As foreign trade is facing challenges and large orders are dwindling, e-commerce is still booming. Dwindling wholesale orders from foreign retailers, especially Americans, resulting from punitive tariffs imposed by former U.S. President Donald Trump are replaced by thousands of small orders placed directly by end-customers through e-commerce channels. A look at recent Chinese government data illustrates how crucial small-item trade has become in shoring up a decline in the country’s traditional export channels, with such parcels surpassing a quarter of a trillion dollars in value annually. At the heart of the growth – and controversy – lies a long-time American trade provision known as the de minimis rule. It allows companies to ship packages to the U.S. worth under USD800 without paying import duties, taxes or fees, or undergoing tedious screening procedures. In 2016, the amount was raised from USD200 to relieve burdens on American customs officials. However, in the ensuing years, U.S. critics have claimed the rule has given Chinese e-commerce platforms and sellers an unfair advantage and squeezed out American retailers. That puts China’s booming e-shopping industry and, by extension, countless manufacturing factories in the country, at risk of huge financial loss, especially as momentum in America gathers to overhaul the century-old trade rule.
Two bipartisan bills introduced in the U.S. Congress call for lowering the thresholds or scrapping the provision to keep shipments from specific countries like China from benefiting. “How the de minimis rule might change will be a critical issue to watch in 2024,” said Sheng Lu of the University of Delaware. Parcel volumes exploded after Temu’s high-profile launch in 2022 under the slogan “shop like a billionaire” and expensive ads placed last year during the National Football League’s annual Super Bowl. For many products on Temu worth under USD10, last-mile door-to-door delivery in the U.S. accounted for the lion’s share of the total price shoppers paid.
Production expenditures plus freight costs within China as well as from the mainland to the U.S. could be kept to a minimum owing to the massive manufacturing capacity in the “world’s factory” and the platforms operating an efficient supply chain. In 2023, U.S. Customs and Border Protection cleared about one billion de minimis shipments for the financial year, a 46% surge compared to a year earlier. Rapidly expanding Temu and Shein are joining traditional players like Amazon and AliExpress, with short-video platform TikTok also joining the competition. These shipments are becoming increasingly indispensable to China’s economy, as weak global trade amid high inflation hit China’s export sector hard in the past year, and the West has turned to “de-risking” supply chains away from China. China's exports to the U.S. in 2023 recorded their steepest decline in almost three decades. Yet China’s e-commerce exports have been booming.
In yuan terms, the country’s overall exports last year grew by a modest 0.6% compared to a year earlier. But those from small e-commerce parcels skyrocketed by 19.6%, reaching CNY1.83 trillion and comprising more than 7% of total exports, according to preliminary Chinese Customs estimates. China’s e-commerce exports have “become a new foreign trade format with the fastest development speed, the greatest potential and the strongest driving effect”, the People’s Daily said in an article. In Guangdong, which accounts for one-third of the industry’s overall turnover in China, the total value of exports and imports via e-commerce last year was 57 times that of 2015, according to provincial government data. Of the total number of e-commerce packages shipped overseas in 2022, more than one-third were destined for the U.S., and one-third were categorized as “clothing, shoes and bags”, a Chinese customs report revealed.
This booming e-commerce may be curtailed if the de minimus rule is abolished. In June last year, U.S. Senators Bill Cassidy and Tammy Baldwin unveiled the “De Minimis Reciprocity Act” to bar Chinese imports from “exploiting customs procedures that allow duty-free entry into the U.S.”. “A trade loophole is allowing Chinese companies to import goods in the U.S. with no oversight, letting them bring in cheap, counterfeit goods that undercut American manufacturers and traffic drugs into our communities,” Baldwin said. Days later, U.S. Senators Marco Rubio and Sherrod Brown introduced the “Import Security and Fairness Act”, proposing to end de minimis treatment for goods from China and Russia. The same month, a congressional select committee on the Chinese Communist Party published a report saying Temu and Shein were likely responsible for more than 30% of all packages imported to the U.S. under the de minimis provision, the South China Morning Post reports.
