White House de minimis loophole rules target Shein, Temu

The Biden administration announced new steps on Friday to curtail what it calls the “overuse and abuse” of a longstanding trade law that permits low-value shipments to enter the United States without paying import duties and processing fees.

The steps include a new rule proposal, which would bar overseas shipments of products that are subject to U.S.-China tariffs from being eligible for the special customs exemption.

Known as the de minimis loophole, the trade provision allows packages with a value of less than $800 to enter the United States with relatively little scrutiny. Over the past decade, the number of de minimis shipments has exploded, from roughly 140 million to more than a billion, according to a White House estimate.

“The drastic increase in de minimis shipments has made it increasingly difficult to target and block illegal or unsafe shipments coming into the U.S.,” Daleep Singh, deputy national security advisor for international economics, told reporters on a Thursday call to preview the actions.

Officials say the explosion in de minimis shipments is largely driven by a few Chinese-linked online retail giants like Shein and Temu, which use the exemption to ship millions of dollars worth of clothing and inexpensive household goods from factories in China directly to American customers.

Each individual package is typically worth far less than $800, and thereby qualifies for the de minimis exemption.

But new eligibility restrictions for products that are subject to tariffs under Section 301, Section 201, and Section 232 — like the ones proposed Friday — could upend this business model.

“Since approximately 70% of Chinese Textile and Apparel imports are subject to section 301 tariffs, this step will drastically reduce the number of shipments entering through the de minimis exemption,” said Daleep.

In addition to the proposed tariff rules, the White House also announced plans for a new rule to “require specific, additional data for de minimis shipments – including the 10-digit tariff classification number and the person claiming the de minimis exemption,” according to a fact sheet.

The Biden administration also called on Congress to pass legislation to overhaul the original de minimis rules.

An obscure tariff law loophole passed by Congress in 1930 – the de minimis exemption landed in the White House’s crosshairs again in recent years after lawmakers raised concerns that the rule allows foreign retailers to evade tariffs and scrutiny of their packages at the border. 

Last year, the House Select Committee on the Chinese Communist Party released a report on Shein and Temu and determined the…