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Fate of Duty Exemption Loophole for Low Value Shipments of Sec. 301 Goods Still ‘Undermined’

Posted February 19, 2021


A proposal made last September by U.S. Customs & Border Protection that would eliminate the $800 de minimis exemption for goods subject to Section 301 tariffs has reportedly been shelved indefinitely as part of the Biden administration’s temporary “regulatory freeze.” 
Cargo loophole (boxes flying through hole in between brick walls)
Current legislation (19 USC 1321 aka Section 321) allows CBP to admit qualifying goods duty- and tax-free provided they are imported by one person on one day and have a total fair market value of $800 or less. The Trump administration had pushed to have goods subject to Section 301 tariffs excluded from the low-value exemption. 

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Enforcement & Accountability Issues 


The treatment of Section 321 duty exemptions for low-value shipments has been an issue of mounting concern for CBP in recent years. 

The exponential growth in e-commerce shipments amid an ongoing trade war that hit most imports from China with punitive tariffs has, according to CBP officials, provided vendors in that country who sell directly to U.S. consumers “with an extraordinary opportunity to evade duties.” 

In testimony before the House Ways and Means and Senate Finance committees last June, then-USTR Robert Lighthizer said the 2016 increase in the de minimis threshold from $200 to $800 had resulted in “massive numbers of shipments to the U.S. receiving duty-free treatment and virtually no screening.”

Moreover, Lighthizer estimated that China accounted for a “disproportionately high volume” of the 1.2 billion de minimis imports into the U.S. in 2018-1019 (60% as opposed to less than 11% of the 68 million formal entries), indicating that “China and others are likely exploiting the high U.S. de minimis threshold to avoid paying duties.” 

Prior to making its latest proposal, CBP issued a ruling last July that required some importers of shipments under the $800 de minimis threshold to provide information about the foreign vendor(s) with the aim of helping CBP to better identify duty evasions and other abuses and to “create a more predictable enforcement environment for trade,” said the agency.  

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Political Pressure For and Against 


Trade groups such as the National Council of Textile Organizations have urged CBP to re-examine the trade, economic, and health and safety impacts of low‑value imports into the U.S., which they suggest have been largely negative. The NCTO has also strenuously argued that not applying Section 301 tariffs on Chinese textiles and apparel entered as de minimis shipments “further compounds the problem and undermines the administration’s efforts to crack down on unfair Chinese trade practices.” 

However, other influential trade groups including the U.S. Chamber of Commerce, the Internet Association, and the American Association of Exporters and Importers are strongly opposed to eliminating the de minimis exemption for Section 301 goods, arguing that such a move “cannot be justified under existing statutory authority and would effectively nullify Congress’s express desire to permit liberal entry of relatively small value goods.”

Since the proposal was introduced, a bipartisan group of lawmakers led by Senate Finance Committee Chairman Chuck Grassley (R‑IA) has also pushed back against the move, warning about the additional burden on small businesses and have urged OMB to “designate this rule as economically significant to correct that problem and ensure robust analysis of its effects.”

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Looking Ahead


Given the contentious nature of the proposal, with competing interests and valid concerns on either side of the argument, a quick resolution of the issue seems unlikely.

Even should the Biden administration decide to uphold the proposal to exclude Section 301 goods from the de minimis duty exemption, the regulatory flexibility analysis called for by lawmakers would be a lengthy process involving a 60‑day public comment period, a cost‑benefit assessment, and an assessment of feasible alternatives. 

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Try our Section 301 Search Tool


GHY’s Section 301 – Search Tool can help you easily navigate through the complex array of Section 301 tariffs and product exclusions. Search by HTSUS number (i.e. 0304.61.0000; decimals are required, or the first 4 digits i.e. 0304), or search by product description (with a word/few words). 

If you have any questions about Section 301 product exclusions or Section 321 programs, don’t hesitate to contact one of our helpful trade experts today.

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Should you have any questions about this issue, don’t hesitate to contact one of our knowledgeable trade experts.

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