( NewsNation ) — President Donald Trump is closing a tax break that lets discount stores such as Shein and Temu evade duties on inexpensive products from China.
Trump signed an executive order Wednesday to end the so-called “de minimis” exemption on merchandise from China and Hong Kong. The rule allowed companies to avoid import taxes and certain customs paperwork on packages worth $800 or less.
This choice might result in increased expenses for customers shopping at discount platforms such as Shein and Temu—platforms that have utilized this exception to offer extremely low-priced items and swiftly broaden their presence in the U.S. market.
Beginning May 2nd, low-cost items coming from China will be subject to a tariff set at either 30% of their worth or $25 for each product. as per a factual document from the White House The monetary value will rise to $50 following June 1st.
As online shopping and direct-to-consumer sales have grown, so too has the utilization of the de minimis exemption. In the previous year, approximately 1.4 billion packages were imported into the U.S. via the duty-free channel, which is over twice as many as the 636 million documented in 2020. as per the U.S. Customs and Border Protection .
Lawmakers on both sides of the political spectrum In recent years, they have advocated for changes to the de minimis provision, expressing concerns that this exemption facilitates drug smuggling into the nation.
Over 90% of all packages entering the U.S. currently arrive through de minimis provisions, with approximately 60% originating from China. according to Reuters .
Why is Trump ending the exemption?
The White House states that shutting down the trade loophole is essential for combating the influx of lethal substances such as fentanyl originating from China.
This occurs because imports entering the country via the de minimis exemption usually undergo less examination and regulation compared to bigger deliveries.
The White House stated that President Trump is addressing misleading shipping tactics employed by China-based shippers who often conceal illegal items, such as synthetic opioids, within small shipments to take advantage of the de minimis exemption.
On a typical day, CBP handles more than 4 million low-value shipments entering the U.S.—a massive amount that criminals are taking advantage of to smuggle illicit drugs. agency has warned .
The Biden administration also took steps To address the issue, they suggested amending regulations with a focus on inexpensive products imported from China. At that time, Democratic officials employed a comparable rationale for their proposal.
"The significant rise in de minimis shipments has made it progressively harder to identify and prevent illicit or hazardous deliveries entering the U.S. via this channel," said Daleep Singh, who serves as the deputy national security advisor to President Biden. said back in September .
Following the failure of the House to introduce legislation aimed at reducing the de minimis exemption, Democratic lawmakers called on Biden to utilize his executive power to modify the regulation.
The National Council of Textile Organizations, which represents American manufacturing companies, commended Trump for his efforts. move Thursday , describing it as "well-deserved."
Will Temu and Shein items cost more?
Eliminating the de minimis threshold for products coming from China might significantly affect discount platforms such as Shein and Temu, which are renowned for offering extremely low-cost apparel, household items, and various other goods.
A 2023 report According to findings from the House Select Committee on China’s Communist Party, Shein and Temu account for over 30% of daily shipments arriving in the U.S. via the de minimis exception.
Under the revised rules, consumers can still purchase items from Shein and Temu, though these products might come with higher price tags.
The Cato Institute, which has a lean towards libertarianism, argues that Ending the exemption will "result in significantly adverse impacts for Americans, especially those with lower incomes."
The think tank cited research papers indicating that the lowest-income zip codes in America get more small-value deliveries, especially from China, as opposed to the highest-income zip codes.
Additionally, one must account for administrative expenses. In February, Trump initially eliminated the duty-free status for inexpensive goods coming from China but changed his stance once shipments began accumulating at U.S. borders.
The National Foreign Trade Council, which includes members such as FedEx, UPS, and DHL along with retailers like Amazon and Walmart, has defended the exemption And mentioned that limiting it would lead to higher taxes for American families. The council stated that decreasing the de minimis threshold would double the cost of a $50 package.
A further issue could be that retailers might determine continuing air freight for inexpensive items to the U.S. is not financially viable, opting instead to transport these products via container ships, which would result in extended shipping durations.
Temu and Shein did not reply to NewsNation’s queries regarding how customers in the U.S. might be impacted by the alteration in policy.
In recent years, both firms have implemented strategies to expand their presence within the U.S., potentially mitigating the impact of any challenges they face.
Recently, Temu has begun directing customers towards "local" products—items that can be delivered from fulfillment centers within the U.S. CNBC reported The business news source reported that Shein established distribution facilities in states such as Illinois and California in 2022, along with setting up a supply chain center in Seattle earlier this year.
Will tiny international shipments also face impacts?
The modification of the de minimis rule currently affects only inexpensive items originating from China and Hong Kong. This implies that products with values up to $800 sourced from places such as Canada or Mexico can continue entering the U.S. without duties.
Nevertheless, shipments originating from elsewhere globally might lose their immunity shortly. A different executive order Issued on Wednesday stated that the de minimis exemption will be eliminated as soon as a mechanism for "quickly processing and collecting" the tariffs is established.
Research has found Eliminating this provision entirely could lead to expenses ranging from $11 billion to $13 billion for U.S. consumers, with a particularly adverse impact on low-income and minority families.
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