Section 321 of the 1930 Tariff Act allows up to $800 in imports per person per day to enter the US duty-free and with minimal customs requirements. Fueled by rising direct-to-consumer trade, these “de minimis” shipments have exploded yet are not recorded in Census trade data. Who benefits from this type of trade, and what are the policy implications? We analyze international shipment data, including de minimis shipments, from three global carriers and US Customs and Border Protection. Lower-income zip codes are more likely to import de minimis shipments, particularly from China, suggesting that the tariff and administrative fee incidence in direct-to-consumer trade is pro-poor. Theoretically, imposing tariffs above a threshold leads to terms-of-trade gains through bunching, even in a setting with complete pass-through to linear tariffs. Empirically, bunching pins down the demand elasticity for direct shipments. Eliminating §321 would reduce aggregate welfare by $11.8-$14.3 billion and disproportionately hurt lower-income and minority consumers.
Authors
- Acknowledgements & Disclosure
- Viyaleta Farysheuskaya provided exceptional research assistance. We thank Davin Chor, Gary Hufbauer, Martin Rotemberg, and Pete Schott for helpful comments, and seminar participants at Yale, NYU, and NC State. We also thank representatives from the carriers who facilitated access to data. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32607
- Published in
- United States of America
Table of Contents
- Introduction 3
- §321 Trade Policy and De Minimis Imports 7
- Framework 10
- Consumers 10
- Firms 11
- Optimal Pricing with Bunching 11
- Identification 14
- Optimal De Minimis Trade Policy 14
- Data & Summary Statistics 16
- Carrier Shipments Data 16
- Product Descriptions 18
- Demographics 19
- Direct-to-Consumer Imports and De Minimis Spending Across Groups 19
- Tariff and Administrative Fee Incidence across Groups 22
- Evidence of Bunching 24
- Main Results 24
- Alternative Explanations 28
- Welfare Impacts of De Minimis Imports 29
- First-Order Approximation 29
- Firm Types 30
- Welfare Measurement 30
- Parametrization 32
- Exact Welfare Impacts 36
- Conclusion 39
- Model Appendix 42
