Shen Lu
Appearances
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
The purpose originally was to allow Americans to bring back souvenirs from overseas trips without having to pay tariffs on them.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
Has anyone looked at their Shein cart this morning?
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
And the use of de minimis exemption has ballooned over the years. About 1.4 billion shipments using the de minimis provision entered the U.S. in 2024. That was up from 637 million four years earlier.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
So the stated rationale is to stem the illegal flow of synthetic opioids, which is fentanyl, into the U.S. And Trump has declared that as a national emergency. Mexico is the main source of the drug, but Trump also blamed Beijing for not doing enough to stop the chemical ingredients from flowing out of China.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
Many e-commerce companies have used this exemption over the past years. And two big beneficiaries of de minimis have been Shein and Taimu.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
She and Taimou use what's called a direct consumer business model. When a U.S. consumer places an order on their website, Taimou or She will just ship the individual order directly to the U.S. consumer. And since their prices are cheap, most of the orders are under $800. Last I checked, the average order value was below $50 for both companies. So most shipments will fall directly
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
under the de minimis exemption so the company does not have to pay taxes on the orders.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
And these bulk shipments don't qualify for de minimis. And so the companies end up paying taxes on these shipments when they enter the U.S.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
It's just the U.S. has been such a crucial market. It's both companies, one of their top markets and wealthier consumers and who buy more frequently from them. So it would be a huge market to lose. And so it's probably going to be a struggle for them to maintain the market to serve the consumers here in the U.S.,
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
Taimou, from a year ago, started recruiting sellers with inventory in the U.S. exactly to mitigate the risk of de minimis going away. So more than a third of Taimou's products sold in the U.S. now are in local warehouses instead of coming in through de minimis.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
Starting in February, Xi'an has talked to some major suppliers and encouraged them to set up production in Vietnam. They've also considered the option of manufacturing in the U.S. But we all know that it's very difficult to shift manufacturing back to the U.S. It could take months and months and months. And it's a lot more expensive to do that.
The Journal.
A Tariff Loophole Just Closed. What That Means for Online Shopping.
Now for these companies, the elimination of De Minimis is basically a double whammy. They didn't have to pay taxes when they sell to U.S. consumers. Now they have to, and the amount of tax is exorbitant.