Lately, the international trade newsroom has cast a bright spotlight–or should we say dark shadow–on some of the shadier business practices allegedly leveraged by certain popular e-commerce platforms.

If you were one of the 123 million viewers that tuned into Superbowl 58, chances are you caught a glimpse of at least one of the six commercials aired by Temu, an e-commerce retailer based in China.

But how did Temu manage to allocate such a hefty sum towards its marketing budget given its rock-bottom prices on everything from 3D chicken nugget pillows to seasonal holiday decorations? Simple. It’s likely the result of the retailer taking advantage of a US import tax loophole known as de minimis.

Maximizing the De Minimis Exception

Before we kick-off, let’s take a moment for a quick warm-up stretch to jog our muscle memory. If you’re wondering what the de minimis loophole is, think of it this way:

You have a piggy bank in your room. Every time you deposit more than five coins, you have to give one extra coin to your mom or dad for taxes. However, you don’t have to pay the additional tax on any deposits made containing five or fewer coins. Instead of making one large deposit of say, 20 coins, you could make four individual deposits of five coins to avoid paying the additional tax.

Some e-commerce companies are running a similar game when it comes to de minimis shipments.

If an importer brings goods valued at more than $800 into the US, they are typically taxed by the government. However, retailers like Temu and Shein attempt to circumvent import taxes by shipping directly to the consumer, thereby avoiding the additional duties levied by US Customs and Border Protection (CBP) and/or other Participating Government Agencies (PGA) at entry.

In addition to skirting tariffs, there is growing concern that this loophole allows for shipments of goods produced from forced labor to enter the US more easily, given the fact that they bypass the rigorous exams, inspections, and duties that the majority of brick-and-mortar–and even some online competitors–cannot dodge. 

The Unintended Dark Side of De Minimis

Initially intended to facilitate smoother trade and Customs processes, this provision may now enable a more dubious practice: the potential for these tariff-dodging shipments to include goods produced through forced labor. This concern is not unfounded, given the complexities and opacities of global supply chains, especially those rooted in regions with poor labor rights records.

In 2022 alone, a staggering 685 million shipments imported into the US benefited from the de minimis exemption. Reports suggest that Temu and Shein combined are responsible for more than 30% of this volume. Now more than ever, consumers are attuned to the origins of the products they purchase and are demanding assurances that their spending does not endorse, or support forced labor.

The de minimis loophole underscores the critical need for transparency, accountability, and ethical considerations in global commerce. US lawmakers are now watching this performance with a critical eye, concerned not just about the loss of tariff revenue but also its darker implications.

As the discussion around the de minimis provision and its unintended consequences unfolds, it’s clear that any path forward will require a collaborative effort. Lawmakers, businesses, and consumers alike must engage in an open dialogue to ensure that the benefits of e-commerce growth and international trade do not come at the expense of human rights.

The narrative surrounding Temu and the de minimis loophole serves as a poignant reminder of the intricate link between commerce, ethics, and legislation. While we navigate this playbook, let’s strive for a future where trade not only thrives economically, but also upholds the fundamental values of fairness, transparency, and respect for human dignity.