Following on February 2's "Tariffs: But What About Temu?".
From Yahoo Finance, February 4:
The new levy ends the de minimis exemption, which allows packages worth under $800 to be shipped into the US duty-free.
Some of the biggest losers from Donald Trump’s first new round of tariffs may have turned out to be cheap fashion fans.
On Monday, the president doubled back on his threats to impose a 25% tax on imports from Mexico and Canada, agreeing to postpone the new levies for at least a month after winning some light concessions on border security from the two countries. However, Trump pushed ahead with a 10% tariff on all Chinese merchandise.
As part of that move, the White House also announced that it would close the century-old de minimis exemption, which allows packages worth under $800 to be shipped into the country duty-free. That rule has allowed for the massive growth of Chinese discount retailers such as Shein and Temu, which ship everything from designer knockoff dresses to gaming monitors at rock-bottom prices directly to consumers from overseas warehouses, one tax-free bundle at a time.
That rapid expansion was propelled by 2016 legislation, which increased the value limit of de minimis parcels to $800 from $200. The number of packages entering the country that way surged from 139 million in 2015 to more than 1.36 billion in 2024, according to U.S. Customs and Border Protection, and now account for 90% of all shipments into the US.
The increase has drawn frustration from American manufacturers and retailers, who’ve argued that the de minimis rule offers an unfair loophole that Chinese competitors have been able to exploit. Amazon (AMZN), meanwhile, has recently tried to keep up with its insurgent competitors by building its own direct-from-China marketplace — a “Temu clone” that earned some mixed reviews.
The de minimis rule has also come under intense bipartisan scrutiny in recent years for aiding drug traffickers, who’ve exploited it to move small packages containing the precursor chemicals used in the production of fentanyl undetected across borders. The sheer crush of packages arriving daily by the plane load has made it impossible to carefully inspect most of them, allowing mass quantities of narcotics ingredients to make their way to cartels....
....MUCH MORE
For our younger readers, and for those who were busy leading their lives rather than trying to figure out if they could make some money off this Bezos guy...
Amazon was built on a three-legged stool:
1) not paying state sales tax, giving them a 10% price advantage in California, less but still huge elsewhere.
2) A subsidy on deliveries from the USPS. At one point it was almost $1.50 per package. Not quite John D. Rockefeller getting rebates on his competitors shipments but quite the advantage to have.
3) The magic of the perpetual break-even machine, paying no income taxes while building shareholders wealth.
Some previous posts that may be of interest:
July 2012 - How Amazon’s Ambitious New Push for Same-day Delivery will Destroy Local Retail (AMZN)
October 2017 - The Big Amazon Subsidy is Doomed (but they still get the $1.46 per package USPS subsidy) AMZN
March 2018 - Amazon, the Zenith of Tax Avoidance (AMZN)
March 2018 - "Is Amazon Too Big to Tax? The e-commerce giant paid zero federal taxes in 2017..."
June 2018 - Sales Taxes: "Did The Supreme Court Potentially Bankrupt Tens Of Thousands Of Small Online Businesses?"
May 2019 - A Legal Theory That Could Put Amazon's Entire Business Strategy At Risk (AMZN)
And then in 2020 the administrative response to covid was to bankrupt small brick-and-mortar retailers by outlawing foot-traffic and giving another 10% of the retail pie to Amazon and the big-box retailers who dutifully painted directional arrows and six-foot-circles on their floors, like some sort of graphical incantations ordered by their state and local witch doctors.
