Forever 21 declares bankruptcy, while Washington’s interest in closing an egregious trade loophole ticks up.
The final nail in Forever 21’s coffin was hammered in this week by offshore online retailers who’ve exploited a U.S. Customs loophole for years to ship millions upon millions of cheap imports into the United States without duties or inspections.
Forever 21 filed for its second bankruptcy protection on Sunday — its first was filed in 2019. In the coming weeks, the fast fashion mall staple is expected to close its 350 stores in the United States. Before exiting the U.S. retail landscape, however, Forever 21 made sure to spotlight a U.S. Customs loophole that has turbocharged fast fashion’s race to the bottom.
“The ability for non-U.S. retailers to sell their products at drastically lower prices to U.S. consumers has significantly impacted the Company’s ability to retain its traditional core customer base,” F21 OpCo Co-chief Restructuring Officer Stephen Coulombe said in the company’s bankruptcy filing.
Originally designed to simplify the import process for tourists bringing souvenirs home, the de minimis provision waives taxes and inspections for imported goods below a certain value. In 1928, when de minimis was enacted, that value was set at $1, meaning that any import coming into the country worth less than a dollar would be allowed in without processing. Since then, Congress has raised the de minimis threshold several times, ultimately increasing it to a whopping $800 in 2015. It was the perfect opening for Chinese e-commerce behemoths like SHEIN and Temu to enter the U.S. market with a huge advantage over traditional retailers like the Gap or Macy’s.
Rather than maintaining an expensive storefront, SHEIN found its consumers online and sent its products (of questionable origin) directly to buyers, exploiting de minimis in the process to avoid paying any taxes on their shipments. This hack of the U.S. Customs system has yielded SHEIN and other e-commerce platforms dominion over U.S. retail.
In 2015, 153 million imports passed into the U.S. through the de minimis exemption. In 2023, that number soared to more than 1 billion, increasing more than 600% from 2015. In 2024, we saw this explosive growth continue with de minimis shipments exceeding 1.36 billion.
Though President Donald Trump suspended the duty-free de minimis treatment for Chinese goods on Feb. 1, he paused implementation of the action shortly thereafter, citing the need for Customs to adopt new processes. On March 7, the Alliance for American Manufacturing joined a coalition of manufacturers, business associations, labor unions, law enforcement, drug prevention organizations, consumer groups, and others in urging Trump to reinstate the de minimis exemption ban.
Luckily, Congress is also working to close the Customs loophole with several bills now under consideration. AAM supports both the Close the De Minimis Loophole Act, introduced by Rep. Linda Sanchez (D-Calif.) on March 4, and the Import Security and Fairness Act, introduced by Rep. Thomas Suozzi (D-N.Y.) on Jan. 9 and co-sponsored by Reps. Neal Dunn (R-Fla.), Rick Allen (R-Ga.) and Andrea Salinas (D-Ore.).
The De Minimis Loophole Act would end de minimis for all countries, with the ban going into effect immediately for Chinese imports while imports from other countries would have a four-month transition period. The Import Security and Fairness Act would prohibit goods imported from non-market economies or countries on the priority watch list to enter the U.S. through the de minimis exemption.
Additionally, there are two other measures that grapple with the de minimis issue as well, namely Rep. Gregory Murphy’s (R-N.C.) End China’s De Minimis Abuse Act and Sen. Ron Wyden’s (D-Ore.) Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for America Act, which have yet to be reintroduced in the 119th Congress.
With more than four million de minimis imports entering the U.S. market each day, the impact of this loophole is wide-reaching for American workers and consumers. We’re glad to see effort from both the White House and Congress to close it is ramping up. There’s little time to waste.