The United States (US) government's plan to prevent Chinese e-commerce giants from exploiting a loophole in import regulations "will not put the genie back in the bottle", according to a new analysis from Xeneta.
Analysts at the ocean and airfreight rate benchmarking and market intelligence platform noted that the Biden administration is moving to curb low-value shipments entering the US duty-free under the US$800 'de minimis' threshold, which it says has been abused by Chinese e-commerce platforms such as Shein and Temu.
Niall van de Wouw, chief airfreight officer at Xeneta, pointed out that "Shein and Temu were not set up to expose a loophole in de minimis regulations."
"The cornerstone of the e-commerce business model is the massive and seemingly insatiable consumer demand in the West for low-cost fast-fashion, apparel and textiles," van de Wouw said.
"More than a billion shipments now enter the US under de minimis exemption each year, with the majority originating from Chinese e-commerce platforms. This extraordinary level of demand is not going away, and the genie cannot be put back in the bottle," he added.
Xeneta's latest air cargo market analysis highlighted a 30% annual increase in e-commerce demand ex-China as well as 37 million new downloads of the TEMU app alone in a single month this summer.
While there is no clear timeline for the introduction of the new de minimis regulations, van de Wouw believes the Chinese e-commerce businesses will be able to adapt quickly.
"Companies like Shein and Temu have known for a long time that changes to US import regulations are inevitable, and I don't think they will be overly concerned by the latest announcement," he said.
"Even if the new de minimis regulations cause prices to rise slightly on e-commerce platforms, they will still be very low cost. The US Government is trying to level the playing field for American retailers and manufacturers, but the price differential is so big that they aren't even playing on the same field as Chinese e-commerce," the chief airfreight officer at Xeneta added.
The analysis noted that the US government also stated the growing volume of de minimis shipments makes it difficult to target and block illegal or unsafe goods.
But van de Wouw pointed out that the US government has existing regulations at its disposal to stop illegal goods entering the country, they just need to enforce them.
"Stringent checks of every shipment entering the country would cause massive delays and hurt e-commerce businesses far more than any changes to de minimis regulations, but the resources required for this level of enforcement would be very costly. It would also have major repercussions for other businesses importing goods into the US by air freight," he warned.
Storm is coming to the air freight market
The majority of e-commerce goods are shipped from Asia to the US by air, and the massive growth in volumes during 2024 squeezed available capacity and caused markets to spike.
Data from Xeneta, the air and ocean freight analytics platform, shows that the air cargo spot rate from China to the US in the week ending September 8 was US$4.53 per kg, up 30% year-on-year.
Van de Wouw warns that the air freight market is set for an "extremely challenging year-end peak season when volumes traditionally increase in the run-up to Christmas and New Year."
"There is a storm coming to the outbound China air freight market. Shippers need to take action now and have a clear plan in place for when the storm hits, such as working with their vendor to minimize the use of spot market capacity, which will likely come at spiralling costs," he said.
