Shein's supply chain realignment amid US customs policy shifts

Shein shrinks Vietnam operations, returns focus to China supply chain

The US suspended the duty-free exemption for low-value shipments from all countries.

Around the start of 2026, Washington suspended the duty-free exemption for low-value shipments from all countries. The exemption, which had long allowed many small shipments worth under $800 to enter the US duty-free, had earlier been removed for low-value shipments from China before being extended to all countries.

The duty-free treatment had particularly increased the cost advantage of Shein and similar e-commerce platforms, whose business model relies on quickly sending low-priced products in small packages to customers in different countries.

With the suspension for all countries, one of the main advantages of moving to Vietnam disappeared. Shein had previously raised plans to source more products from countries such as Turkey and Brazil while expanding its production network outside China; after the policy change, its major Vietnam investment turned from an expansion project into a downsizing operation.

Shein planned to make Vietnam one of its important export centers to bypass US tariffs on Chinese goods.

Around August 2025, Shein was preparing to make Vietnam one of its important export centers, with the country serving as an alternative production and logistics base to China. The plan was driven by the US-China trade war: rising US tariffs made Vietnam attractive as a new outlet for Shein's low-cost fast-fashion shipments.

Shein initially rented about 15 hectares of warehouse space near Ho Chi Minh City, an area equivalent to roughly 21 football pitches, and encouraged large Chinese suppliers to establish production facilities in Vietnam. The company's model relied on quickly sending low-priced products in small packages, and the duty-free exemption for small shipments gave the Vietnam move an additional cost advantage.

The planned shift did not mean abandoning China's production heartland. Guangzhou and its surroundings remained the center of Shein's model, with thousands of small textile producers working close together to turn even very small orders into fast production runs.

The US removed the duty-free exemption for small shipments from China.

For years, a longstanding US regulation allowed many small shipments worth under $800 to enter the country duty-free. According to reports, that exemption particularly increased the cost advantage of Shein and similar e-commerce platforms, whose business model depends on quickly sending low-priced products in small packages to customers in different countries.

The duty-free advantage was first removed for low-value shipments from China, and Washington later suspended the exemption for low-value shipments not only from China but from all countries. Around the beginning of March 2025, after this change in US customs policy, Shein's route turned back to Guangzhou, China, and its major Vietnam investment shifted from an expansion project into a downsizing operation.