Importers’ biggest coup of the last decade was one most people don’t know about.
Since 1938, customs law has had a provision called “de minimis”, which said that customs officers need not waste their time trying to collect taxes and tariffs on goods of trivial value. If the value of the merchandise is considered “de minimis”, then it sails through customs without any revenue collection or much oversight. That value was between $1 and $5 for most of the last century. Then, in 2016, it was blown up to $800 in a huge coup for businesses that thrive on imports.
But that window may be closing, at least for those importing from China.
On Tuesday, House Ways and Means Committee Chairman Earl Blumenauer (D-OR) introduced the Import Security and Fairness Act to “exclude products from non-market economy countries and products that are subject to certain enforcement actions from the privilege of de minimis treatment.”
The Blumenauer bill would exclude merchandise from countries on the Non-Market Economies List and the USTR Priority Watch List from being eligible for de minimis treatment. There are about a dozen countries on each list, but only China is on both lists.
The bill would also prohibit goods that are subject to trade remedies (like the Section 301 tariffs on China) from benefiting from duty-free de minimis.
“The number of packages we receive in the United States has skyrocketed to more than two million daily packages—a number that will only climb in the coming years. As long as foreign companies that sell their goods in America are splitting up their shipments to evade tariffs and oversight, American businesses will continue to be put at a competitive disadvantage cost-wise,” said Blumenauer, adding that the de minimis loophole also makes it easier for China to sell harmful products such as beauty products and supplements, or counterfeit goods like fake Nike sneakers. He did not name any particular product lines, however, or brands.
Other representatives of domestic manufacturers do as well.
“We support the introduction of this legislation to reform the de minimis threshold, which is routinely exploited to evade U.S. enforcement actions against China and other trade cheats,” said Alliance for American Manufacturing President Scott Paul.
“We are very supportive. This bill would prohibit China and all nonmarket economies from exploiting the de minimis mechanism in U.S. trade law, a damaging loophole that has severely undermined U.S. companies and workers…while also endangering American consumers,” said National Council of Textile Organizations President and CEO Kim Glas.
The U.S. has the highest de minimis threshold in the world. Europe’s is around $250. China’s is 50 yuan, or about $8.
Whether this bill makes it to the President’s desk or not, de minimis is an important e-commerce issue. It has made the growth of the U.S. consumer-direct-to-China business model plausible. The e-commerce model has turned China into an American shopping mall like never before. Lowering de minimis thresholds and raising the costs of those imported goods – whether it’s a dress from Shein – or a set of new pots and pans – gives American manufacturers of those products a fighting chance against counterfeit goods, cheap and perhaps forced labor, and weak environmental regulations by comparison.
