With only a few months left in his presidential term, U.S. President Joe Biden wants to cement his legacy by implementing and advancing his pro-consumer protection agenda.
Biden's presidential tenure has prioritized protecting American shoppers by proposing and implementing consumer-benefiting rules and regulations.
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However, Chinese online retail giants like Shein and Temu seem to have found a loophole to get away with avoiding a U.S. pro-consumer trade rule.
A battle of prominent two world economies
Due to the U.S. and China being two of the world's largest economies, The U.S. has tried to diversify its supply chain by minimizing its reliance on Chinese products.
However, there is no rule that prohibits U.S. citizens from personally purchasing goods made in China.
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According to a White House statement, the number of shipments from overseas to the U.S. that avoided the trade tariffs increased from 140 million to over a billion items annually.
The de minimis rule allows packages shipped from foreign countries to enter the U.S. without paying import duties and processing fees as long as the package doesn't exceed $800 per day for each recipient.
This rule is meant to protect American consumers, workers, and businesses by targeting and blocking foreign shipments that contain unfairly traded or unsafe products that violate U.S. laws.
Shein and Temu find a loophole
For years, Shein and Temu (PDD) have avoided paying extra tariffs to the U.S. on their Chinese-originated shipments by formulating a business model that facilitates this execution.
Since the e-commerce giants' products are sold at very low prices, the shipments don't usually exceed the $800 limit per customer, which allows them to avoid extra import costs and, in turn, increases their profits.
Previous investigation raises suspicions against Temu and Shein
In June 2023, the Select Committee released findings from a Forced Labor Investigation against Shein and Temu.
According to the investigation, 685 million shipments entered the U.S. under de minimis in 2022, with more than 30% of all packages coming from Shein and Temu alone.
In 2022, at least 62% of all de minimis shipments entering the U.S. originated from China, of which approximately half are suspected to come from Shein and Temu.
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The investigation discovered that Shein and Temu exploited the de minimis rule by evading customs enforcement because they made sure their shipments were under $800.
According to the findings, Temu has no system in its business model to ensure its compliance with the Uyghur Forced Labor Protection Act (UFLPA), which prohibits the entry of forced labor goods from China into the U.S.
"All companies operating in the United States have an obligation to clean up their supply chain and ensure that they are not contributing to the CCP’s genocide of the Uyghur people by facilitating the sale of goods made with forced labor," said Chairman Mike Gallagher and Ranking Member Raja Krishnamoorthi from the Select Committee on the Chinese Communist Party.
Biden's proposal to make Shein and Temu's mass retail empire crumble
On Friday, the Biden administration announced a new rule proposition prohibiting the shipment of any product from China that applies to the U.S. trade tariff from getting to American customers without paying duty fees.
Additionally, it proposes excluding tariffs for products covered by Sections 201, 232, and 301.
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