In the past year, there has been a notable surge in B2C e-commerce parcels from China to the US and Europe, predominantly transported by air cargo. E-commerce giants like Temu and Shein have been at the forefront of this increase, driving a surge of interest in fast-fashion supply chains.
With air cargo typically around 12 times more expensive than ocean freight, it’s usually reserved for high-value, high-margin, time-sensitive goods. However, Chinese e-commerce importers leverage air cargo to offer relatively fast delivery of 9-11 days, compared to a more typical 30-40 days for ocean freight (especially given the Red Sea issues), while keeping the value of goods below the $800 de minimis threshold. This customs status allows the goods to enter the US without paying tariffs or duties, possibly making air cargo cost effective even for low-value products.
The De Minimis Threshold and E-Commerce Surge
This approach has led to a surge in de minimis volumes entering the US. According to US Customs and Border Protection (USCBP) data, in 2022, 685 million de minimis parcels entered the country. In 2023, this number climbed to a billion as Temu and Shein intensified their focus on the US market. As of mid-2024, imports of de minimis parcels have already passed 700 million even before the holiday season rush, exceeding all of 2022’s shipments in just half a year. This trend isn’t only a result of Chinese e-commerce sellers. Many US importers are also leveraging the trends, sometimes while tapping digital custom brokerages.
Impact on Air Cargo Volumes
The increase in Chinese e-commerce imports has significantly impacted air cargo volumes and, as a result, prices.
Reports indicate that some 30-40 freight aircraft are exporting Chinese B2C e-commerce goods globally on a daily basis, with e-commerce volumes at major hubs like Hong Kong sometimes accounting for about 80% of daily air cargo exports. The latest IATA data from May shows a 13% year-to-date increase in global air cargo volumes compared to last year. Volumes out of Asia Pacific increased by 18% in May year on year, with Asia to North America volumes up by 12% compared to the previous year.
This growth is particularly impressive given that it has occurred during what is typically a slow season for air cargo. This volume strength underscores the substantial impact of B2C e-commerce on international air cargo.
Air Cargo Rates and Market Dynamics
Of course, high volumes means higher rates. This surge in e-commerce has dramatically influenced air cargo rates that are already somewhat impacted by soaring ocean freight costs.
According to data from Freightos Terminal, rates for China to North America and China to Europe have remained elevated. Even during typically slow seasons, rates have stayed around $5.50-$6/kg to North America and $4/kg to Europe. These rates are higher than pre-pandemic peak season rates, which typically ranged from $4-5/kg. This persistent elevation in rates reflects tight capacity largely driven by the influx of e-commerce goods.
Regulatory Pressures and Compliance Challenges
The growth of Chinese e-commerce imports has not been without several challenges in the US.
The National Security Act 2024, which was signed into law in April and mandates the sale or shutdown of TikTok in the US by January, reflects the US government’s willingness to take action against Chinese businesses it perceives as threats to security or other national interests.
More directly related to e-commerce, the Americas Act, introduced in the Senate in May, proposes lowering the de minimis threshold and banning certain countries, including China, from using it due to concerns about forced labor, contraband goods, and harm to US industries. Although this act has not progressed, it also sends a message about opposition to this trend and the need for stringent regulation of these imports. This joins a broader trend of US protectionism, with both the Biden administration and the Trump campaign pushing for increased tariffs on US imports from China.
Increased Scrutiny
The dramatic increase in de minimis clearances has also opened the door for a potential increase in bad actors using it to bypass authorities. Recent increases in enforcement and screening of de minimis imports has only increased confidence that this is indeed taking place. The USCBP inspected 100% of e-commerce imports at LAX for several days in May, uncovering many mislabeled items as well as contraband like fentanyl. This crackdown resulted in the suspension of several high-profile forwarders and customs brokers from using the de minimis threshold, highlighting the need for better compliance.
Such enforcement actions underscore the challenges associated with the sheer scale of e-commerce imports and the relatively lax reporting requirements for de minimis shipments. But these developments signal to Chinese e-commerce platforms the importance of robust compliance mechanisms to continue leveraging this import strategy.
Impact on Major E-Commerce Players
The combination of increased compliance, enforcement and legislation may be having an impact on e-commerce platforms. Shein has backed away from plans for a US IPO, and reports had Temu planning a shift of focus away from the North American market indicating expectations that its US sales would drop from 60% to 30% of its annual sales, and that the platform would focus more on customer retention than growth through new customers in the US. Temu has denied these reports, though, and states that expansion to other markets will take place alongside continued plans for growth in the US.
Despite these challenges and reports of a resulting pull back, volume and rate data show no slow down of e-commerce volumes from China to the US even since scrutiny intensified in May.
Amazon a Player Too
In light of these ongoing sales, the United States’ largest e-commerce retailer, Amazon, couldn’t stay on the sidelines and is opening a channel for direct B2C sales from Chinese manufacturers and retailers to US customers, using the de minimis exemption.
This move signifies Amazon’s recognition of the growing importance of this trend, despite likely opposition from US-based Amazon sellers concerned about low-cost, customs-exempt competition. Amazon plans to start signing up merchants this summer and begin accepting inventory in the fall, aiming to offer delivery within the 9-11 day timeframe.
Long-Term Outlook
Despite the mentioned challenges for e-commerce platforms, most signs don’t point to an end of international B2C e-commerce from China in the near future.
Some customs and logistics experts expect that these regulatory steps will push e-commerce platforms to implement better due diligence and compliance on labor and manufacturing standards required by the US including screening out contraband and ensuring detailed and accurate shipment data.
Shein is already setting up a legal and compliance center and plans to spend $50 million on global compliance. Temu, while more hands-off, is also expected to invest in better compliance measures to address these regulatory hurdles.
What it all means
The surge in Chinese B2C e-commerce imports to North America, facilitated by air cargo and the de minimis threshold, represents a significant new trend in global trade. Despite regulatory challenges and increased enforcement, the sustained demand for Chinese e-commerce goods and the strategic responses from major players like Shein, Temu, and Amazon suggest that this trend is far from over. Enhanced compliance and robust logistics strategies will be crucial for these platforms to navigate the evolving regulatory landscape and continue capitalizing on the booming e-commerce market and the regulations that facilitate them.e, precision, and confidence.
