De minimis

These new products were cheap, which people really like, but they didn't actually last.

Chinese brands like Shein and Timu managed to undercut Zara by moving even faster, having no physical stores, not owning the factories, instead treating them like Uber drivers hooked up to an app, and exploiting a tax loophole known as the de minimis exemption.

The de minimis exemption became law in the United States in 1930 to allow Americans to skip import duties for small value shipments.

It was put in place so that people could bring souvenirs home from their holidays without being taxed.

Most countries around the world have a version of this rule, but the United States had the highest exemption rate of $800 per item.

Americans who have ordered goods from another country online that cost less than $800 over the last ten years have benefited from the de minimis exemption.

If they had bought the exact same item from a local store, the price would have been quite a bit higher, as it would have had to include the cost of manufacturing, shipping, warehousing, along with the store's rent and the wages of the US employee who works there.

Both Republicans and Democrats have talked about ending this exemption for quite some time, as it made it impossible for stores to compete with brands like Timu and Shein, who could avoid most of those costs and pay none of the taxes or fees a larger volume importer would have to pay.

Yeah, great question.

There are specific de minimis thresholds for reporting for applicable manufacturers and GPOs.

The concept here being that Very small payments or other transfers of value to covered recipients don't need to be reported if they fall below these de minimis threshold amounts.

CMS adjusts these thresholds annually based on the Consumer Price Index to account for inflation.

For program year 2026, which we're currently in, an individual payment or transfer value that falls below $13.82 does not need to be reported on its own.

It's going to do what it wants to do.

Dennis, do you, do you get a sense? Like, I mean, if it ever was to be re reinvigorated, like an effort to do it, Do the regulators or policymakers, are they understanding that some of the things that we want the most obviously weren't in there, like de minimis and other things? Are those things that would be able to be re-adjudicated? Do you think there's any path for that, or is it just...

I don't think there's any path for De Minimis right now.

The bill that they tried to put forward, the tax bill that came out, nobody likes it.

I said that before.

For those that might not be familiar with that term, it's like whenever you want something that costs money, you need to have something that will pay for it.

And wash trading is considered to be a big revenue loss for, at least Congress considers it to be a huge revenue loss, and they've done all sorts of like budget I can't remember what the number is, but they've all done all sorts of like budget reporting to like figure out what that loss is every year for the US government.

And so that's considered a pay for, and people were arguing like, well, that's a pay for, for things like de minimis.

But why is this possibly going to be a harder thing coming up in the next month or so? And for who?

So that is because of these type 13 entries for low value shipments that originally they were under the de minimis rule and they could basically come into the country without really any information passed to any government agency.

And so there kind of was, I don't want to say a blind eye to it, but nobody had to submit any information.

So, okay, real quick.

agencies.

Okay, so hold on a sec here.

De Minimis went away last year.

So why hasn't this been a thing for the last year in mail?

Any quick comments on the Sheehan IPO? It was many years in the making.

They've lost their de minimis advantage in America.

How did the IPO go? And what are your thoughts on the prospects?

A few reasons to include this.

We have talked about Shein's desires to go public for quite some time, including just a few weeks ago when it looked like it was going to happen.

And so it did on the Hong Kong exchange.

A couple of interesting things, as you pointed out, their business has really taken a step backward because of the U.S. business taking a big hit because of De Minimis.

But it's a business that went from almost nothing to...

Period.

Look, the De Minimis era is dead.

We're seeing giants like Timu and Sheehan pivot to local fulfillment just to survive this.

It's a structural shift, not more heightened behind small package loopholes.