A loophole used by Shein/Temu to ship packages to US tax-free (2024)

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I live in New Zealand - until 2019 things used to work this way for us too. A law was introduced to require overseas sellers selling more than $60,000 NZD&#x2F;year into New Zealand to collect pay our Goods and Services Tax. Now Amazon&#x2F;Temu&#x2F;AliExpress others all collect 15% NZ GST at the checkout. It&#x27;s pretty seamless as a buyer, just that GST is not usually shown until checkout unlike domestic sites. <a href="https:&#x2F;&#x2F;www.ird.govt.nz&#x2F;gst&#x2F;gst-for-overseas-businesses&#x2F;gst-on-low-value-imported-goods&#x2F;registering-for-gst-on-low-value-imported-goods" rel="nofollow">https:&#x2F;&#x2F;www.ird.govt.nz&#x2F;gst&#x2F;gst-for-overseas-businesses&#x2F;gst-...</a>

It isn&#x27;t a loophole. It&#x27;s by design. You can argue the limit should be lower, but it&#x27;s not like 2016&#x27;s $200 threshold would break Temu either.

I’ve experienced part of this as someone that once sold imported music back in the late 90s. A competitor opened up in Hong Kong that sold at retail prices lower than our wholesale prices (we used legit importers who paid their duties and priced accordingly). I placed an order to see how it would turn out, and when I received the package, there was a note inside that stated the duties had not been paid on the order and that I was responsible for them. If customs were to inspect the package, they would hold it and release it once the duties were collected. These packages were too small and infrequent for customs to ever take notice, so the buyers were essentially getting items tax free because of course nobody self reported and paid these taxes.<p>This was pretty much the straw breaking the camel’s back, and our little import business shut down shortly after that as orders dropped like a rock

U.S. de minimis exception ends on Tuesday 4 February 2025 for all Chinese imports. New limit of 0$ for all goods.<p>What will be the total tariff percentage on custom PCBs from China?

A &quot;loophole&quot; that is very cut-and-dried piece of law. If you want companies to pay tax on products, don&#x27;t set the minimum value threshold to $800. We used to have it at about 45€, then at 22€ and now at 0€. If I need to buy a 5€ adapter from Aliexpress, I pay VAT on it.

That ended yesterday. Trump&#x27;s new tariffs apply all the way down to $0.<p>Not clear what happens now that Customs and Border Protection has to look at all those little boxes.<p>This isn&#x27;t unexpected, though. There was a notice of proposed rule making back in September 2024, and it was probably going to happen this year, anyway.[1]<p>This is going to complicate the &quot;dropshipping&quot; business. The dropshipper is usually the importer, and they now have to pay customs duties. But they&#x27;re not the seller of record (the one Amazon says is the seller), who collects from the customer. Amazon likes to consider the customer to be the importer, but that may not fly. Amazon sellers are going to have to deal with the wonderful world of customs brokers, bonded warehouses, and e-filing customs paper work.<p>Dropshippers who order in bulk and then ship out individual packages now either have to pay duties when they get the bulk shipment, or use a bonded warehouse (inspected by CBP) to store stuff on which duty has not yet been paid. DHL has a bonded warehouse service.<p>[1] <a href="https:&#x2F;&#x2F;www.jdsupra.com&#x2F;legalnews&#x2F;cbp-proposes-to-modify-the-de-minimis-2068031&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.jdsupra.com&#x2F;legalnews&#x2F;cbp-proposes-to-modify-the...</a>

(2024)<p>Year old story.<p>More recent development discussion:<p><i>US targets trade loophole used by ecommerce groups Temu and Shein</i><p><a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=41536137">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=41536137</a>

Presuming they also combine this with foreign post abuse too? ie where one country&#x27;s post office takes the mail at a knock down discount and then rely on the deal that post offices take on foreign sourced mail delivery for free, meaning the sender gets a massive discount vs sending if it were charged at anything remotely sustainable.

I hate this cycle.<p>1) Media - you won&#x27;t <i>believe</i> this legal loophole!<p>2) Politicians - what loophole? that&#x27;s the law working as intended.<p>3) Media - watch our corrupt politicians defend the evil loophole that costs us <i>millions</i>!<p>4) Politicians - ok, we&#x27;ll change it then. that&#x27;ll get us positive coverage, right?<p>5) Law - gets worse

let&#x27;s be clear: deminimus being $800 is corrupt.<p>what gets me about this sort of thing is that we don&#x27;t wind up getting to the bottom of it. the current deminimus violates the intent - we need to not just restore it to something reasonable, like $10, but also find out what in the process went wrong, find out whose palm was greased.<p>$10 sounds too low? consider that with today&#x27;s IT, import processing fees should be much lower than that. the idea of deminimus is a fine one, just that these numbers don&#x27;t make sense, and cause a lot of damage.

&quot;The limit for eligible items has been raised many times over the years, most recently going up to $800 from $200 in 2016.&quot;<p>4x increase. What is the explanation

They pay sales tax

Yeah, they use the same scam in Europe as well. There was a documentary following some customs officials a few months back, apparently they even use &quot;smurfing&quot; - they split large orders into multiple parcels with nominated &quot;lower&quot; values [1]... but of course sometimes the customs officials note &quot;hey, I saw that recipient just a few packages ago&quot;.<p>It&#x27;s high time that we put the hammer down on Temu, Shein et al., and that <i>hard</i>. China and its companies routinely abuse relaxed rules meant for &quot;developing&quot; countries such as reduced, subsidised shipping or the mentioned tax simplifications - that status absolutely has to end rather sooner than later.<p>And if they do not want to do that for whatever (corrupt?) reasons, at the very least mandate live feeds for all incoming parcels to customs.<p>[1] <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=ySUKSRydpnY" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=ySUKSRydpnY</a>

Same in the UK.

&quot;loophole&quot;