White House minimum vulnerability rule targets Shein, Teem | Real Time Headlines

The Biden administration announced new measures on Friday to curb what it called “overuse and abuse” of a long-standing trade law that allows low-value goods to enter the United States without paying import duties and processing fees.

Those steps include a new rule proposal that would ban shipments overseas of products subject to U.S. and Chinese tariffs from receiving special customs exemptions.

The trade provision, known as a “minimum loophole,” allows packages worth less than $800 to enter the United States with relatively little scrutiny. Micro-volume shipments have surged over the past decade, from about 140 million units to more than 1 billion units, according to White House estimates.

“The dramatic increase in micro-volume shipments makes it increasingly difficult to target and prevent illegal or unsafe shipments from entering the United States,” Daleep Singh, deputy national security adviser for international economics, told reporters on a conference call Thursday. .

Officials say the explosion in micro-volume shipments has been driven largely by a handful of online retail giants with ties to China, such as Shein and Temu. Use exemptions Shipping millions of dollars’ worth of clothing and cheap home goods directly from factories in China to customers in the United States.

The value of each individual package is typically well under $800 and therefore qualifies for the de minimis exemption.

But new eligibility restrictions on products subject to tariffs under Sections 301, 201 and 232, as proposed on Friday, could upend that business model.

“With approximately 70% of Chinese textile and apparel imports subject to Section 301 tariffs, this move will significantly reduce the number of goods entering through de minimis exemptions,” Daleep said.

In addition to the proposed tariff rules, the White House reportedly announced plans for a new rule that would “require specific additional data on de minimis shipments, including a 10-digit tariff classification number and who is applying for a de minimis exemption.”

The Biden administration has also called on Congress to pass legislation that would overhaul the original minimum rules.

An obscure tariff law loophole passed by Congress in 1930 — and in recent years amid concerns among lawmakers that the rule allowed foreign retailers Evade duties and scrutiny Their package is at the border.

Last year, the House Select Committee on the Communist Party of China issued a report Shein and Temu were investigated and determined that the two companies “may be responsible for more than 30% of all packages shipped to the United States under de minimis terms each day and may account for nearly half of all de minimis shipments from China to the United States.”

Traditional retailers typically import containers of merchandise and send them to warehouses in the United States for distribution. But Shein and Temu typically ship products directly to U.S. consumers through their network of Chinese suppliers.

By exploiting minimal loopholes to avoid tariffs, Chinese retail giants may have avoided tens of millions of dollars in import duties.

According to the House Select Committee on Chinese Communist Party, Gap paid $700 million in import tariffs in 2022 alone, H&M paid $205 million and David’s Bridal paid $19.5 million.

However, Shain and Tem No import duties paid at all.

Lawmakers believe that by avoiding the high import tariffs the United States imposes on most Chinese textiles, clothing and footwear, Shein and Temu can offer extremely low prices and outperform competitors who pay import fees.

They also argued that the exemption allowed Shein and Temu to import products made with slave labor without detection because the packaging was not subject to the same level of scrutiny and testing.

Shein argued that its inventory-less supply chain and overall business model allowed it to offer such low prices and that its pricing structure was not tied to the de minimis exemption.

Last summer, Shein executive chairman Donald Tang Call for minimal reforms It said the rules “need to be overhauled to create a level playing field for all retailers.” He did not outline what those reforms would look like, and the company’s current position on the minimum is unclear.

The company acknowledged that it had found cotton from the restricted area in its supply chain and said it was taking action. Working on fix problem.