Tech Report: Biden Administration proposes crack down on Shein and Temu e-commerce platforms

The Biden Administration has proposed new rules for fast-fashion and rapid Chinese e-commerce platforms like Shein and Temu, which would increase the cost of importing goods to consumers in the US.

The President’s announcement specifically highlights abuses of the ‘de minimis’ exemption, an import exemption that allows goods of a value below $800 to avoid duties and taxes while requiring a lower standard of information on the nature and origin of imported goods.

The Administration proposes to use its executive authority to exclude shipments containing products “covered by tariffs imposed 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.

The new rules would also impose higher information collection obligations and require the submission of Certificates of Compliance, an electronic method of ensuring goods meet necessary standards.

Changes affect up to 70% of Chinese textile imports

“The majority of shipments entering the United States claiming the de minimis exemption originate from several China-founded e-commerce platforms, putting American consumers at risk,” the Administration’s announcement read.

The Administration claims the importation of these cheap items undercuts American workers and businesses, while also “resulting in the importation of huge volumes of low-value products such as textiles and apparel into the US market duty-free”.

Section 301 tariffs currently cover about 40% of total US imports. Significantly, that includes 70% of textile and apparel imports from China.

Shein alone has more than 5,000 clothing factories, producing 500 to 2,000 new pieces of clothing daily.

The clothing bought at these sorts of fast fashion retailers is poorly designed, made from cheap materials that deteriorate rapidly after purchase.

In this era of fast fashion, of the 100 billion tonnes of garments created every year, 92 million tonnes end up as textile waste.

In America alone, the average consumer throws away about 37 kilograms of clothes every year, having worn each garment only seven to ten times each.

Chinese manufacturers appear unfazed

Imposing import duties on super-cheap textile products could have an outsized impact on their bottom line – the rock-bottom price is the core reason most consumers purchase these sort of products.

Neither manufacturer appears particularly concerned by the proposed changes, however.

“Since Temu's launch in September 2022, our mission has been to offer consumers a wider selection of quality products at affordable prices,” Temu's spokesperson told online publication Ars Technica.

“We achieve this through an efficient business model that cuts out unnecessary middlemen, allowing us to pass savings directly to our customers.

"Temu's growth does not depend on the de minimis policy.”

Earlier this year Shein began voluntarily adding additional information to its low-value shipments to the US in response to a US Customs and Border Protection (CBP) pilot program that sought to "identify and target high-risk shipments for inspection while expediting clearance of legitimate trade flows."

"Shein makes import compliance a top priority, including the reporting requirements under US law with respect to de minimis entries,” a spokesperson for the company said.

Other “decisive actions” under consideration

Nonetheless, House Democrats remain convinced the measures will have the desired impact.

A letter to the Biden Administration strongly supported the move, calling on the White House to "use executive authority to end the dangerous de minimis loophole and protect Americans from its growing danger."

"This would make it possible for Customs and other regulatory agencies enforcing product safety, labor rights, drug interdiction, and other policies to target shipments that need inspection and seize violating imports," the House Democrats' letter said.

"It would also close the door for bad actors now using the lack of inspection and information about de minimis shipments’ contents to flood the US with illicit, forced-labor, fake, and deadly goods—leveling the playing field for domestic manufacturers and workers.

"In a particularly stark example of the impact this loophole has on American manufacturers, over the past several months, 18 US textile plants closed due to the flood of imports coming in via the de minimis loophole and putting hundreds of American workers out of jobs," the letter warned.

Biden vowed to explore other decisive actions beyond the proposed import changes in the White House announcement, measures which will focus on “small package shipments”, targeting “illicit textile and apparel imports” with “joint trade special operations, increased customs audits and foreign verifications and the expansion of the Uyghur Forced Labor Prevention Act (UFLPA) Entity List.”

The UFLPA seeks to eliminate imports created with illegal cotton sourced through the forced labour of detained Uyghur people in China, a Muslim-majority minority that has been subject to alleged acts of genocide, state-imposed forced labour and crimes against humanity.