GUANGZHOU (CHINA): Rows of white concrete buildings near the Pearl River in southern China house one of the world’s fastest-growing industries: Gritty workshops are churning out inexpensive clothing that is exported straight to homes and small businesses around the world. No tariffs are paid, and no customs inspections are conducted.
The labourers who make these goods earn as little as $5 an hour, including overtime, for workdays that can last 10 hours or more. They pay $130 a month to sleep on bunk beds in tiny rooms above factories. “It’s hard work,” said Wu Hua, who sews pants, seven days a week, at a factory in Guangzhou, a vast metropolis that straddles the Pearl River.
E-commerce giants have forged close links from international markets to workers like Wu, shaking retailing and economies around the globe. The number of duty-free shipments to the US has risen more than tenfold since 2016, to 4 million parcels per day last year; those to the European Union have reached 12 million parcels a day last year. Duty-free shipments to developing countries like Thailand and South Africa have also surged.
Now a global backlash is underway. President Trump ordered a halt Feb 4 to the duty-free entry, without inspection, of parcels with goods worth up to $800. He temporarily suspended his order to give officials time to devise a plan to handle mounds of parcels that immediately started piling up at airports for inspection.
The US action on so-called de minimis shipments – low-value parcels that customs services don’t bother inspecting or calculating tariffs on – was one of many. Last summer, South Africa imposed 45% tariffs on even the smallest imports of clothing. Thailand ended its exemption of low-value imported parcels from sales taxes, although it continues to allow tariff-free entry of parcels up to 1,500 Thai baht ($44). The EU proposed this month to end the 27-nation bloc’s duty-free treatment of packages worth up to 150 euros ($156).
Countries have cited different reasons: Trump claims by skirting inspections, the duty-free parcels had become a conduit for fentanyl and related materials to enter the US.
Guangzhou has been a hub of low-cost manufacturing for export since the 1980s, especially apparel. But the rise of e-commerce sellers around the world has created ever-growing demand of such shipments. The city has emerged as the global hub of de minimis shipments.
Shein and Temu, competing Chinese e-commerce giants that together hold at least a third of the de minimis industry, coordinate much of their supply chains from large offices in Guangzhou. Amazon has introduced its own de minimis business, Haul, for shipments from China.
China’s de minimis industry is not confined to Guangzhou. Nor is it limited to the industry’s mainstay, clothing. Yiwu, a city 600 miles northeast of Guangzhou with a vast wholesale market, has become another hub. It coordinates de minimis exports of toys, hats and other small items from towns scattered across the Yangtze River delta.
If Trump permanently ends the de minimis rule, imported apparel that is now duty-free would be subject to basic tariffs of 3% to 30%, plus a 7.5% tariff imposed during his first term, plus a 10% tariff on all imports from China that the President imposed Feb 4. On top of that, there would be customs processing fees of $5 to $20 per parcel.
