Key Takeaways
- The Biden administration proposed new rules to limit a loophole around U.S. tariffs that are especially 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.
- The White House said the “significant increased abuse” of the de minimis exemption hurts American consumers, workers, and businesses.
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.
White House officials announced they were countering the “significant increased abuse of the de minimis exemption, in particular China-founded e-commerce platforms,” taking aim at firms like fast-fashion retailers Temu and privately held Shein, although they were not mentioned by name.
The White House said that the number of shipments entering the U.S. that used the exemption had surged to more than 1 billion a year from about 140 million a decade ago.
Loophole Brings ‘Huge Volumes of Low-Value Products’ Into US Duty-Free
The officials argued that the use of the loophole is “putting American consumers at risk, undercutting American workers and businesses, and resulting in the importation of huge volumes of low-value products such as textiles and apparel into the U.S. market duty-free.”
The administration said it would be proposing rules to prevent use of the de minimis exemption for any imports that are subject to Chinese tariffs, as well as other steps to limit the provision’s use. The White House also called on Congress to pass “comprehensive de minimis reform legislation by the end of the year.”
PDD’s ADRs fell 2.5% to $94.88 in late-morning trading Friday and have lost more than a third of their value this year.