At least one country is closing the so-called de minimis “loophole” that critics say is fueling the growth of ultra-fast-fashion e-tailers like Shein and Temu at the cost of domestic businesses.
Come July 1 in South Africa, small overseas shipments valued at under 500 South African rands (roughly $27) will be taxed at the same rate as larger ones. This means that Shein and Temu items that previously squeaked by with a 20 percent import duty and 0 percent value-added tax will have to pay the same 45 percent tariff, plus a 15 percent VAT on the total amount, that local sellers importing textiles have to pony up.
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Neither Shein nor Temu responded to requests for comment.
Trade and industry minister Ebrahim Patel told textile industry workers last month that the rise of global online platforms could undermine progress in South Africa’s manufacturing and retail sectors, where more than half a million jobs have been created over the past five years. Any rules the local industry follows must apply to foreign online traders selling into the market, he said, adding that there was an “urgent need” to address the issue.
Unfair competition for domestic companies is the same reason American lawmakers like Senators Sherrod Brown and Rick Scott and Representative Earl Blumenauer have been pushing for action on de minimis in a rare show of bipartisan unity during a time of congressional gridlock. In the United States, any parcel worth less than $800 doesn’t have to pay customs tariffs or duties. More controversially, they’re less likely to come under the intense scrutiny that the Uyghur Forced Labor Prevention Act demands of larger freight. This, experts say, could allow goods that could have been made by forced labor to breeze into the country.
The fact that Shein and Temu are often namechecked by those who urge the loophole’s closure is no coincidence. Despite respective headquarters in Singapore and Boston, Shein and Temu have Chinese founders and—for the most part—hawk Chinese-made products. Frustration over the firms’ meteoric success has only fueled deteriorating U.S.-Sino relations already stoked by mutual rivalry and distrust.
Shein has also been inundated by allegations of worker exploitation, leading U.K. advocacy groups such as Labour Behind the Label to call its hotly anticipated float on the London Stock Exchange “problematic.”