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Shein, Temu… How an American legal loophole benefits Chinese e-commerce giants

Opportunity makes the thief.

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Shein, Temu… How an American legal loophole benefits Chinese e-commerce giants

Opportunity makes the thief. The Chinese online commerce giants know this very well. These sleuths of legal vagueness did not hesitate to rush into the breach opened by an old American law dating from 1930. Lightened controls and reductions in customs duties for low-value parcels have become the goose that lays the eggs of gold from exporting companies like Shein and Temu. Known as the “de minimis rule,” this law exempts imports worth less than $800 from tariffs if the recipients are individual consumers. A threshold well below the vast majority of orders placed on Chinese sites. So much so that this year, more than a billion packages have entered the United States via this special regime: a record almost twice that of 2019, according to estimates from American customs.

To the point that across the Atlantic, angry parliamentarians tabled two bills last June - in the House of Representatives and the Senate - to put an end to what they consider to be a legal vacuum. Criticized vehemently, the measure is accused of allowing Chinese companies to flood the American market with their potentially counterfeit, dangerous or illegal products. Criticisms taken up with fervor by American industrialists. “The de minimis rule is the largest black market in the world, with, surprisingly, the blessing of the American government,” criticized Kim Glas in the columns of the Wall Street Journal. For the one who heads the United States-China Economic and Security Review Commission and the National Textile Business Council, “it has gotten totally out of control.”

If industrialists had also stepped up to the plate, others, such as the CEO of Seko Logistics, Brian Bourke, castigated this sudden outcry. For him, the legislative initiatives go “against the grain of American customs policy” in recent years, which sought more to relax trade restrictions. In 2016, MPs had in fact raised the customs tax exemption threshold from 200 to 800 dollars. Measure taken to reduce the workload of customs officers in the midst of the e-commerce boom. For Brian Bourke, legitimate concerns about counterfeit products, consumer health and safety concerns, and barriers to trade are not an adequate response.

However, in 2019, the Consumer Product Safety Commission reported all the difficulties it had in detecting dangerous imports. It was then already overwhelmed by the approximately 410.5 million packages imported in 2018. American customs counted 685.5 million in 2022. A brand new problem permitted by a law from 1930, which then exempted American tourists from taxes on their small purchases abroad.

Also read: TikTok, Shein, Temu... These Chinese apps that are sweeping the world

Alongside this explosion in the number of packages benefiting from the de minimis rule, the number of active monthly users of Chinese e-commerce platforms is skyrocketing. Between 2021 and the third quarter of 2023, Shein's sales doubled to 30.2 million, according to estimates from market research firm Sensor Tower. Unstoppable, that of Tenu has exceeded that of its competitor in a single year of activity. Results that both companies attribute to the quality of their supply chain, without any link with the rule of minimis.

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