Shein Blames End of Exemptions for Low-Cost Imports for US Sales Slump

Shein, the global fast-fashion bargain behemoth, said the removal of a key trade law loophole has dragged down its U.S. sales and profits.President Donald Trump signed an executive order last year suspending duty-free de minimis treatment for low-value packages from China.Digital commerce firms worldwide have used this loophole to ship duty-free packages worth less than $800 to the United States. Under last summer’s One Big Beautiful Bill Act, a permanent statutory repeal is scheduled for July 2027.Industry experts have said the exemption has provided a competitive advantage for many Chinese e-commerce companies like Shein and Temu.Ahead of its planned initial public offering—also known as an IPO—on the Hong Kong stock market, the discount apparel retailer said its U.S. sales slowdown reflected the company’s move to raise prices, a strategy to offset new tariff costs.“Since May 2025, we have begun passing on the majority of the additional tariff costs by increasing our prices in the U.S. market,” the company said in documents. “Since May 2025, we observed a negative impact on our net revenues from the U.S. market in the remainder of 2025.”Shein’s first-quarter revenues in the United States fell by 3 percent year over year to $2 billion. Operating income declined by more than a quarter, while fulfillment and marketing costs jumped. It reported a quarterly net loss of $99 million, a complete reversal from its $395 million profit registered in the previous year.The situation could worsen now that Europe has abolished duty-free shipping for low-value packages and instituted flat-rate fees. The trade bloc’s new trade measures, introduced in July, could “increase the relevant costs and expenses associated” with sales in the European Union.“Similar to the U.S. market, we expect to pursue a wide range of options in response to the developments in the EU, including increasing our prices to offset a portion of the increased costs,” Shein said in a filing.The United Kingdom also plans to remove its de minimis-style exemption for low-value imports, effective October 2028.Shein attributed the war in Iran to its year-over-year decline in business activity in the Middle East, “which is expected to result in a low single-digit percentage point impact on our net revenues” this year.The company revealed that it is making changes to its import and export practices.For products that previously qualified for the de minimis exemption, it moved from a straightforward customs entry process to a full customs‑clearance procedure that demands more detailed documentation and additional steps, the filing noted. It has also instituted measures to ensure the company is adhering to paperwork and procedural standards.While tariffs rocked the international economy in 2025, companies eventually found Washington’s sweeping global trade policy changes to be manageable, said Giuseppe Sette, co-founder and president of the market research firm Reflexivity.On Dec. 1, 2023, the Hong Kong Hang Seng Index (HSI) crossed the 17,000 mark. Ten days later, on Dec. 11, the HSI dived further below 16,000, touching its lowest ebb at 15,972. Bill Cox/The Epoch Times“Executives spent less time fretting about Washington than feared. Tariffs were repeatedly cast as manageable or fully offset through pricing and supply-chain moves,” Sette said in a note emailed to The Epoch Times.“The tariff panic that shadowed the spring has, for now, been priced in.”‘Highly Volatile’The China Securities Regulatory Commission approved a Hong Kong share sale after Shein’s attempts to list in New York and London were rejected.The internet retailer’s IPO target valuation is between $30 billion and $40 billion, but some market watchers believe its actual valuation could be less.“My base case valuation of Shein is implied market cap of US$26 billion,” Douglas Kim, founder of Douglas Research Insights, said in an August 8 research note.“Overall, depending upon how much Shein is able to turn around its operations and improve its profitability, the earnings and share price of the company are likely to be highly volatile along with those changes.”Shein, meanwhile, disclosed in its filings a Federal Trade Commission investigation into its U.S. business operations that could result in “significant monetary payments.”As analysts monitor Shein’s debut in financial markets, consumers have increasingly soured on the brand.YouGov BrandIndex data, released earlier this month, suggest that the public’s perception—compared with other fast fashion brands and apparel companies—has sunk regarding quality, reputation, value, and impression.James Xu and Frank Zhang contributed to this report.