New US Regulations on Chinese Shipments
The United States has set new regulations that might add taxes to a lot of inexpensive shipments arriving from China, specifically aimed at online stores like Shein and Temu.
According to the Biden administration, this step is intended to stop the “misuse” of an existing rule that allows packages valued below $800 (£600) to enter the U.S. without any tariffs or additional fees.
The U.S. stated that the “de minimis” rule has benefited companies like Shein and Temu, which usually send products straight from the manufacturer to the buyer, allowing them to offer cheaper prices and beat their competitors. In response, both companies defended their business practices.
In 2016, the U.S. raised the limit for tariff-free imports from $200 to $800 to simplify trade and allow officials to focus on bigger shipments. Recently, some lawmakers are concerned that companies like Temu and Shein are “taking advantage” of this rule, particularly as these businesses rapidly grow in the U.S. market.
The new regulations would eliminate the tariff exemption for Chinese goods that currently face U.S. tariffs, covering a variety of items such as shoes, machinery, and 70% of textiles and clothing. Additionally, they would require shippers to provide more detailed information to authorities.
Temu said that its success is due to an “efficient business model that cuts out unnecessary middlemen, allowing them to pass savings directly to customers.” The company noted that it is currently reviewing the proposed rules but remains committed to “providing value to consumers.”
They also highlighted that “Temu’s growth does not depend on the de minimis policy.”
Shein attributed its success to its “on-demand business model” and expressed support for reforming the de minimis exemption. The company stated that it advocates for rules to be applied “evenly and equally” across the board.
The company emphasized that following the rules is very important and shared that they are currently taking part in a test program with U.S. Customs and Border Protection (CBP). “We are trying to give more specific details about what’s inside each package and are working closely with CBP,” the company said.
Exponential increase
Since their launch a few years ago, Temu and Shein have made headlines with flashy Super Bowl ads and remarkably low prices.Their growing popularity has strongly challenged Amazon, the leading online retailer in the US. Because of this, Amazon is reportedly considering starting a new discount division that would focus on shipping products directly to customers.
Their growth has also attracted scrutiny from US politicians and regulators, who have raised concerns about the safety of products on their platforms. There have been warnings about a “high risk” that Temu may be selling products produced with forced labor.
Authorities have cited the success of companies like Temu and Shein as a key factor putting strain on U.S. border and customs services. The number of packages entering the U.S. under the de minimis exemption has surged from 140 million in 2013 to over 1 billion last year.
When announcing the new rules, the Biden administration pointed out that “several China-founded e-commerce platforms” now make up a “majority” of shipments under the $800 threshold.
The administration stated that its actions were prompted by the “exponential increase in de minimis shipments,” which has made it more difficult to identify and intercept illegal packages. It also accused companies of trying to evade consumer protection laws and bypass trade barriers.
Commerce Secretary Gina Raimondo said, “American workers and businesses can outcompete anyone on a level playing field, but for too long, Chinese e-commerce platforms have avoided tariffs by exploiting the de minimis exemption.”
The American Action Forum, a right-leaning policy group, has estimated that removing the $800 exemption entirely could result in “$8 billion to $30 billion in additional annual costs, which would ultimately be passed on to consumers.” The proposal will go through a comment period before it is finalized and put into effect.
According to reports from Bloomberg and the Financial Times earlier this year, officials in the European Union have been thinking about implementing similar rules for low-cost packages. After the news was released, the stock prices of PDD Holdings, the company that owns Temu, fell by over 2%.
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