American retailers have faced an existential crisis after e-commerce disrupted the industry’s traditional business models. But a group of retailers and policymakers say their latest threat is coming from a nearly century-old trade rule that has given their e-commerce rivals — many of them founded in China — an unfair advantage.
The rule, known as de minimis, allows companies to send packages worth less than $800 to the United States without paying fees and charges imposed by Customs and Border Protection. Approximately three million de minimis shipments enter the United States every day, and approximately half of those shipments are textile and apparel products.
Critics of the rule said it hurts American companies. He said Chinese-founded companies like Shein and Teemu, both budget-friendly retailers, would ship merchandise from their overseas warehouses directly to shoppers’ homes, and some of those packages were worth at least $800. But products made overseas and then shipped in bulk to U.S. retailers — where they are stored in warehouses before being shipped to customers — are less likely to fall under the $800 threshold. (In 2022, Shein opened a distribution center in Indiana that will store inventory from overseas before shipping it to customers.)
Critics also argue that shipments falling under the de minimis rule provide an uncontrolled channel that allows goods to enter the United States that might have been made by forced labor.
In June, the House Select Committee on the Chinese Communist Party published a report It found that Teemu and Sheen alone were responsible for more than 30 percent of all packages imported into the United States under the de minimis provision.
American retailers want to change the rules. If that’s not the case, he argues, companies could move their warehouses and the jobs that come with them outside the United States.
A Shein spokesperson said the retailer “continues to prioritize import compliance” and that “the de minimis provision is not critical to the success of our business.” In July, Shein’s executive vice president said the company was “eager” to work with lawmakers to help reform the minimum. A spokeswoman for TEMU echoed Sheen, saying that TEMU’s “growth is not dependent on a policy minimum” and that it “supports any policy adjustments made by legislators consistent with consumer interests.”
Jim Marcum, chief executive of wedding retailer David’s Bridal, said the de minimis rule “played a significant role” in the financial stress that led the company to file for bankruptcy in April, its second time to do so in five years. , In 2022, David’s Bridal said it paid approximately $20 million in fees to U.S. Customs. Mr. Marcum said China-based competitors who ship dresses directly to buyers don’t have to pay anything. He further said, over the course of six years, David’s Bridal paid approximately $100 million in duties, which could have been invested in modernizing its business.
“You can see the enormity of it – how much loss we have suffered,” Mr Markham said.
Ron Sorini, a lobbyist and trade expert who is working with a group of 20 U.S. retailers to change the de minimis entry law, said it has created an incentive for companies to move their distribution offshore. .
The group, Ship Safe Coalition, has proposed a change that would expand the application of de minimis to U.S. distribution centers located in foreign trade territories. In these areas, companies are not required to immediately pay duty fees for imported products. Instead, they pay a fee when they ship those products to customers. That delay helps them manage cash flow, but unlike products shipped from warehouses abroad, products shipped from warehouses in foreign trade zones are not exempt from duty when their value is less than $800. .
“What we want is equality,” Mr. Sorini said. “As long as the status quo continues, we will face a big problem for American retailers and American jobs.”
Not all American retailers agree with the ShipSafe Coalition’s proposal. Kim Glass, president of the National Council of Textile Organizations, a lobbying group, said it would be more effective to limit the use of de minimis than to expand its application to retailers in foreign trade zones. She supports a bill introduced in June that would exclude “non-market economies” such as China and Russia from using the exception, though she wants the legislation to go further.
“We believe the Administration needs to use its executive authority to separate all e-commerce shipments from minimal treatment,” Ms. Glas said.
The American Apparel & Footwear Association, a trade organization that represents more than 300 U.S. companies, is gathering input from its members for a policy recommendation it plans to publish in the next few weeks.
,“While it may be complicated – and very complicated – for some people in Congress to understand, it is not very complicated for people in business to understand,” said Peter Bragdon, general counsel for Columbia Sportswear, a ShipSafe member. alliance. “People are taking advantage of it and it’s having an impact on people, on businesses.”
