Trump closed a China loophole. Shein and Temu were already prepared.
Trump’s executive order ending de minimis shipments hurts Shein and Temu. The companies have prepared for changes by fulfilling more orders locally in recent years. Experts say Shein and Temu’s success relies on low prices, not de minimis shipments. Shein and Temu won’t meet an untimely end because of de minimis changes, e-commerce experts say. The logistics world has been expecting changes to the de minimis exemption for a while, and both Chinese e-commerce players have made some changes to their fulfillment strategies that experts say could help cushion the blow.
Temu and Shein disrupted the e-commerce industry in part by avoiding paying duty on shipments through a provision of customs law called Section 321, also known as de minimis. These shipments came on planes directly from China and were able to make use of the Section 321 provision because they were valued at less than $800 each. The executive order Trump issued on February 1 effectively closes that loophole for goods originating in China.
“This will certainly have an impact, but it’s much smaller than people think,” Alex Yancher, CEO of Passport, a startup that helps brands sell globally, told Business Insider. Shein and Temu have mainly prepared for de minimis disruption by having more orders fulfilled in the US. While the majority of its orders were still coming on planes from China, Shein started fulfilling more of them from US warehouses in 2022 and 2023. Shein opened its first US-based warehouse in Whitestown, Indiana, in 2022, and in 2024 it opened an office in Bellevue, Washington, to serve as a hub for its US fulfillment and logistics operations. Temu also began allowing US-based vendors to sell on its marketplace in 2024. This newer model allowed sellers with warehouses in the US to handle fulfillment and logistics themselves, creating orders that would not need to cross borders before making their way to customers.
Products from those vendors are designated with a “local” badge on their listing page and in search results. Fulfilling orders locally in the US is a departure from how Shein and Temu started out. But e-commerce experts say it doesn’t disrupt the main drivers of their success: ultra-low prices and very trendy items. Shein, in particular, has a unique model in which it partners directly with manufacturers to create small batches of only the most in-demand items. That model has allowed it to test consumer appetite and turn around clothing designs in a matter of weeks. — news from Business Insider
