Editor’s note: This story is part of a series on the de minimis rule's supply chain impact and its uncertain future. Read the previous story here.

The meteoric rise of Temu and Shein has injected fresh momentum into the U.S. parcel delivery market, but questions persist over whether the volume surge can withstand regulatory headwinds and pricing pressures.

Data from ShipMatrix, shared with Supply Chain Dive, shows that in July alone each of the two e-commerce marketplaces provided carriers with approximately 900,000 packages daily within the United States. That influx has helped offset the post-pandemic slowdown in home delivery demand.

Both companies rely on a streamlined import process underpinned by the “de minimis” exemption, which allows low-value shipments to enter the country with minimal customs formalities. This mechanism keeps product prices low, attracting shoppers and generating steady volume for delivery providers.

However, growing scrutiny from U.S. lawmakers and Customs and Border Protection enforcement actions threaten the exemption's current form. Parcel carriers are betting that Temu and Shein will adapt, given how deeply some industry players have integrated their operations with these two companies, according to experts interviewed by Supply Chain Dive.

“I do think the smaller carriers and regional carriers would be greatly impacted by a disruption to the volume,” said Nate Skiver, founder of parcel consultancy LPF Spend Management.

‘Explosive’ growth catches UPS' attention

For now, the boom is helping carriers regain volume momentum that faded after the COVID-19 pandemic's home delivery surge subsided. After more than two years of declining volume, UPS finally reversed its demand slump in the second quarter of 2024. Average daily U.S. volume rose 0.7% year over year in Q2, aided by heightened interest in its low-cost SurePost service.

CEO Carol Tomé said during a July earnings call that e-commerce companies operating under a different shipping model than traditional UPS users helped drive the rebound.

“There were two new e-commerce customers that came into our network, and you can imagine who they are,” Tomé said. “These are new e-commerce shippers in the United States whose volume has been quite explosive.”

Temu and Shein were not named during the call, but both companies use UPS, and experts interviewed by Supply Chain Dive said they are the primary drivers of the carrier's surge in lightweight volume.

“It's the only two retailers that could have enough volume to actually impact their results like that,” said Alan Amling, an assistant professor of practice at the University of Tennessee and former vice president of corporate strategy for UPS.

Temu and Shein's influence extends beyond UPS. Temu also uses FedEx, the U.S. Postal Service and a broad range of smaller carriers for domestic delivery, according to its website. Shein's website does not specify its delivery partners, though it notes returns can be made via UPS or the Postal Service.

“The only growth that's propping up the last-mile market is coming from cross-border e-commerce,” said Andrew Townsend, senior vice president of corporate development and strategy at SpeedX, which delivers for both Temu and Shein.

Temu and Shein command low delivery prices

In exchange for the substantial volume they provide, Temu and Shein negotiate generous shipping rates, according to carrier executives and industry observers who spoke with Supply Chain Dive.

“Having so much volume on a daily basis should allow them to negotiate some really favorable rates, and then taking into account just the broader U.S. parcel market is already soft, so that just commands better pricing,” Skiver said.

Inexpensive rates enable Temu and Shein to maintain highly competitive product prices while still covering the cost of air freight into the U.S., a critical component of their supply chain models.

The companies' cost-centric approach leaves little room for speed, at least for standard delivery options. Temu's standard shipping is free for customers, but delivery times can range from six to 22 days. Standard shipping on Shein is free for orders above $29 — otherwise it costs shoppers $3.99 — with estimated delivery times of 10 to 13 days.

“If your average order value is sub-$40, there's not enough margin inside the box to pay for any type of premium delivery experience,” said Derek Lossing, a former Amazon Logistics leader who now serves as founder and principal advisor of Cirrus Global Advisors.

The low rates carriers extend to Shein and Temu can squeeze their own profit margins if not carefully managed. UPS' average daily ground shipping volume in the U.S. grew 2.3% year over year in Q2, but per-package revenue for that segment fell 3.3%.

UPS' CEO said the growth in lower-value volume was not by design. Rather, the company's new e-commerce customers brought in far more volume than anticipated.

“We need to manage through it and we will be managing through it,” Tomé said. “So don't read anything into this other than we had new customers come into our network whose volume blew up.”

Amid profitability pressures, UPS is preparing a per-pound fee on all U.S. imports from 13 countries and territories starting Sept. 15. The highest charge will apply to shipments from China, Hong Kong and Macau, which could help UPS offset lower revenues from Shein and Temu deliveries.

UPS is not the only delivery provider adjusting to the low-cost parcel boom. Pitney Bowes Global Ecommerce, which delivered for Shein, struggled to grow per-package revenue in the quarters leading up to its shutdown announcement in August.

“Those volumes, think about things like Temu, Alibaba, those types of places, tend to come in at a much lower weight, which definitely impacts the rate per piece,” Jason Dies, Pitney Bowes' former interim CEO, said on a May 2 earnings call.

Low-value volume can cover costs

Parcel carriers serve more lucrative segments, such as small- and medium-sized merchants and healthcare shippers. Yet the wave of low-cost e-commerce packages can keep trucks full and delivery routes active, helping cover fixed expenses and improve operational efficiency.

This dynamic is especially important for smaller carriers seeking to expand into new markets, experts said. Both Temu and Shein offer a straightforward path to lower service costs through increased delivery density. Anthony Pizza, vice president of business growth and innovation at SpeedX, said baseline volume from Temu and Shein helps the carrier attract more domestic customers.

“One of the nice benefits that has come from working with the China importers is that's allowed us to set a really good density in a lot of the areas that we are delivering to, which helps the unit economics like it does for a lot of other carriers,” Pizza said. “It really helps us to have a more competitive service offering to get the domestic market, as well.”

Even as U.S. lawmakers push to restrict low-cost goods entering directly from China, Pizza does not expect demand for Shein and Temu products to cool. Only a complete removal of the $800 de minimis threshold could challenge that momentum, and even then, workarounds such as shipping into Mexico before U.S. delivery remain possible, Pizza said.

But Temu and Shein must ensure that any supply chain adjustments made in response to new U.S. regulations do not translate into higher costs for customers. Otherwise, price-sensitive shoppers may shift to alternatives, jeopardizing the volume windfall carriers currently enjoy.

“Your $10 pair of jeans might just become $12, so are you as willing to wait if you can get them on Amazon the next day for $14?” Cirrus Global Advisors' Lossing said.