A global backlash is intensifying against the rapid proliferation of duty-free, low-value parcel shipments, predominantly originating from China's fast fashion hubs like Guangzhou. These shipments, which have increased exponentially in recent years, are facing scrutiny and regulatory changes in major markets, including the US, Europe, and other developing nations, while simultaneously, the rise of ‘micro-sweatshops’ continues to plague the industry.
US restrictions on certain goods
President Donald Trump recently ordered a halt to the duty-free entry of parcels valued up to $800 into the US, citing concerns over the unchecked flow of potentially dangerous goods, such as fentanyl. This move, temporarily suspended, to allow for the development of inspection protocols, signals a potential shift in international trade and could significantly impact e-commerce giants like Shein, Temu, and Amazon's Haul, which heavily rely on the "de minimis" exemption.
As per The New York Times report the de minimis rule, which allows low-value parcels to bypass customs inspections and tariffs, has led to the explosive growth of fast fashion, with duty-free shipments to the US increasing tenfold since 2016, reaching four million parcels per day last year. Similar shipments to the EU have grown to 12 million parcels daily.
The European Commission has also proposed ending duty-free treatment for packages worth up to €150, citing concerns about product safety, counterfeit goods, and unfair competition. And South Africa has imposed 45 per cent tariffs on all clothing imports, regardless of value, and Thailand has ended its sales tax exemption for low-value parcels.
Labor conditions in Guangzhou, Yiwu in focus
The heart of this industry lies in cities like Guangzhou and Yiwu, where networks of workshops and factories churn out inexpensive clothing, toys, and other goods for global consumers. Labor conditions within these workshops are often harsh, with workers like Wu Hua earning as little as $5 per hour, including overtime, for 10-hour workdays. They often reside in cramped living quarters above the factories.
Shein and Temu, major players in the de minimis industry, coordinate their supply chains from Guangzhou, collaborating with thousands of small factories across China. Shein, in particular, emphasizes its ability to connect consumers directly with manufacturers, minimizing the need for traditional retail infrastructure. However, some workshop owners are concerned about the demanding requirements and low prices offered by companies like Shein. They also face challenges due to rising labor costs and a shrinking pool of workers, as younger generations opt for higher education and less physically demanding jobs.
The if the US permanently ends the de minimis rule, imported apparel could face significant tariffs and customs processing fees, potentially disrupting the business models of e-commerce companies and impacting consumer prices. Shein claims their suppliers pay workers twice the local minimum wage, and Temu states that nearly 60 per cent of its US sales are now from domestic warehouses with tariffs paid. Thus the future of the de minimis industry remains uncertain as governments worldwide grapple with the challenges and implications of this rapidly evolving trade landscape.
