Government

Mexico curtails duty-free fulfillment option for apparel , textile importers

Switching from Mexico- to USbased fulfillment will result in higher costs but shorter delivery times . Shutterstock . com

By Eric Johnson

US apparel and textile importers can no longer avoid paying duties while using Mexican warehouses as fulfillment hubs for low-cost finished products sourced outside Mexico that are sent directly to US consumers .

Mexico ’ s decision , which went into effect Jan . 1 , will likely result in US e-commerce brands shifting their fulfillment back to the US or switching to fulfillment providers in Asia , sources have told the Journal of Commerce . Neither option comes without cost , or risk .

“ How impactful would this be to US-based e-commerce as a whole ?” said Matthew Hertz , founder and CEO of Third Person , a platform that helps e-commerce brands find and connect with fulfillment partners . “ There will be companies that suffer .”

Using US-based third-party logistics providers ( 3PLs ) that fulfill from US locations translates to higher labor costs , which would be somewhat offset by shorter delivery times to customers , Hertz said .

Switching to fulfill directly from Asia , while cost-effective for US brands sourcing in Asia , would subject importers to the risk of further regulatory upheaval if , in 2025 , there were changes to a US program that allows single shipments of $ 800 or less per day to be imported to the US duty-free .

President Claudia Sheinbaum ’ s decree essentially stops the use of Mexico ’ s IMMEX program , which allows companies to defer duties on the import of raw materials and components used in the production of goods destined for export , for whole categories of apparel and textiles .

Mexico-focused fulfillment 3PLs will also be affected , as their business has effectively been wiped away by the changes .

Sheinbaum ’ s action also increased tariffs to 35 % — from between 20 % and 25 % — on 121 apparel products and textiles . Another category of textiles will see tariff levels increase to 15 % from the current 10 %.

“ These increases aim to level the playing field for Mexican industries facing competition from lower-priced imports , particularly from countries without free trade agreements with Mexico , and they will remain in effect until April 23 , 2026 ,” trade law firm Sandler , Travis , & Rosenberg said in a note to clients .

The e-commerce import volumes affected by the decree will now be up for grabs among more diversified fulfillment-focused 3PLs that aren ’ t overly exposed to Mexico , as well as global 3PLs that have fulfillment services for e-commerce in the US .

“ We ’ ve been talking about this forever ,” Hertz said of

www . joc . com the ability of US e-commerce apparel and textiles brands to import to the US via Mexico to avoid duties . “ It ’ s a loophole . Loopholes are good until they ’ re not available anymore .”

Hertz noted he ’ s already hearing of 3PLs offering relief on transition costs for e-commerce brands that will need to move inventory out of Mexico . His conservative estimate of the value of 3PL services now in play to move back to the US is $ 10 billion .

“ That ’ s a lot of volume to absorb , and it ’ s going to happen quickly ,” he said .

Duty-free uncertainty

Sheinbaum ’ s decree comes amid a changing landscape for US Section 321 shipments , also known as “ de minimis .” The Biden administration in September announced it would be ending duty-free treatment on all shipments that would ordinarily be subject to 25 % Section 301 tariffs on Chinese imports , tariffs originally implemented during the first Trump administration .

“ How impactful would this be to US-based e-commerce as a whole ? There will be companies that suffer .”

While that rule would wipe away the $ 800 duty-free threshold on most shipments from China , there isn ’ t yet a timeline for implementation .

“ As of right now , the timeline and exact implementation remain uncertain , but most close to the situation have understood that brands probably had [ until ] April to make the transition ,” Flexport CEO Ryan Petersen wrote in a comment on X . “ Most brands were already planning an exit from Mexican fulfillment centers and reshoring that work as soon as the details become more clear .”

Research analyst Cathy Morrow Roberson contributed to this report .

email : eric . johnson @ spglobal . com

February 3 , 2025 | Journal of Commerce 35