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De minimis is something that has been used and talked about throughout freight and trade for years now, but there is a change that’s coming which could affect all operations. De minimis is referred to as a threshold for shipments that will not incur tariffs, duties, or extensive paperwork around the shipment. With this in mind, a change to the de minimis could bring on negative effects like delays in shipment, increased costs, and cash flow issues for trucking companies. We’re going to dive deeper into what this change means and how freight factoring could help you avoid some of those challenges that might come with the change to de minimis.
What Was the De Minimis Rule Before the Change?
Let’s recap what the de minimis rule looked like before this change. Firstly, the threshold was $800, meaning that every shipment below that threshold was exempt from certain tariffs and paperwork as they weren’t imported through a practical customs entry. This rule meant that consumers received products faster and cheaper from overseas, as well as being able to ship out smaller packages with little to no paperwork, and foreign sellers could ship into the U.S. without import duties. These rules made it easier to shop on foreign e-commerce sites and led to an increase in direct-to-consumer e-commerce sales.
Understanding the De Minimis Change
Ultimately, that de minimis is now no longer in effect, and there is no de minimis at all, meaning no low threshold for these shipments. This change can bring on tighter restrictions, more inspections, and it could even mean changes to what countries and what products can be shipped into the United States. The supply chain can expect to see some changes within its operations as well when it comes to this change, such as more paperwork for shipments, increased delivery times, and even unpredictable revenue cycles for carriers.
Why Are Carriers and Owner-Operators Being Affected?
There are a few reasons why carriers and owner-operators are affected by this change, and understanding these effects can help you determine the best course of action for your company when dealing with the change to de minimis.
Delays in Freight Movement: Delays in freight movement mean that loads may not be delivered as often as they once were. Not only this, but there could also be delays in getting paid as well, even if the shipment was picked up on time. This can lead to a delay in funds, unpredictable revenue streams, and delays in the already long wait time for freight to get paid.
Rejected or Delayed Loads: Due to changes in the shipments and processing procedures, this may result in more delayed or rejected shipments. What once was a simpler process and had less paperwork and restrictions will now see many more restrictions and potential delays due to the increase in restrictions.
Extra Admin Tasks: Due to the increase in paperwork and overall restrictions with shipments, the admin tasks for companies will be increased. This can take away time and effort from other tasks that freight companies were once focused on.
Tighter Margins: There are a lot of different areas where carriers and owner-operators will be affected, but with these tighter margins, smaller carriers and owner-operators may have a harder time making these load pickups work.
The Role of Freight Factoring Following These Changes
With the de minimis rule changing and becoming non-existent, there are some solutions that carriers and owner-operators can look into to help minimize these negative effects. Freight factoring is a great option for those who are looking for ways to minimize the effects of this and ensure that they are dealing with as few challenges as possible. Freight factoring allows you to sell invoices for immediate cash, which means that those delays will have little to no effect on how fast you get paid for those shipments. Here’s a look at how freight factoring can help shield your business from the de minimis change challenges:
Cushioning Delays: Factoring bridges the gap while shippers wait for customs clearance. This means that the payment will not be delayed, even if customs is delayed.
Predictable Cash Flow: Since you’re still getting paid up front for the shipments, there is predictability in the cash flow, which otherwise wouldn’t be there without factoring.
Reduced Risk: There’s always a risk of non-payment, and with the de minimis rule changing, there could be an increase in risk. However, with factoring, there is protection against unpaid invoices; therefore, that risk is reduced immensely.
Flexibility: You no longer have to chase payments to track the status of your payment with factoring. Factoring companies take over that part and ensure that you get payment without having to spend extra time and resources following up with the client.
Factoring Can Help Shield You from De Minimis Change Impacts
If you are a freight company looking to avoid challenges associated with the de minimis change, then you’re in the right place. Freight factoring is a huge asset to your company when it comes to avoiding the negative impacts of the de minimis change. When it comes to invoice delays, shipment delays, extra restrictions, and potential unpredictable payments, TBS Factoring is the solution for you. At TBS Factoring, we help you to stay on top of invoices, get paid faster, and keep your current cash flow even with the de minimis changes. The de minimis change has been something that many freight companies, especially smaller companies and owner-operators, have stressed over. However, freight factoring is a solution that can help avoid these issues and stay on top of your business even during times of big change. Contact us today and let’s get started with factoring for your freight business to help avoid these challenges and keep your business stable during future changes as well.
