Shein and Temu are famous because they offer Chinese items online. An ancient law lets $10 gowns be delivered to American mailboxes tax-free.
The old de minimis rule simplifies this. It states that shipments under $800 delivered to various persons are tax-free. This law applies to all retailers. However, it helps Shein and Temu, controlled by PDD Holdings, and TikTok’s new online purchasing operation.
A House committee reported in June that Shein and Temu may be responsible for over 30% of small parcels entering the U.S. without paying taxes or tariffs.
This publication mirrors the Senate’s increasingly unfavorable inquiry into this provision. Critics argue this loophole gives firms the confidence to circumvent the legislation banning forced labor goods. They avoid customs and Chinese import duties. Shein’s possible U.S. IPO is garnering notice.
Since 2012, Chinese-founded Shein has followed U.S. tax and customs requirements. Global strategy head Peter Pernot-Day said Shein’s success is not attributable to this outlier. Instead, he attributed the company’s success to smartness and internet trends. They first ordered a few garments from producers. Producing more in-demand commodities minimizes expensive surpluses.
In July, Shein wrote to the American Apparel and Footwear Association (AAFA) requesting minimal improvements but needed to specify them. Shein’s Senate records show he’s focused on trade and taxation.
Temu, which will start selling in the U.S. next year, declined to comment. TikTok, run by Beijing-based ByteDance, likewise remained mute.
Customs and Border Protection data is intriguing. In 2022, U.S. small exports rose to 685.5 million. That’s about 67% greater than in 2018. In July, DHS Under Secretary for Policy Robert Silvers said two to three million shipments are dispatched daily. This numerical representation illustrates.
In June, a group of American legislators from different parties suggested measures to ban exporting tiny Chinese packages.
Some legislators are upset that Chinese products and firms are taking advantage of the “de minimis” principle. In a May meeting, Republican House Ways and Means Committee Chairman Jason Smith called this portion of the measure a “free trade agreement” for China.
As Shein and Temu gain power, U.S. opponents are worried. According to Senate records, twelve shops have petitioned the Senate to close this loophole since 2018. Coach and Mercari, a Japanese internet marketplace, are owned by Tapestry.
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All these perspectives have complicated this debate. Columbia Sportswear and the AAFA support the $800 cap. Sellers who ship from U.S. foreign trade zone storage centers should likewise be exempt.
The cap should be lifted. Supporters of the present status, who utilize this clause often, oppose improvements.
Steve Story, a de minimis shipping specialist with Apex Logistics International, says this exception applies to everyone. He emphasizes that you may save a lot of money and should take advantage of this revolution in internet purchasing. The narrative implies that you must exploit this economic opportunity to retain capital.
Large boats bring plenty of goods to large shops. They pay tariffs at the port. After that, they travel to enormous facilities to be stored until they are sent to retailers or online buyers.
“De minimis” objects in the U.S. don’t pay taxes or get customs inspections. UPS and FedEx like these shipments.
However, Chinese items may be shipped by sea to Mexico or Canada and housed in safe establishments. Online purchases are individually packaged and sent to the U.S. Items come without additional expenses.
The de minimis rule was established in 1938 to encompass small foreign gifts and American tourists’ souvenirs. Congress raised the minimum from $200 to $800 in 2015. The U.S. has become one of the nations with high limitations.
Our Reader’s Queries
Is Temu and Shein the same?
Temu specializes in apparel and accessories, whereas Shein boasts a diverse range of products, spanning from home goods to beauty products. Temu’s prices are typically more affordable than Shein’s. While Temu is a newer brand, Shein has already established itself as a prominent player in the market.
Why is Shein suing Temu?
In July, Temu took legal action against Shein in Massachusetts federal court, alleging that the company had breached antitrust laws. This lawsuit came after Shein had filed a complaint against Temu in December, claiming that the latter had used social media influencers to defame Shein online.
Is there a lawsuit against Temu?
In the past, Shein filed a lawsuit against Temu in the United States, claiming that Temu instructed social media influencers to make negative comments about the fast-fashion brand. Additionally, Temu allegedly used fake social media accounts to deceive customers into downloading their app.
What company owns Temu?
Temu is under the ownership and operation of PDD Holdings, the same company that manages the well-known online commerce platform in China, Pinduoduo. PDD Holdings was initially registered in the Cayman Islands but later transferred its place of incorporation from Shanghai to Dublin in 2023.