China no longer has a de minimis trade exemption. What is it?

A trade loophole called de minimis helped drive explosive growth for bargain sites such as Temu and Shein, allowing them to ship cheap goods from China to U.S. consumers without having to pay taxes and import duties.

But that now stands to change, after President Trump signed an executive order stating de minimis treatment “shall not be available” for products made in China, the top source of goods imported to the U.S.

The effects could be far-reaching: De minimis shipments account for most of the cargo entering the U.S., Customs and Border Protection said last fall. The agency said it was handling some 4 million de minimis shipments every day — a rate that would blow past the previous year’s mark of more than 1 billion shipments.

When asked to comment on the U.S. shift, Teresa Murray of the Public Interest Research Group consumer watchdog told NPR that her group supports changes to the law.

De minimis shipments “often don’t have as much documentation, making it easier to get the shipments into the United States, whether we’re talking about unsafe consumer products or fentanyl or food items that aren’t permitted to be imported,” Murray said.

Here’s a quick guide to de minimis:

The U.S. limit is among the highest

De minimis is a Latin term denoting something that is “trifling or of little importance,” according to the U.S. International Trade Commission. It became law in the U.S. Tariff Act of 1930, as a way to let people skip import fees for small-value shipments.

But over the past decade, de minimis has loomed large: such shipments to the United States rose from 140 million in 2014 to 1 billion in 2023, according to the White House.

About 100 countries have de minimis exceptions, based on a wide range of monetary thresholds. The U.S. level used to be $200, but it rose to $800 in 2016 — one of the highest in the world — when then-President Barack Obama signed the bipartisan Trade Facilitation and Trade Enforcement Act. Across the European Union, the level is 150 euros (about $156).

Items imported under the exemption “are free of duty and taxes and are subject to expedited clearance processing,” the U.S. International Trade Commission notes.

Backers of the existing de minimis structure say it eases commerce and gives consumers low prices; critics say it is used to hawk “cheap crap,” as one lawmaker put it, and gives foreign companies an unfair advantage over domestic retailers.

Even before Trump was sworn in last month, de minimis was being targeted for change. The Biden administration proposed a new rule last fall to close the loophole. And U.S. agencies and politicians have said the law is prone to abuse, from unscrupulous retailers falsely labeling expensive items as costing under $800 to criminals shipping illegal drugs under the guise of innocuous goods.

As Trump’s new 10% tariff on Chinese goods took effect, the U.S. Postal Service said on Tuesday that it was suspending acceptance of packages sent from China and Hong Kong — but it reversed course on Wednesday, saying it’s working with Customs and Border Protection on a way to collect the new tariff “to ensure the least disruption to package delivery.”

Temu and Shein are under scrutiny

Together, Temu and Shein accounted for about 17% of the U.S. discount market in 2023 for items such as consumer goods, fast fashion, and toys, according to a report on de minimis policies that the Congressional Research Service (CRS) updated last week.

Neither company responded to NPR’s request for comment about the new U.S. de minimis policy before this story was published.

Murray, of the Public Interest Research Group, said her group supports bipartisan legislation such as the Ensure Accountability in De Minimis Act, which would limit which shipments can benefit from de minimis rules.

“Restricting what qualifies for a de minimis exemption would help keep more unsafe toys and other products from getting into our homes,” Murray said. “This would make people in the United States safer.”

But she also said that lowering the U.S. limit on de minimis wouldn’t be enough to stop shipments of small packages that go directly from Temu and Shein to U.S. consumers without close inspection.

Exporters also use “master cartons” (large containers holding individually wrapped boxes) and transshipments (transferring cargo to another container or vessel) to obscure products’ origins and contents, according to the CBP.

While the new U.S. policy targets China, both Temu and Shein seem to be trying to become more global.

They’re among the Chinese-founded businesses that have shifted key parts of their corporate structures outside of China. The CRS report notes that Shein doesn’t sell goods within China and has a parent company that “is based in Singapore and tied to a holding company in the British Virgin Islands,” while Temu’s parent company, PDD Holdings¸ “changed its legal domicile from the PRC to Ireland.”