White House Targets Shein, Temu in De Minimis Rule Crackdown

The Biden administration unveiled new measures to address the “overuse and abuse” of a trade law loophole that allows low-value shipments into the U.S. without paying import duties. Under the proposed rule, products subject to U.S.-China tariffs would no longer qualify for this exemption. This loophole, known as the de minimis provision, has seen a significant increase in shipments over the past decade, posing challenges in targeting illegal or unsafe shipments.

Officials pointed out that Chinese online retail giants like Shein and Temu have been taking advantage of this loophole to ship millions of dollars worth of goods directly to American customers, bypassing tariffs. The proposed tariff rules could disrupt this business model, particularly for products subject to Section 301 tariffs.

In addition to the tariff rules, the administration also plans to require additional data for de minimis shipments, such as tariff classification numbers and the person claiming the exemption. Furthermore, they are calling on Congress to pass legislation to overhaul the de minimis rules.

Lawmakers have raised concerns about the impact of this loophole on traditional retailers who pay significant import duties, unlike companies like Shein and Temu, which have reportedly avoided paying any import duties. This has allowed them to offer lower prices and outcompete import-paying competitors.

There are also concerns about the potential for products made with slave labor to enter the country undetected through the de minimis exemption. Despite these allegations, Shein has maintained that its pricing structure is not related to the exemption and that it prioritizes import compliance.

Shein’s executive chairman has called for reforms to the de minimis policy to create a level playing field for all retailers. The company has acknowledged issues with banned cotton in its supply chain and is working to address them. Temu, on the other hand, has stated that its growth does not depend on the de minimis policy and remains committed to ethical labor practices.

As the Biden administration takes steps to address the misuse of the de minimis provision, the impact on Chinese retail giants like Shein and Temu remains to be seen. With calls for reform and increased scrutiny on these companies, the future of the de minimis loophole could be in jeopardy.