Washington. The Biden administration is targeting a loophole that allows Chinese companies like Temu and Shein to bypass tariffs by shipping goods valued under $800. A proposed rule released Friday would end these tariff exemptions on imports covered by Sections 201 or 301 of the Trade Act of 1974, or Section 232 of the Trade Expansion Act of 1962.

Currently, Chinese importers can use the “de minimis” exemption to flood the US with low-cost products. The number of these small shipments has surged from 140 million to over 1 billion annually, according to the White House.

This move comes amid ongoing efforts by the US to reduce reliance on Chinese goods, protect emerging industries, and limit China’s access to advanced technologies. Meanwhile, China, grappling with economic challenges post-pandemic, relies heavily on exports to fuel growth.

The US also highlighted the exemption's role in facilitating the entry of illicit substances like fentanyl and enabling Chinese companies to sell cheap textiles, potentially harming American industries.

The changes could significantly impact companies like Shein and Temu, whose competitive advantage relies on keeping prices low. About 40 percent of US imports, including 70 percent of textiles and apparel from China, are currently covered by Section 301 tariffs.

The new rule would also impose stricter requirements for de minimis shipments, including the need for a 10-digit tariff classification number and detailed information from those claiming the exemption.