US might end zero tariffs on low-price goods

United States President Joe Biden has proposed removing a trade exemption that allows goods made in China and shipped by popular companies such as Shein and Temu to bypass import duties if they are worth less than $800.

A US trade association said such changes would also affect US companies and consumers.

The "de minimis" exemption — a legal principle that allows matters of a small scale to be exempted from a requirement — permits such packages to be flown into the US without levies or processing fees.

The Biden administration wants the packages to no longer be exempted from tariffs if they fall under Sections 201 or 301 of the Trade Act of 1974, or Section 232 of the Trade Expansion Act of 1962, according to a statement released by the White House on Friday.

The changes sought by the administration would not go into effect right away, The New York Times reported, adding that the proposal will be subject to industry comment before being finalized.

More than 1 billion de minimis packages from across the globe came through US customs in 2023, up from 134 million in 2015, according to Customs and Border Protection data.

China is the biggest source of retail packages entering the US daily, with around 3 million categorized as de minimis, CBP data shows.

Z. John Zhang, a professor of marketing at the Wharton School of the University of Pennsylvania, told China Daily that Chinese fast-fashion brands are so successful because they offer international consumers several perks.

"Prices are lower, helped to a significant extent by zero tariffs that the US is levying on small parcels of less than $800 in value," Zhang said.

A Temu spokesperson told Ars Technica, a technology news website: "Since Temu's launch in September 2022, our mission has been to offer consumers a wider selection of quality products at affordable prices. We achieve this through an efficient business model that cuts out unnecessary middlemen, allowing us to pass savings directly to our customers. Temu's growth does not depend on the de minimis policy."

A Shein spokesperson told Ars Technica that the company "makes import compliance a top priority, including the reporting requirements under US law with respect to de minimis entries".

The National Foreign Trade Council, a trade association based in Washington, said the proposed changes to the rule would affect not only Chinese fast-fashion brands, but also US companies and consumers who buy the low-cost goods.

Earlier this year, US lawmakers called on the federal government to amend or shut down the de minimis exemption. A group of 40 lawmakers asked Homeland Security Secretary Alejandro Mayorkas in a letter in February to explore amending the use of the rule.

In a letter dated March 6, the National Foreign Trade Council wrote to US National Security Advisor Jake Sullivan and Lael Brainard, director of the US National Economic Council, on behalf of several US trade organizations.

The trade body urged the government to protect de minimis treatment, which it described as an "essential component of America's economic health and supply chain efficiency".

"De minimis has benefited thousands of American small businesses across all sectors," the letter said.

"It has also made purchasing goods online more affordable and accessible for consumers at a time of inflation and supply chain challenges," it said.

The National Foreign Trade Council estimates that changes to the de minimis rule would more than double the price of a $50 package based on a processing fee of $31.67 and a brokerage fee of $20 after it arrives in the US.