Shein and Temu: Global online shopping under scrutiny in US over trade rule

WASHINGTON – U.S. lawmakers are looking into the rise of global online shopping, particularly from countries like China. 

More and more consumers are looking to buy items overseas that cost less and ar a bargain.  

How can stylish imports from the other side of the Pacific be so cheap? The answer has much to do with a trade rule known as the de minimis exception, which allows parcels valued under $800 to enter the U.S. duty-free per person per day.

Lawmakers from both parties are questioning whether the rule allows manufacturers to avoid tariffs aimed at protecting American companies and bypass laws barring the imports of products made by forced labor, illicit drugs or unsafe materials.

On Thursday, a group of 40 lawmakers asked Homeland Security Secretary Alexander Mayorkas to crack down on the de minimis trade, which they said also facilitates the flow of deadly drugs like fentanyl into the U.S.

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Rep. Earl Blumenauer of Oregon, top Democrat on the House Ways and Means trade subcommittee, has introduced legislation to exclude non-market economies like China from the rule. A bill introduced in the Senate would make the practice reciprocal. China, for example, sets the de minimis threshold at about $7.

“The de minimis loophole is a threat to American competitiveness, consumer safety and basic human rights,” Blumenauer said in December.

However, the de minimis rule also has powerful defenders. The National Foreign Trade Council, whose members include major shippers such as FedEx, UPS and DHL as well as online retailers like Amazon and eBay, argue that restricting its use would make purchases more expensive for American consumers and small businesses. The cost of a $50 package would double, according to the council.

Introduced in 1938, the de minimis exception was intended to facilitate the flow of small packages valued at no more than $5, the equivalent of about $106 today. The threshold increased to $200 in 1994 and $800 in 2016. At the time, Sen. John Thune, a South Dakota Republican, said the bill would “empower more Americans to engage in global commerce.”

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A June 2023 report by the House Select Committee on China’s Communist Party found that Shein and Temu, a low-cost online retailer of clothing and household goods, alone accounted for more than 30% of all packages shipped to the U.S. daily under the de minimis exemption.

China’s exports grew only 0.6% last year, but the bright spot was cross-border e-commerce, which includes but is not limited to the de minimis packages. These online sales expanded nearly 20% in 2023 to reach 1.83 trillion yuan, or $257 billion, nearly 8% of the country’s total exports. The U.S. is the biggest market, accounting for more than a third of Chinese goods bought online and shipped internationally in 2022, the last year for which China’s official customs data are available.

The Associated Press contributed to this report. This story was reported from Los Angeles.