President Trump has ordered the closure of a tariff exemption loophole that has allowed fast-fashion giants like Shein and Temu to thrive in the United States. The loophole, known as the de minimis exemption, allows goods worth less than $800 to enter the country without tariffs. Last year, 1.36 billion packages entered the U.S. through this exemption, mostly from China, resulting in high levels of planet-warming emissions due to airfreight transportation.
The crackdown on these shipments comes as concerns about health and safety compliance, potential contraband, and intellectual property rights have been raised. President Biden also announced a crackdown last fall. The new rules will be phased in over the coming weeks, with steep levies to take effect on June 1, proposed to be up to $200 per package or 120 percent of the package value.
The surge in airfreight emissions linked to the fashion industry has raised concerns about the lack of solutions for decarbonizing the sector. Companies like Shein and Temu, which have been flying the equivalent of 108 Boeing 777 cargo planes full of packages every day, could be forced to shift to sending larger shipments by ocean freight to U.S. warehouses to avoid the higher tariffs.
The closure of the tariff exemption loophole could have unintended consequences, potentially shaking up the e-commerce industry as companies adapt to the new rules. Temu, for example, has already shifted to delivering about half of its products from domestic warehouses in the U.S. instead of mailing individual packages from overseas. The move may also result in a decrease in emissions, contributing to efforts to combat climate change.
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