Temu, one of China’s fastest-growing e-commerce platforms, has announced a significant operational shift in response to tightening U.S. trade regulations. The company, which rapidly gained traction in the American market through its budget-friendly pricing and efficient delivery model, has confirmed that it will no longer sell and ship products directly from China to U.S. consumers. Instead, Temu has stated that it will now rely on “locally based sellers,” with all orders fulfilled domestically within the United States.
This change represents a major shift in the company’s logistics and retail strategy and comes on the heels of increased scrutiny over the use of a long-standing U.S. trade rule known as the “de minimis” exemption. The rule, which allowed international sellers to ship low-value goods (under $800) to U.S. buyers without incurring import duties or taxes, has faced criticism from lawmakers and officials for enabling large-scale evasion of tariffs and, in some cases, facilitating the smuggling of illegal drugs.
Why Temu Is Changing Its Model
Temu, alongside fellow Chinese e-commerce giant Shein, capitalized heavily on the de minimis rule. By shipping inexpensive goods directly from China to the U.S., these companies avoided significant tax and duty costs, enabling them to offer ultra-low prices that undercut local competitors.
However, with recent moves from both the Trump and Biden administrations to tighten or close this loophole, Temu has begun reshaping its approach. According to a company spokesperson, Temu has been actively onboarding U.S.-based vendors to its platform in anticipation of these changes.
“All sales in the U.S. are now handled by locally based sellers, with orders fulfilled from within the country,” Temu confirmed.
“This move is designed to help local merchants reach more customers and grow their businesses.”
While this strategy allows Temu to remain operational and competitive in the U.S. market, it also signals the increasing pressure foreign sellers are facing due to shifting global trade policies.
Understanding the “De Minimis” Exemption
The de minimis exemption is a trade policy originally introduced by the U.S. Congress in 1938. Its purpose was to eliminate the administrative burden of collecting minimal amounts of import duty on low-value items. The Latin phrase “de minimis non curat lex” roughly translates to “the law does not concern itself with trifles”.
Over time, this threshold was raised several times, and in recent years, it allowed for tax-free import of goods valued under $800 per package. This rule applied to millions of shipments daily and became a cornerstone of business models for companies like Temu and Shein, which specialized in selling large volumes of low-cost goods.
According to U.S. Customs and Border Protection (CBP), packages qualifying under this exemption account for over 90% of all shipments entering the U.S. each year. In 2023 alone, the number of such packages surged beyond one billion, up from around 140 million just a decade ago.
Rising Opposition and Closure of the Loophole
Despite its efficiency, the de minimis rule has faced mounting criticism from U.S. manufacturers, retailers, and policymakers. Former President Donald Trump and current President Joe Biden have both opposed the loophole, citing its detrimental impact on American businesses and its potential for misuse.
One of the most pressing concerns is that the exemption has been exploited to smuggle synthetic opioids, including fentanyl, into the United States. According to the Trump administration’s latest executive order, many illicit substances are disguised and shipped as low-value consumer goods to avoid detection under the de minimis policy.
“These drugs kill tens of thousands of Americans each year,” the order noted, highlighting fentanyl’s role in over 75,000 deaths annually.
In February, Trump attempted to temporarily suspend the de minimis exemption, but the move caused immediate chaos across customs operations. The U.S. Postal Service stopped accepting parcels from China and Hong Kong, while online retailers scrambled to adjust to the sudden shift.
Though the suspension was paused, the Biden administration followed up by proposing stricter regulations to curb abuse of the rule. Officials cited the growing difficulty of identifying illegal or unsafe shipments due to the overwhelming volume of de minimis parcels.
As of now, packages sent from China and Hong Kong valued under $800 are no longer tax-exempt. A new tax rate of 120% has been imposed on these shipments, and flat-rate fees have also been introduced—starting at $100 and expected to rise to $200 by June 1st.
The Impact on Chinese Retailers
Both Temu and Shein have admitted that the recent regulatory changes have significantly increased their operational costs. In a joint statement issued last month, the companies stated:
“Our operating expenses have risen due to recent changes in global trade rules and tariffs. As a result, price adjustments will take effect from April 25.”
Shein, which has yet to issue a formal response to the BBC’s request for comment, has also been adapting its logistics strategy, reportedly establishing more local warehouses and fulfillment centers in the U.S. and other key markets.
These strategic pivots underscore the long-term threat that regulatory changes pose to the business models of Chinese e-commerce giants. Their previous success was largely built on fast, direct-to-consumer shipments with minimal customs interference—a framework that is rapidly being dismantled.
Broader Economic and Political Implications
The demise of the de minimis loophole is part of a broader economic decoupling strategy by the United States in its trade relationship with China. Since returning to office in January, Trump has introduced new tariffs of up to 145% on Chinese imports. Combined with previous tariffs, certain goods now face levies as high as 245%, making it increasingly difficult for low-cost imports to compete in the American market.
Beyond the U.S., other countries are also re-evaluating their de minimis rules. In the United Kingdom, international sellers can currently send packages worth less than £135 duty-free. However, Chancellor Rachel Reeves recently announced a review of this policy, citing the need to support local retailers who are being undercut by cheap imports.
Similarly, the European Union has proposed removing duty-free exemptions for parcels valued under €150. If enacted, this would impact platforms like Temu and Shein across multiple global markets, not just the United States.
Consequences for Consumers
For American shoppers who turned to Temu for incredibly low prices on fashion, electronics, and home goods, the regulatory shift could result in noticeable price increases and longer delivery times. Now that products must be warehoused and shipped within the U.S., overhead costs are expected to rise, cutting into the margin advantages that Chinese sellers previously enjoyed.
Research by the American Action Forum, a right-leaning think tank, estimates that removing the de minimis exemption could lead to $8 billion to $30 billion in annual additional costs, most of which would ultimately be passed on to consumers.
While domestic retailers might benefit from the leveling of the playing field, budget-conscious shoppers may find fewer ultra-cheap options available online.
Effects on U.S. Border Security and Customs
While the primary goal of ending the de minimis exemption is to reduce illicit drug imports and protect local businesses, some critics argue that it could overburden the already stretched U.S. customs infrastructure.
The National Foreign Trade Council (NFTC) warned that removing the exemption could divert resources from critical border checkpoints, particularly along the southern U.S. border, where the majority of illegal drug traffic occurs.
“Customs and Border Protection (CBP) would need to hire and train new personnel, costing the agency millions or causing them to redeploy agents from the already overburdened southern border,” said an NFTC spokesperson.
Additionally, the Council highlighted that even under the de minimis rule, packages were still subject to inspection and security checks, making the exemption’s removal potentially less impactful in curbing drug smuggling than anticipated.
Final Thoughts: A New Era for Global E-Commerce
Temu’s decision to pivot away from direct imports from China reflects a growing global shift in how cross-border e-commerce is regulated. While once celebrated for making international shopping more accessible and affordable, platforms that relied on legal loopholes to bypass taxes and customs are now being forced to restructure their business models to comply with stricter oversight.
For U.S. consumers, this could mean fewer bargains but also more reliable product quality and improved protection from unsafe goods. For U.S. merchants, it represents a potential resurgence in competitive fairness. And for policymakers, it’s an ongoing balancing act between national security, economic protectionism, and the free flow of global trade.
Whether Temu and similar platforms can maintain their meteoric rise in markets like the U.S. remains to be seen—but one thing is certain: the era of duty-free, ultra-cheap direct imports from China is coming to an end.
