Temu, SHEIN hit as Trump suspends duty-free small package rule
What's the story
President Donald Trump has suspended a global trade loophole that allowed smaller parcels into the US duty-free. The move is likely to impact Chinese mega-shippers like Shein and Temu, who may pass on the additional costs to consumers. The so-called "de minimis exemption" had allowed duty-free imports of goods worth $800 or less into America.
Trade implications
The de minimis exemption
The de minimis exemption was widely used by major e-commerce platforms for shipping hundreds of millions of packages to US consumers. However, in May, amid the US-China trade war, the Trump administration revoked this exemption for goods coming from China and Hong Kong. Now, it has been extended to all countries worldwide.
Security reasons
Executive order cites drug trafficking concerns
In an executive order issued last week, Trump expressed concerns that "many shippers go to great lengths to evade law enforcement and hide illicit substances in imports that go through international commerce." He said the risk of "evasion, deception, and illicit-drug importation are particularly high for low-value articles" eligible for duty-free de minimis treatment.
Shipping challenges
New rule complicates shipping for Chinese retailers
The new rule complicates the shipping process for Chinese retailers and their customers, as it eliminates the option of routing small shipments duty-free through countries like Vietnam with a 20% tariff rate. The executive order also mandates that the origin of the package must be declared to US Customs and Border Protection (CBP).
Business adjustments
Price hikes for American consumers?
In response to the de minimis exemption expiration for China in early May, Temu announced a major change in its shipping model. The company said it would ship all American orders through US-based distributors, maintaining that its "pricing for US consumers remains unchanged." However, some American buyers of Temu later complained about price hikes and rapid stock depletion.
Market impact
Higher prices for customers likely
Chris Tang, a professor of global supply chain management at UCLA, told CNN that the global suspension of de minimis leaves no other workaround for companies. They will now have to pay a hefty import tax even on bulk shipments, which could eventually lead to higher prices for customers. The rule will also impact millions of sellers on Amazon Haul, a discount competitor to Temu and TikTok Shop that ships directly from China.
Package impact
CBP processed nearly 4 million shipments a day last year
The repeal of the de minimis rule will affect a huge number of packages that Americans are used to receiving duty-free. CBP previously told CNN it processes "nearly 4 million duty-free de minimis shipments a day." Research shows most of those shipments come from China and Hong Kong. Last fiscal year alone, CBP said 1.36 billion packages entered the US under this exemption.