Prices for cheap goods from Chinese companies Shein and Temu are rising as Trump closes a duty-free loophole - BBC

President Donald Trump closed a loophole for duty-free low-value parcels. This has led to rising prices for American customers of online retail giants such as Shein and Temu, reports the BBC, UNN reports.

Details

Chinese online retail giants have relied on the so-called "de minimis" exemption to sell and ship low-value goods directly to the US without having to pay import duties or taxes.

De minimis is a Latin term that literally translates to "the smallest." In this context, it refers to a US trade rule passed by Congress in 1938 to avoid the costs associated with collecting only small amounts of import duties. In the 21st century, after a series of increases in this threshold, this rule allowed retailers to ship parcels worth less than $800 to American customers without paying duties or taxes. Supporters of this loophole say it helped streamline the customs process.

According to US Customs and Border Protection (CBP), shipments covered by this exemption account for more than 90% of all shipments entering the country.

Chinese online stores such as Shein and Temu have benefited significantly from this loophole. Both platforms have attracted millions of American customers through marketing blitzes that showcased their ultra-low prices. And it was the de minimis exemption that helped them offer these offers so cheaply.

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But Trump, like his predecessor Joe Biden, said it was harming American business and being used to smuggle illegal goods, including drugs.

In February, Trump briefly closed the loophole. The suspension was quickly lifted as customs inspectors, shipping companies and online stores struggled to adjust to such major changes in a short period of time.

During the initial suspension of the exemption, the US Postal Service temporarily stopped accepting parcels from mainland China and Hong Kong.

The order announcing the latest decision states that it is aimed at combating the illegal importation of synthetic opioids such as fentanyl.

It states that many Chinese shippers use deceptive methods to hide banned substances in low-value packages "to take advantage of the de minimis duty exemption."

These drugs kill tens of thousands of Americans every year, including 75,000 deaths a year from fentanyl alone

Biden also banned

The idea is not new. Last year, the Biden administration proposed rules designed to stop "abuse" of the duty exemption.

The increasing volume of de minimis shipments makes it difficult to detect and block illegal or dangerous shipments

The move is in line with Trump's policy of combating goods from China.

The White House also criticised the success of firms such as Temu and Shein in creating an additional burden on border services, as the number of parcels entering the US through this loophole has risen from around 140 million ten years ago to over a billion last year.

What it means for online shopping

Parcels sent to the US from mainland China and Hong Kong worth up to $800 are now subject to a 120% tax or a fixed fee. Initially, this fee was $100, but it is expected to rise to $200 in early June.

Even before these packages were taxed on import, American consumers saw prices rise. Shein and Temu raised prices for their American customers by May 2 "due to recent changes in global trade rules and tariffs."

Last year, the American Action Forum, a right-leaning political group, estimated that repealing the exemption would result in "additional annual costs of between $8 billion and $30 billion, which would ultimately be passed on to consumers."

Addition

Apple CEO Tim Cook detailed at a press conference on Wednesday how the company is responding to US tariffs imposed by President Donald Trump, estimating the potential impact on the company's business at at least $900 million this quarter