A ‘big scam’? The end of a shipping loophole on China goods and what it means for consumers

A decades-old shipping loophole that made imported goods cheaper for customers and boosted foreign e-commerce platforms such as Shein and Temu sunsetted Friday.

The 1938 provision, called the “de minimis” exception, formerly allowed shipments under $800 to enter the U.S. duty-free. Trump last month signed an executive order eliminating the exemption for goods imported from China and Hong Kong in what the White House called a “critical step in countering the ongoing health emergency posed by the illicit flow of synthetic opioids into the U.S.”

Federal officials have previously accused China of fueling the U.S. fentanyl crisis by supplying fentanyl precursors to illicit drug manufacturers.

Trump’s move to restrict the shipping loophole is the latest in a slew of trade policy revisions poised to affect millions of consumers and small businesses who rely on low-cost goods from China.

Here’s what to know:

What is the shipping loophole?

Congress first introduced the “de mimimis” exception in 1938 as Section 321(a)(2)(C) of the Tariff Act of 1930, licensing duty waivers for small shipments in order to streamline customs operations. The policy was designed to boost trade and spare the government the hassle of processing low-value parcels generating negligible tax revenue.

Congress has raised the “de minimis” exemption threshold several times since the policy’s initial adoption. In 2015, the figure rose for the last time to $800.

U.S. Customs and Border Protection processes “nearly 4 million duty-free de minimis shipments a day,” most of them coming from China and Hong Kong, a spokesperson for the agency told CNN. In the last fiscal year, 1.36 billion shipments came to the U.S. under the shipping exemption.

Why did Trump end it?

The White House said that Trump disqualified China from the trade loophole because of the country’s “deceptive shipping practices,” including an alleged pattern of smuggling “illicit substances” into the U.S. and bordering countries.

Moreover, the country “enforces strict import restrictions and tightly limits de minimis exemptions, showing no similar leniency toward U.S. shipments,” a White House fact sheet said.

The president also argued the exemption has allowed Chinese e-commerce giants to edge U.S. retailers out of the market.

“It’s a big scam going on against our country against, really, small businesses and we’ve ended it,” Trump said Wednesday during a Cabinet meeting.

How will this affect consumers?

Foreign e-commerce platforms impacted by the loophole’s closure will probably pass price increases on to shoppers. Thus, U.S. consumers who rely on such platforms for bargain-priced clothing and other household goods may struggle to shoulder new higher costs.

It’s a harsh blow when Americans are already anxious about rising costs stemming from the steep tariffs Trump has levied on Chinese imports.

Plus, it’s not just Chinese goods that may skyrocket in price. Trump said in an executive order that “de minimis” packages from other countries are also slated to lose their tariff exemption as soon as the government can develop a system to “expeditiously process and collect” the duties,” Bloomberg reported.

What about the fallout for Shein, Temu and others?

Shein has already raised its prices, with its top 100 products in the beauty and health category seeing an average increase of 51%, Bloomberg reported.

Temu, one of Shein’s primary competitors, said in a statement to the Washington Post that it is moving to a “local fulfillment model,” with U.S. orders handled by sellers in the United States in an effort to sidestep tariffs.

Customers have already expressed disappointment about products being removed from their shopping carts because they were not certified “local” to the U.S., the outlet reported.

Singapore-based Shein and China-owned Temu stand to lose significant business from U.S. consumers aggrieved by the price hikes and decreased product availability. Plus, shoppers are likely to become frustrated with slow shipping resulting from stricter customs protocols.