How Fast Fashion Brands Avoiding Paying Taxes.  

Overview

Companies like Temu and Shein ship packages from Chinese warehouses to the US at extremely low prices. One of the reasons may be a tax loophole called “de minimis”, meant for tourists’ souvenirs,  that allows for packages under $800 to be shipped to the US without paying taxes.

Nearly 30% of small packages coming into the U.S. daily are from Shein or TEMU under de minimis exportation. Shein paid $0 in tariffs on its U.S. sales in 2022

Most US-based companies don’t benefit from “de minimis” as they receive bulk products from overseas and assemble them in US warehouses.

Because of de minimis, American businesses have higher incentives to move their warehouses out of the US or close their domestic textile plants.8 textile plants from 5 companies have closed since September 2023 across the US, laying off thousands of workers.

Some politicians believe that de minimis facilitates the shipment of illegal + unethical products

There’s “no question” that products being made with forced labor are coming into the country via de minimis - US Rep Blumenauer (D)

• De minimis packages are much less likely to be screened for compliance with federal regulations
• Temu does not track whether its products comply with the Uyghur Forced Labor Prevention Act
• Research has found that some Shein products contain cotton from Xinjiang, which should be banned

Proponents of the bill argue that de minimis promotes global commerce and would increase costs for American shoppers and small businesses.

These powerful lobbyists include The National Foreign Trade Council, FedEx, UPS, DHL, and online retailers like eBay and Amazon. The cost of a $50 package from a foreign retailer would double, according to The National Foreign Trade Council.

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Reference

https://time.com/6695469/temu-shein-de-minimis/

https://apnews.com/article/china-trade-de-minimis-shein-c7652da74a12de2bf68032c40052ab47

https://www.reuters.com/business/retail-consumer/key-trade-loophole-keeps-cheap-chinese-products-flowing-us-2023-08-04/

https://hbr.org/2024/02/the-lingering-cost-of-instant-fashion