A loophole used by Shein/Temu to ship packages to US tax-free (2024)
111 comments
·February 2, 2025bentpins
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-...
kiratp
> just that GST is not usually shown until checkout unlike domestic sites.
This still puts domestic sites at a significant disadvantage.
danpalmer
This is distinct from import taxes. I used to work for a retailer that sold to the US. We collected sales tax (which is not GST/VAT, semantically different, and you have to pay a US company to calculate it for you), but still had to put a limit of $800 per package in order to not get hit by import duties.
I believe Temu/Shein/etc collect US sales tax based on the destination address, but that is insufficient.
toast0
> you have to pay a US company to calculate it for you
You don't have to pay a company to calculate it for you, but it is difficult to calculate. I think all the states with sales tax assert that the correct sales tax for a delivered item is based on the location of delivery, and determining the tax jurisdictions from the location of delivery is complex. Using the city field of the address is often wrong, because that's really just the name of the post office that serves the delivery location, not an indiciation of what city (if any) the delivery location is in.
Once you've determined the jurisdictions, you also need to confirm the rates for the shipped items and collect and remit the taxes.
It's a lot harder than schemes where there's a single rate for a country or at most one rate per top level subdivision of a country, where delivery addresses almost always have the subdivision clearly marked.
danpalmer
In the general case, sales tax changes at the building level. While you are not legally required to pay a company to calculate it, US sales tax is prohibitively complex to the point that paying a company to calculate it is practically required.
gsky
Seamlessly putting local businesses out of business
loeg
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.
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?
votepaunchy
Or a traveler and a company doing $30 billion in de minimus import sales annually.
danpalmer
But Temu/etc aren't sending a shipping container. They're sending a tiny package addressed to an individual directly. They look a lot more like family sending a souvenir from their holiday than large scale commercial freight.
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?
maxerickson
Doing the work on a large amount of miscellaneous parcels is going to have pretty much the same problem.
sundvor
Bit off topic, but if you ever travel into Australia never don't declare that package of chips.
It could easily turn into your most expensive bag ever.
All food items simply _must_ be declared. There's two lines, so join the "something to declare" one. You'll be waved through after a quick inspection, or asked to surrender any offending items. Super easy. The declare line is often quicker as well.
dylan604
I was witness to someone doing this into New Zealand. It clearly states all food stuff, but someone failed to declare their half of a Subway sandwich. This was a sandwich bought in the departing airport in the US, and then sat at room temp for the entire flight to NZ. Like, why do you still have it on you, and not have trashed it already? Nice little fine for essentially trash because someone wasn’t paying attention.
seanmcdirmid
The USA has this also. I once declared chocolate cake that my girlfriend (now wife) baked for me on a trip to the USA from China. I didn’t even get sent off to secondary, I just told them what I had when I handed in the form and they waved me through.
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.
maxerickson
It's the importer that pays the tariff.
You could make being subject to the tariff depend on the shipper volume of course.
kelnos
No, the reason for that has nothing to do with de minimis, and reforming de minimis would not change this particular situation at all.
dylan604
I’ve experienced part of this as someone that once sold imported music back in the late 90s. A competitor opened up in Hong Kong that sold at retail prices lower than our wholesale prices (we used legit importers who paid their duties and priced accordingly). I placed an order to see how it would turn out, and when I received the package, there was a note inside that stated the duties had not been paid on the order and that I was responsible for them. If customs were to inspect the package, they would hold it and release it once the duties were collected. These packages were too small and infrequent for customs to ever take notice, so the buyers were essentially getting items tax free because of course nobody self reported and paid these taxes.
This was pretty much the straw breaking the camel’s back, and our little import business shut down shortly after that as orders dropped like a rock
fennecbutt
They don't include a note now they just under declare the value of contents of the package.
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.
dylan604
Great, so used car prices are going to increase to new car prices, again
enfiniraveceddy
Do automakers use foreign trade zones? My (perhaps incorrect) understanding is that the US doesn't charge duties on goods imported into FTZs that are later re-exported. To be clear, I agree that these tariffs will disrupt the transport of car parts across the border and raise car prices...
bhaney
So you're saying that in order to produce cars at a price point that will actually sell, manufacturers are going to be forced to start doing more of their production domestically?
Oh no!
2OEH8eoCRo0
About damn time
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.
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?
lupire
Lots of things cost less themselves than theirn packaging transaction costs. That's why we have economics of scale.
consp
That is mainly because Norway wants to be special. I have non of these issues but then again my country is part of the one stop shop scheme due to being in the EU.
fennecbutt
I already do tho lmao, anything that comes from the US or is shipped with UPS even outside the US is just ridiculous.
6£ ultra pro card deck box from their European website...they try to force people to use UPS shipping for that at 90£ shipping, Belgium warehouse to UK. Ended up not buying because that's just plain ridiculous.
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.
Dylan16807
> 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.
In this case, the threshold has been updated repeatedly while the use was the same as today. It's not a loophole.
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.
gambiting
Was it? It was a big(in certain circles) discussion point around Brexit, because Germany does allow dual citizenship but only for citizens of other EU countries. Since UK was about to stop being an EU country, there was a question whether dual British-German citizens would have to renounce one of their citizenships. I'm glad they changed it then.
Muromec
yes, but for that there is (I guess) the standard principle -- it's outside of the control of the person being naturalized, so they have a free pass as long as they pinky-promise to not use the other passport for convenience. Same goes for refugees -- it doesn't make sense to ask a persecuted person to fill all the necessary paperwork with the place that persecuted them. That is standard, but Ukraine also had the procedure cost in that list of exception for political reasons.
Nowdays, after the loophole is repealed, the muchhonoured-clearexcelency-mister-chief-of-the-military pushes for some version of dual citizenship where citizens of nice countries can sign a pledge instead of allegiance instead.
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.
consp
We had that but online retailers can opt to join a one stop shop scheme and eBay does this via its global shipping program. Which eliminated the vat customs problems but people of course complained since now they never get lucky anymore by dodging taxes
immibis
The intention was presumably for people sending one-off things or bringing things with them. The loophole is companies shipping 1000 small packages under the limit instead of one big package over the limit.
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.)
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...
Uvix
> Dropshippers who order in bulk and then ship out individual packages
If they're doing that, they're no longer a dropshipper, just a bog-standard retailer.
donavanm
> Not clear what happens now that Customs and Border Protection has to look at all those little boxes
Push compliance on to the logistics providers, is my guess. Australia removed the low value VAT/GST exemption a few years ago. Anything parcel shaped coming in needs an appropriate customs form, declared values, and VAT remitted. If the overseas seller/sender hasnt already paid VAT then DHL/auspost/etc will hold it at the port until the recipient completes and remits GST. End user never deals with customs directly, its all handled by the importer before going to last mile delivery.
Same experience sending/receiving in to the nordic countries. Though in that case nordpost entirely sucks, so any real-but-abnormal import is a HUGE pain dealing with them.
fennecbutt
Then they just lie on the customs sheet lmao. They did it from China when I lived in NZ and they do it from China now I live in UK. None of the things I get from aliexpress etc are valuable enough to be insured so it's never been an issue per se, but it really is an issue.
I don't agree with these new thoughtless tariffs at all, but I do agree that some countries skirt the rules and certainly some more than others. Just ironic that country only got slammed with 10% when they're the worst offender.
ChrisArchitect
(2024)
Year old story.
More recent development discussion:
US targets trade loophole used by ecommerce groups Temu and Shein
dang
Thanks! Macroexpanded:
US targets trade loophole used by ecommerce groups Temu and Shein - https://news.ycombinator.com/item?id=41536137 - Sept 2024 (103 comments)
nmstoker
Presuming they also combine this with foreign post abuse too? ie where one country's post office takes the mail at a knock down discount and then rely on the deal that post offices take on foreign sourced mail delivery for free, meaning the sender gets a massive discount vs sending if it were charged at anything remotely sustainable.
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
fennecbutt
6) drooling voters - keep voting for the same old circle shape in square hole politicians
CPLX
The current system is wildly unfair and harmful to American manufacturers, and it's especially unfair to American brands that manufacture abroad but bring their goods to the U.S. in bulk.
HDThoreaun
Tariffs are wildly unfair to foreign manufacturers. Theres no reason we should be taxing everyone to help domestic manufacturers.
markhahn
let's be clear: deminimus being $800 is corrupt.
what gets me about this sort of thing is that we don't wind up getting to the bottom of it. the current deminimus violates the intent - we need to not just restore it to something reasonable, like $10, but also find out what in the process went wrong, find out whose palm was greased.
$10 sounds too low? consider that with today's IT, import processing fees should be much lower than that. the idea of deminimus is a fine one, just that these numbers don't make sense, and cause a lot of damage.
1vuio0pswjnm7
"The limit for eligible items has been raised many times over the years, most recently going up to $800 from $200 in 2016."
4x increase. What is the explanation
https://archive.ph/i8kC7