Chinese Fashion House Shein and Trade Loopholes

Shein is dominating with ultra-low prices for Chinese made goods. The reason is a Trump-era tax loophole.

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Dresses for $10? Shorts for $6? Tank tops for $4? Yes, that’s what Chinese clothing retailer Shein is now offering. With sales at $10 billion and growing, Shein is restructuring the clothing industry. And why? It’s because of a tax loophole that Barack Obama and then Donald Trump put into trade law for online purchases.

Because Shein ships most orders from its warehouses in China, it was already in a good position in the U.S., where packages worth less than $800 have been able to enter the country duty-free since 2016. When the Trump administration later imposed tariffs to make Chinese products more expensive, the small-value shipments remained exempt.

That’s the de minimus exception for imports, which allows individuals to buy up to $800 of goods every day duty and tax free. That wouldn’t be such a big deal because most retailers buy large quantities and then put them in stores for sale, so duties and tariffs apply. Now, however, online merchants, like Amazon and Shein, ship directly to consumers, and they argue that the consumer is the end purchaser.

That means everything bought online and shipped directly from a Chinese warehouse comes in duty free. The Customs and Border Patrol can close parts of this loophole, but ultimately Congress should get rid of it. There’s just no reason to have one set of import rules for stuff that’s bought online and a different set for everything else.

There’s a reason we don’t make much clothing in America anymore. That reason is called policy.