Temu has defied expectations by staying in business despite offering incredibly low prices on everyday items and spending exorbitant amounts on advertising, including Super Bowl ads. The secret to their success lies in various strategies, such as operating at a loss to gain market share. However, one crucial advantage that may soon disappear is their ability to deliver affordable Chinese-made products to American consumers without facing escalating tariffs.
Temu has managed to evade higher tariffs on Chinese imports by leveraging the “De Minimis Value,” a threshold below which individual shipments are exempt from customs duties. Unlike major US companies like Apple and Amazon, which ship large quantities of products to warehouses, Temu ships directly to customers with most items priced under $800, allowing them to bypass import duties. Even if a customer orders multiple items exceeding the threshold, Temu cleverly organizes shipments to stay under $800.
However, the era of tariff-free imports for companies like Temu is coming to an end as President Trump recently suspended the de minimis exemption for all countries. Starting August 29, goods valued at or under $800 sent through non-postal networks will be subject to duties. While goods shipped through postal networks will also face duties, a phased approach will be implemented for the first six months to ease the transition.
Although Chinese companies like Temu and Shein were already affected by this change earlier, the Biden-Harris administration had also considered De Minimis Reform. With the elimination of this trade loophole, companies will need to adjust their strategies to navigate the new tariff landscape.
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