President Donald Trump has suspended a global trade loophole allowing smaller parcels into America duty-free, which means price hikes for Chinese mega-shippers like Shein and Temu.
He eliminated the de minimis exemption, which admitted duty-free shipments of goods worth US$800 or less into the U.S. This was used as a loophole by giant e-commerce sites when shipping hundreds of millions of packages to U.S. consumers.
The Trump administration got rid of the exemption for goods coming out of China and Hong Kong in May, amidst a U.S.-China trade war.
In an executive order last week, it was extended to every country around the world.
This is set to take place on 29 August and will require international packages to declare their country of origin to U.S. Customs and Border Protection and pay applicable tariffs.
This could lead to tariffs ranging from US$80 to US$200, depending on the exporting country’s tariff rate.
This is bad news for Chinese retailers and their customers as it shuts down the option of re-routing small shipments duty-free through countries like Vietnam, which is already facing a tariff rate of 20%.
When the de minimis exemption expires for China in early May, Temu overhauled its shipping within hours, saying it would send out all American orders via U.S.-based distributors.
However, some consumers complained that this led to higher prices and items being out of stock.
The change could have a significant impact on global e-commerce as the CPD processed nearly 1.36 billion de minimis shipments in the last fiscal year, averaging 4 million duty-free packages per day.
