Shein’s fast fashions may not be so fast anymore under new customs restrictions from the Trump administration – and that could be an even bigger problem for the Chinese company than tariffs, The Post has learned.
President Trump is expected to slap Beijing with a 10% tariff, which kicks in Tuesday, but his executive orders issued Saturday also closed a trade loophole used by Shein and fellow Chinese e-commerce giant Temu to expedite shipments.
The so-called de minimis exemption allows packages worth less than $800 to be shipped into the US duty free. Now, the heavily discounted apparel and other low-cost items will need to go through US customs, and the massive intake could more than double the shipping times, experts told The Post.
“At the end of the day there will be delays and extra cost and the $2 dress could wind up being $4 and take an extra week to get to you,” said James Thompson, e-commerce expert at Equity Value Advisors.
“If that creates too much friction, consumers may want to buy something from Amazon for the easier, faster shipment time.”
Shares in Temu parent PDD Holdings plunged 5% on Monday.
Without the exemption, customs officials will need to randomly search an additional 1 million packages per day – the amount of items that Shein and Temu send to the US daily, according to The Wall Street Journal.
The Chinese sellers also will need to fill out tedious forms declaring the item they are sending, a dress for example, and the material it’s made from, since cotton and silk have different tax rates — causing a massive a backlog.
“This is an economic earthquake and US Amazon sellers are rejoicing,” Jon Elder, an e-commerce consultant, wrote on LinkedIn.
The Chinese fast-fashion companies have taken advantage of the circa-1930 international trade rule, initially passed so that US travelers could bring home souvenirs hassle-free, to aggressively ramp up their exports of low-value items. Their exports have soared to $66 billion in 2023, from $5.3 billion in 2018, according to a report released last week by the Congressional Research Service.
The customs red-tape could tack on an extra five to 10 days to Shein and Temu packages — which typically take about a week to arrive at US customers’ doors.
“They won’t be as responsive as they once were (to trends),” Alex King, founder of personal finance site Generation Money and a former international trade VP at Barclays, told The Post.
The prices may also be bumped up because of the 10% tariff – but even if the companies pass the entire cost along to the consumer, it will only be a small hike. For example, a $10 dress will jump to $11.
Other countries around the world have similar de minimis exceptions, but with much smaller limits. The European Union abides by a 150 euro limit, and the UK caps their exemption at 135 pounds.
The US used to have a $200 limit, but it was raised to $800 in 2016 under former President Obama after customs officials complained that they were struggling to examine all the incoming packages.
The end of de minimis could cost American consumers between $11 billion and $13 billion — hitting low-income consumers the hardest, since they rely heavily on Temu and Shein for ultra low-cost goods, according to The New York Times.
Shein and Temu have been preparing for the elimination of this loophole by opening distribution centers in the US and manufacturing facilities in Mexico in recent years, according to James Mercer, head of global research at Coresight.
“Shein and Temu have adapted their model already so that they are not fully exposed to tariffs and the elimination of the de minimis loophole, but we don’t know to what extent,” Mercer said.
In November, Temu opened its marketplace to US sellers, in part, to offer larger household items like appliances that would be costly to ship from overseas, while Shein began opening distribution centers in the US in 2022.
“I would think Temu and Shein were aware this may happen so they have started to implement plans B and C in case this executive order went into place. If they did, I couldn’t see an immediate major disruption in the supply chain of products or increase in prices,” Hitha Herzog, chief retail analyst at H Squared Research and part-time faculty at Parsons School of Design told The Post.
“However, if this change was not implemented, the ripple effect could happen as soon as a month or two.”
