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By Rachel Dobkin
Weekend Reporter
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The Biden administration announced on Friday that it was taking new action against Chinese online companies like Temu and Shein.
China-founded e-commerce platforms have been accused by the White House of abusing the "de minimis exemption." This exemption allows imports of an aggregate fair retail value of $800 or less to enter the U.S. duty- and tax-free.
According to the White House, the number of shipments entering the U.S. claiming the de minimis exemption has spiked from about 140 million annually to over 1 billion annually.
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"This exponential increase in de minimis shipments makes it more challenging to enforce U.S. trade laws, health and safety requirements, intellectual property rights, consumer protection rules, and to block illicit synthetic drugs such as fentanyl and synthetic drug raw materials and machinery from entering the country," a White House press release sent out on Friday read.
The press release announced that the Biden administration intended to issue a "Notice of Proposed Rulemaking" that would exclude all imports covered by tariffs imported under Sections 201 or 301 of the Trade Act of 1974 or Section 232 of the Trade Expansion Act of 1962 from the de minimis exemption, among taking other actions to combat the trade loophole.
Section 301 tariffs cover about 40 percent of U.S. imports, including 70 percent of textile and apparel imports from China, according to the White House.
A Temu spokesperson said in a statement to Newsweek early Saturday: "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."
The spokesperson added: "Temu's growth does not depend on the de minimis policy. We are reviewing the new rule proposals and remain committed to delivering value to consumers."
Shein said it complies with all import requirements, including for de minimis shipments, adding that it supports "responsible reform" of the de minimis exemption to create "a level, transparent playing field," where the same rules are applied "regardless of where a company is based or ships from."
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Chinese companies like Temu and Shein could take a blow from the new actions taken by the Biden administration as their popularity is driven by cheap prices, and now they might have to face additional scrutiny.
An April 2023 issue brief by the U.S.-China Economic and Security Review Commission stated that Chinese e-commerce platforms pose challenges, "including exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labor; and violations of intellectual property rights."
These Chinese online companies emerged out of what has become known as the "fast fashion" industry. Fast fashion began during the 1990s when retailers started selling cheap and poorly made clothes to keep up with weekly trends.
Before then, there were only two fashion seasons, spring/summer and fall/winter. Consumers would buy only a few quality-made items every year that would last them.
The de minimis exemption has only propelled the fast fashion industry, which critics say has led to worsening working conditions in overseas factories and has had a significant negative impact on the environment.
"The actions announced today by the Biden-Harris Administration will help the Department keep pace with global electronic commerce and improve our ability to protect communities from fentanyl and its precursor chemicals," Secretary of Homeland Security Alejandro N. Mayorkas said in a statement.
Mayorkas continued: "Our Administration remains ready and eager to work with Congress to pass badly-needed, long-overdue comprehensive de minimis reform legislation and ensure border officials have the resources and tools they need to track and target the millions of small-dollar shipments that enter our country every day."
This article includes reporting from The Associated Press.
Update 9/13/24 3:13 p.m. ET: This article has been updated with additional information.
Update 9/14/24 10:19 a.m. ET: This article has been updated with comment from Temu and Shein.
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