AI can help fashion brands navigate the US's new de minimis rules, writes Amy Morgan, vice president of trade compliance at Altana.

Artificial intelligence (AI) is already helping fashion brands manage the upheaval of President Donald Trump’s push to narrow the de minimis exemption — and gain competitive advantage.

Fashion brands and apparel companies rely on de minimis shipments to enable direct-to-consumer sales, optimise e-commerce fulfilment, and avoid costly tariffs. Their supply chains are complex and the regulations governing them are subject to frequent change, so the companies need to adapt quickly to new policies and maintain compliance.

The Trump administration’s de minimis policy is in flux, and whatever the scope of the changes, fashion companies who rely on de minimis shipping need to prepare for increased duties, higher compliance costs, and a greater administrative burden.

Here’s where artificial intelligence can help: It can process and organise vast amounts of shipping information, the billions of transactions that collectively record global commerce. With that unified, integrated, common picture of global commerce, companies can map, analyse and plan their product value chains, from Tier 1 manufacturers all the way to the soil.

Artificial intelligence has already enabled a fashion brand to mitigate forced labour risks. When US Customs and Border Protection (CBP) for the first time began requiring tariff codes for a huge volume of low-value shipments, a major logistics service provider used AI to assist customs brokers with tariff classification. Other companies are using artificial intelligence to simulate tariff scenarios and calculate landed costs.

Clothing exposure

Fashion brands have significant exposure to trade regulation because so much of the product is sourced from China, both a leading trade partner and strategic competitor of the US.

Apparel is a prime target for the US’s effort to remove Chinese forced labour from the global supply chain. Apparel products are also subject to relatively high import duties, which increases the attractiveness of the de minimis exemption.

Enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) gives a hint about how the US could narrow de minimis eligibility by scrutinising imports up and down product value chains. Under the UFLPA, retailers are accountable for identifying compliance risks upstream and downstream in their global value chains, a sea change from previous enforcement.

As much as 90% of China’s cotton production comes from China’s Xinjiang Uyghur Autonomous Region, and DHS has identified cotton as a priority sector for UFLPA enforcement. The list of entities effectively barred from US value chains is growing fast, vastly increasing the compliance burden on retailers sourcing from China.

Up next: De minimis reform

Congress and the executive branch have been eyeing moves to narrow the de minimis exemption for years, including denying it to goods otherwise subject to trade or national security actions.

President Trump has shown he intends to wield de minimis exemption as an instrument of aggressive trade policy, and the repeal for China remains in flux.

The stakes for apparel brands are huge: US fashion brand Gap paid $700m in import taxes in 2022, while direct-from-China competitors who trade in the de minimis exemption paid virtually nothing, e-commerce analyst Ben Donovan told Just Style recently.

If the exemption for goods shipped directly from China is repealed, as a next step Congress and the administration are likely to take aim at transshipment by eliminating the exemption for goods shipped from China to a third country and re-exported to the US as de minimis shipments. Chinese firms have already incorporated warehouses in Mexico and Vietnam for that purpose.

According to Altana’s analysis of global value chain data, in 2024, more than $540m in de minimis shipments of apparel with HS code 62 (articles of clothing, not knitted or crocheted) was shipped from China to Vietnam and Mexico, then to the US.

Some Chinese firms ship low-tier components to a third country for final assembly, which are then exported to the US as de minimis trade. Congress and the Trump administration could also make any Chinese content in the upstream value chain ineligible for the de minimis exemption. In that scenario, a hypothetical $50 blouse from Vietnam would be subject to duties and extra scrutiny if its cotton was grown in China.

Whatever de minimis policy the administration settles on, retailers, logistics service providers and CBP will need to collaborate closely to minimise delays and detentions, ease the administration burden, and maintain compliance with what could be an enduring pillar of US-China trade policy.

Artificial intelligence makes that possible, by establishing a shared source of truth about global supply chains, akin to how companies in all sectors rely on the same sets of economic indicators, commodities prices, credit ratings, and much more. That shared source of truth, in turn, will enable more compliant shipments and reduce friction at the border so their customers get the goods they want on time.

By Just Style