Image source: Visual China

BEIJING，June 25 （TMTPost） -- The House Select Committee on the Chinese Communist Party issued a report on Thursday, alleging that Chinese online retail giants Temu and SHEIN exploited the de minimis provision to import goods into the U.S. without paying import duties.

A total of 685 million goods items entered the U.S. under the de minimis provision in 2022, according to the report. And it found that the two companies are likely responsible for over 30% of packages shipped daily to the U.S. under the de minimis provision, accounting to some 600,000 per day or 210 million per year without paying any import duties. The report further stated that more than 60% of de minimis imports into the U.S. in 2021 came from China, with Temu and SHEIN likely to account for nearly half of that total. Temu is the cross-border ecommerce platform of Pingduoduo and SHEIN is a Chinese-owned online fast fashion platform.

Originally from the U.S. Tariff Act of 1930, the "de minimis provision" was designed to waive import tariffs if the fair retail value of the shipment does not exceed a certain amount of money. In March 2016, the threshold was raised from $200 to $800 with the passage of the Trade Facilitation and Trade Promotion Act (TFTEA), an attempt to reduce the government's burden on the processing of imported goods.

The report noted, the number of de minimis imports entering the country soared from 220 million packages in 2016 to 720 million in 2021.

On May 2, the committee sent letters to Nike, Adidas, Shein and Temu, asking for details of their compliance with the National Labor Relations Act (NLRA) and raised questions about Temu and Shein's exploitation of the de minimis provision.

Founded in 2009, SHEIN has replaced ZARA and H&M in the U.S. market as the benchmark of the new-generation fast-fashion brands, with products sourced entirely from the Chinese supply chain. Temu, a cross-border e-commerce platform owned by PDD Holdings, launched in North America in September 2022. Temu’s  valuation is estimated at $100 billion, while SHEIN was recently valued at $64 billion, according to the report.

According to the report, almost all of the SHEIN and Temu shipments are under the "de minimis provision", which means no importing duties and customs inspections. The report stated that the large number of small packages and the lack of actionable data restrain the U.S. Customs and Border Protection (CBP) from identifying and intercepting high-risk shipments that may contain narcotics, counterfeit goods and other prohibited goods that may pose a threat to public safety.

This is not the first time that Chinese e-commerce platforms such as Temu and SHEIN have been blamed in North America due to tariffs. On January 18, 2022, U.S. House Representative Earl Blumenauer proposed the Import Security and Fairness Act (ISFA) to prevent goods from non-market economy countries and countries on the U.S. Priority Watch List, including China, from entering the U.S. under the de minimis provision.

Chen Jiao, director of solutions at STAR & SEA Group, which is mainly engaged in cross-border compliance consulting, said the report will force Temu to accelerate its deployment of overseas warehouses, but it also means a rise in costs.

SHEIN and Temu have not responded to the report and its allegations, while the committee’s investigation is still ongoing.