The recent bankruptcy filing by Forever 21 marks yet another casualty in an American retail sector struggling under the weight of unfair competition. While many factors contributed to the fast-fashion giant’s decline, one in particular stands out: the unchecked rise of foreign e-commerce retailers like Shein and Temu, made possible by a glaring loophole in U.S. trade policy known as the de minimis exemption. If policymakers fail to act, Forever 21 won’t be the last American brand to fall.
The de minimis exemption allows a shipment of foreign goods imported by one person in one day that’s valued under $800 to enter the U.S. without paying duties or undergoing rigorous customs inspections. While this rule was originally part of the Tariff Act of 1930 and intended to facilitate the return of goods purchased by American tourists abroad by streamlining the customs processes for low-value shipments, it has become a major liability for domestic businesses by not keeping pace with the development of international trade via e-commerce. Shein and Temu—both Chinese-owned e-commerce companies—have weaponized this loophole to flood the U.S. market with ultra-cheap products that avoid the tariffs and regulatory scrutiny faced by their American competitors.
Forever 21’s financial struggles exemplify the damage caused by this unfair advantage. The company’s chief financial officer explicitly called out Shein and Temu’s exploitation of de minimis as a major factor in the company’s downfall. While Forever 21 was required to pay import duties, meet labor standards, and comply with consumer protection regulations, its foreign competitors could ship directly to American consumers, skirting many of the costs that make domestic retailers viable. This is not a free-market success story; it’s an example of trade policy failing to adapt to modern e-commerce realities.
The consequences of de minimis go far beyond Forever 21 and its 9,200 U.S. employees who no longer have a job. Thousands of American businesses—large and small—are being undercut by foreign companies that operate under different rules. Domestic manufacturers and retailers, who employ millions of Americans and contribute to local economies, cannot compete on a playing field tilted in favor of overseas giants. The loophole effectively subsidizes foreign businesses while handicapping American firms that pay taxes, hire locally, and invest in their communities. In fact, the number of Chinese imports coming into the U.S. under de minimis has surged, with Customs and Border Patrol (CBP) processing over 1.3 billion de minimis shipments in 2024 — more than double the 640 million it processed in 2023.
Beyond its economic toll, de minimis raises significant concerns about consumer safety and national security. Because packages valued under $800 enter the U.S. with minimal oversight, there is little way to ensure that products meet safety and quality standards. Reports have already highlighted hazardous goods slipping through customs, from counterfeit pharmaceuticals to lead-contaminated children’s toys. Even worse, there is growing evidence that de minimis is being exploited by bad actors to smuggle illicit goods—including fentanyl, which continues to fuel America’s devastating opioid crisis.
Earlier this year, the Trump Administration announced plans to do away with de minimis, but ultimately paused implementation of the executive order to allow CBP to put in place policies to deal with the influx of goods it needs to process. With ample support from both sides of the aisle, several congressional proposals for de minimis reform have been introduced over the past year, but none have a clear path forward.
But there is no compelling reason why foreign e-commerce giants should be given special privileges at the expense of U.S. retailers, manufacturers, and workers. If a package is bound for an American doorstep, it should be subject to the same rules and fees, regardless of whether it was shipped from California or Guangdong. Eliminating the de minimis exemption is not about stifling trade, but about ensuring that trade is fair.
Forever 21’s bankruptcy is a warning sign. If the U.S. government does not act swiftly to reform de minimis, more American brands will collapse under the weight of a system that prioritizes foreign profits over domestic prosperity. It’s time to put an end to this loophole before more jobs, businesses, and communities pay the price.
