Interesting story from @AnaSwanson and Jordyn Holman on how Chinese retailers like Temu and Shein get around tariffs, and how it's pressuring US companies like Walmart and Amazon to follow suit. https://t.co/CzPrpjF5AR
— Noam Scheiber (@noamscheiber) September 16, 2024
The Biden administration has proposed new rules to limit a loophole around U.S. tariffs that are especially used by Chinese e-commerce firms. The de minimis exemption allows for imported products valued at less than $800 to avoid paying duties and processing fees. The White House said the “significant increased abuse” of the de minimis exemption hurts American consumers, workers, and businesses.
Don't miss this @WSJ story on announced White House executive actions aimed at #deminimis reform & mitigating the damage to American manufacturers & families. NCTO's Kim Glas amplifies the impact on U.S. #textiles & the urgent need for action.👇
More here: https://t.co/9W1RwC9Y7m pic.twitter.com/MlM9JaIJ2p— NCTO (@NCTO) September 16, 2024
Officials argued that the use of the loophole is “putting American consumers at risk, undercutting American workers and businesses, and resulting in the importation of huge volumes of low-value products such as textiles and apparel into the U.S. market duty-free.” The administration said it would be proposing rules to prevent use of the de minimis exemption for any imports that are subject to Chinese tariffs, as well as other steps to limit the provision’s use. The White House also called on Congress to pass “comprehensive de minimis reform legislation by the end of the year.”
The White House initiative comes at a delicate time for the world’s two largest economies.
🇺🇸 Under pressure from Chinese competitors, Amazon, Walmart and other U.S. retailers have been exploring ways to avoid tariffs. Could a new Biden administration rule change that?
https://t.co/X7sQU3VhIn— Neil Saunders (@NeilRetail) September 16, 2024
The United States is working to reduce its reliance on Chinese products, protect emerging industries like electric vehicles from Chinese competition, and restrict China’s access to advanced computer chips.
Meanwhile, China views manufacturing and export growth as essential for its economic recovery following pandemic-related lockdowns.
“…while other merchants are using a convoluted import method that routes bulk China imports to warehouses in Mexico and Canada, from which they can be sent to shoppers under the de minimis exemption.”
Hopefully Mexico will also block de minimis shipments https://t.co/YLrLPB7vB5
— Jorge Guajardo (@jorge_guajardo) September 15, 2024
Homeland Security Secretary Alejandro Mayorkas has highlighted the challenge of screening the 4 million packages entering the U.S. daily under the tariff exception. He emphasized that the current system falsely assumes low-value items pose low risks.
However, the National Foreign Trade Council and major shipping and retail companies like FedEx, UPS, DHL, Amazon, and Walmart defend the exemption. They argue it is critical for economic health and supply chain efficiency.
Biden administration scrutinizes import loophole
Eliminating the exemption, they warn, would increase costs for American consumers and small businesses. The administration’s proposed changes could significantly impact e-commerce giants like Temu and Shein, which have thrived by offering low-priced goods. The proposed rule would tighten scrutiny on these companies, which might face additional tariffs and regulations.
Both Shein and Temu responded that the import loophole was not central to their business models. Temu emphasized its mission to offer consumers a wide selection of affordable quality products through an efficient business model that cuts out unnecessary middlemen. “Temu’s growth does not depend on the de minimis policy,” a spokesperson said.
Temu’s operations are based in China. Shein, headquartered in Singapore, noted that while many of its manufacturers are based in China, some are also in Brazil and Turkey. A Shein spokesperson stated, “Our success is anchored in our unique on-demand business model, which allows us to bring customers the styles they want, efficiently and at an affordable price.
The timeline for the White House’s new proposed rules is unclear.
The administration also called on Congress to undertake a comprehensive reform of the de minimis trade exemption, which lawmakers have long considered affecting. Initially designed to protect individual shippers and small businesses, this exemption has faced opposition from many shipping companies regarding changes to the import tax structure.
