A loophole used by Shein/Temu to ship packages to US tax-free (2024)
47 comments
·February 2, 2025loeg
adrr
De Minimus rules are the reason why you don’t have declare that fridge magnet and bag of chips you bought from your trip to Beijing. Going to make air travel a mess flying into the US setting de minimus to $0 and travelers have to declare everything.
arijun
Are these laws so inflexible they can’t differentiate between a traveler and a shipping container?
crooked-v
What if the traveler is a celebrity on a chartered jet bringing home a shipping container's worth of souvenirs? Where do you draw the line?
votepaunchy
Or a traveler and a company doing $30 billion in de minimus import sales annually.
daft_pink
I agree with your statement except that their entire business model revolves around exploiting a de minimus rule such that it isn’t beneficial to the USA. Their should be a limitation against a shipper exceeding a certain threshhold value of shipments into the USA before they need to start paying tarriffs.
I think you could adjust the rule so that it covered this situation, but didn’t cover shippers who specifically created fast shipping to avoid tarriffs and keep the processing outside the country.
That being said, I benefited from this when I ordered my Prusa 3d printer and I believe it was purposely priced exactly under the threshhold so that I would avoid the tarriff.
bentpins
I live in New Zealand - until 2019 things used to work this way for us too. A law was introduced to require overseas sellers selling more than $60,000 NZD/year into New Zealand to collect pay our Goods and Services Tax. Now Amazon/Temu/AliExpress others all collect 15% NZ GST at the checkout. It's pretty seamless as a buyer, just that GST is not usually shown until checkout unlike domestic sites. https://www.ird.govt.nz/gst/gst-for-overseas-businesses/gst-...
walterbell
U.S. de minimis exception ends on Tuesday 4 February 2025 for all Chinese imports. New limit of 0$ for all goods.
What will be the total tariff percentage on custom PCBs from China?
15155
> U.S. de minimis exception ends on Tuesday 4 February 2025 for all Chinese imports. New limit of 0$ for all goods.
The de minimis exemption ends on Tuesday, but only if the goods are already in a bonded warehouse or customs house pending clearance.
Goods needed to be on their "final mode of transportation to the US" by 2025-02-01 at 12:00am Eastern Time to be exempt.
The total Section 301 tariff on PCBs is now 35%.
ck2
De minimis also is $0 now for Canada and Mexico
Car parts often travel back and forth across the borders before full assembly.
Now they have tariffs each time they cross for each part.
No-one is going to be able to afford a new car soon.
2OEH8eoCRo0
About damn time
Animats
That ended yesterday. Trump's new tariffs apply all the way down to $0.
Not clear what happens now that Customs and Border Protection has to look at all those little boxes.
This isn't unexpected, though. There was a notice of proposed rule making back in September 2024, and it was probably going to happen this year, anyway.[1]
This is going to complicate the "dropshipping" business. The dropshipper is usually the importer, and they now have to pay customs duties. But they're not the seller of record (the one Amazon says is the seller), who collects from the customer. Amazon likes to consider the customer to be the importer, but that may not fly. Amazon sellers are going to have to deal with the wonderful world of customs brokers, bonded warehouses, and e-filing customs paper work.
Dropshippers who order in bulk and then ship out individual packages now either have to pay duties when they get the bulk shipment, or use a bonded warehouse (inspected by CBP) to store stuff on which duty has not yet been paid. DHL has a bonded warehouse service.
[1] https://www.jdsupra.com/legalnews/cbp-proposes-to-modify-the...
ChrisArchitect
(2024)
Year old story.
More recent development discussion:
US targets trade loophole used by ecommerce groups Temu and Shein
Hamuko
A "loophole" that is very cut-and-dried piece of law. If you want companies to pay tax on products, don't set the minimum value threshold to $800. We used to have it at about 45€, then at 22€ and now at 0€. If I need to buy a 5€ adapter from Aliexpress, I pay VAT on it.
Muromec
A lot of loopholes are like that. They are clearly legal things that you can do added there for a reason a certain expectation of it to not be abused for different people purposes. They are of course used for different purposes once the landscape changes to allow so.
My favorite legal loophole was in the Ukrainian citizenship law: to naturalize, one has to renounce their previous citizenship(s), but sometimes it's not practically possible to do. When the law was passed, one of legitimate reasons to not follow through with renouncing previous citizenships was "it costs more than X percent of a minimal monthly salary". At some point 30 years later it turns out that, despite X being changed a few times, most the countries that people have to renouncing citizenships of, are falling under this "too expensive" loophole, since minimal monthly salary is a bit of an arbitrary number that a lot of laws refer to and it made sense to have it suppressed. So after kicking the can down the road a few times, the loophole was removed.
em-bee
interestingly germany came to the opposite conclusion. many people came from countries that did not allow the renouncement of their citizenship at all. i don't know how big of a factor it was but a year ago the law changed and now germany allows dual citizenship.
xnzakg
That works great until you end up paying more in processing fees than the value of the item. Or when you pre-pay the tax online when buying an item, the shipper doesn't mark the package correctly and the local post service tells you you have to pay the tax a second time and ask the seller for a refund of the prepaid tax. Of course that involves a long time spent chatting with a CS rep who doesn't seem to understand the problem, and they refuse to refund you for the extra processing fee. (Looking at AliExpress here. Still, don't have much of a choice.) Or a friend decides to be nice and send you a gift for Christmas but you end up having to pay more in taxes and tax processing fees than the actual value of the gift. Oh and did I mention the tax here in Norway is 25% of the item value _plus_ the shipping cost?
loeg
Companies don't pay these tariffs -- consumers do.
whereismyacc
They literally pay the tax but yes often the incidence ends up on the consumers.
loeg
No, these are paid by consumers at import time. It's not just a pass-through cost; consumers pay CBP. (I've imported many purchases, both below and above de minimis thresholds. Even the negotiation of which HTS schedule applies to specific items is between CBP and the individual -- the selling company isn't involved at all.)
tyre
Not sure why you're downvoted. It's explicitly a part of American law. It wasn't an accident. It might not be in the US's best interest now (not saying one way or the other) but it's definitely by design! And not in a bad way either; this lowers costs for US consumers.
_delirium
Yes, this has historically been a nice aspect of living in the U.S. compared to Europe, for those of us who like obscure stuff. Want to order some book only available from an eBay seller in another country? If you're shipping to the U.S., it's easy. If you're shipping to Germany, it's going to get held up in a customs warehouse somewhere. Seems we're going to start getting more of the European experience now.
troad
I hate this cycle.
1) Media - you won't believe this legal loophole!
2) Politicians - what loophole? that's the law working as intended.
3) Media - watch our corrupt politicians defend the evil loophole that costs us millions!
4) Politicians - ok, we'll change it then. that'll get us positive coverage, right?
5) Law - gets worse
null
qwe----3
They pay sales tax
4ndrewl
Same in the UK.
mschuster91
Yeah, they use the same scam in Europe as well. There was a documentary following some customs officials a few months back, apparently they even use "smurfing" - they split large orders into multiple parcels with nominated "lower" values [1]... but of course sometimes the customs officials note "hey, I saw that recipient just a few packages ago".
It's high time that we put the hammer down on Temu, Shein et al., and that hard. China and its companies routinely abuse relaxed rules meant for "developing" countries such as reduced, subsidised shipping or the mentioned tax simplifications - that status absolutely has to end rather sooner than later.
And if they do not want to do that for whatever (corrupt?) reasons, at the very least mandate live feeds for all incoming parcels to customs.
A_D_E_P_T
> It's high time that we put the hammer down on Temu, Shein et al., and that hard.
Why? Their business model is perfectly legal, and in fact, as the article makes clear, it's not even a "loophole" -- what they're taking advantage of is an explicit provision of law. On the other side of the equation, US consumers benefit from lower prices, and often superior quality, relative to what they'd otherwise get on Amazon and Wal-Mart.
Besides, Amazon and Wal-Mart are often (in some retail categories even usually) middlemen for Chinese manufacturers. Shein, Temu, et al. are demonstrably superior middlemen.
So what's the harm?
lumost
Were making it cheaper to import product from across the globe than to manufacture and ship across town.
Its in most countries interest to build things locally if they can. A policy which penalizes a local business in favor of a foreign one is pathological.
stevenwoo
We already ship food stuffs from the USA to China where it is processed and it gets sent back to the USA, because the cost to do this shipping back and forth and labor is so low it undercuts any North American processor. This is what free trade and low cost of bunker fuel, zero consequences for heavy pollution for container ships have wrought.
One example:
https://www.seattletimes.com/business/nw-salmon-sent-to-chin...
Muromec
I often see the same or similar item on aliexpress for about 2-3 eurobucks, while the local shop will happily sell it to me for 20. It isn't even 2 bucks for chinese product versus the one manufactured locally, it's literally the same thing.
xnzakg
I agree with the "build things locally" thing, but that only works for products that are popular enough in an area/country to justify production, and, through economy of scale, allow for a low enough price to be competitive.
Meanwhile those who need some niche items, for example people with a niche hobby, end up having to pay more for the same things, because they simply have no other choice. Or if they're lucky they can pay several times the price to a local (usually online) store, getting the same product, probably from the exact same factory line, just for several times the price, because now there's an extra middleman.
oa335
> Its in most countries interest to build things locally if they can.
Why is it in a country's interest to build things "locally"? Is that true in all cases?
datavirtue
Good luck putting the genie back in the bottle.
2OEH8eoCRo0
But it raises the price for consumers!
But it also employs nobody. If everyone's jobless what's the point? Is the end goal really manufacturing everything offshore and employing nobody? How the heck is that sustainable? What would such an economy even look like?
cameldrv
The nature of parcel shipping and ecommerce has changed. Years ago it wasn’t economically practical to order things directly from China and ship them to the U.S. Instead you’d fill up a container and send it to a U.S. distributor, and pay the tariff. The de mininimis exemption was to avoid hassle and overhead for small value transactions.
Currently though temu and schein have a big advantage over Amazon and U.S. retailers because they completely avoid tariffs by shipping direct from China.
briandear
> superior quality
citation needed.
Also, Shein is notorious for their sweatshops, forced labor and all sorts of highly unethical business practices. A terrible company that should be destroyed, especially since part of their business model is targeting pre-teen girls with highly manipulative and exploitive content.
mschuster91
> So what's the harm?
Imagine you're making a product that is produced in America (or you import it wholesale from China) and conforms to American standards for product safety - fire resistance, toxic chemicals, electrical safety, IT security, EM emissions.
Now, some Chinese cloners come, clone your product but shart on all the regulations, cut corners everywhere and sell it for half the price or less on Temu. You're out of business, your employees are out of jobs, the US taxman is out of all of your tax revenue, and to top it off people complain about "your" product being faulty/incompliant/dangerous because they got shipped illegitimate clones. In the worst case people actually die in their sleep because the shoddy li-ion battery cell erupts in flames.
Everyone suffers from this form of unfair competition.
> Besides, Amazon and Wal-Mart are often (in some retail categories even usually) middlemen for Chinese manufacturers.
Indeed, but at least Wal-Mart makes rigorous QA for everything they sell in a store (they're known to be especially cut-throat). And Amazon at least gives you your money back no questions asked.
krupan
This whole scenario assumes that the majority of people are just plain dumb, and if that's the case then we are screwed as a society no matter what regulations and tariffs you put in place
toss1
The harm is to every other vendor who actually pays their taxes, and every resident of the country who now gets lower services for the taxes they pay, because those scammers are cheating at scale.
mindslight
> So what's the harm?
Bezos is looking at the tariff increases and wondering what the fuck he just bought. Welcome to the party, pal. There are no free returns on this one.
datavirtue
Not to mention what happens when the people that have a clue pull back spending to stack cash while a multiprong trade war erupts. "A little pain?"
It isn't a loophole. It's by design. You can argue the limit should be lower, but it's not like 2016's $200 threshold would break Temu either.