On February 1, 2025, the new president initiated changes to the de minimis exception, a threshold that simplifies the entry of goods into the United States. Per the de minimis exception, goods with a value under $800 were allowed per day, per person without being charged a tariff. The adjustments to de minimis eliminate exceptions for low-value goods from China and Hong Kong.
While the removal of exceptions was to take place immediately, the transportation industry reacted with understandable concern. The USPS stated it would have to refuse any packages coming from China or Hong Kong. Brokers and shippers had to quickly adjust pricing for shipments already ordered or en route to the U.S.
A temporary amendment allows transportation industry experts more time for systems to be put in place. To qualify for a time-limited exception, the goods must have been en route to the U.S. before February 1st.
Brokers, shippers, and logistics providers have a temporary extension to strengthen partnerships and collaborate on solutions. If your business is transporting low-value products from countries like China and Hong Kong, enhance your company’s efficiency and build a strong cash flow during this extension with Saint John Capital.
Preparing for the Permanent Removal of De Minimis Exceptions
One of the benefits to the de minimis exception is also a problem for customs. Less paperwork was needed. That’s great for the manufacturer and shipper, but it makes it harder for customs to determine what’s in a container, box, or other shipping vessel.
With more than 4 million shipments valued at $800 or less coming to the U.S. every day, Homeland Security and U.S. Customs do what they can to keep illegal drugs out of the country. That’s what’s driving the change. The goal is to stop counterfeit items and stop the import of equipment that aids in the making of illegal drugs, like pill molds.
With the end of these exemptions, paperwork must be provided. That paperwork must show a tracking number, ID number for the type of merchandise, and country of origin. In addition, a photo of the product, the URL to the product listing on a marketplace, or an X-ray must be provided.
For now, there is a temporary extension, but people in the transportation industry need to make plans. If you transport goods from China or Hong Kong, you need to renegotiate fees and make your transportation partners aware of your plans to address de minimis exceptions as soon as you can. You also need to be prepared for this exception to expand to shipments from other countries.
The Benefit of Freight Factoring to Improve Your Cash Flow
Your fees must increase as tariffs on Canada, China, and Mexico are applied. As much as you want to protect your long-time customers, you cannot afford to cover the increases. In the end, the tariffs trickle down to the price of goods, which means consumers end up paying more to cover the increases.
Until the final sale, you still have invoices due, and you need to cover the increased cost at a port, an airport, etc. That’s why you need to increase your fees, and that can be hard but necessary.
It’s just as important to get paid on time. As fees increase for everyone, you may have clients who start paying later than usual. That hurts your bottom line. If you start paying your creditors later than usual because you’re not being paid in a timely manner, you face hefty late payment fees and higher interest rates. Can you afford that?
That’s one of the benefits freight factoring offers. Instead of waiting until the end of the month or even two or three months from now, you get paid today. At the very latest, if you miss the day’s deadline for payment requests, you’ll have the money you’re owed in a couple of days. There’s no more waiting, and no more worrying about whether you’ll get paid in time to pay your creditors.
Freight factoring is a service that allows growth, improves cash flow, and even makes it easier to find additional clients. When you complete your part of a shipment’s journey, you have a bill of lading that you submit to a freight factoring company. The company processes your request and submits immediate payment once it’s approved. Depending on the arrangement, you get some of or all of the money you’re owed, minus the freight factoring fee.
Suppose you want payment when you pick up a load to haul across the country. You pick up the crates or trailer and get a bill of lading. You need cash to cover your expenses as you drive to the other coast.
With freight factoring, you can request 50% of the money you’re owed right now. When you arrive, the remaining 50%, minus fees, is paid. Your fuel, truck repair and maintenance costs, and meals are covered with that advance payment. You’re not floating expenses on credit cards with high interest rates.
Yes. There is a fee involved with any freight factoring arrangement, and that fee is based on several things.
- The size of your fleet
- The number of invoices you submit each month for payment
- Whether you choose a recourse (you may have to pay it back) or non-recourse (you’re protected from paying it back if your client shuts down or files bankruptcy) arrangement
- Whether you want 50%, 90%, 100%, etc. payment terms
- Your client’s business credit score
Talk to a freight factoring expert to learn how these decisions impact the factoring fee. Even with a higher fee, it’s still substantially below credit card interest rates or late payment fees. It’s often in the 3% to 5% range, which isn’t too bad considering many business credit cards have an APR of 20% or higher.
When you’re paying bills on time, your credit score increases. If you do need to take out a small business loan to grow your trucking company, you’ll save money with a low interest rate. That high credit score also makes you a better partner when brokers and shippers are looking for a new transportation partner. You have money coming in, lowered expenses, and plenty of work, which increases your cash flow.
Choosing a Freight Factoring Partner
How do you choose the best freight factoring company for your trucking business? Look for a company that’s been around a long time. While a new factor may be great, there’s no proven history of success.
The Bureau of Labor Statistics finds that 45% of businesses fail in the first five years, and 65% fail during the first 10 years. That makes it a gamble. Partner with a freight factoring company with transportation industry expertise and a long history of helping trucking companies build a strong cash flow.
Check that additional services like load finding boards, unlimited free business credit checks, Click & Pay API, and fuel discounts are available, and what it takes to sign up for them, too. Make sure that the factoring company is easily reached if you have concerns or questions.
Do you want to get paid before you deliver your load? If so, you’ll want to ask about 50% advance rates. If you want everything after you deliver it, look for 100% advance rates. Can you get that money the same day? If so, by what time must you submit your bills of lading?
Most importantly, ask what the rates are for your specific needs. Do you want protection if your broker or shipper goes bankrupt or shuts down unexpectedly? The factoring rate will be slightly higher, but you have insurance against unplanned closures. If you trust your clients, great. Recourse factoring has a lower rate.
Saint John Capital’s been a trusted transportation factoring company since 2009. Our team’s expertise in the trucking industry is undeniable, and we’re ready to help you, no matter how large or small your company is.
