The Article Tells The Story of:
- Trump’s tariffs order imposes on China, Canada, and Mexico, targeting the de minimis customs loophole.
- E-commerce giants like Shein and Temu face disruptions as brands scramble to adapt.
- Prices may rise as companies explore new supply chain strategies.
- Uncertainty looms as the future of de minimis remains unclear.
Trump’s Tariff Order: A Game-Changer for Global Trade Like Shein & Temu
President Trump’s recent executive order on tariffs has sent shockwaves through global markets. The order imposes new tariffs on goods from China, Canada, and Mexico, citing concerns over trade imbalances and illicit activities. However, one specific aspect of the order has caught the attention of e-commerce brands: the targeting of the de minimis customs loophole.
The de minimis provision, also known as Section 321, allows importers to avoid paying duties and taxes on shipments valued at less than $800. This loophole has been a lifeline for e-commerce disruptors like Shein and Temu, enabling them to ship goods directly to customers without extensive customs inspections. Critics argue that the provision has facilitated the import of illicit goods, including fentanyl, into the U.S.
Check Out Similar Article of How Shein and Temu Snuck Up on Amazon Published on May 28, 2024 SquaredTech
The De Minimis Loophole: What It Means for E-Commerce Giants
The executive order partially closes the de minimis loophole, leaving many brands scrambling for solutions. Companies that relied on this provision to import goods duty-free now face significant challenges. Maggie Barnett, CEO of third-party logistics provider LVK, noted that some direct-to-consumer brands are experiencing cash-flow issues. These brands may need to raise prices to offset new costs.
Portless, a startup that mimics Shein’s business model, has already begun adapting. The company plans to shift to Entry Type 11, a faster import method that requires upfront tax payments. CEO Izzy Rosenzweig stated that Portless will now cover import duties for its customers and issue monthly invoices to recoup costs.
Brands in Crisis: Rising Prices and Supply Chain Overhauls
The executive order has forced brands to rethink their supply chains. Some are considering partnerships with U.S.-based logistics companies or sourcing goods from countries unaffected by the tariffs. However, making such changes can be costly and time-consuming. Barnett advises brands to proceed cautiously, as further policy changes could disrupt their plans again.
The rise of Shein and Temu has brought the de minimis loophole into the spotlight. A 2023 report from the U.S. House Select Committee on the Chinese Communist Party revealed that these two companies likely account for over 30% of all de minimis shipments to the U.S. Nearly 50% of such shipments originate from China. Both Shein and Temu deny relying heavily on the loophole, but the data suggests otherwise.
What’s Next for Global Trade?
The future of the de minimis provision remains uncertain. While the executive order targets shipments from China, Canada, and Mexico, it leaves the door open for other countries to continue using the loophole. Additionally, Canadian Prime Minister Justin Trudeau has announced retaliatory tariffs on the U.S., further complicating trade relations.
As brands navigate these changes, one thing is clear: the e-commerce landscape is undergoing a seismic shift. Companies must adapt quickly to survive in this new environment. Will prices rise? Will supply chains be overhauled? Only time will tell.
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