In response to President Donald Trump’s recent revocation of the de minimis tax exemption, Chinese online retailer Temu has intensified its focus on promoting products that can be shipped from U.S. warehouses. This strategic shift comes as the nearly century-old exception, which allowed e-commerce companies to send goods worth less than $800 into the U.S. duty-free, has been suspended as part of new tariffs, including an additional 10% tax on Chinese imports.
The de minimis exemption has played a crucial role in the rapid expansion of Temu and other companies like Shein in the U.S. market. By enabling these retailers to bypass taxes on low-value shipments, they have maintained competitive prices on a wide range of products, from clothing to electronics.
By removing this tariff exemption, Temu has pivoted to spotlight sellers with inventory stored in U.S. warehouses. A quick examination of the “Lightning Deals” section on the Temu app reveals that it is predominantly filled with items marked with a green “local” badge, indicating faster delivery options for consumers.
By emphasizing local inventory, Temu not only ensures quicker shipping times but also lessens its dependence on sellers’ shipping directly from China. Notably, while many of these products are stored in U.S. warehouses, the listings often indicate that businesses based in China sell the items.
The implications of this shift are significant for Temu, as it positions itself in direct competition with established e-commerce giants such as Amazon, eBay, and Walmart. These competitors have also welcomed Chinese sellers who ship goods to their U.S. warehouses. In response to Temu and Shein’s rapid growth, Amazon launched its budget storefront, Haul, last year.
Temu, which falls under the umbrella of Chinese online retailer PDD Holdings, began onboarding sellers with inventory in U.S. warehouses in March. By July, approximately 20% of Temu’s U.S. sales were attributed to these local sellers, according to Marketplace Pulse, an e-commerce market research firm.
As Temu and other Chinese e-commerce platforms adapt to new customs requirements, they faced additional challenges when the U.S. Postal Service (USPS) unexpectedly suspended inbound packages from China and Hong Kong. However, this decision was quickly reversed, and the USPS resumed operations while pledging to work with U.S. Customs and Border Protection (CBP) to implement effective mechanisms for managing the new tariffs.
This ongoing uncertainty has resulted in volatility for PDD Holdings’ stock price, which fluctuated significantly over the week, reflecting investor concerns about the impact of these regulatory changes.
Critics of the de minimis provision argue that it has granted an unfair advantage to Chinese e-commerce companies and has led to an overwhelming influx of packages that evade thorough documentation and inspection. This raises concerns over counterfeit and unsafe goods entering the market. Conversely, supporters of the exemption argue that its elimination would impose additional burdens on customs officials and lead to increased government costs.
Hugo Pakula, CEO of the supply chain compliance firm Tru Identity, highlighted the potential strain on customs resources, stating, “At some point, there are going to be 3 million of these goods piling up a day, and while customs can do their best, they’re not equipped.” He noted that customs would have to perform ten times more screenings than in previous weeks.
CBP reported processing over 1.3 billion de minimis shipments in 2024, with a 2023 report from the House Select Committee on the Chinese Communist Party indicating that Temu and Shein are “likely responsible” for over 30% of these shipments entering the U.S.
Shein is also actively pursuing U.S. buyers by establishing distribution centers in states such as Illinois and California, as well as a supply chain hub in Seattle, aimed at enhancing delivery speed for American consumers.
