Chinese e-commerce names rattled by customs crack-down – reports

Washington has increased its efforts to crack down on tariff evaders by deploying additional resources at U.S. Customs and Border Protection (CBP) and the Department of Justice, weighing on shares of Chinese e-commerce giants Alibaba (NYSE:BABA), JD.com (NASDAQ:JD) and PDD Holdings (NASDAQ:PDD), the parent company of Temu.

According to Nikkei Asia, citing sources familiar with the enforcement of U.S. trade policies, the government has increased the use of civil investigative demands (CID) to scrutinize potential violations of federal trade laws. The Department of Justice has added personnel for a new unit targeting tariff evasion, trade attorneys told Nikkei, with the issuance of CIDs showing a dramatic increase.

The increased efforts come as the Trump Administration plans to end the de minimis exemption later this month, a policy which allows companies outside the U.S. to ship merchandise with a value less than $800 tariff-free into the U.S. The exemption was exploited by Chinese retailers like Temu, SHEIN, and Alibaba (NYSE:BABA) to undercut U.S. rivals and avoid employing U.S. warehouses to store merchandise.

Chinese retailers are increasingly finding ways to skirt U.S. tariffs—by undervaluing goods, misclassifying products, or mislabeling their origin. U.S. authorities, including the DOJ and CBP, are also cracking down on “transshipments,” imposing an extra 40% tariff on goods routed through third countries to take advantage of lower duties.

“Trade and customs fraudsters, including those who commit tariff evasion, seek to circumvent the rules and regulations that protect American consumers and undermine the Administration’s efforts to create jobs and increase investment in the United States,” said Matthew Galeotti, head of the DOJ’s criminal division, wrote in a letter to staff cited by Nikkei Asia. “Prosecuting such frauds will ensure that American businesses are competing on a level playing field in global trade and commerce.”

The Nikkei report initially sent shares of PDD Holdings (NASDAQ:PDD), Alibaba (NYSE:BABA), and JD.com lower at the U.S. open.