House Democrats Take Lead on Closing De Minimis Loophole, Going Against Amazon, FedEx, Others

In 2022, when there were ‘only’ 685 million de minimis shipments, CPA chief economist Jeff Ferry published a report estimating the value of de minimis shipments at $188 billion. It must be much higher today. CPA has been an active participant on Capitol Hill in changing hearts and minds on this massive trade loophole, a loophole that has helped turn Amazon into a direct-from-China shopping mall, and gave birth to the likes of China online retail giants Shein and Temu.

De minimis has never had the attacks it faces today on Capitol Hill. Support for the status quo anarchy mainly comes from companies like FedEx and UPS. Inspectors say the workload to go through these packages is overwhelming, if not impossible. 

The mail is a particularly lawless channel. Last September, a report, titled “CBP Did Not Effectively Conduct International Mail Screening or Implement the STOP Act” by Customs and Border Protection said they did not consistently target for additional inspection or evaluate potentially inadmissible international mail entering the United States through those eight facilities, the report led. Other than running packages through metal detectors, and drug sniffing dogs, there is no way to know if goods are banned via sanctions like the Uyghur Forced Labor law, or full of fake Nike sneakers or drug making paraphernalia. 

In a hearing this March, James Joholske, director of the office of import surveillance at the U.S. Consumer Product and Safety Commission told the U.S. China Economic and Security Review Commission that small package de minimis volume “makes it harder for us to police products for consumer safety.” Commissioner Kim Glas called de minimis “the Wild West of commerce” 

“More than 80% of shipments we examined at the ports had China listed as a country of origin,” Joholske said. “We face considerable challenges. The sheer volume remains overwhelming. The rise of e- commerce is a challenge for us with almost 60% of these small package shipments coming via e-commerce sales. We have little ability to act on small manufacturers overseas and that makes it harder for us to police consumer safety,” he said.

Shortly after that hearing, CPA launched a coalition of de minimis reformers. Among its key objectives, the Coalition is dedicated to increasing awareness of how this trade rule can facilitate a flood of fentanyl and other illicit goods into the U.S. market. 

Blumenauer called the coalition a “testament to the mounting pressure to close the de minimis loophole. De minimis is not just a threat to American businesses and consumers, as if that weren’t enough, but it is increasingly contributing to the fentanyl crisis.  

He has been a leader on de minimis reform. His Import Security and Fairness Act would block China from de minimis and require Customs to collect more information on what’s been shipped via the de minimis provision. The bill never left House Ways & Means and samples of it were rejected in the House, causing Republican leadership on that Committee to rewrite new bills in the spring.

Senators are interested in ending de minimis, too. Republicans are included in the mix. Senators Sherrod Brown (D-OH) and Rick Scott (R-FL) sent a letter urging the Biden Administration to take executive action to close the de minimis loophole in March, which is what the 126 Democrats are doing now. 

This summer, the Department of Justice indicted a Chinese national who was living in the United States and importing thousands of kilograms of precursor chemicals used to make fentanyl. The now unsealed charges say that 48-year-old Minsu Fang and his associates imported over 2,000 kilograms of fentanyl precursor chemicals from China into the United States and on to Mexico in approximately 100 separate shipments between August and October 2023. 

Homeland Secretary Alejandro Mayorkas said that de minimis entry “is stunning from a point of view of narcotics and all sorts of contraband. The de minimis exception is built on a false premise that low value means low risk.”

De minimis shipments are rising. Policing it remains nearly impossible. 

These shipments priced below $800 rose 55.6% from 685.1 million in fiscal year 2022 to 1.06 billion in fiscal year 2023, according to Customs.  Your local hardware store can import cast iron skillets and grills every month, duty free, direct from anywhere in the world. China gas grills were once subject to Section 301 tariffs, but those were removed in May.

With de minimis, 100% of the benefit goes to overseas vendors who use e-commerce platforms to sell directly to Americans despite having zero presence here. Why does it make sense to eliminate tariffs, but only for foreign vendors shipping small packages? Shipping small packages has a host of negative externalities and it penalizes businesses who have brick and mortar establishments, and hurts traditional importer-wholesalers that pay income tax in addition to tariffs, noted CPA trade counsel Charles Benoit.

De minimis has turned e-commerce into a China business.

In July, the WSJ reported that Amazon is looking to shift away from its warehousing strategy and instead will launch a service focused on imports directly from China warehouses. The article said that this would mainly be for clothes and household goods, stuff sold on Shein and Temu.  

Amazon built its business by developing an extensive domestic warehouse and fulfillment business, which can’t make use of de minimis shipments as those are required to originate outside the United States. A 2023 analysis estimated that Amazon operates 305 large warehouses in the United States, likely more than 1,000 smaller delivery facilities. But now Amazon is closing U.S. warehouses and will outsource its warehousing to China. It could also be Vietnam or Mexico for that matter. De minimis makes it all possible.

“Legally, closing the loophole is easy,” said Benoit. “It can be done by a President or by Congress, anytime. It’s easy because we already have a functioning regulatory infrastructure to deal with small packages: it’s called Informal Entry, and applies to shipments valued under $2,500. But with the de minimis loophole, if a foreign vendor declares it’s worth less than $800 in their country, then they can skip the rules and regulations of Informal Entry. If we repeal de minimis, most merchandise exploiting the loophole will revert to more efficient bulk shipments in containers,” he said. “That’s a massive win for port security, and a win for the American economy.”