Online websites such as Shein, Temu, Aliexpress, and TikTok Shop provide cheap prices for a wide range of items, making their marketplaces irresistible to many consumers. “China has [already] been ‘the world’s factory’ for decades, with made-in-China goods reaching global consumers” through platforms such as Amazon and Alibaba.[i] China expanded its manufacturing production while simultaneously opening its economy to the world in the late 1970s.[ii]Many factories struggled to reach large consumer markets unless they were sold through globally recognized names such as Walmart, Costco, and Target.[iii] North American teens and young women’s preference for fast fashion is credited for Shein’s rise to its current success.[iv] Shein alone is currently a $24 billion industry that outsells H&M and Zara combined, while Temu was the most downloaded app in the U.S. in 2022.[v]
The success of these Chinese retailers is attributed to the de minimis tax exemption. [vi] The de minimis exemption, established in 19 U.S.C. § 1321(a)(2)(c), allows low-value items to be imported free of duty, taxes, and standard screening procedures.[vii] Congress created the de minimis exemption to reduce inflationary pressures on small U.S. businesses and reduce supply chain delays.[viii] This allows small U.S. businesses to grow while allowing consumers access to affordable goods.[ix]
The U.S. has defined “low-value” items depending on its country of origin. As of 2015, the threshold for China is $800, which has allowed Chinese-based retailers, such as Shein, Temu, and TikTok Shop, to flourish.[x] When the de minimis exemption was originally created by the Tariff Act of 1930, China’s threshold was originally $200.[xi] This threshold increase allowed for an influx of small packages to enter the U.S., sparking concerns about its effects[xii] De minimis shipments account for 92% of cargo entering the U.S.[xiii]
This influx of de minimis shipments has been exploited to traffic counterfeits, dangerous narcotics, and other illicit goods.[xiv] This is because these small shipments are not often screened at ports of entry, enabling drugs and their ingredients to enter undetected.[xv] As a result, the Trump administration imposed an additional 10% tariff on imports from China, along with tariffs for Canada and Mexico as well.[xvi] This tariff is the administration’s attempt to reduce the flow of contraband, such as fentanyl, into the U.S., which has been considered a national emergency and public health crisis.[xvii] This tariff aims to close the “loophole” created by the de minimis exemption, which foresees significant changes in e-commerce within the U.S.[xviii] Still, since Trump’s order “do[es] not contain any language suggesting a global or permanent suspension of the de minimis status,” there still remains a possibility that fentanyl could arrive unchecked as long as the country of origin is not China, Canada, or Mexico.[xix]
The Biden administration attempted to implement rules to curb the de minimis exemption globally by making the exemption unavailable to goods under other punitive tariff orders and requiring the identification of packages with a 10-digit tariff code.[xx] The Biden administration was also concerned with the de minimis exemption overwhelming efforts against narcotics, counterfeits, and products made with forced labor.[xxi] Thus, Trump’s tariffs are a continuation of efforts to combat an issue that has been developing for years.
The new tariff took effect on February 4, 2025, and closed the de minimis exemption loophole.[xxii] Issues with the new tariffs immediately began on that same day, with the United States Postal Service (“USPS”) announcing they were suspending incoming shipments from China and Hong Kong.[xxiii] USPS retracted the policy within twenty-four hours and posted a service alert that they would continue to accept these packages while working with Customs and Border Protection “to implement an efficient collection mechanism for the new China tariffs to ensure the least disruption to package delivery.”[xxiv]
On February 7, 2025, the Trump administration announced the delay of the suspension of the de minimis exemption until “‘adequate systems are in place’ for the Commerce Department ‘to fully and expediently process and collect tariff revenue.’”[xxv] Although the total annihilation of the de minimis exemption may curb the inflow of fentanyl that arrives from China, Canada, and Mexico, the e-commerce landscape will be having a makeover in the U.S. Specifically, prices for items from Chinese-based retailers, such as Shein and Temu, will rise for U.S. consumers. These Chinese-based online retailers’ role in the industry has led large, established U.S. online retailers, such as Amazon, to implement initiatives in order to compete.[xxvi] Due to the low prices of Chinese-based online retailers and the lower manufacturing costs, there is bigger competition against U.S.-based retailers. Therefore, U.S.-based retailers must provide lower competitive prices that will give them a better chance of retaining consumers, even if it will lower their profit margins.
The removal of the de minimus exemption will force these Chinese retailers to raise prices to compensate for the new import taxes. Maintaining the de minimis exemption will encourage U.S. retailers to maintain lower prices for lower-income individuals. If some change is necessary, the solution should be to lower the threshold instead of completely removing the exemption. This allows some room for Chinese-based online retailers to continue charging lower prices. Although this solution would be less effective at reducing the influx of fentanyl, the removal of the de minimis exemption is not a long-term solution to the fentanyl crisis because fentanyl comes from other countries too, and the fentanyl trade will merely divert to these countries instead of China.
[i] Viola Zhou, et al., How China Took Over the World’s Online Shopping Carts, Rest of World (Nov. 14, 2023), https://restofworld.org/2023/china-shopping-shein-temu-global-rise/.
[ii] See John A. Deighton, How SHEIN and Temu Conquered Fast Fashion—and Forged a New Business Model, Harv. Bus. Sch.: Working Knowledge (Apr. 25, 2023), https://www.library.hbs.edu/working-knowledge/how-shein-and-temu-conquered-fast-fashion-and-forged-a-new-business-model.
[iii] See id.
[iv] See id.
[v] See id.
[vi] See Annie Palmer, Temu and Shein’s Soaring Popularity Has Wall Street Eyeing China’s Influence on Tech Earnings, CNBC (July 29, 2024, 8:00 AM), https://www.cnbc.com/2024/07/29/temu-shein-soaring-popularity-could-hit-amazon-meta-ebay-earnings.html (“Much of their growth, according to some industry experts, is the result of a trade loophole, known as the de minimis exception, which allows for packages shipped from China valued at under $800 to enter the U.S. duty free.”).
[vii] See Christopher A. Casey, Imports and the Section 321 (De Minimis) Exemption: Origins, Evolution, and Use, Cong. Rsch. Serv. (Jan. 31, 2025), https://crsreports.congress.gov/product/pdf/R/R48380; see also Lars-Erik A. Hjelm, et al., DHS, Treasury, and CBP Seek to Modify the De Minimis Exemption from Duties and Fees for Low Value Shipments, Including to Prohibit Products of China Subject to Section 301 Duties from De Minimis Eligibility, Akin (Feb. 5, 2025), https://www.akingump.com/en/insights/alerts/dhs-treasury-and-cbp-seek-to-modify-the-de-minimis-exemption-from-duties-and-fees-for-low-value-shipments (“The $800 de minimis exemption is subject to the condition that the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from duty cannot exceed $800.”).
[viii] See De Minimis: A Vital Tax Exemption, NFTC, https://www.nftc.org/de-minimis-a-vital-tax-exemption/ (last visited Feb. 13, 2025).
[ix] See id. (“According to the Centre for Economic Policy Research, the tax exemption disproportionately benefits low-income households and African American and Hispanic families.”).
[x] See De Minimis Value – Express Shipment Exemptions, Int’l Trade Admin., https://www.trade.gov/de-minimis-value (last visited Mar. 7, 2025).
[xi] See Jon Bradford & Dynamo Ventures, Exploiting Loopholes: The Dark Side of Fast Fashion Giants Shein and Temu, Retail Touch Points(Apr. 4, 2024, 8:11 AM), https://www.retailtouchpoints.com/features/executive-viewpoints/exploiting-loopholes-the-dark-side-of-fast-fashion-giants-shein-and-temu.
[xii] See Casey, supra note vii; see also Simone Del Rosario, Trump Tariffs Could Close Loophole That Let China’s Shein and Temu Soar, Straight Arrow News Pols. (Feb. 3, 2025), https://san.com/cc/trump-tariffs-could-close-loophole-that-let-chinas-shein-and-temu-soar/ (“From 2015 to 2024, the number of qualifying shipments grew tenfold, from 139 million packages to 1.36 billion.”).
[xiii] See Marcy Mason, Buyer Beware: Bad Actors Exploit De Minimis Shipments, U.S. Customs & Border Prot. (Oct. 28, 2024),https://www.cbp.gov/frontline/buyer-beware-bad-actors-exploit-de-minimis-shipments.
[xiv] See Casey, supra note vii.
[xv] See David Lawder, Trump’s Canada, Mexico, China Tariffs Suspend Loophole Behind Fentanyl Shipments, Reuters (Feb. 2, 2025, 1:36 PM), https://www.reuters.com/world/trumps-canada-mexico-china-tariffs-suspend-loophole-behind-fentanyl-shipments-2025-02-02/.
[xvi] See id.
[xvii] See Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports From Canada, Mexico and China, The White House (Feb. 1, 2025), https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/.
[xviii] See Rosario, supra note xii (“By targeting Chinese companies like Temu and Shein, which have benefited from the loophole to offer products at low prices, the U.S. government is pushing for a more competitive environment for American retailers.”).
[xix] Lawder, supra note xv.
[xx] See id.
[xxi] See Nazak Nikakhtar, et al., Biden Administration Announces Changes to De Minimis Trade Exemptions to Address Unfair and Unsafe Imports into the United States, Wiley: Alert (Sept. 25, 2024), https://www.wiley.law/alert-Biden-Administration-Announces-Changes-to-De-Minimis-Trade-Exemptions-to-Address-Unfair-and-Unsafe-Imports-into-the-United-States.
[xxii] See Hjelm, supra note vii.
[xxiii] See USPS Says Packages from China and Hong Kong Will be Accepted Again After Temporary Suspension, CBS News (Feb. 5, 2025, 11:51 AM), https://www.cbsnews.com/news/usps-suspends-packages-china-hong-kong/.
[xxiv] International Inbound Mail and Packages from China and Hong Kong Posts, USPS Serv. Alerts,
https://about.usps.com/newsroom/service-alerts/international/suspension-of-inbound-parcels-from-china-and-hong-kong.htm (last visited Mar. 7, 2025).
[xxv] Ramishah Maruf, Trump Reinstates Tariff Exemption for Certain Cheap Shipments – For Now, CNN Bus. (Feb. 7, 2025, 5:38 PM), https://www.cnn.com/2025/02/07/business/de-minimis-loophole-tariffs-trump/index.html.
[xxvi] See Rachel Wolff, Shein, Temu Win Over Gen Z Shoppers, Emarketer (Aug. 30, 2024), https://www.emarketer.com/content/shein-temu-win-over-gen-z-shoppers.
