How Chinese retailers can offer Americans steep bargains on clothes and why that could change

WASHINGTON — As a substitute teacher in her mid-20s, Lindsey Puls was thrilled to discover Shein’s fashion scene more than a decade ago, lured by its super-low prices—with tops selling for a few dollars, dresses under $10, and free shipping on orders over then $29.

Puls, who has a blog called ‘Have Clothes, Will Travel’, joined other influencers in modeling her cheap but trendy purchases on social media such as Instagram and TikTok, contributing to a surge in popularity for Shein. The company, which was founded in China and sells clothing there, is now the largest fast fashion retailer in the US

“From my experience, they have pretty good designs for the price and extensive varieties,” says Puls, who lives in Shiocton, Wisconsin. “The US is in a phase where ‘more is better.’ A lot of people want to get as much clothing as money can buy.”

How can stylish imports from the other side of 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 per person per day to enter the U.S. duty-free.

With the explosion of global online shopping, this rule is now coming under scrutiny. While America’s Gen Z shoppers may be celebrating their online bargains, lawmakers from both parties are wondering whether the rule will allow manufacturers to avoid tariffs aimed at protecting U.S. businesses and sidestep laws that ban the import of products that are made by forced labor, illegal drugs or unsafe materials.

On Thursday, a group of 40 lawmakers asked Homeland Security Secretary Alexander Mayorkas to crack down on the de minimis trafficking, which they say also facilitates the flow of deadly drugs like fentanyl into the US.

Rep. Earl Blumenauer of Oregon, the top Democrat on the House Ways and Means subcommittee on trade, has introduced legislation to exclude non-market economies like China from the rule. A bill introduced in the Senate would make the practice reciprocal. For example, China sets the de minimis threshold at around $7.

“The de minimis loophole threatens 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 and online retailers such as Amazon and eBay, said limiting their use would make purchases more expensive for American consumers and small businesses. According to the city, the cost of a $50 package would double.

Shein, now based in Singapore, said in a statement that it has made it a priority to comply with the customs and import laws of the countries where the company operates, including U.S. requirements for de minimis packages.

The de minimis exception, introduced in 1938, was intended to ease the flow of small parcels valued at no more than $5, the equivalent of about $106 today. The threshold was increased to $200 in 1994 and $800 in 2016. At the time, Senator John Thune, a Republican from South Dakota, said the bill would “enable more Americans to participate in global trade.”

In 2023, more than 1 billion de minimis packages cleared US customs for the first time, up from 134 million packages in 2015. China is the largest source of retail packages entering the US, accounting for the majority of the nearly 3 million small packages account. packages arriving every day under the de minimis rule, according to Customs and Border Protection data.

“That’s an increase of about 646% in just eight years,” said LaFonda Sutton-Burke, director of field operations for Custom and Border Protection’s Chicago field office, which oversees one of the nation’s busiest ports for de minimis packages. Behind the surge is the explosive growth of e-commerce, she said.

A June 2023 report from the House Select Committee on China’s Communist Party found that Shein and Temu, a low-cost online retailer of clothing and home goods, alone accounted for more than 30% of all packages shipped to the U.S. daily under the de minimis rules. exemption.

Chinese exports grew by just 0.6% last year, but the bright spot was cross-border e-commerce, which includes but is not limited to de minimis packages. These online sales rose by almost 20% in 2023 to 1.83 trillion yuan, or US$257 billion, almost 8% 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 last year for which China’s official customs data is available.

The United States does not include these direct online retail sales in its import figures, so it is difficult to know the true dollar value of the de minimis packages. 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.

A repeal of the provision could add $20 to $30 to each transaction, making it financially impossible for companies like Shein and Temu to sell to U.S. consumers at the low prices they now offer, Benoit said.

During a January meeting with Mayorkas, the National Council of Textile Organizations complained about unfair trade practices, including the de minimis rule.

“The industry has lost eight factories in three months,” the council said. “Plants that survived the Great Depression, Great Recession and COVID are not surviving the economic climate due to demand destruction exacerbated by unfair trade practices.” It called for better enforcement of laws banning the import of goods produced by forced labor, and for closing the de minimis loophole, which the report said “facilitates millions of uncontrolled parcels per day into our market and hurts 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 before the House Ways and Means Commerce Subcommittee in December that much of the fentanyl seized last year entered the country in de minimis packages. It is unclear how much fentanyl and other illegal drugs are slipping into the country unnoticed in small packages.

On a recent Friday morning at Chicago’s O’Hare Airport, small packages that had arrived by mail from abroad lay on conveyor belts passing through X-ray machines for inspection. Officers would occasionally stop the band to pick up and open a suspicious package. Among the items seized were replica weapons and illegal drugs.

Sutton-Burke said Customs and Border Protection uses a “layered security approach” and works with multiple partners to manage shipments, but resources have “literally remained static” in light of the explosive growth of de minimis packages.

Investments in infrastructure and technology would be helpful, she said, as would updating U.S. rules and laws so the agency can obtain more information about the small packages coming in so customs brokers can identify high-risk shipments.


Videojournalist Melissa Perez Winder in Chicago and business writer Haleluya Hadero in New York contributed to this report.