In This Story
Chinese e-commerce giants Temu and Shein have been preparing to maintain their U.S. customer base following the end of the de minimis exemption.
This rule, which allowed goods worth less than $800 to enter the U.S. duty-free, has played a key role in their rapid growth in the American market. But with President Donald Trump’s recent decision to suspend the provision, both companies are stepping up efforts to navigate new tariffs and customs rules.
To reduce the impact of the changes, Temu has increased its focus on promoting items stored in U.S. warehouses, allowing it to bypass the tariffs that would have affected direct shipments from China. Shein has adopted a similar strategy, using warehouses in states like California and New Jersey.
While this strategy may help them compete with Amazon, it also means both companies are working with less inventory. However, focusing on local inventory allows them to speed up delivery times – a critical advantage in the crowded e-commerce space. This has already paid off for Temu, with a significant portion of U.S. sales now coming from U.S.-based sellers. Temu had been exploring faster delivery options from local sellers even before the tariffs. Amazon (AMZN+0.84%), however, still leads the way in same-day and next-day delivery, with over nine billion items delivered in 2024.
Shein, which has already been localizing its operations, has expanded its U.S. distribution centers. This shift enables Shein to fulfill orders from local stock, reducing its reliance on cross-border shipments while easing the impact of tariffs. The move also cuts down on delivery wait times, potentially boosting sales. However, Shein’s U.S. IPO plans are now uncertain as the company faces challenges, including concerns over its labor practices, which have delayed its public debut.
The uncertainty surrounding cross-border shipments grew when the U.S. Postal Service (USPS) briefly stopped accepting packages from China, throwing a wrench in operations for companies like Temu and Amazon. The Postal Service quickly reversed course, allowing packages to be accepted once again. Still, the episode highlighted the volatility that Chinese e-commerce firms face as they navigate shifting customs requirements.
For now, Temu and Shein’s strategies to go local signal that both companies have been preparing for these regulatory shifts and are taking steps to soften the impact.
While critics argue that the de minimis exemption gave Chinese companies an unfair advantage, experts believe both Temu and Shein will continue to thrive. Santa Clara University Professor Kirthi Kalyanam told Business Insider that Shein’s success is driven by its manufacturing model, not its reliance on de minimis shipments. While the “tightening” of de minimis may remove any price advantage, Kalyanam believes Shein’s core strengths will remain intact.