Temu and Shein’s favorite import policy is about to disappear
Adios, de minimis loophole
Last month, we discussed a proposal from five US senators to crack down on Chinese e-commerce companies taking advantage of the "de minimis" loophole to ship billions of dollars of goods to the US, duty-free.
The TL;DR: The US's Tariff Act of 1930 established a de minimis threshold that allowed low-cost imports to enter the country duty-free and tariff-free to expedite transit through customs. As recently as 2014, the total value of goods entering the country through de minimus was still under $1 billion, but the emergence of fast fashion e-commerce brands, especially in China, has caused an explosion in de minimis shipments, with more than $40 billion of de minimis imports entering the country each year since 2019. A 2023 congressional investigation showed that in 2022, 30% of de minimis shipments came from Shein and Temu alone, and 62% came from China.
As previously mentioned, the de minimis loophole could be costing the US government $400 million in missed duty fees, and today, the Biden administration announced that it would be cracking down on this loophole. According to The Wall Street Journal, around 70% of Chinese textile and apparel shipments will now be subject to tariffs that they were previously avoiding.
The de minimis loophole allowed Temu and Shein to pass cost savings on to their customers, but with this policy change, users will likely see prices tick up to account for the new fees. Not great news for Temu, especially, which has seen its app downloads flatline in the US.
