New US shipping rules target China's Shein and Temu

The United States government has introduced new regulations that will significantly impact many low-value shipments coming from China. These regulations are aimed at addressing the overwhelming influx of packages from popular online shopping platforms such as Shein and Temu. The Biden administration has stated that the purpose of these new rules is to prevent the misuse of a special exemption that previously allowed packages valued at less than $800 to enter the country without incurring tariffs or additional fees. This exemption, known as the 'de minimis' rule, has been beneficial for companies like Shein and Temu, which typically ship products directly from manufacturers to consumers, allowing them to offer lower prices than their competitors. In 2016, the US raised the threshold for tariff-free shipments from $200 to $800 to facilitate trade and enable customs officials to concentrate on more significant shipments. However, lawmakers have expressed growing concerns about the exploitation of this exemption by companies like Temu and Shein, which have rapidly gained market share in the US. The new regulations will eliminate the exemption for Chinese goods that are already subject to tariffs, which includes a wide array of products such as footwear, machinery, and approximately 70% of textiles and apparel. Additionally, the new rules will require shippers to provide more detailed information to authorities regarding their shipments. Temu has defended its business model, stating that its success is attributed to an efficient approach that eliminates unnecessary intermediaries, allowing them to pass savings directly to consumers. The company has indicated that it is currently reviewing the new regulations while remaining committed to delivering value to its customers. Temu also emphasized that its growth is not dependent on the de minimis policy. Shein, on the other hand, has attributed its success to its 'on-demand business model' and has expressed support for reforming the de minimis exemption to ensure that the rules are applied fairly across the board. The company has made compliance a priority and is actively participating in a trial program with US Customs and Border Protection (CBP) to enhance transparency regarding the contents of its packages. Since their inception a few years ago, both Temu and Shein have attracted a large following through eye-catching advertisements, including Super Bowl commercials, and by offering extremely low prices. Their rapid growth has put significant pressure on Amazon, the leading e-commerce company in the US, prompting Amazon to establish its own discount division focused on direct-to-consumer shipments. However, the rise of these companies has also drawn scrutiny from US politicians and regulators, who have raised concerns about the potential exploitation of labor, particularly regarding allegations that Temu may be selling products made with forced labor. Authorities have pointed to the success of these platforms as a contributing factor to the increasing strain on US border and customs operations, as the number of packages entering the country under the de minimis exemption has surged from 140 million in 2013 to over 1 billion in the previous year. In announcing the new regulations, the Biden administration noted that several e-commerce platforms founded in China now account for a significant portion of shipments that fall under the $800 threshold. They stated that their actions are a response to the 'exponential increase in de minimis shipments,' which has made it increasingly difficult to identify and intercept illegal shipments. The administration accused these companies of attempting to circumvent consumer protection laws and trade barriers. Commerce Secretary Gina Raimondo remarked, 'American workers and businesses can outcompete anyone on a level playing field, but for too long, Chinese e-commerce platforms have skirted tariffs by abusing the de minimis exemption. ' A right-leaning policy group known as the American Action Forum has estimated that completely eliminating the $800 exemption could result in additional costs ranging from $8 billion to $30 billion annually, which would ultimately be passed on to consumers. The proposal will undergo a public comment period before it is finalized and implemented. Meanwhile, authorities in the European Union are also exploring similar measures aimed at regulating low-value shipments. Following the announcement of these new rules, shares of PDD Holdings, the parent company of Temu, experienced a decline of over 2%.