Congressman Blumenauer Holds Special De Minimis Meeting As Importers Dig In

Congressman Earl Blumenauer (D-OR-3) held a special meeting with Democrats on the House Ways & Means Committee members on Wednesday to discuss the damage from the de minimis rule. That Customs rule is officially on the clock. Will it remain as-is, be reformed, or will it be removed as a superhighway into Americans’ homes for overseas, judgment-proof vendors? That is the question.

De minimis allows for goods to be shipped to the U.S. without meaningful scrutiny and duty-free if the foreign vendor claims the package is worth less than $800 in their country. Dealing with this lawlessness is the subject of two bills in the House and Senate. However, express shippers and their trade associations are digging in to make sure Congress keeps the status quo.

“De minimis for duty-free entry into China is just 50 yuan (~$8); ours is $800. This has dangerous ramifications for American manufacturing. You can import tires from China that are priced under $800,” said Roy Houseman, USW Legislative Director when asked for examples of companies hurt by the rule. The U.S. has the highest de minimis threshold of any major economy. “Paper and pulp product producers here now deal with imports from China that come in duty-free under de minimis,” he said, adding that companies selling goods made from the forced labor of Uyghur Muslims in East China – banned by the Uyghur Forced Labor Law of 2021 – could easily be coming in via apparel purchases made online by American consumers. Also of interest are products that face tariffs and anti-dumping duties that can then be sold here via de minimis without paying any of the associated duties if the product price is right.

Blumenauer was joined by five of the 18 Democrats on the House Ways & Means Committee for the roundtable, which was organized by Blumenauer, a stalwart on this issue for the last two years. He will retire in 2025.  Other Democrats that attended included Brian Higgins of New York, Suzan DelBene of Washington, Judy Chu and Jimmy Panetta of California, and Don Beyer of Virginia.

Rep. Higgins was seemingly on the fence about de minimis, concerned about the lawlessness but also touting the benefits of access to our markets.

“Our economy is 70% consumption so it seems to me that we are going to be a magnet for trade and all of this business of getting cheap goods into the U.S., including illegal drugs as well,” he said. “Between 1990-2017, global poverty fell from 36% to 9% and a billion people came out of poverty because of trade,” he noted.

Houseman explained the folly of unlimited access to vendors abroad: “I bought shoes online the other day. I can buy 14 pairs of shoes from China for under $200 and get them here in 14 days. The company that makes and sells those shoes pays no taxes and no duties. An American business cannot compete with that. All a U.S. consumer has to do is click online. Think of the major sneaker manufacturers in the U.S., they cannot compete with that. Why should we just give China unilateral access to our economy that way?” he asked.

De minimis allows for duty free shipment of goods priced under $800. Around one million of these small packages arrive in the U.S. each day from overseas sellers.

“We are the importer of last resort. China, Japan, Germany, South Korea…all excessively rely on U.S. consumers for growth. Our manufacturers are displaced because of the industrial strategies of those countries. Fine, we have lowered poverty in the developing world, but our country was torn apart by that, and we should not be shy about saying that and doing something about it, either.” – Michael Stumo, CEO of CPA, during Blumenauer’s Dec. 11 meeting titled “Examining the Pernicious Impact of the De Minimis Loophole”

Rep. Beyer addressed CPA member Anderson Warlick, CEO of Parkdale Mills, a yarn manufacturer supplying the textile industry. “De minimis has all the hallmarks of a free trade agreement, doesn’t it?”

Warlick said no. “Our trade agreements, USMCA and CAFTA-DR, have reciprocal trade that enforces labor and environmental laws. De-minimis is a free ride where we get nothing in return. De minimus exploded after we put in the Section 301 tariffs to punish trade cheaters. No one cares if someone gets off a cruise ship and brings in $800 worth of goods duty-free. It was never intended for e-commerce.”

In his opening remarks, Stumo told the Ways & Means Committee members sitting alongside Blumenauer that the pre-1994 rule of one package per person per day of de minimis could be reinstated. “Commercial goods should come in through normal entry. A few U.S. companies have built their business on the expectation of this loophole, which is not in the national interest. Right now, we have over a million small packages a day coming in by de minimis and it will soon be two million and then three million as e-commerce continues to grow. U.S. companies that pay taxes are competing with these duty-free import rivals,” he said.

This year, Customs and Border Protection agents warned in numerous Washington DC trade publications that the overwhelming arrival of small packages made it hard for them to look for products with poor safety profiles, and contraband.

“Congress cannot expect a few customs agents with drug-sniffing dogs to police the chaos of all those packages coming in per day,” Stumo said. “Most packages that arrive from China do have data on them about what’s inside; that data is garbage. Someone shipping narcotics or fake Nike sneakers from anywhere in the world is not going to fill out forms telling you what’s inside, or if it is legitimate goods like consumer electronics – how much it’s worth so they don’t go over the $800 threshold.”

Rep. Blumenauer asked about transshipping. Initial plans in House bills were to just remove “adversarial nations” from the de minimis benefit.

“You can still start with China because that’s where most of these imported goods come from. It’s a good start,” Stumo said. He explained how other countries handle small packages from foreign sellers. “If you buy something on Amazon in Canada and it came from Canada that’s one thing, but if it came from somewhere else, it is tagged and taxed. No one does de minimis like we do,” Stumo said.

Rep. Beyer said that if de minimis just excludes China, then shipments to the U.S. will shift to other markets.  China clothing retailer Shein has said it was considering setting up shop in Brazil in order to serve the Americas. Consumers can order dozens of clothing items on Shein for under $800. Small boutiques could quite literally fill their shelves in a few months with Shein gear imported duty-free and marked up for local shoppers.

Andrea Edmiston from the National Association of Police Organizations spoke about how narcotics are still coming into the U.S. by mail. Customs said this year that it has captured more fentanyl as of September than it did in the same period a year ago. Most of the fentanyl here comes in through the border. “Congress, or the White House itself, can close this loophole,” she said.

Congressman Blumenauer said that fentanyl and other drugs can easily be ordered online from Mexico. Customs said it captured more fentanyl in the mail this year than in the year before. Though most of the drug is coming in through the border, Customs is short staffed to find narcotics shipped inside shoes, laptops, and dolls destined for a U.S. mailbox somewhere, duty free.

On Thursday morning, Jim Carroll, the former director of the White House Office of National Drug Control Policy testified at the Senate Committee on Aging in a hearing titled “Understanding a Growing Crisis: Substance Use Trends Among Older Adults”. In it, Carroll mentioned how the de minimis rule helps narcotics get delivered duty-free into American mailboxes every day.

“What was once intended to improve efficiency has morphed into a dangerous loophole that threatens American competitiveness, consumer safety, exploits forced labor, and contributes to the fentanyl crisis in our communities. My legislation is narrowly tailored to stop areas of abuse. It is past time for Congress to act.” — Ways and Means Trade Subcommittee Ranking Member Earl Blumenauer, Dec. 13, 2023

Importers don’t want the disruptions a change to de minimis would cause them. Rep. Blumenauer and others who seek changes to the rule have bureaucrats to tend with, and they may be able to persuade Congress to water down or give up on making meaningful changes to de minimis.

According to a report by DC-niche publication International Trade Today, Rep. Beyer said he spoke with CBP Acting Commissioner Troy Miller along with other Ways and Means members on Dec. 12, when the agency shared the statutory changes they want for de minimis. Those changes include better data collection from new sources, such as e-commerce marketplaces like Amazon Marketplace, and logistics providers, that can help share information on intellectual property violations. These elements are part of the Senate’s recently introduced Customs Modernization Act. Beyer noted that CBP was “clearly not in favor of Blumenauer’s proposal.”  But after Wednesday’s hearing, Beyer changed his tune, saying “I’m less ambivalent today because I think the testimony was clear about de minimis’ impact,” adding that what he heard from the five people at the meeting, of which Stumo and Warlick were a part, was “the best explanation I’ve heard of the downside of de minimis.”

Rep. Jimmy Panetta (D-CA-19) also told International Trade Today about his talk with Miller, saying Miller “really focused on insufficient data, mislabeling of products. It’s not the case that de minimis is a loophole where packages aren’t screened, but it is the case that a lack of information and information sharing … affects their ability to target riskier shipments.”  This will be the view that those who want to keep de minimis as-is will use going forward; that if only there was more data about the package contents, de minimis would be less chaotic, and more fair.

CBP did, however, reportedly ask for the authority to deny de minimis eligibility for individual shippers or customs brokers that have already been found to be selling contraband or mislabeling items to fall under the $800 threshold. “Updates would clearly authorize CBP to leverage suspension and debarment laws to prevent irresponsible actors from participating in trade programs, as they may be more susceptible to engaging in deceptive tactics — like using shell companies — to evade duties and laws.”

Beyer told International Trade Today that when he brought up changes to de minimis in a small business roundtable he held in his Northern Virginia district earlier this week, an estimated 50/50 were keen on keeping the rule or restricting who can benefit from it.

Blumenauer said he was trying to persuade Trade Committee Chairman Adrian Smith (R-NE-3) — who is more in favor of keeping the rule intact — and Ways and Means Committee Chairman Jason Smith (R-MO-8) — who is more open to big changes with de minimis. Blumenauer said that many Republicans have “deep concern” with how de minimis operates.  He said the purpose of Wednesday’s testimony was “to help build a consensus. We can get this across the finish line, I think, in the next few months.”

On the same day of Blumenauer’s meeting on de minimis, the Department of Homeland Security hired Christa Brzozowksi as Assistant Secretary of Trade and Economic Security. Before this new position, she was a Senior Manager of Public Policy at Amazon. Amazon Marketplace is loaded with duty-free shippers from around the world, most of them from China. In her new role, Brzozowksi will be able to steer Amazon’s view of the de minimis “pilot project” at CBP they are participating in, known as the Section 321 pilot, to her former employer’s benefit and at the expense of what Blumenauer and others in the Senate are seeking to do.