White House Targets Chinese E-Commerce Firms with New Import Rules
American depositary receipts (ADRs) of Temu parent PDD Holdings (PDD) fell Friday after the Biden administration took new steps to limit tariff exemptions that often benefit Chinese e-commerce companies. The White House announced a crackdown on what is known as the de minimis exemption—a trade provision that allows imports of products that sell for less than $800 to avoid paying duties and processing fees.
Cracking Down on Abuse of the De Minimis Exemption
The White House has proposed new rules to limit a loophole around U.S. tariffs that is frequently used by Chinese e-commerce firms. The de minimis exemption allows for imported products valued at less than $800 to avoid paying duties and processing fees. However, the Biden administration argues that there has been a “significant increased abuse” of this exemption, which is hurting American consumers, workers, and businesses.
White House officials have expressed concerns about the abuse of the de minimis exemption, particularly by China-founded e-commerce platforms. While not mentioning any specific companies, fast-fashion retailers Temu and privately held Shein are among the firms that could be affected by these new rules.
The number of shipments entering the U.S. using the de minimis exemption has surged to over 1 billion per year, up from about 140 million a decade ago. This influx of low-value products, such as textiles and apparel, into the U.S. market duty-free has raised concerns about the impact on American consumers and businesses.
Proposed Rules and Legislative Action
In response to the abuse of the de minimis exemption, the Biden administration is proposing rules to prevent its use for any imports that are subject to Chinese tariffs. Additionally, the White House is taking other steps to limit the provision’s use. The administration is also calling on Congress to pass comprehensive de minimis reform legislation by the end of the year.
The announcement of these new rules has had an immediate impact on the stock market. ADRs of PDD, the parent company of Temu, fell 2.5% to $94.88 in late-morning trading on Friday. This decline adds to the company’s losses, as its ADRs have already dropped by more than a third of their value this year.
Implications for Chinese E-Commerce Firms
The White House’s move to limit the de minimis exemption could have significant implications for Chinese e-commerce firms. These companies have been able to take advantage of the exemption to avoid paying tariffs and processing fees on their low-value products. By closing this loophole, the Biden administration aims to level the playing field for American businesses and protect American workers.
Chinese e-commerce platforms, such as Temu and Shein, may face increased costs if they are no longer able to benefit from the de minimis exemption. This could impact their competitiveness in the U.S. market and potentially lead to higher prices for American consumers.
Conclusion
The Biden administration’s proposed rules to limit the de minimis exemption are aimed at addressing the abuse of this trade provision by Chinese e-commerce firms. The surge in shipments using the exemption has raised concerns about the impact on American consumers, workers, and businesses. By proposing these new rules and calling for legislative action, the White House is taking steps to protect American interests and create a more level playing field for businesses. The impact of these rules on Chinese e-commerce firms remains to be seen, but it could have significant implications for their operations and competitiveness in the U.S. market.
Read the original article on Investopedia.
