In recent developments, a significant number of imported goods, predominantly Temu items, are encountering delays in clearing U.S. customs, disrupting the usual clearance process. This issue, which has garnered attention across the cross-border community, has the potential to escalate into a widespread crisis, although the duration of these disruptions remains uncertain at present.
On May 23rd, SEKO, a prominent U.S. customs clearance and logistics firm, announced to stakeholders that its T86 parcel clearance qualification has been temporarily suspended by customs. This suspension is expected to last for a minimum of 90 days, during which SEKO will be unable to process T86 clearance shipments.
Recently, a group of customs clearance firms operating at the major freight airport in Chicago, USA, faced permit revocations by customs authorities due to violations related to clearing cross-border e-commerce goods.
Meanwhile, customs authorities in the western United States have intensified scrutiny on customs clearance firms handling Chinese goods. Following concentrated inspections on some firms offering T86 services, authorities found deficiencies in personnel and qualifications necessary for supervising clearance services for small packages. Consequently, their T86 clearance services were suspended. Since March, renowned customs clearance firms in Los Angeles have had their T86 clearance services suspended, leading to a scarcity of clearance resources and congestion at the entire airport.
While customs clearance firms providing general trade clearance services can still operate compliantly, U.S. customs supervision over clearance procedures is tightening. Additional inspection sites have been set up in Los Angeles to oversee goods imported from China.
Earlier this year, U.S. customs began focusing on T86 clearance for small packages imported from China. While T86 clearance is legal, there is a list of prohibited items, including agricultural products and tobacco and alcohol products, that cannot be cleared using this method.
Due to heightened demand, clearance firms may sometimes succumb to client pressure, such as concealing the nature of goods. However, for logistics companies and customs clearance firms, such practices are non-compliant.
With few source companies possessing customs clearance qualifications, U.S. customs inspections of small packages are expected to become more stringent, affecting clearance efficiency. Given the strict efficiency requirements for small packages, sellers and logistics companies must devise contingency plans and stay abreast of customs policies.
Where to Next for E-commerce Sellers Going Global?
TikTok, along with Shein and Temu, is encountering legislative scrutiny in the United States. On April 19th, the House Committee on Ways and Means approved "The End China's De Minimis Abuse Act," which seeks to enhance regulations governing the entry of Chinese goods under the "de minimis" exemption and introduce penalties for non-compliance. Representative Blumenauer underscored the imperative for decisive measures.
In the United States, the "de minimis" provision traces back to Section 321 of the Tariff Act of 1930, allowing goods valued under $800 to enter the country free from duties and without rigorous scrutiny by the U.S. Customs and Border Protection (CBP).
CBP data reveals a steady rise in cross-border small package entries into the United States: 410 million in 2018, 500 million in 2019, 640 million in 2020, and 770 million in 2021. In 2023, this figure surpassed one billion for the first time. Notably, the fiscal year 2023-2024 witnessed a notable surge in goods entering the United States via the "de minimis" provision. Presently, 94% of all import transactions utilize this rule, encompassing 90% of the total value of seized illegal drugs, agricultural products, and counterfeit items.
During the 2023 Super Bowl in the United States, Temu made a significant impact by airing two 30-second ad slots. The company's bold move to secure six Super Bowl ad slots earlier in February garnered widespread attention in American media reports. As of January 2024, Temu boasts over 50 million monthly active users in the US, marking a remarkable 300% year-on-year increase, with a staggering 1.23 billion app downloads. In the fiercely competitive US market, Temu dominates with a commanding 60% share of merchandise sales, while Shein maintains a solid 40% market share, solidifying its position as the leading fast-moving consumer goods brand in the United States.
Shein and Temu have made significant strides in both the US and global markets, leveraging products sourced from cost-effective supply chains in China, typically with an average order value not exceeding $10. While this approach has enabled them to capture a wide customer base, it has also led to lower profit margins. By the end of 2023, both companies were collectively shipping approximately one million packages per day in the US alone—a figure that continues to surge. However, alongside concerns surrounding data security and intellectual property rights, they now grapple with the looming threat of import taxes on their goods.
Chinese goods primarily enter the US through three main channels: direct shipping, partnerships, and overseas warehouses. Small and medium-sized merchants often opt for direct shipping, while larger platforms and enterprises leverage overseas warehouses for cross-border logistics fulfillment. The direct shipping model has traditionally favored e-commerce sellers, as it aligns with the "de minimis" policy, allowing small goods to enter duty-free. However, recent changes to low-value duty-free allowances have impacted this model, eroding its price advantage. With the elimination of informal customs clearance, goods now undergo more stringent inspection procedures upon arrival at the border, resulting in delays in clearance.
Despite the pricing advantage, Chinese goods still encounter challenges under general tariff calculations. To navigate these complexities, cross-border e-commerce sellers must adopt tailored tools and strategies to ensure compliance with new regulations and sanctions. For products with higher profit margins and average order values conducive to centralized stocking, leveraging overseas warehouses may offer a viable solution. Alternatively, establishing manufacturing facilities in the US could present opportunities, provided companies adhere to rules of origin and secure US origin certificates. However, this approach may encounter obstacles and limitations under evolving legislation.
Chinese cross-border e-commerce giants like Temu and Shein are grappling with a notable lack of trust within the US market, largely stemming from the US government's regulatory crackdown on these platforms. American media coverage has predominantly centered on copyright disputes and their repercussions for local US businesses, overshadowing any positive contributions these platforms may make in environmental stewardship or community engagement. Despite significant usage among American consumers, particularly on the Temu platform, there remains a prevailing skepticism toward these platforms. In contrast, despite facing a ban in the US, TikTok enjoys widespread support from American users, complicating efforts by US policymakers to enforce the ban. Consequently, Chinese e-commerce companies face a critical imperative to enhance user trust and perception.
Looking ahead, adjustments to laws and policies surrounding "de minimis" exemptions in the US will emerge as a central focus. For cross-border e-commerce sellers, the "de minimis" issue transcends mere cost considerations, encompassing critical factors such as operational compliance, business strategy, and brand reputation. There is a pressing need for these companies to bolster their localization efforts and fortify their resilience against political and economic uncertainties in target markets. Additionally, they must cultivate a nuanced understanding of local political dynamics and engage in adept negotiation strategies to navigate evolving regulatory landscapes effectively.
Comments