Dems Propose Closing De Minimus Loophole for Imports from China

Trade Update • JANUARY 19, 2021

Legislation introduced yesterday by U.S. Representative Earl Blumenauer (D-OR), chairman of the House Ways and Means Trade Subcommittee, would prohibit low value shipments from China and other non-market economies from entering the U.S. duty-free under the $800 de minimus threshold.

“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.

“This loophole also makes it easier for people to import illegal goods and harmful products, because there is virtually no way to tell whether these packages contain products made through forced labor, intellectual property theft, or are otherwise dangerous.”

Proposed Changes

Aiming to fix “a wide-ranging set of unaddressed issues,” the Import Security and Fairness Act would:

• Prohibit Goods from Countries that are Both Non-Market Economies and on the U.S.
  Trade Representative’s (USTR) Watch List from Using De Minimis: To address concerns related to U.S. competitiveness, the legislation prohibits goods from non-market economies, such as China, from benefitting from de minimis treatment. The U.S. government has found that such countries provide unfair benefits to their companies and, therefore, this change ensures that shipments from these countries don’t benefit further under U.S. law.
• Prohibit Goods Subject to Enforcement Actions from Using De Minimis: U.S. enforcement statutes, such as Section 301 and 232, provide the United States with leverage to address unfair trade practices that harm U.S. workers and firms. Exempting de minimis shipments from paying enforcement-related duties has significantly undercut this leverage, even though de minimis shipments subject to other enforcement actions, like antidumping and countervailing duty orders, are still required to pay the duties.
• Close De Minimis Loophole for Offshore Distribution or Processing Facilities.
• Require CBP to Collect More Information on All De Minimis Shipments and Prohibits Use by Bad Actors: To address concerns regarding compliance with U.S. laws, this provision makes common-sense changes that will require CBP to collect more information on de minimis shipments and prohibit importers that have been suspended or debarred from being able to use de minimis. This provision provides statutory support for the ongoing work that multiple administrations at CBP have already started.

Trade Groups Divided

The AFL-CIO, the National Council of Textile Organizations, the Coalition for a Prosperous America, and the Alliance for American Manufacturing have expressed support for the legislation, according to a statement from Blumenauer’s office.

“It’s long overdue that Congress address the rampant abuse of the de minimis loophole by China and companies like Amazon,” said Michael Stumo, CEO of CPA. “Originally meant for low-value goods, multinational corporations addicted to profiting off of cheap Chinese imports successfully lobbied to increase the de minimis limit.”

Business groups such as the U.S. Chamber of Commerce, the Express Association of America, and the National Retail Federation, which in 2016 backed a significant hike in the U.S. de minimis threshold from $200 to $800, are expected to oppose the proposed changes.