As the US moves to amend the "de minimis" exemption, millions of American consumers may soon feel the financial pinch prompted by new import duties.
**US to Close Small Parcel Loophole, Upsetting Bargain Hunters on Shein and Temu**
**US to Close Small Parcel Loophole, Upsetting Bargain Hunters on Shein and Temu**
The closure of a duty-free loophole for low-value items is poised to increase prices for shoppers on popular Chinese retail platforms.
The US government is set to close a duty-free loophole that has allowedChinese retailers like Shein and Temu to ship low-value parcels directly to American customers without incurring customs fees. Initially established in 1938, the "de minimis" exemption has allowed for duty-free packages valued at up to $800 (£600), helping to streamline the flow of small imports into the US. However, both President Donald Trump and former President Joe Biden have raised concerns that this system is detrimental to local businesses and has been exploited for smuggling illegal goods, including synthetic drugs.
Currently, packages falling under the de minimis exemption account for over 90% of incoming cargo, according to the US Customs and Border Protection (CBP). Companies like Shein and Temu have aggressively marketed their ultra-low prices to millions of US customers, a strategy that has helped bolster their user bases. However, both firms recently acknowledged rising operational costs due to evolving global trade regulations, informing customers they would implement price increases starting April 25, prior to the exemption's closure.
The looming closure follows a brief suspension of the exemption earlier this year, resulting in a temporary halt on parcel acceptance by the US Postal Service from mainland China and Hong Kong. The recent executive order outlines that effective May 2, all parcels from these regions will be subject to import duties, with incremental increases planned thereafter. Officials argue that the crackdown on low-value shipments is crucial to combatting the influx of synthetic opioids such as fentanyl, which are associated with thousands of American fatalities annually.
This regulatory shift aligns with growing pressure on the US government to address rampant abuse of the de minimis allowance, especially as the volume of related shipments soared from around 140 million in the past decade to over one billion last year. The American Action Forum estimates that eliminating the exemption could lead to an increase of between $8 billion to $30 billion in annual consumer costs.
Internationally, the proposed changes have resonated with other markets as the UK and European Union governments also scrutinize similar low-value import exemptions amid concerns about local retailers being undercut. These nations are considering measures that could mirror those of the US, indicating the potential for an uptick in prices across both regions.
With the shift set to create an additional burden for US border officials who already face challenges in regulating illegal materials, some experts suggest that the end of the de minimis exemption will not significantly reduce the flow of illicit goods while just adding to the workload of customs agencies. The National Foreign Trade Council warns that attention may be drawn away from the more significant border concerns, ultimately making the current situation more complex for US authorities.
Currently, packages falling under the de minimis exemption account for over 90% of incoming cargo, according to the US Customs and Border Protection (CBP). Companies like Shein and Temu have aggressively marketed their ultra-low prices to millions of US customers, a strategy that has helped bolster their user bases. However, both firms recently acknowledged rising operational costs due to evolving global trade regulations, informing customers they would implement price increases starting April 25, prior to the exemption's closure.
The looming closure follows a brief suspension of the exemption earlier this year, resulting in a temporary halt on parcel acceptance by the US Postal Service from mainland China and Hong Kong. The recent executive order outlines that effective May 2, all parcels from these regions will be subject to import duties, with incremental increases planned thereafter. Officials argue that the crackdown on low-value shipments is crucial to combatting the influx of synthetic opioids such as fentanyl, which are associated with thousands of American fatalities annually.
This regulatory shift aligns with growing pressure on the US government to address rampant abuse of the de minimis allowance, especially as the volume of related shipments soared from around 140 million in the past decade to over one billion last year. The American Action Forum estimates that eliminating the exemption could lead to an increase of between $8 billion to $30 billion in annual consumer costs.
Internationally, the proposed changes have resonated with other markets as the UK and European Union governments also scrutinize similar low-value import exemptions amid concerns about local retailers being undercut. These nations are considering measures that could mirror those of the US, indicating the potential for an uptick in prices across both regions.
With the shift set to create an additional burden for US border officials who already face challenges in regulating illegal materials, some experts suggest that the end of the de minimis exemption will not significantly reduce the flow of illicit goods while just adding to the workload of customs agencies. The National Foreign Trade Council warns that attention may be drawn away from the more significant border concerns, ultimately making the current situation more complex for US authorities.
