A row of white concrete buildings near the Pal River in southern China is one of the fastest-growing industries in the world: gritty workshops are stirring up cheap clothing that is exported directly to homes and small businesses around the world. No customs duties were paid, and no customs inspections were conducted.
Workers who make these goods earn as little as $5 per hour, including overtime work, which can last for 10 hours or more. They paid $130 a month to sleep on the bunk beds in the small room above the factory with sewing machines and clothes covered in them.
“It’s hard work,” said Wu Hua, who sews his pants at a factory in Guangzhou, a vast metropolis across the Zhuhe River, seven days a week.
The e-commerce giant has established close ties from international markets with workers such as Mr. Wu, shaking retail and global economies.
The number of duty-free goods to the United States has increased by more than tenfold since 2016, reaching four million packages per day last year. Similar goods to the EU climbed faster, reaching 12 million parcels a day last year. Duty-free goods in developing countries such as Thailand and South Africa have also surged.
Now, strong global opposition is underway. President Trump ordered a cessation on February 4, and there was no entry worth $800 without inspection. Mr. Trump temporarily suspended his orders to give officials time to develop a plan to deal with the immediate inspection of mounds of land piled up at the airport.
Since taking office less than a month ago, Mr. Trump has launched a series of trade lawsuits, including an order Thursday to ask his advisers to propose new tariff levels to consider a range of trade barriers. But lasting duty-free goods may be one of the most profound moves. Until now, the goods have not only avoided his new tariffs, including a 10% tax on all Chinese goods, but have accumulated many other tariffs over the years.
The US action on so-called de Minimis cargo–customs services do not bother to check or calculate low-value packages for customs services–is one of many. Last summer, South Africa imposed a 45% tariff on even the smallest clothing imports. Thailand ended its exemption of tax-free business tax on low-value imported parcels, although it continues to allow tax-free additions up to 1,500 Thai baht ($44). The European Union’s executive branch, the European Commission, proposed this month to end the tax-free treatment (USD 156) of parcels worth up to 150 euros.
Countries have cited different reasons for restriction. Mr. Trump argued that by cracking down on customs inspections, duty-free packages have become a channel for fentanyl and related materials to enter the United States. The European Commission cited the need to ensure the safety of imported products, stop counterfeiting of goods and prevent unfair competition. South Africa and Thailand take action to protect local store owners.
“It is our responsibility to ensure that the goods entering our market are safe and that all traders respect the rights of consumers,” said European Commissioner Michael McGrath.
Since the 1980s, this corner of southern China near Hong Kong has been a hub for exporting low-cost manufacturing, especially clothing. However, the rise of e-commerce sellers around the world has created a growing demand for such goods.
Guangzhou has become a global hub for De Minimis transportation. For many square miles of the city, fast fashion clothing is made in concrete buildings with sewing shops, sometimes living above them.
Shein and Temu compete with Chinese e-commerce giants, co-owned at least one-third of the De Minimis industry, coordinated most of their supply chains in their large offices in Guangzhou. Amazon launched its own De Minimis business Haul for starting from China.
China’s de Minimis industry is not limited to Guangzhou. It is not limited to the pillars of the industry, clothing.
Yiwu is a city 600 miles northeast of Guangzhou, with a vast wholesale market, and has become another hub. It coordinates the export of smallest toys, hats and other small items, scattered in the Yant River Delta.
Shein in particular is a new business concept that connects distant customers with factories ready to tailor and sew anything. Shein’s approach, working with 5,000 workshops and small factories in China, almost completely eliminates the need for store inventory, and even the demand for shops and retail staff.
“At Shein, we reimagine supply chains by empowering thousands of small and medium-sized businesses to fully understand the needs and needs of their customers,” the company said on its website.
But the owner of the workshop in Guangzhou complained that Shein was too demanding.
Lee’s workshop made clothing for Shein contractors four years ago, but the arrangement lasted only one year. “Shein demands high quality but offers low prices,” she said.
Now, she sells it to wholesalers in the domestic market in China, which offers her a higher price. But the shortage of blue-collar workers has cost nearly $70 a day, starting from $48 four years ago, she said.
Today, nearly two-thirds of 18-year-olds in China attended a university or university in 2000. This has made almost no young Chinese willing to work in factories.
“The business is deteriorating every year,” Ms. Lee said. “There are fewer and fewer workers now, mainly those born in the 1970s and 1980s.”
If Mr. Trump permanently terminates the minimum rules, now duty-free imported clothing will be subject to a basic tariff of 3% to 30%, plus a 7.5% tariff imposed during his first term, as well as all imported goods The president imposed 10% tariffs on China on February 4. Most importantly, customs processing costs per parcel are $5 to $20.
Shein said its suppliers paid workers twice the local minimum wage. Nearly 60% of sales in the U.S. are now from U.S. warehouses, with customs goods and paying tariffs, Temu said.
China’s De Minimis export industry has a competitive advantage beyond avoiding tariffs and avoiding customs inspections. More than 90% of Chinese cotton is grown in a region of northwestern China. Many Western governments have begun to restrict or ban the import of any content with Xinjiang after mass arrests by Chinese security agencies and prove that the region is mainly Muslim, especially Yuliger.
Families and small businesses that purchase De Minimis packages from China assume legal liability to ensure that there is no cotton or other content in their packages. But Western regulators are reluctant to file charges.
By contrast, large retailers usually comply with relevant legislation in Xinjiang when they imported large containers of clothing for stores.
The shop owners in Guangzhou said they don’t know where fabric suppliers get cotton.
Guangzhou sewing shop owner Yun Congping supplies the Thai market, saying he and other merchants need exports.
“If we don’t accept these deals to offer low-priced exports, there’s nothing else to do,” he said.
Jordan Holman Reports from New York. Li, you Contributed to the research.
