No-tariff shipments popular with Shein, Temu hit US customs speedbump

[June 06, 2024]  By Lisa Baertlein and Lisa Barrington

LOS ANGELES (Reuters) -A new U.S. crackdown on customs brokers handling billions of dollars in inexpensive online shopping orders from giants like China-linked Shein and Temu is likely to cause delivery delays and bottlenecks, industry experts said.

U.S. Customs and Border Protection announced late last week it suspended "multiple" brokers from an expedited clearance program for those duty-free, direct-to-consumer imports partly over concerns that contraband was being brought into the country this way. While the agency did not specify a number, customs experts they were aware of up to six suspended companies.

The move is part of a CBP effort that includes increased inspections of such packages at U.S. airports and reviews of electronic information submissions by customs brokers.

"All ports of entry are being affected so there really isn't a way to avoid delays," said Chad Schofield, co-founder of U.S.-based e-commerce logistics platform BoxC.

The crackdown comes as more than 1 billion packages, averaging around $50 in value, are forecast to arrive in the U.S. this year driven by robust consumer demand for fast-fashion made by Chinese factories, among other things.

E-commerce powerhouse Shein, which is trying to expand its market share before going public, and Chinese-owned e-retailer Temu depend on the expedited clearance process, which is available for direct-to-consumer shipments valued at $800 or less. U.S. brokers handling those packages submit shipping information electronically to CBP, speeding up processing.

Customs brokers that participate in that program handle clearance for 62% of those shipments, an administrative burden that would otherwise fall on exporters or transportation firms, said Cindy Allen, CEO of consultancy Trade Force Multiplier LLC.

Shein could not be immediately reached for comment. Temu said its operations were unaffected.

POLITICAL CONSIDERATIONS

The CBP's action landed amid intense election-year political pressure on the Biden administration to protect U.S. businesses and stem the flow of illegal drugs into the country, said Brandon Fried, executive director of the Airforwarders Association industry group.

Shein logo and their web shop are seen in this illustration taken, May 16, 2024. REUTERS/Dado Ruvic/Illustration/File Photo

Some U.S. lawmakers say the rules allowing duty-free imports on packages below $800 in value give e-commerce firms in China and other nations an unfair advantage over domestic retailers. Critics also charge that the administration has not done enough to stop the country's deadly fentanyl crisis.

CBP said last week that the suspended brokers' data entries "posed unacceptable compliance risk" and that "bad actors" were exploiting the regulations to move contraband, including materials to make drugs like fentanyl.

The agency did not name the customs brokers.

One of those affected, Illinois-based SEKO Logistics, filed a lawsuit with the U.S. Court of International Trade on Saturday against the action. It claimed CBP failed to give it proper notice of the suspension, specify alleged violations or provide a way to remedy the situation.

SEKO told Business Insider in January 2023 that it managed transportation for Shein and other e-commerce clients. The company did not specify whether it handled electronic customs filings for Shein.

CBP also suspended SEKO from the agency's Customs Trade Partnership Against Terrorism security program, according to SEKO. Many Fortune 500 companies require their vendors to have that certification.

On Tuesday, SEKO said it won conditional CBP reinstatements for both programs.

"We are incredibly disappointed by, and strongly disagree with, the original decision by CBP," SEKO CEO James Gagne said on Tuesday, adding that the company maintained a "99.999+%" compliance rate in the expedited clearance program.

Other companies involved in that program include UPS and DHL Express, who said they had not been suspended.

(Reporting by Lisa Baertlein in Los Angeles and Lisa Barrington in Seoul; Editing by Cynthia Osterman)

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