Sunday September 15, 2024
A Shein package in its signature packaging, illustrating the direct-to-consumer shipping strategy that has allowed the Chinese e-commerce giant to flood the U.S. market with low-cost goods, now targeted by the Biden administration's proposed shipping rule changes. CREDIT/ YR Staff
MINNEAPOLIS, Minn (HOL) — The Biden administration has introduced new regulations to curb the influx of low-cost shipments from China, a move that directly targets popular e-commerce giants Shein and Temu. The new rules, proposed this week, aim to close loopholes in the "de minimis" exemption, which allows goods valued at less than $800 to enter the United States without facing tariffs and other fees. The change could significantly impact Chinese e-commerce platforms that rely on low-cost, direct-to-consumer shipping to gain a competitive edge in the U.S. market.
Under the proposed rules, the exemption for Chinese goods currently subject to U.S. tariffs will be removed. This category includes a broad spectrum of items, including footwear, machinery, and textiles. The measure also demands more detailed information from shippers, making it easier for customs authorities to identify and block illegal shipments. Commerce Secretary Gina Raimondo emphasized that this move addresses the "exponential increase in de minimis shipments" from China. "American workers and businesses can outcompete anyone on a level playing field, but for too long, Chinese e-commerce platforms have skirted tariffs by abusing the de minimis exemption," she said.
The U.S. first raised the de minimis threshold from $200 to $800 in 2016 to facilitate trade and allow customs officials to concentrate on higher-value shipments. However, lawmakers have increasingly voiced concerns over the "abuse" of this exemption by Chinese firms, claiming it undermines U.S. manufacturing and bypasses consumer protection regulations. According to Homeland Security Secretary Alejandro Mayorkas, the rule's lax enforcement has led to a surge in small shipments. He acknowledged the challenge of screening the 4 million packages entering the U.S. daily under this exemption.
Shein and Temu have responded to the proposed changes and are defending their business models. Temu claims its growth stems from an "efficient business model" that eliminates unnecessary intermediaries, allowing it to pass on savings directly to consumers. "Temu's growth does not depend on the de minimis policy," the company said. Meanwhile, Shein expressed support for "responsible reform" of the exemption, stating it seeks a "level, transparent playing field" where the rules apply "evenly and equally."
The surge in de minimis shipments has drawn scrutiny not just for its economic impact but also for the potential to facilitate illegal imports. U.S. officials have cited the difficulty in screening for contraband, including counterfeit goods and narcotics. Mayorkas has called the current system "built on a false premise that low value means low risk. "
The tariffs occur amid broader U.S.-China tensions, with Washington attempting to reduce its reliance on Chinese imports and protect domestic industries. The proposal aligns with a wider strategy to compete with Beijing, from commerce to technology. Analysts warn that removing the de minimis exemption could lead to higher prices for American consumers, a point echoed by the National Foreign Trade Council, which argued that the exemption is crucial for economic health and supply chain efficiency.
The proposed rules will enter a public comment period before finalization, possibly reshaping the U.S. e-commerce landscape. The European Union is reportedly exploring similar measures to address low-value shipments. Shares in PDD Holdings, which owns Temu, fell more than 2% following the announcement, signalling investor apprehension about the potential impact on Chinese-founded companies that rely on low prices to attract U.S. consumers.