Potential Fraud Exposure: Elimination of China Goods' Shipping Loophole - Implications for Consumers
The End of a Century-Old Loophole
Say goodbye to that shipping loophole that made your online purchases from Shein and Temu cheaper. Thiswclosure happened last week. The loophole, known as the "de minimis" exception, had been in place since 1938. It enabled duty-free entries for imported goods valued under $800, boosting foreign e-commerce like Shein and Temu.
Donald Trump signed an executive order last month that eliminated the exemption for goods imported from China and Hong Kong. The White House reportedly justified this move as a "crucial step in countering the persistent health risk posed by the illicit flow of synthetic opioids into the U.S." Here's the scoop:
What was the "de minimis" exception?
Congress first introduced the "de minimis" exception back in 1938 as Section 321(a)(2)(C) of the Tariff Act of 1930. This policy permitted duty waivers for small shipments to streamline customs operations, helping to promote trade and spare the government from dealing with trivial tax revenue. Congress raised the threshold several times since then. In 2015, it peaked at $800.
The U.S. Customs and Border Protection processes approximately 4 million duty-free "de minimis" shipments daily, with most arriving from China and Hong Kong. In the previous fiscal year, a staggering 1.36 billion shipments entered the U.S. under the shipping exemption.
Why did Trump axe it?
The White House accused China of fueling the U.S. fentanyl crisis by providing fentanyl precursors to illicit drug manufacturers. Trump's decision to restrict the shipping loophole is the latest move in a series of trade policy revisions that will likely affect millions of consumers and small businesses relying on cheaper goods from China.
How will this impact consumers?
Platforms affected by the loophole's shutdown will likely transfer the increased costs to shoppers. This means U.S. customers, who often rely on these platforms for affordable clothing and other household goods, may find it tough to absorb the new expenses.
In a time when Americans are already juggling surging costs due to the high tariffs Trump imposed on Chinese imports, this is a hard hit. Moreover, the change isn't merely for Chinese goods. The government intends to abolish the "de minimis" exemption for packages from other countries as soon as they can develop a system for expediting duty collection.
Implications for Shein, Temu, and Others
Shein has already boosted prices, with its top 100 beauty and health items seeing an average increase of 51%, according to Bloomberg. Temu, one of Shein's main competitors, plans to switch to a "local fulfillment model," with U.S. orders handled by local sellers to evade tariffs. Frustrated customers have already noticed items being yanked from their shopping carts due to the lack of local certification.
China-based Shein and Singapore-based Temu may lose substantial business from U.S. customers sick of the price hikes and diminishing product availability. Additionally, consumers are likely to become irked by sluggish shipping speeds as a result of stricter customs guidelines.
Further Reading
- Humor as a Free Export Amid Trump Tariffs
- Big Tech in Confusion over Trump Tariff Exemptions
- Shock and Awe: U.S. Importers Faced with Trump's China Tariff
Extra Insights:
The De Minimis Exception in Depth
The de minimis exception is a trading rule that permits shipments of goods valued under a specific limit to enter a country duty-free. In the U.S., the threshold was set at $800 for daily postal shipments, simplifying customs procedures for affordable goods[1][2]. Established in 1938 to encourage the importation of low-cost items, the exemption benefited small businesses and consumers alike[1].
The End of the Exemption for China and Hong Kong
The Trump administration ended the de minimis exception for goods imported from China and Hong Kong through an executive order. This alteration became effective on May 2, 2025, subjecting the affected shipments to applicable taxes, duties, and fees[5]. Carriers are required to collect and remit taxes, either as a percentage of the shipment's value or a flat fee starting at $25 per postal item after May 2, 2025, and rising to $50 per item after June 1, 2025[5]. The Trump administration's objective was to tackle concerns about trade practices and reciprocity, potentially extending the change to other nations[5].
The Trump administration aimed to address perceived trade imbalances and security risks related to the exemption by enforcing standard customs procedures and tariffs on all imports[5]. This shift is predicted to impact e-commerce significantly, potentially increasing the cost of importing items from China and Hong Kong[5].
- The de minimis exception, a trading rule allowing duty-free entry for small shipments, was introduced in 1938 to streamline customs operations and promote trade.
- Congress, over the years, raised the threshold from its initial value, with it peaking at $800 in 2015.
- The U.S. Customs and Border Protection processes approximately 4 million duty-free "de minimis" shipments daily, with most arriving from China and Hong Kong.
- In 2025, the Trump administration ended the de minimis exception for goods imported from China and Hong Kong, subjecting these shipments to applicable taxes, duties, and fees.
- The Trump administration's objective was to tackle concerns about trade practices and reciprocity, potentially extending the change to other nations.
- Shein, one of the platforms affected by the loophole's shutdown, has already boosted prices, with its top 100 beauty and health items seeing an average increase of 51%.
- In addition to affecting China-based Shein and Singapore-based Temu, the government intends to abolish the "de minimis" exemption for packages from other countries as soon as they can develop a system for expediting duty collection.
