President Donald Trump’s executive order imposing tariffs on China included a provision that eliminates the controversial “de minimis” exemption for small import shipments.
This loophole is the foundation of China’s “fast fashion” micro-shipment industry, crucial to the business model of giants like Shein and Temu. It has also been criticized for helping Chinese companies ship fentanyl chemicals and evade U.S. laws like the Uyghur Forced Labor Prevention Act (UFLPA).
Trump’s orders were initially written to apply to China, Canada, and Mexico, but the latter two nations struck last-minute deals that delayed implementation for them. China was not so accommodating, so tariffs of ten percent on Chinese imports went into effect on Tuesday.
The “de minimis” exemption was established in 1938 to lift duties, tariffs, and certain customs procedures on very small shipments. The exemption threshold was originally very low, but in 2015 the Obama administration raised it from $200 to $800. Most other nations have a de minimis limit that is close to the pre-Obama threshold, or even lower.
The increase had a profound effect on imports over the next decade because the increase to $800 created enough space for entire industries to thrive. Shein, Temu, and other Chinese e-commerce companies realized they could funnel a huge amount of merchandise through the Obama-expanded loophole, provided they shipped directly to customers.
Online ordering married to de minimis shipments helped China dominate the American “fast fashion” industry, in which customers could order very small shipments of just a few cheaply made garments and receive delivery in just a day or two, with low or zero shipping charges. Soon, this model expanded beyond garments to include a wide range of products. Temu will sell you a tiny house with free shipping, for example.
Critics said Chinese companies ruthlessly exploited the de minimis exemption to evade laws like the UFLPA, which requires exporters to prove their products are not tainted by forced labor from oppressed groups like the Uyghurs. Investigators said companies like Shein violated the UFLPA by shipping garments made with cotton from occupied East Turkistan, the province where China forces Uyghur serfs to work in factories and fields.
Chinese companies chasing the de minimis gold mine have been criticized for other abusive practices, including the implementation of illegal working hours, pay schemes that are little better than slavery, corporate financial irregularities, and the selling of unsafe products – including items meant for babies and small children.
Suppliers in China have rioted over Shein and Temu’s penny-pinching business practices, which saddle manufacturers with “fines” for product returns that can completely wipe out their annual profits.
The name of the de minimis game is keeping production costs to minimal levels that no free country could possibly compete with. Shein and Temu raked in billions of dollars in profits without paying any customs duties, while competing companies like Gap pay hundreds of millions of dollars per year.
The de minimis exemption has also been cited as a key element in the fentanyl smuggling industry, allowing small shipments of precursor chemicals to glide past customs inspectors with minimal scrutiny.
In October, a coalition of families who lost loved ones to fentanyl unsuccessfully petitioned the Biden administration to impose sanctions on China that would include revoking the de minimis threshold. The families cited research that showed the chemicals needed to manufacture a gigantic amount of fentanyl have slipped into America through this loophole.
In July 2024, a group of Reuters reporters found they could easily order enough chemicals from China to make three million fentanyl pills with their smartphones, at a total cost of just over $3,000. Delivery took about six weeks. The deadly chemicals arrived in boxes mislabeled as shipments of electronics parts.
The Biden administration was characteristically torpid on the issue, making a few media-friendly noises about reform but taking no dramatic action. If Trump’s executive order on China holds up through the coming weeks of trade negotiations, he will finally have closed the door that fentanyl families begged Biden to shut.
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