OVERCOMING THE TAX GAP

Rather than transporting bulk shipments to U.S. warehouses, Shein and Temu ship small individual orders directly to American customers, allowing them to legally bypass import duties. This is because US law exempts shipments under $800 from tax.

Exploiting the tax loophole allows foreign e-commerce platforms to save millions of dollars in import fees that the White House says undercut American workers, retailers and manufacturers.

As the US prepares for the busiest shopping season of the year close the gap It is known as the de minimis exemption. Such a move would force retailers such as Shein and Temu, two of the fastest growing retailers in the country, to pay taxes on goods regardless of their value.

The proposals made by MPs for this purpose in September will not come into force immediately; It will be subject to feedback from the industry before being finalized in the coming months.

MINIMUM IMPACT

In response to the suggestions, both Shein and Temu said the import gap was not central to their success.

While Shein said its growth was based on an “on-demand business model”, Temu said “growth does not depend on this policy”.

Likewise, experts said the impact on companies may be minimal.

“As a customer, if I buy a t-shirt for $3 (and) I have to pay duties, the duties might be 10 percent (or) 20 percent. It’s not important. In this case, the price is still much lower than other retailers,” said Christopher Tan, distinguished professor at the UCLA Anderson School of Management.

But the US is also concerned about another issue with Temu: data privacy concerns.