Alibaba, Temu and Shein have expanded into the United States at breakneck speed, almost as if it were their home market. The Chinese platforms benefit from the fact that imports of goods under $800 are exempt from customs duties under what is known as the exception. de minimis. It is this gap that Chinese e-commerce platforms have taken advantage of to flood the American market with their products. Today, Joe Biden has decided to react and tighten the regulation of these imports in the face of what he considers to be abuses and “unfair competition” on the part of these giants, which he does not name. The measures will particularly affect the textile sector.
Under the new measures, many products will be excluded from the tariff exemption. Products that account for 40% of U.S. imports and 70% of textile and apparel imports from China will no longer be covered by the exemption, according to the White House. Prices for these products will become higher when the tariffs are applied.
The effect of Biden's proposals on the Spanish Inditex is uncertain. They might also end up taxing some of their online sales, but overall they would improve their competitive position against thriving Chinese companies.
Over the past 10 years, the number of shipments entering the United States under the exemption de minimis has grown significantly, from around 140 million per year to over a billion per year. They have become popular with the rise of e-commerce, the pandemic, the imposition of tariffs on traditional commerce and the brilliant success of Shein and Temu's low prices.
The volume of shipments, mainly from China, makes it almost impossible to effectively monitor whether products comply with health and safety requirements, intellectual property rights or consumer protection standards. Moreover, in this swell, they sneak illicit synthetic drugs such as fentanyl and raw materials and machinery for the manufacture of synthetic drugs.
Most shipments entering the United States under the exemption de minimis They come from several China-based e-commerce platforms, according to the White House, which “results in huge volumes of low-value products, such as textiles and apparel, being imported into the U.S. market duty-free.” For Shein and Temu, selling directly to consumers not only frees them from tariffs, but also eliminates the need for warehouses and large logistics facilities.
Biden announced the measures less than two months before the presidential election between current Vice President Kamala Harris and former President Donald Trump. The Republican has made tariff increases and tax cuts the magic formulas of economic policy with which he goes to the polls. Harris has criticized blind tariff increases as an indirect tax on consumers. This crossing of positions implies a certain ideological pirouette for both Republicans and Democrats. In any case, protectionism is winning the game, as shown the consensus against the acquisition of US Steel by Nippon Steel.
The White House says the growing volume of shipments de minimis makes it increasingly difficult to detect and block imports of illegal or dangerous products. Some companies exploit this exemption to conceal shipments of illegal and dangerous products and circumvent health, safety, and consumer protection laws. Other entities use it to circumvent U.S. trade measures designed to level the playing field for American workers, retailers, and manufacturers.
For smaller shipments that are still not subject to customs duties, what becomes complicated is the bureaucracy. More data will be required. The proposed regulatory changes will also clarify who qualifies for the administrative exemption and require declarants to identify the person on whose behalf it is requested. Safety and consumer protection measures will also be strengthened, with the requirement for certificates of conformity.
Greater textile protectionism
There are other measures that the Joe Biden administration wants to promote, but for which legal changes would be necessary, which is why it is asking Congress to act. The president wants it to be completely excluded from the exemption de minimis to import-sensitive products, including textiles and clothing, and, in general, to all those on which the United States already imposes customs duties. In reality, various initiatives in this regard are blocked on Capitol Hill.
The Biden administration is particularly keen to protect the textile sector. It stresses that American clothing manufacturers play a vital role in the US defense industrial base and support hundreds of thousands of direct and indirect jobs in the country. It believes that “they face unfair competition from several e-commerce giants founded in China.”
In addition to the reform of exemptions de minimis, The administration will seek to support American businesses in other ways. For example, it will explore ways to increase cross-agency purchases of certain textile and apparel products. It will also prioritize combating illicit imports of textiles and apparel through increased targeting of small-package shipments, special joint trade operations, increased customs audits and foreign verifications, and an expanded list of entities under the Act to prevent Uyghur forced labor.