No more free pass: New rules target Shein, Temu shipments

For years, a subtle hole in U.S. trade law has allowed billions in foreign goods to slip through, untouched, untaxed and unbothered. Think of it like a backdoor left open, just wide enough for packages under $800 to pass through customs, duty-free. That metaphorical door, known as the de minimis exemption, turned into a highway for global retailers like Shein and Temu, delivering low-cost products to American doorsteps without paying a dime in import duties.

Trump closes the loophole

On Wednesday, July 30, President Donald Trump signed an executive order that closes that door for good, requiring all packages valued under $800 to pay all applicable duties starting Aug. 29.

Trump framed the move as a needed step for national security, linking the flow of duty-free goods to the rise in fentanyl and other synthetic drugs slipping into the U.S.

The White House argues that drug traffickers and counterfeiters have used the de minimis loophole to move illicit goods in small-value shipments, often disguised through false labels or deceptive packaging. Countries like China, Mexico and Canada were named directly, with the administration saying those governments haven’t done enough to stop the flow.

The rise of Shein and Temu

Although national security is the stated reason for the executive order, companies like Shein and Temu are at the center of the fallout. These shopping apps have become staples in American households, known for offering piles of cheap goods, often shipped free from warehouses in China.

That growth didn’t happen by chance. It was supercharged by Section 321 of the Tariff Act, which allowed these packages to enter the U.S. duty-free. Between 2018 and 2023, Chinese e-commerce exports jumped from $5.3 billion to $66 billion, much of it driven by platforms like Shein and Temu.

According to Congress.gov, in 2023 alone, roughly one billion packages, worth about $54.5 billion, entered the U.S. under this exemption, with nearly 70% coming from China or Hong Kong, according to Customs and Border Protection.

For years, lawmakers and agencies had sounded alarms over lost tariff revenue, counterfeit goods and the smuggling of illicit drugs like fentanyl. Even before Trump’s order, both the Biden and Trump administrations had accused Chinese e-commerce giants of exploiting the system and signaled a crackdown was coming.

How Shein and Temu are adjusting

Temu told CNBC in May that it was no longer shipping directly from China. It came in response to the Trump administration’s move to shut down the de minimis loophole, the company announced plans to pivot to U.S.-based warehouses and sellers to keep orders flowing to American customers. According to reports, Shein has started building warehouses in North America and Europe for similar reasons. The move could help the company cut back on direct imports by stocking more products closer to customers.