US Ends Tax-Free Status for Chinese E-commerce: How Are Temu Orders Still Untaxed?

In April 2025, American consumers shopping on the Temu platform noticed that some orders were not subject to import fees, despite the Trump administration revoking the "de minimis" tax exemption for China and Hong Kong on May 2. This move drew attention as tariffs as high as 145% and import fees up to $200 per package are about to be implemented. The article explores the legal background of the U.S. "de minimis" system and how Chinese e-commerce platforms such as Temu and Shein have leveraged this system for cross-border sales, and analyzes the impact of these policy changes on their business models.

Introduction to the U.S. "de minimis" System

The U.S. "de minimis" system originates from Section 321 of the U.S. Code, allowing packages with a single import value not exceeding $800 to be exempt from tariffs and import taxes. The initial purpose of this system was to simplify customs procedures, reduce administrative costs, and promote small cross-border e-commerce transactions. In 2016, the U.S. Congress raised the tax exemption threshold from $200 to $800, leading to a surge in declarations. According to U.S. Customs and Border Protection (CBP) data, as of 2024, approximately 4 million packages enter the U.S. daily under the "de minimis" system, with over half coming from China.

How Temu and Shein Utilize the "de minimis" System

Chinese e-commerce platforms Temu (a subsidiary of Pinduoduo) and Shein are the biggest beneficiaries of the "de minimis" system. These platforms use direct mail to send goods valued under $800 directly from China to U.S. consumers, bypassing traditional customs processes and tariffs. This model allows them to offer clothing, home goods, and electronics at extremely low prices, rapidly expanding in the U.S. market.

According to a report by Business Insider, Temu and Shein together account for over 30% of the U.S. daily "de minimis" packages in 2024. These platforms have even developed specialized logistics and customs systems to ensure each order is split into low-value small packages to meet the tax exemption threshold.

Policy Shift: Trump Administration Ends "de minimis" Treatment

In February 2025, former President Trump signed an executive order announcing the termination of "de minimis" treatment for China and Hong Kong starting May 2. Under the new regulations, all packages from these two regions will no longer enjoy the tax exemption benefit for items under $800 but will instead be subject to tariffs as high as 120% or a fixed import fee of $100 per package (increasing to $200 on June 1).

This move is seen as a trade defense measure against Chinese e-commerce. The White House statement noted that the "de minimis" system has been abused, not only undermining the competitiveness of U.S. domestic retailers but also becoming a channel for illegal drugs and counterfeit goods entering the U.S.

Temu's Response Strategy: Import Fees and Local Warehouses

In response to the policy change, Temu began imposing an "import fee" on some products starting April 25, with rates as high as 130% to 150%. For example, a summer dress priced at $18.47 incurs an additional import fee of $26.21 at checkout, bringing the total to $44.68, a 142% increase. Temu explains on its website that this fee covers all customs-related processes and costs, including import taxes paid on behalf, but does not guarantee it matches the actual amount paid.

However, some consumers still find their orders not subject to the import fee. This is because Temu has also launched another strategy: prioritizing "local warehouse" products. According to a report by Business Insider, Temu has placed U.S. warehouse items at the forefront of search results and recommendation pages. These products, already circulating within the U.S., are no longer considered imports and are naturally unaffected by the new tariffs.

Additionally, according to a report by Yahoo Finance, the proportion of Temu's local warehouse products in the U.S. has significantly increased. Among its top 80 best-selling items, 66 are marked as "shipped from U.S. warehouse," with prices remaining relatively stable and no import fees added.

Shein's Approach: Tariffs Included in Prices

Unlike Temu, Shein chooses to incorporate tariff costs directly into product prices rather than listing them as separate import fees. Starting April 25, Shein adjusted the prices of most products, with beauty and health items seeing an average increase of 51%, and some items rising by as much as 377%. Shein added a notice on the checkout page: "Tariffs are included in the price you pay, and you do not need to pay additional fees upon delivery."

Although this approach makes the price increases less apparent, it similarly reflects the impact of policy changes on operating costs.

Legal and Policy Background Supplement

The legal basis for the U.S. "de minimis" system is Section 321 of the U.S. Code (19 U.S.C. § 1321), enforced by U.S. Customs and Border Protection (CBP). This provision allows for the exemption of tariffs and taxes on imports "valued below the statutory threshold." In 2016, the U.S. Congress passed the Trade Facilitation and Trade Enforcement Act (TFTEA), raising the threshold from $200 to $800.

However, as Chinese e-commerce extensively utilized this system, the U.S. Congress and enforcement agencies began questioning its fairness and security. In 2023, a report by a special committee of the U.S. House of Representatives noted that nearly half of the "de minimis" packages came from China, with some involving counterfeit goods and drug smuggling. This prompted the Trump administration to take action in early 2025, ending the treatment for China and Hong Kong.

US Ends Tax-Free Status for Chinese E-commerce: How Are Temu Orders Still Untaxed?

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