Shipping chaos: How the end of de minimis exemption affects air freight in Guam, CNMI

 By Jayvee Vallejera

Residents of Guam and the Northern Marianas Islands, who rely on air freight for shipment of their orders from the U.S. mainland, will not be receiving their packages anytime soon, thanks to a White House decision to suspend the “duty-free” status of imported goods valued under $800.

That was just one of the many unintended consequences of President Donald Trump's executive order ending the De Minimis Tax Exemption law, which results in the suspension of air mail services to and from Guam and the CNMI.

E.O. 14324, which Trump signed on July 30, now requires that all imported packages—except for postal mail—entering and leaving the U.S. must go through full customs entry and pay duties, taxes or new flat-rate fees.

Both Guam and the CNMI fall outside U.S. Customs territory. They do not implement U.S. customs rules, and each has its own excise tax system. All imports coming from foreign countries to Guam and the CNMI are not covered by this EO.

The problem arises for goods shipped or imported from the United States. That means any import that lands in a U.S. port and is shipped elsewhere—to Guam or the CNMI—will be subject to the executive order and U.S. Customs taxes.

Airlines are now also being required to collect the fees on air mail packages.

This is where many questions arise and further clarifications are being sought from federal agencies.

The Guam Customs and Quarantine Agency said it continues to monitor and work closely with its federal partners regarding all import and trade policies or regulations as they apply to Guam.

The agency said Guam Del. James Moylan has told CQA Director Ike Q. Peredo that he would obtain further clarification from federal agencies and update the local agency.

For now, Customs is not enforcing EO 14324, arguing that the presidential directive does not apply to Guam, which falls outside of the U.S. Customs.

 “Guam is a duty-free port and no duties or tariffs are assessed on goods imported from all places outside of Guam,” said the agency when asked about the matter.

The U.S. Postal Service is still looking into the matter. John Hyatt, USPS spokesman, promised to update the public as soon as he has information to share.

Sen. Jesse A. Lujan is requesting Guam's exemption from the executive order, saying the new restrictions could significantly disrupt the island's supply chain and further impact the cost of goods. He said it will have a severe and disproportionate impact on Guam’s residents, small businesses and military families.

“Guam has no domestic production base, and nearly all our goods, from food to household supplies, are shipped from abroad," Lujan said in his letter to  Rodney Scott, U.S. Customs and Border Protection commissioner.

"The blanket application of this executive order would raise prices on essential items, burden small businesses, and hurt both civilian and military communities alike,” he added.

Guam imports approximately 90 percent of its goods, mainly from Asia and the Pacific.

Lujan pointed out that Guam is outside U.S. Customs territory and called on the CBP to uphold that longstanding distinction.

He also urged CBP to issue formal guidance confirming Guam’s territorial exemption and to coordinate with the Office of Insular Affairs to assess the potential economic harm of the executive order on Guam and other U.S. territories.

CNMI Del. Kimberlyn King-Hinds said she is working with the U.S. Postal Service and federal Customs to obtain clarification and restore postal services to the CNMI.

“Folks who need to have eyes on it are working on it. I will keep everyone updated as we hear something more definitive,” she said.

When asked if there is a timeline on when to expect an answer from these federal agencies, King-Hinds said the goal is to have a more definitive update before the end of this week.

In a separate news release, King-Hinds said the White House has made clear that the intent of this executive order is not to interrupt mail services from the CNMI.

“Rather, this is a result of unforeseen challenges in implementing a global suspension of the ‘de minimis’ exception for low-value imports and in reconciling that policy with the Covenant and laws governing the territories. They assured me that USPS and CBP are working together urgently to resolve this matter,” she said.

King-Hinds said the “de minimis” suspension appears to be an issue only impacting the airmail delivery services for Guam and the CNMI.

The snag that appears thorniest is that, as per the EO’s requirement, it will now be the carriers that will collect the fees and customs duties for postal shipments.

Postal shipments are levied flat fees between $80 and $200, or ad valorem duties, depending on the country of origin.

The airlines apparently don’t want this additional work since there are no systems in place for implementing the EO.

Many foreign postal services and online sellers have suspended or limited shipments to "U.S." addresses (including the CNMI) until duty-collection systems are in, leading to canceled orders and delays for CNMI families, according to Rep. Vicente Aldan, who chairs the Committee on Transportation and Infrastructure for the 24^th CNMI Legislature.

King-Hinds said the immediate priority is restoring regular air mail service.

Aldan said not everything has changed. Goods shipped directly to the CNMI from abroad, such as those from Asia, remain subject to CNMI customs and excise rules.

Local exemptions remain in effect, Aldan added.

Aldan advises residents to request direct shipment to the CNMI from overseas suppliers to avoid stacking U.S. duty costs on top of CNMI excise taxes.

He also advised agencies and vendors to review routing and ask suppliers for through-routing or direct CNMI entry instead of shipping them first to a U.S. port. This will minimize added costs.

For consumers, expect higher costs on goods that come through U.S. ports first and plan for delays in online orders and shipping interruptions.

Aldan said that EO 14324 is a kitchen table issue for every CNMI family.

“This executive order’s effect on small, remote territories like the CNMI is severe," he said. "With near-total dependence on imports, our people will feel this as higher grocery bills, more expensive household goods, and delayed shipments. The public must be aware and prepared.” 

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