Thu, 01 May 2025

Thu, 01 May 2025 US small parcels loophole set to close, pushing up prices at Shein and Temu

The de minimis exemption was key to the huge growth of sales seen by the Chinese online retailers.
President Donald Trump has announced plans to close a duty-free loophole for low-value packages, which will increase prices for US customers of online retailers like Shein and Temu. The "de minimis" exemption allowed these companies to sell and ship items worth less than $800 without paying duties or import taxes. However, Trump and his predecessor Joe Biden have argued that the loophole damaged American businesses and was used to smuggle illegal goods. The de minimis exemption has been in place since 1938 and originally applied to tourists bringing back souvenirs from abroad. It allowed retailers to ship packages worth less than $800 without paying duties or taxes, which accounted for over 90% of all cargo entering the US. Chinese online retailers like Shein and Temu have benefited greatly from this loophole, offering ultra-low prices that attracted millions of US customers. However, Trump has argued that many shippers use deceptive practices to hide illicit substances in low-value packages, taking advantage of the exemption. The executive order closing the loophole aims to tackle the importation of synthetic opioids like fentanyl. Under the new rules, packages from mainland China and Hong Kong will become subject to import duties from May 2nd. The move is part of Trump's policies to crack down on goods from China, including imposing taxes of up to 145% on Chinese imports. The Biden administration had previously proposed similar rules to stop "abuse" of the exemption. US authorities have also blamed the success of firms like Temu and Shein for putting strains on border authorities. The closure of the loophole is expected to result in $8-30 billion in additional annual costs being passed on to consumers, according to estimates by the American Action Forum. Chinese online retailers have also benefited from similar rules in the UK and the EU, which has led to concerns that cheap goods from China could flood into these countries. The UK has announced a review of low-value imports coming into the country, while the European Union has proposed a new fee for parcels being shipped into the bloc from online retailers. This means that consumers in the UK and EU may also see prices rising soon.
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