MW Temu parent PDD's stock falls as Biden administration goes after trade loophole
By Victor Reklaitis
Administration says it's starting a regulatory process to curtail 'overuse and abuse' of so-called de minimis exemption
The U.S.-listed shares of Temu parent PDD Holdings $(PDD)$ were down about 4% on Friday morning, after the Biden-Harris administration announced it's proposing to take regulatory actions to cut down on what it describes as "overuse and abuse" of a trade loophole.
Senior administration officials said they're concerned about how e-commerce giant Temu and rival Shein have relied on the loophole.
The so-called de minimis exemption makes it possible for shipments worth $800 or less to avoid tariffs and U.S. Customs and Border Patrol scrutiny.
It's become an increasingly popular loophole for shipments. The number of shipments coming into the U.S. in a year under de minimis has grown to more than 1 billion, up from about 140 million a year a decade ago, the deputy director of President Joe Biden's National Economic Council, Navtej Dhillon, told reporters.
"The drastic increase in de minimis shipments has made it increasingly difficult to target and block illegal or unsafe shipments coming into the U.S. through this pathway. That's why the administration is starting a regulatory process to curtail de minimis overuse and abuse," said Biden's deputy national-security adviser for international economics, Daleep Singh.
The administration is aiming to remove de minimis eligibility for products that are subject to trade enforcement actions under certain sections of U.S. trade law, according to Singh. About 70% of textile and apparel imports from China would be affected, he said.
The new regulatory process includes a new rulemaking to reduce de minimis volume, a new rulemaking to improve accountability and enforcement in shipments, and a proposed final rule on safety standards, according to a news release from the Biden administration. Officials also said they're "ready to work with Congress to pass comprehensive de minimis reform legislation by the end of the year."
Democratic and Republican lawmakers have been raising concerns about the trade loophole, rolling out bipartisan bills such as the Import Security and Fairness Act and De Minimis Reciprocity Act.
GOP Rep. Jason Smith of Missouri, who chairs the House Ways and Means Committee, said in a statement Friday that the Biden administration has "finally embraced Republicans' common-sense reforms to prevent China's abuse of the de minimis threshold," and he's "hopeful that House Democrats will work with us to codify this policy into law and make other common-sense reforms."
Temu is an online marketplace run by PDD, which was founded in China but now has its headquarters in Dublin. Shein, a fast-fashion company founded in China but now based in Singapore, has been working on going public on the London Stock Exchange. That's after its push for a U.S. IPO drew a frosty reception in Washington last year.
Shares in Chinese e-commerce giant Alibaba Group Holding $(BABA)$ also were lower Friday, dropping 1.5% while the main U.S. stock benchmarks SPX DJIA COMP gained.
Now read: Temu parent PDD's stock suffered a record plunge after revenue missed forecasts
And see: Shein sues Temu over copyright infringements as fast-fashion legal feud heats up
Opinion: Chinese e-commerce giants want your business - and U.S. retailers are losing it
-Victor Reklaitis
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September 13, 2024 10:08 ET (14:08 GMT)
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