Temu owner invests in local fulfillment in face of de minimis changes

Dive Brief: - Temu owner PDD Holdings is adjusting its supply chain and fulfillment processes to limit the impact of European Union customs duties on lower-value goods, taking a page out of its playbook for a post-de minimis U.S., co-Chairman and co-CEO Lei Chen said in an Aug. 24 earnings call. - On July 1, the EU began applying a customs duty of 3 euros on each item worth 150 euros or less brought into the country. Previously, these items could enter at no charge under the bloc’s de minimis duty-free rule. Orders inbound to affected markets will see reduced fulfillment efficiency and higher costs, creating "a considerable impact" for parts of PDD's business, Chen said in remarks through an interpreter. - To reduce the sting over the long term, PDD will continue to onboard and support "high-quality local merchants" that will broaden its supply of products closer to customers, according to Chen. The company is also speeding up the development of local warehousing and fulfillment infrastructure, he added. Dive Insight: Temu's owner continues to shake up its supply chain as regulatory changes challenge the low-cost, cross-border shipping model it has historically relied upon: shipping products into destination countries individually to limit added duties. Prior to the EU's new charge, the U.S. ended duty-free treatment for lower-value China-origin imports in May 2025, before expanding it to all shipments a few months later. In an earnings call last year following the ban for China imports, Chen said the company would work to strengthen operations and help local merchants in the markets it serves, enabling more orders to be fulfilled from local warehouses. But Temu can't avoid the impact of the added duties entirely, as the e-commerce outlet known for selling low-cost goods still primarily works with merchants outside the U.S. and the EU, a majority of which are based in China, according to a PDD annual report filed in April. The end of the duty-free threshold in the EU will result in higher customs duties and taxes for Temu merchants, and additional regulatory requirements imposed by customs authorities could further delay shipments and increase costs, per the report. As a result, shoppers may face higher prices, order volumes may fall and merchant participation on the platform could decrease, it added. As PDD and its merchants adjust to the EU’s new duty, the company is investing in warehouses to help local merchants streamline their fulfillment processes, limit logistics hurdles and increase delivery reliability, co-Chairman and co-CEO Jiazhen Zhao said on the call. Currently, point-to-point shipping methods used by merchants in certain markets — rather than a consolidated shipping approach — are resulting in higher fulfillment costs and leaving some consumer demand unsatisfied, he noted in remarks made through an interpreter. "Our current supply chain investments have two complementary priorities," Zhao said. "First is ensuring a strong supply of quality products, and second is building the infrastructure to deliver them efficiently.”