A worker makes clothes at a garment factory that supplies SHEIN, a cross-border fast fashion ... [+] e-commerce company in Guangzhou. (Photo by Jade Gao / AFP) (Photo by JADE GAO/AFP via Getty Images)
No one will consider you a dummy if you’ve never heard of the ‘de minimis’ trade provision at Customs and Border Protection (CBP). But China retailers SHEIN and Temu surely have. They wouldn’t exist here without it. Flatware For 4 Person
De minimis is a provision of custom’s law that allows for duty-free shipments up to $800 into the U.S. It has led to the growing trend of direct-from-China e-commerce, and super low-cost clothing retailers SHEIN and Temu can use it to their advantage. It is a wonder stores like Old Navy, or the baby clothing aisle at Walmart WMT and Target TGT , still exist. SHEIN and Temu will replace them soon enough.
Temu’s parent company in China, logistics beast Pinduoduo (PDD) ran ads during the Superbowl. The company’s share price is up 14.5% this year, beating MSCI China and CSI-300, the leading China A-shares index, which are up no more than 8% as of Feb. 19.
China’s foray into e-commerce happened a long time ago. But it was mainly for the locals back home. De minimis helps them sell directly to the U.S. consumer. There’s no need for costly storefronts. There’s no need to pay real estate taxes. And there are no port duties for packages under $800. Small family stitch and sew factories in China can make a prom dress for $50 and ship it direct to American teens, tax-free, from their tiny home in X’ian, out to New York via the Shanghai International Airport.
In other cases, importers will order container loads from manufacturers and store them in Mexico. Amazon AMZN will often do this but will store in U.S. fulfillment centers. Such bulk orders are not de minimis, as container loads will cost over $800.
CBP’s John Leonard, Deputy Executive Assistant Commissioner at U.S. Customs and Border Protection, reportedly referred to de minimis as the country’s ‘free trade agreement with China.’ The Wall Street Journal called it a ‘tariff dodge’ in a headline last April, saying that in some cases, de minimis allows for companies to breach U.S. trade policies.
Temu's Superbowl ad: "Cha-ching. I'm shopping like a billionaire," the ad copy says. Temu is now ... [+] part of the U.S. e-commerce ecosystem.
Greg Owens is the CEO of Sherrill Manufacturing. They make flatware under the brand Liberty Tabletop at their factory in upstate New York. Amazon accounts for around 20%-25% of their sales. And online sales account for around 60% of their total sales flow, up three-fold since the pandemic.
“Because of de minimis, China manufacturers can now sell you flatware duty-free, which is interesting for them because they actually have a 25% tariff since the Trump years,” Owens says. “De minimis means they don’t have to pay it. As it is now, around 80% of flatware sold in the U.S. is all made in China, with the rest in Vietnam and Indonesia.”
CBP says they got as many as three million uninspected shipments daily in 2022 that could claim de minimis treatment, a rate more than doubled from 2018. At some ports of entry, de minimis shipments arrive via the mail and express courier without electronic data, making them impossible to police.
The American shopping mall has suffered the collateral damage of online shopping.
In 2021, UBS retail analysts predicted some 50,000 store closures by 2026. Global REIT Westfield said they would exit the mall business in the U.S.
Senator Elizabeth Warren and two other Senators wrote to SHEIN's CEO in February inquiring about its ... [+] adherence to U.S. trade and Customs laws. (Photo by Kevin Dietsch/Getty Images)
Some 1.15 million Americans work in retail, either as clerks or managers of clothing and clothing accessory stores, according to the Bureau of Labor Statistics as of January 2023. This is a dying business. Coronavirus lockdowns hurt the job numbers. Some are coming back. But two years after the 2021 pandemic was in high gear, job totals are nowhere near where they once were. Online shopping hurts them. China’s entry into the de minimis game will hurt this segment even more.
“De minimis makes it much more difficult to compete because it creates an unlevel playing field that alters the real cost of a product,” says Don Buckner, CEO of MadeinUSA.com in Florida. “You are already competing with countries that have very low wages, no environmental regulations, little to no taxes and freight subsidized by the U.S. taxpayer. Consumers have to get smart about their purchases and think where their dollars are going and who is benefiting,” he says.
Temu will benefit. It is a new brand for Americans. SHEIN’s been selling directly to U.S. consumers for a few years.
SHEIN caught the attention of a bipartisan trio of Senators recently. Bill Cassidy (R-LA), Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) sent a letter to SHEIN CEO Chris Xu on Feb. 9. They inquired about two things – de minimis and use of banned cotton in making clothes for sale on SHEIN’s website.
While SHEIN CEO Xu is unlikely to answer questions about the supply chain of all of his company’s sellers, certainly the bulk of shipments to the U.S. use de minimis.
The de minimis rule was never meant to be a tool of commerce. It was meant to ensure customs agents weren't wasting their time doing tariff assessments on the most trivial items. But now, allowing every fly-by-night oversees judgment-proof vendor to ship sales directly into American households is Customs anarchy.
Every societal expectation, from those reflecting laws against forced or child labor to consumer safety standards and truth in advertising laws, all go out the window under existing rules.
Cindy Allen of FedEx tells the Senate Finance Committee that de minimis is important for trade ... [+] facilitation. “Congress looked at this issue in 2016 and explained that the higher threshold provides benefits to consumers and businesses,' she said. "CBP can still seize shipments that are in violation of laws.”
De minimis used to be set at $200 but was increased in 2015 to $800.
At a Senate Finance Committee hearing on ‘leveling the playing field’ for trade, held on Feb. 16, FedEx FDX Vice President for Regulatory Affairs and Compliance, Cindy Allen, told the Committee that the de minimis trade provision was important to businesses.
“It helped facilitate trade for hundreds of small to mid-sized businesses who can import easily, without paying a tariff,” Allen said. “That tariff is a tax on them.”
On March 24, 2022, a small business advocacy and research organization called the Small Business Majority, sent a letter to House and Senate leaders saying the de minimis threshold should be lowered to $10.
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I am a seasoned freelance financial journalist reporting for a variety of publications across the globe. I was formerly a stocks and commodities reporter - and editor of print and online foreign currency coverage - at Shares Magazine, providing information and analysis for readers to make sound investment decisions in the UK and overseas. I was also a regular contributor to the magazine's extensive catalogue of bookazines and trading guides. Prior to this I was a reporter with the BaseMetals.com and TheBullionDesk.com newswires, breaking the latest news and providing in-depth analyses of the base and precious metals markets.
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I am the founding principal and publisher of Spin-Off Research, an independent advisory report featuring analysis of spin-off situations. I am the author of the book Spin-Off to Pay-Off: An Analytical Guide to Corporate Divestitures (McGraw-Hill). In addition to being a Forbes contributor, I have been featured or quoted in various media such as Barron’s, The Wall Street Journal, Bloomberg, Business Week and Fox Business. I have published “Spin-Off Research”, an institutional advisory report featuring analysis on spin-offs since March, 1997. Spin-Offs often result in higher aggregate value for the constituent pieces. Many diversified companies are electing to spin-off parts of their business finding they can create significant value for shareholders.
Joe Cornell CFA, publisher of Spin-Off Research, an independent research provider. For more information about spin-offs, go to Spin-Off Research website at spinoffresearch.com
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I am the Founder and President of Agility Executive Search, a boutique executive search firm. Previously, I was a Senior Managing Director at Teneo. I originally founded Agility in 2008 and we specialize in corporate board and senior level executive search. I have twenty-three years of search experience and have seen the good, bad, and ugly in businesses around the world. I like to ask tough questions and challenge the status quo. I hold a BA (with Distinction) in Psychology from McGill University and an MBA from Concordia University.
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I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I began following stocks in 1981 when I was in grad school at MIT and first analyzed tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 15th book -- published in November 2020 -- is \"Goliath Strikes Back: How Traditional Retailers Are Winning Back Customers from Ecommerce Startups.\" I appeared eight times in the 2016 documentary: \"We The People: The Market Basket Effect.\" (http://www.themarketbasketeffect.com/). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass. (http://www.babson.edu/Academics/faculty/profiles/Pages/Cohan-Peter.aspx)
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The SmartMoneyCircle.com Show interviews large money managers and CEOs for timeless advice.
Adam Sarhan hosts the show and is the author of the #1 best selling book: Psychological Analysis For Investing & Trading.
The book introduces a third school of thought because Fundamental & Technical Analysis are not enough to win.
Adam is the author of the very popular FindLeadingStocks.com newsletter.
He is the founder of TrueMarketLeaders.com, holds a BA and a MA in political science, is a contributor to Forbes, and has been quoted all over the financial media including: CNBC, Reuters, Bloomberg, Fox Business, Barron’s, CBS News, Yahoo Finance, The Wall Street Journal, MarketWatch, among other popular sites.
He is also the Founder/CEO of 50ParkInvestments.com
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Led by MIT engineers and Wall Street analysts, Trefis (through its dashboards platform dashboards.trefis.com) helps you understand how a company's products, that you touch, read, or hear about everyday, impact its stock price. Surprisingly, the founders of Trefis discovered that along with most other people they just did not understand even the seemingly familiar companies around them: Apple, Google, Coca Cola, Walmart, GE, Ford, Gap, and others. This might include you though you may have invested money in these companies, or may have been working with one of them for years as an employee, or have consulted with them as an expert for a long time. You can play with assumptions, or try scenarios, as-well-as ask questions to other users and experts. The platform uses extensive data to show in a single snapshot what drives the value of a company's business. Trefis is currently used by hundreds of thousands of investors, company employees, and business professionals.
I am a seasoned freelance financial journalist reporting for a variety of publications across the globe. I was formerly a stocks and commodities reporter - and editor of print and online foreign currency coverage - at Shares Magazine, providing information and analysis for readers to make sound investment decisions in the UK and overseas. I was also a regular contributor to the magazine's extensive catalogue of bookazines and trading guides. Prior to this I was a reporter with the BaseMetals.com and TheBullionDesk.com newswires, breaking the latest news and providing in-depth analyses of the base and precious metals markets.
I am a seasoned freelance financial journalist reporting for a variety of publications across the globe. I was formerly a stocks and commodities reporter - and editor of print and online foreign currency coverage - at Shares Magazine, providing information and analysis for readers to make sound investment decisions in the UK and overseas. I was also a regular contributor to the magazine's extensive catalogue of bookazines and trading guides. Prior to this I was a reporter with the BaseMetals.com and TheBullionDesk.com newswires, breaking the latest news and providing in-depth analyses of the base and precious metals markets.
I am CEO IG North America, the parent company of market-leading brokerage tastytrade, financial education content network tastylive, and tastycrypto. I facilitate the development and delivery of innovative new offerings for retail investors as we continue to grow our business and provide the tools for our customers to manage their own investments.
I was formerly Chief Market Strategist and Managing Director of market structure strategy and client advocacy, as well as Managing Director of Trading Platforms for TD Ameritrade, a subsidiary of Charles Schwab. I began my career as a Chicago Board Options Exchange market maker, later holding positions with ING Bank and Van Der Moolen. I serve as a member of the CBOE Advisory Board, SIFMA Options Committee, and on the Board of Clearlist.
I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE.
I am CEO IG North America, the parent company of market-leading brokerage tastytrade, financial education content network tastylive, and tastycrypto. I facilitate the development and delivery of innovative new offerings for retail investors as we continue to grow our business and provide the tools for our customers to manage their own investments.
I was formerly Chief Market Strategist and Managing Director of market structure strategy and client advocacy, as well as Managing Director of Trading Platforms for TD Ameritrade, a subsidiary of Charles Schwab. I began my career as a Chicago Board Options Exchange market maker, later holding positions with ING Bank and Van Der Moolen. I serve as a member of the CBOE Advisory Board, SIFMA Options Committee, and on the Board of Clearlist.
Flatware Maker I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE.