Temu, a prominent Chinese online retailer owned by PDD Holdings, is strategically shifting its focus to bolster its U.S. market presence following significant changes in trade regulations. The de minimis provision, which previously allowed e-commerce companies to send goods under $800 into the U.S. duty-free, has been a critical factor in Temu's and Shein's rapid growth stateside. However, following President Donald Trump's decision to revoke this provision, Temu is now steering its users toward products labeled as "local."
In response to heightened scrutiny from U.S. lawmakers concerning the de minimis exemption, Temu has increased its onboarding of sellers with inventory stored in U.S. warehouses. This strategic move began in March and by July, approximately 20% of Temu’s sales in the U.S. emanated from these domestic sellers. This shift not only facilitates faster delivery times for American consumers but also reduces Temu's dependence on Chinese-based merchants.
To accommodate this transition, Temu has significantly enhanced its promotion of items shipped from U.S. warehouses within its app interface. The company aims to localize and support speedier delivery times for American consumers, aligning with similar strategies employed by Shein.
"Localize and support speedier delivery times for American consumers." – Shein.
The de minimis provision has been pivotal for various e-commerce platforms, allowing the influx of goods into the U.S. without incurring tariffs. According to a 2023 report from the House Select Committee on the Chinese Communist Party, Temu and Shein are "likely responsible" for over 30% of these shipments. Moreover, the Customs and Border Protection (CBP) has reportedly processed over 1.3 billion de minimis shipments in 2024 alone.
"Likely responsible." – House Select Committee on the Chinese Communist Party.
In response to the changing landscape, Temu has established distribution centers across several U.S. states, including Illinois and California, and a supply chain hub in Seattle last year. These strategic locations aid in expediting the delivery process and maintaining competitive advantage in the fast-evolving e-commerce market.
The revocation of the de minimis provision has not only impacted Temu but also prompted competitors like Amazon to innovate. Amazon launched its budget storefront, Haul, last year as a direct response to the burgeoning presence of Temu and Shein in the U.S.
Despite these adaptations, concerns persist regarding counterfeit and unsafe goods associated with many local listings. These items often indicate they are sold by businesses based in China, even when stored in U.S. warehouses, raising alarms about product authenticity and consumer safety.
The increased scrutiny over de minimis shipments has led to a dramatic rise in compliance efforts. Hugo Pakula, CEO of supply chain compliance company Tru Identity, noted the intensified regulatory oversight.
"They have to do 10x more screenings this week than last week." – Hugo Pakula, CEO of supply chain compliance company Tru Identity.