Can Biden’s De Minimis Actions Keep Shein, Temu at Bay? It’s Debatable
The Biden administration's Executive Order to address abuse of the de minimis tax exemption could steal these platforms' advantage.
WASHINGTON, DC – On Sept. 13, the Biden administration issued an Executive Order to address increased abuse of the de minimis exemption, particularly from Chinese e-commerce platforms, such as Shein and Temu, which sell significantly reduced home and fashion items directly to the consumer from the factory.
“Shein and Temu are the latest in a long line of disrupters coming into the gift and home business and trying to change all the rules,” said Warren Shoulberg of WarrensReport, a home industry expert and respected commentator. “Unlike some, however, they have been wildly successful, which has prompted government actions on the de minimis rules.”
The de minimis tax exemption is a law that allows shipments bound for American businesses and consumers valued under $800 (per person, per day) to enter the U.S. free of duty and taxes. The Executive Order proposes several rulemakings which would:
- Deny de minimis treatment to anything subject to Section 301 duties/tariffs with a focus on products imported from China
- Implement standard reporting, bond and document requirements for these shipments, just like any standard freight entry
- Require 10-digit HTS (Harmonized Tariff Schedule) reporting for manifest clearances – increases customs requirements for these shipments, establishing responsible supervision control procedures
- Direct CBP (Customs & Border Protection) to increase enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) with more audits, operations and foreign verifications.
“These changes are going to slow down Chinese e-commerce companies like [Shein and Temu], but it will not eliminate the underlying premise of why they have been so successful: American consumers love cheap stuff,” Shoulberg added. “And though they may say otherwise on surveys, they are far less concerned with issues like sustainability and global politics.”
Whether or not the Executive Order will put an end to these platforms’ wild success and unfair advantage, however, is still up for debate.
“Big players like Shein and Temu are already putting in place workarounds like U.S. distribution points and even moving some production out of China and into more politically correct nations in Latin America…and even some manufacturing in America itself,” Shoulberg continued. “So, they are not going away…at least not from these new federal requirements. But this is going to adjust the playing field for the marketplace. The best advice for vendors and retailers alike trying to compete with these sellers remains the same: Stay away from commodity merchandise and emphasize the quality and customer service aspects of your business.”
Home Industry Writes to Biden Administration
Executives in the wholesale home and gift business are in support of the order and speaking out in its favor.
Home Furnishings Assn. CEO Shannon Williams sent a letter to the Biden administration on behalf of the organization’s membership, expressing support for the orders. Williams shared the letter with sister publication Furniture Today and noted that the issue of Chinese e-commerce platforms’ usage of de minimis came up during the HFA’s DC Fly-In earlier this year and that Temu and Shein are among the more notable companies that are exploiting the exemption.
The body of the letter reads, as follows:
The North American Home Furnishings Assn. (HFA), representing 1,500+ home furnishings retailers with 13,000+ storefronts in the U.S., strongly supports your announcement on upcoming Executive Actions designed to crack down on continued abuse of the de minimis exemption.
HFA’s members provide U.S. consumers with essential home furnishings products and décor that helps make their house into a home. Furniture is a heavily regulated category, and ensuring a safe environment for consumers and their families remains a top priority for our members. Unfortunately, increased abuse of the de minimis exemption weakens product safety and reduces our members’ ability to compete fairly in the marketplace.
Recently, our industry has struggled due to several economic factors, but these proposed actions would help create a level playing field moving forward. Home furnishings retailers were one of the strongest economic segments during the COVID-19 pandemic. Our members and their employees work each day to help this industry contribute to local economies, and we hope these proposed actions will help address some of those challenges posed by foreign competitors.
We look forward to working with your Administration as it implements these proposals and will discuss legislative solutions with Congress.
Retail Editor Thomas Lester for Furniture Today contributed to this article.
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