• Temu is ceasing direct Chinese exports to the US, shifting to a local fulfillment model.
• The change follows the closure of a trade loophole allowing duty-free imports under $800.
• Higher prices are expected as import taxes may now apply to previously exempt goods.

The era of ultra-cheap goods shipped directly from China via Temu is coming to an end.

The e-commerce giant, which added "import charges" to customers' orders at the end of April, announced a dramatic overhaul of its US business model.

Temu is ceasing direct-from-China shipments in response to the federal government closing a long-standing trade loophole.

The "de minimis" exemption allowed packages valued under $800 to enter the US duty-free, a critical advantage Temu and competitor Shein exploited to offer cheap prices.

The exemption, born from a 1938 law meant to simplify customs, became a linchpin of modern e-commerce logistics. Its $800 threshold fueled an explosion of small packages flooding US ports, accounting for the vast majority of import entries, according to CBP data.

Washington moved to close the loophole under the Trump administration, with the two-pronged goal of cracking down on illicit shipments like fentanyl smuggled in small packages and creating fairer competition for American retailers burdened by tariffs bypassed by foreign shippers.

Similar concerns about the rule's exploitation were previously flagged by the Biden administration.

In a statement shared with Business Insider, the company said: "Temu's pricing for US consumers remains unchanged as the platform transitions to a local fulfilment model. All sales in the US are now handled by locally based sellers, with orders fulfilled from within the country.

"The move is designed to help local merchants reach more customers and grow their businesses. This shift is part of Temu's ongoing adjustments to improve service levels."

The impact on consumers is expected to be direct: higher prices.

Goods once exempt could now be hit with hefty import taxes or fees, potentially starting at $100 or based on percentages exceeding 100% of the value. Policy watchers have consistently warned that these new costs would likely be passed on to shoppers.

Besides the cost, officials said the huge number of these packages overwhelmed customs workers and strained inspection resources.

The UK and EU are both considering similar policy shifts, which could prompt a hike in prices in Europe soon.

• Shein and Temu benefit from Trump's pause on ending the de minimis exemption — for now.
• The de minimis exemption allows duty-free imports under $800.
• Meanwhile, many companies that source their products from China are now paying tariffs.

Shein and Temu scored a win thanks to President Donald Trump. As tariffs are hitting retailers and forcing some to raise their prices, both companies are still able to use the de minimis exemption after the Trump administration temporarily paused its plan to eliminate it.

Both companies are doubly advantaged over some of their competitors — at least for now. Many businesses that manufacture their goods in China are now paying extra in tariffs, while de minimis allows companies like Temu and Shein to import low-cost items without paying any kind of duty.

"Everyone will be paying them except for Temu and Shein. (For now; we know de minimis is going away in the future,)" Marketplace Pulse founder Juozas Kaziukėnas said in a LinkedIn post. "Bizarrely, Temu and Shein never had it better."

Neither company responded to a request for comment from Business Insider.

In early February, Trump announced that he would simultaneously impose tariffs on Mexican, Canadian, and Chinese products and end the de minimis exemption, which allowed retailers to import goods duty-free as long as they were valued at less than $800 and being sent directly to customers.

But just a few days later, Trump issued another executive order that said de minimis — also known as Section 321 — would remain in place until customs officials could establish a new process for collecting duty on packages sent using the provision.

Meanwhile, the 20% tariffs on Chinese goods have gone ahead. (Trump temporarily paused the 25% tariffs on Mexican and Canadian goods on Thursday, saying they would be on hold until April 2.) That means that even if an item would have been subject to a tariff, importers do not currently have to pay that tariff if they are shipped via de minimis.

One reason that lawmakers have advocated for the repeal of de minimis in recent years is that it's difficult for American businesses to compete with companies using de minimis to save money. They also have argued that de minimis allows for the import of illicit goods like fentanyl — an argument that Trump has echoed in executive orders.

"The fact that we are immediately penalizing US businesses who manufacture offshore while providing this continued advantage to Chinese marketplaces such as Temu and Shein makes zero sense," Matthew Hertz, founder of the third-party logistics platform Third Person, said to BI.

He wrote on LinkedIn: "There is currently 0% tariffs on individual parcels entering the U.S. from anywhere, so long as values < $800. Even if it's a high-tariff item from China."

Logistics experts expect de minimis to go away, but it's not clear when.

Shein and Temu prepared for the end of de minimis by diversifying their supply chain and fulfilling more of their orders in the US. Both e-commerce companies have previously said they do not rely on de minimis to grow. Industry experts told BI in February that the companies' true advantage lies in their ultra-low prices and, in Shein's case, an ability to manufacture very trendy items in a short period of time.

The Chinese e-commerce disruptors are also not the only companies to use the de minimis exemption. US Customs and Border Protection said in a January press release that de minimis shipments increased by more than 600% from fiscal year 2015 to fiscal year 2023, going from 139 million a year to more than 1 billion. More than 1.36 billion shipments were sent via de minimis in fiscal year 2024, according to CBP.

The announcement that de minimis would be repealed — and then the sudden reversal of that announcement — left many businesses that sell cross-border into the US struggling to plan. With no clear timeline on when de minimis will be officially gone, they now have a bit more time to do so.

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