China is utilizing Mexico and Canada as transshipment hubs for sending small packages to the US. This strategy helps reduce per-unit transportation costs as bulk shipping is more cost-effective. Tijuana and Monterrey in Mexico, and Vancouver and Toronto in Canada are key transit points for this process.
The main reason behind China’s use of Mexico and Canada for transshipment is to exploit the US De Minimis Rule, which allows packages valued at $800 or less to enter the US duty-free under Section 321 of the US Tariff Act. By splitting goods into smaller packages to ensure each delivery stays under the $800 limit, Chinese businesses can bypass tariffs, take advantage of duty-free thresholds, and expedite delivery. E-commerce platforms like Temu, Shein, AliExpress, and DHgate have played a significant role in facilitating this logistics strategy.
Shipping directly from China to the US typically takes 10-30 days. However, using Mexico or Canada as transshipment hubs reduces delivery time to 3-7 days. Bulk shipments arrive at warehouses in Mexico or Canada, where they are repackaged and relabeled for individual customer destinations before being sorted and re-shipped using local logistics networks. Final delivery in the US is handled by companies like FedEx, UPS, DHL, and USPS.
In addition to taking advantage of the De Minimis Rule, Chinese companies are also leveraging the US-Mexico-Canada Agreement (USMCA) to enhance their shipping operations. This agreement provides preferential treatment for North American-origin goods, and Chinese companies have been setting up warehouses or assembly units near US borders to claim North American origin for their products.
The USMCA, which replaced NAFTA in 2020, sets specific rules of origin that determine the eligibility of goods for preferential treatment. Goods must be wholly obtained or substantially transformed in North America, and self-certification is required to claim USMCA benefits. Records must be kept for five years to comply with the agreement’s regulations.
Overall, China’s use of Mexico and Canada as transshipment hubs for small package shipments to the US is a strategic logistics model that capitalizes on duty-free thresholds, trade agreements, and faster delivery options. The evolving trade landscape will ultimately determine the sustainability of this practice in the long run.
