The rise of the shopping apps Temu and Shein have impacted American businesses, prompting Congressional efforts to try to close a loophole.
n Super Bowl Sunday, the e-commerce giant Temu flaunted their alluringly low prices in multiple ad spots during the game, encouraging customers to “shop like a billionaire.” Halsey Cook, the CEO of the South Carolina-based textile manufacturer Milliken & Company, was less than enthused. For the past couple years, he’s been watching as products similar to Milliken’s apparel lines have popped up on Temu and Shein for shockingly low prices.
For years, de minimis was a minor factor in the American retail landscape. But in 2016, the de minimis threshold was raised from $200 to $800, allowing pricier items to skip the formal customs process. Companies like Temu were able to ship products directly from warehouses to customers, sliding under this higher threshold and thus avoiding typical entry fees.
Unlike foreign businesses, most small and mid-sized American businesses don’t benefit from the de minimis rule. Many of these companies receive products or materials in bulk from overseas, then assemble them in American warehouses. This mode of production requires paying hefty fees. Jim Marcum, the CEO of the dress retailer David’s Bridal, says that the company paid $100 million in fees over the last six years to U.S. customs, which forced it to charge higher prices for its dresses.
American entrepreneurs now worry that de minimis will result in warehouses moving out of the country. Some companies have already established warehouses to Mexico or Canada, where they can receive large shipments of composite parts, then assemble them into products and send them via de minimis to the U.S. “Most U.S. companies, if they haven’t started to avail themselves of the opportunity, are exploring or evaluating it,” says Marcum.
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