Biden targets Temu and Shein with action on low-cost Chinese shipments
Shipments worth less than $800 from China are no longer eligible for a special U.S. customs exemption.
The Biden-Harris Administration is addressing what it calls the "significant increased abuse" of an import exception for lower-value goods by "China-founded e-commerce platforms." In a new executive action, President Biden is making any import shipment subject to U.S.-China tariffs ineligible for the "de minimis exemption."
This special exemption eliminates duties and taxes on imported shipments with an aggregate value of less than $800, and also allows them to enter the U.S. while revealing less information about the contents than other imported shipments.
According to an official White House fact sheet, during the last 10 years, the number of shipments entering the U.S. claiming the de minimis exemption has grown from roughly 140 million per year to more than one billion per year, largely originating from “several China-founded e-commerce platforms.”
Biden said the potential dangers these shipments pose include making it more challenging to enforce U.S. trade laws, health and safety requirements, intellectual property rights and consumer protection rules.
He also said the widespread use of the exemption by Chinese e-commerce platforms makes it harder for the U.S. to block illicit synthetic drugs such as fentanyl and synthetic drug raw materials and machinery, and reduces the duties and taxes that would otherwise be collected.
The Biden administration is now using executive authority to exclude from the de minimis exemption all shipments containing products covered by tariffs imposed under Sections 201 or 301 of the Trade Act of 1974, or Section 232 of the Trade Expansion Act of 1962.
Section 301 tariffs currently cover approximately 40% of U.S. imports, including 70% of textile and apparel imports from China. The administration is also asking Congress to pass legislation this year to reform the de minimis exemption.
Shein, Temu come under scrutiny
Although a large number of Chinese e-commerce platforms sell primarily low-cost goods to U.S. consumers, the two most popular are Shein and Temu. While Shein is technically based in Singapore and Temu has headquarters in Boston, both are generally considered "Chinese shopping apps" due to close ties with companies on the Chinese mainland.
These apps are increasingly popular with U.S. consumers, especially Gen Z shoppers. According to a recent survey, Shein is ranked as the most popular Chinese shopping app among Gen Z respondents, with Temu ranked second, followed by TikTok Shop (36%) and AliExpress (24%).
According to CNBC, Shein and Temu paid no import duties in 2022 due to de minimis exemption claims, and a 2023 report from the House Select Committee on the Chinese Communist Party found that the two companies likely generate almost half of all de minimis shipments to the U.S. from China.
Shein, which filed for an initial public offering (IPO) in the U.S. stock market with the Securities & Exchange Commission (SEC) in late 2023, reportedly is trying to join the National Retail Federation (NRF) in an attempt to boost its chances of receiving SEC approval.
Both companies have been publicly accused of unfair labor practices and having connections to the communist Chinese government, and in the past year have filed lawsuits against each other alleging unfair trade practices.
In commentary emailed to Chain Store Age, a Temu spokesperson said the company is not reliant on de minimis exemptions for its success in the U.S.
"Since Temu's launch in September 2022, our mission has been to offer consumers a wider selection of quality products at affordable prices," the spokesperson said. "We achieve this through an efficient business model that cuts out unnecessary middlemen, allowing us to pass savings directly to our customers. Temu's growth does not depend on the de minimis policy. We are reviewing the new rule proposals and remain committed to delivering value to consumers."
In a sign of the growing popularity of Chinese shopping apps such as Shein and Temu with U.S. consumers, Amazon is said to be planning to open a section of its e-commerce site for U.S. consumers to purchase Chinese items at discount prices, with direct shipping from China to the consumers.
[READ MORE: Amazon reportedly preparing to directly compete with Temu & Shein]
