Chinese fast-fashion giant Shein is reportedly preparing to slash its valuation for a prospective listing on the London stock market by $50 billion, losing almost a quarter of its value after President Donald Trump closed the “de minimis” loophole that allows small import shipments to evade duties and customs inspections.
President Trump’s executive order imposing tariffs on Chinese imports this week included a provision to close the de minimis exemption, which was created in the 1930s to reduce the effort and expense needed to ship small packages into the United States.
The threshold for the de minimis exemption was quadrupled by the Obama administration in 2015, creating an opportunity for an entirely new industry to thrive: “fast fashion” and other micro-import businesses that take orders online and ship directly to consumers.
Critics pointed out this new industry enjoyed unfair competitive advantages over traditional retail operations, which paid heavy import fees to warehouse items from overseas and distribute them to outlets across the country. Coupled with labor practices and sourcing that would be blatantly illegal anywhere in the Western world, Chinese companies were able to undercut American and European competitors by huge margins.
The de minimis threshold has also been exploited by fentanyl traffickers, who use small and often mislabeled parcels to ship precursor chemicals for the deadly drug from China to North America; and by the Chinese government’s slave trade, which uses forced labor from the Uyghurs and other oppressed minorities to pick cotton and manufacture textile products.
The kings of the de minimus import trade have unquestionably been Shein and Temu, another Chinese company that ships cheap merchandise directly to foreign customers. Those two companies accounted for nearly 30 percent of all de minimus packages in 2023, according to a U.S. congressional report.
Three anonymous sources told Reuters on Friday that Shein is aware of how much the shuttering of the de minimis loophole will damage its profitability, although the company is still working on precise estimates of its losses.
These changes came at an awkward moment for Shein, which was reportedly hoping to make an initial public offering (IPO) on the London stock market by April of this year. Shein previously attempted an IPO in the United States, but gave up under scrutiny by U.S. lawmakers of the company’s labor practices and potential security risks.
Shein is now awaiting approval from both British and Chinese regulators for its London offering. British regulators, while less aggressive than their American counterparts on the subject, may also require the company to prove that it does not use textiles made with forced labor.
That proof would be very difficult for Shein to provide without angering the Chinese Communist Party, because the party resists making even the smallest admission of having violated human rights. Shein reportedly began the IPO process with the U.K. Financial Conduct Authority (FCA) in June 2024 and has yet to receive approval, even though FCA usually makes such decisions within a few months.
A U.K. activist group called Stop Uyghur Genocide (SUG) on Wednesday urged the FCA to reject Shein’s bid to list on the London stock market, on the grounds that the company’s alleged use of forced Uyghur labor violates Britain’s Modern Slavery Act. SUG said it was prepared to take legal action if FCA does not decisively reject Shein’s application within two weeks.
The European Commission has also been considering tighter regulations on goods shipped by e-commerce companies like Shein, possibly including the end of its de minimis threshold, which at 150 euros (about $155) is much lower than the exemption in the United States.
