Biden Targets Shein, Temu With New Rules to Curb Alleged ‘Abuse’ of US Trade Loophole
The Biden administration announced new steps on Friday to curtail what it calls the “overuse and abuse” of a longstanding trade law that permits low-value shipments to enter the United States without paying import duties and processing fees. The steps include a new rule proposal which would bar overseas shipments of products that are subject to U.S.-China tariffs from being eligible for the special customs exemption.
Known as the de minimis loophole, the trade provision allows packages with a value of less than $800 to enter the U.S. with relatively little scrutiny. Over the past decade, the number of de minimis shipments has exploded, from roughly 140 million to more than a billion, according to a White House estimate.
Total Retail's Take: Ever wonder how emerging online sellers Shein and Temu have penetrated the U.S. market so quickly with their ultra-low pricing models? The de minimis loophole is a large reason why. This seemingly unfair advantage is being targeted by the Biden administration, with the goal of evening the playing field for all online sellers. U.S.-based retailers typically import containers of merchandise and send them to U.S. warehouses for distribution. However, Shein and Temu usually ship their products directly to American consumers through their networks of Chinese suppliers. By utilizing the de minimis loophole to avoid tariffs, Chinese retail giants have likely skirted tens of millions of dollars in import duties. This has allowed Temu and Shein to price their products below its competitors without negatively impacting its margins.
This development should be welcome news for U.S.-based retailers, particularly those that are importing their goods. However, it will be up to Congress to pass legislation to overhaul the original de minimis rules. Therefore, a speedy resolution to this issue shouldn't be expected.
