WASHINGTON (AP) — As a substitute teacher in her mid-20s, Lindsey Pools was happy to discover the fashion world of Shein more than 10 years ago, drawn by the super-low prices — with tops selling for a few dollars, dresses under $10 and free shipping on orders over $29.
Puls, who has a blog called “Have Clothes, Will Travel,” joined other influencers in modeling her inexpensive but trendy purchases on social media like Instagram and TikTok, which helped Shein’s popularity grow. The company that was founded in China and sells clothes made there is now the top fast fashion retailer in the US
“In my experience, they have pretty good designs for the price and extensive varieties,” said Puls, who lives in Shiocton, Wisconsin. “The US is in that phase where ‘more is better.’ Many people want to get as many clothes as money can buy.
How can a stylish import from across the Pacific be so cheap? The answer has a lot to do with a trade rule known as the de minimis exception, which allows packages worth less than $800 to enter the U.S. duty-free per person per day.
With the explosion of global online shopping, this rule is now under scrutiny. While America’s Gen Z shoppers can celebrate their online bargains, lawmakers on both sides of the aisle question whether the rule allows manufacturers to avoid tariffs aimed at protecting American companies and circumvent laws barring imports of products made through forced labor. labor, illegal drugs or hazardous materials.
On Thursday, a group of 40 lawmakers asked Homeland Security Secretary Alexander Mayorkas to crack down on the de minimis trade, which they say also facilitates the flow of deadly drugs like fentanyl into the U.S.
Congressman Earl Blumenauer of Oregon, the top Democrat on the House Ways and Means Commerce Subcommittee, has introduced legislation to exclude non-market economies like China from the rule. A bill introduced in the Senate would make the practice reciprocal. China, for example, sets the de minimis threshold at about $7.
“The de minimis loophole is a threat to American competitiveness, consumer safety and basic human rights,” Blumenauer said in December.
But the de minimis rule also has powerful defenders. The National Foreign Trade Council, whose members include major shippers such as FedEx, UPS and DHL, as well as online retailers such as Amazon and eBay, argue that restricting its use would make purchases more expensive for American consumers and small businesses. The cost of a $50 package will double, according to the council.
Shein, which is now based in Singapore, said in a statement that it has prioritized compliance with the customs and import laws of the countries it operates in, including US de minimis package requirements.
Introduced in 1938, the de minimis exemption was intended to facilitate the flow of small packages valued at no more than $5, the equivalent of about $106 today. The threshold was raised to $200 in 1994 and $800 in 2016. At the time, Sen. John Thune, R-South Dakota, said the bill would “enable more Americans to engage in global trade.”
In 2023, for the first time, more than 1 billion de minimis packages passed through US customs, up from 134 million packages in 2015. China is the largest source of retail packaging entering the US, accounting for the largest part of the nearly 3 million small packages that pass through each day under the de minimis rule, according to Customs and Border Protection data.
“That’s roughly a 646 percent increase in just eight years,” said LaFonda Sutton-Burke, director of field operations for the Customs and Border Protection field office in Chicago, which oversees one of the nation’s busiest ports for de minimis shipments. Behind the jump is the explosive growth of e-commerce, she said.
A June 2023 report by the Select Committee of the House of Representatives of the Chinese Communist Party found that Shein and Temu, a low-cost online retailer of clothing and home goods, accounted for more than 30 percent of all shipments sent daily to the U.S. under de minimis exemption.
China’s exports grew by just 0.6% last year, but the bright spot is cross-border e-commerce, which includes but is not limited to de minimis packages. Those online sales increased by nearly 20 percent in 2023 to reach 1.83 trillion yuan, or $257 billion, nearly 8 percent of the country’s total exports. The US is the largest market, accounting for more than a third of Chinese goods bought online and shipped internationally in 2022, the latest year for which official Chinese customs data is available.
The United States does not include these direct online retail sales in its import data, so it is difficult to know the true dollar value of de minimis parcels. Charles Benoit, trade adviser for the Coalition for a Prosperous America, said an estimated $188 billion came into the U.S. from other countries in 2022.
Repealing the provision could add $20 to $30 to each transaction, making it financially impossible for companies like Shein and Temu to sell to American consumers at the low prices they offer now, Benoit said.
At a January meeting with Mallorcas, the National Council of Textile Organizations complained about unfair trade practices, including the de minimis rule.
“The industry lost eight plants in three months,” the council said. “Plants that survived the Great Depression, the Great Recession and COVID are not surviving the economic environment because of the destruction of demand exacerbated by unfair trade practices.” He called for better enforcement of laws banning the importation of goods produced through forced labor, and closing the de minimis loophole, which he says “facilitates millions of unchecked packages a day in our market and harms our industry.”
Law enforcement agencies also complain about the de minimis provision, which they say has fueled the drug crisis.
The National Association of Police Organizations testified in December before the House Ways and Means Commerce Subcommittee that much of the fentanyl seized last year entered the country in de minimis packages. It’s unclear how much fentanyl and other illegal drugs can sneak into the country unnoticed in the small packages.
On a recent Friday morning at Chicago’s O’Hare Airport, small packages that had arrived by mail from overseas were on conveyor belts passing through X-ray inspection machines. Officers occasionally stopped the belt to select and open a suspicious package. Among the items seized were replica weapons and illegal drugs.
Sutton-Burke said Customs and Border Protection uses a “multi-layered approach to security” and works with multiple partners to manage shipments, but resources have “literally remained static” in the face of explosive growth in de minimis parcels.
Investments in infrastructure and technology would be helpful, she said, as would updating U.S. rules and laws to allow the agency to get more information about small packages coming in to help customs agents identify high-risk shipments.
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Video journalist Melissa Perez Winder in Chicago and business writer Hallelujah Hadero in New York contributed to this report.
