parcel shipments from China and Hong Kong.

Reduced Profit Margins: For dropshippers who previously relied on razor-thin margins on low-cost items, these new duties effectively eliminate profitability. The cost of a $5 product can now be inflated by a $200 duty fee, making it impossible to sell competitively.

Stricter Enforcement and Delays: U.S. Customs and Border Protection (CBP) has increased its enforcement of origin labeling and customs inspections. This can lead to longer shipping times and a higher risk of non-compliance, which can result in fines or product seizures.

Shift in Carrier Responsibility: Carriers are now responsible for collecting and remitting the appropriate duties, and they must choose a consistent method for doing so each month. This adds another layer of complexity and cost to the shipping process.

The New Rules Do Not "Kill" All Dropshipping
While the new laws severely disrupt the low-ticket, China-to-U.S. dropshipping model, they do not kill the business model entirely. Instead, they force a necessary evolution. To remain viable, dropshipping businesses must adapt their strategies.

What You Need to Know and How to Adapt
To succeed in this new environment, dropshippers must pivot to more sophisticated and compliant business models.

Source from U.S. or Other Countries: The new tariffs are specifically targeted at China and Hong Kong. Businesses can now gain a competitive advantage by sourcing products from domestic suppliers or from other countries that are not subject to the same tariffs. This also has the added benefit of faster shipping times, which is a major factor in customer satisfaction.

Focus on High-Ticket Dropshipping: The high duties make low-value items unprofitable, but they have less of an impact on high-value items. A $200 duty on a $1,000 product is a manageable cost, while a $200 duty on a $10 product is not. By selling more expensive items with higher profit margins, dropshippers can absorb these costs and still remain profitable.

Build a Strong Brand and Customer Experience: In a market where price is no longer the primary differentiator, the customer experience becomes paramount. This includes providing excellent customer service, having transparent shipping policies, and building a brand that customers trust.

Prioritize Compliance: Businesses must ensure they are compliant with all U.S. laws, including those related to product safety, intellectual property, and consumer protection. Working with reputable suppliers who can provide proper documentation and certificates is more important than ever.

In summary, the new U.S. laws have not killed dropshipping but have effectively ended the era of easy, low-effort dropshipping from China. The business model is now shifting towards a more professional, brand-focused, and compliant approach that prioritizes domestic or alternative sourcing and high-ticket items.