Chances are you’ve never heard of the “de minimis exemption.” However, if you’re a fan of Temu, Shein or, more relevantly, brands such as Takomo Golf, you will.

And it just might put an end to those great deals you’ve been getting. For Takomo and others, it puts a serious dent into the company’s value proposition and it may force a rethink of its entire business strategy.

This one requires some explanation.

What is the “de minimis exemption?”

Have you ever wondered why, no matter what you do, you can’t get the price of a set of Takomo irons to go over $800? Or, if you order irons, a fairway wood and some wedges, they come in separate shipments?

The reason is the de minimis exemption.

The de minimis exemption is simple. Any individual shipment of anything to an individual consumer in the U.S. valued at less than $800 is exempt from import duties. The only additional charge for something like golf clubs would be a Merchandise Processing fee, typically just a couple of bucks.

If the shipment comes via sea freight, there’s a Harbor Maintenance Fee that’s typically 0.125 percent of the total value. There’s no Harbor Maintenance Fee for air freight shipments.

However, a White House Executive Order is, as of May 2, putting an end to the de minimis exemption.

After that date, any shipment originating in China or Hong Kong under $800 will be subject to all applicable duties. That could be as low as $25 per item (going up to $50 per item in June) or it could be 30 percent, depending on the value of the shipment.

That means a set of Takomo 101T player’s distance irons, currently priced at $589 for a stock set, could jump to more than $767 as of May 2.

The phenomenon of “drop-shipping”

Since the $800 de minimis exemption went into effect in 2015, there’s been a dramatic rise in what’s known as “drop-shipping.”

Through drop-shipping, a company can sell products made in China without having to stock, handle or ship anything themselves. The original manufacturer handles all the logistics, everything from assembly to warehousing and shipping. A company doesn’t even need an actual business location or headquarters. When a consumer orders from that company’s website, that order goes directly to the factory. The factory then assembles, packages and ships the single order. The company never touches, stores or even sees the products it sells.

If you’ve bought anything from Tokomo, check the shipping label. It comes directly to you from Hong Kong, even though the Takomo Manufacturing Co, Ltd. is headquartered in Finland.

The benefit of drop-shipping is substantial. There are thousands of Chinese suppliers that specialize in customizing and private labeling their products. They’re also very good at integrating their processes into e-commerce businesses. The company that sells to the consumer becomes the front-facing “brand.” Because it never sees, touches or handles the actual product, it doesn’t need to worry about overstocking or understocking, sales projections, inventory management or a workforce much beyond office staff.

Profit margins are higher and low-cost to no-cost social media marketing drives sales.

Not all direct-to-consumer companies are alike

Since the de minimis guidelines went into effect in 2016, exempt drop-ship imports have increased over 400 percent, which is in line with the rise of e-commerce. Temu and Shein have already instituted price increases since the Executive Order was announced on April 2.

We know the new world of tariffs will impact golfers. No one, however, is 100 percent sure of what will happen since the situation seems to be changing daily. What we do know is that direct-to-consumer companies will be impacted differently than mainstream OEMs. We also know prices will go up, likely across the board.

The end of the de minimis exemption won’t impact DTC brands that assemble, package and ship in the U.S. That includes brands such as Sub 70 and the Sports Brands Inc. army of Ben Hogan, MacGregor, Ram, Zebra and Teardrop.

Those companies will, however, be hit by tariffs on the components they import from China and other countries. One DTC brand tells us it’s stepped up shipments from shaft suppliers. It has also air-freighted in other components to get ahead of pending tariffs.

The Executive Order ending the de minimis exemption specifically targets China. We don’t know how, or if, it will impact DTC brands such as Haywood, based in Vancouver, B.C. After checking the Scotland-based Caley Golf website and finding “404-Page Not Found” messages on the product pages, Caley has confirmed to MyGolfSpy that it is, for the time being, pausing shipments to the U.S. due to recent tariff announcements.

We have reached out to Takomo and Haywood, with no response as of yet.

MyGolfSpy will stay on top of it …

The tariff situation is unpredictable and fluid, to say the least, and will continue to evolve in the coming weeks. MyGolfSpy will do its best to stay on top of things to keep you, the golfing consumer, as up to date as possible.

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