Deepshikha Maan, Jadetimes Staff
D. Maan is a Jadetimes news reporter covering Business
US Introduces New Shipping Regulations to Limit Tax Exemptions for Chinese Retail Powerhouses Shein and Temu
The US administration has introduced new legislation aimed at levying tariffs on low value shipments originating from China, specifically focussing on prominent e commerce platforms such as Shein and Temu. The Biden administration implemented this strategy to tackle the widespread misuse of a tariff exemption, which permits products with a value below $800 to enter the United States without incurring taxes and fines.
The "de minimis" norm, raised from $200 to $800 in 2016 to encourage commerce, has been progressively manipulated by firms like Shein and Temu who specialise in direct shipment from manufacturers to consumers. These companies have effectively utilised the exception to provide much reduced costs, therefore undercutting their rivals in the United States.
The proposed rules aim to abolish the exception for Chinese manufactured goods that are subject to taxes, encompassing a diverse array of products such as clothing, footwear, and machinery. Furthermore, the modifications require shippers to furnish customs authorities with more comprehensive information.
In response, Temu justified its business strategy by highlighting that its success is derived from eliminating intermediaries to transfer cost savings to customers and emphasising that its expansion is not dependent on the minimalist rule. Furthermore, Shein expressed its endorsement of changes to the exemption, underscoring its dedication to adherence and disclosing its involvement in a trial initiative with US Customs and Border Protection (CBP).
Both companies have swiftly acquired a larger portion of the market in the United States, through assertive promotional efforts and much reduced pricing that have even exerted pressure on Amazon. Nevertheless, the exponential growth of these companies has drawn close examination from American legislators, who express apprehension over the safety of their products and allegations of coerced labour. Furthermore, the authorities have identified the increase in low-value shipments, which rose from 140 million in 2013 to more than 1 billion last year, as a substantial burden on customs enforcement.
According to Commerce Secretary Gina Raimondo, the new measures are designed to provide equitable conditions for American businesses and workers, enabling them to surpass competitors without being disadvantaged by companies taking advantage of tariff loopholes. Prior to finalisation, the new regulations are subject to a comment period. European Union regulators are also investigating analogous measures to manage the surge of low value goods.
Post the announcement, the shares of PDD Holdings, the parent company of Temu, declined by almost 2%. According to the American Action Forum, completely eliminating the de minimis deduction might lead to an increase in annually incurred expenses ranging from $8 billion to $30 billion, which may be transferred to consumers.
