When you order a product online without country-of-origin information being provided, the product may be sent directly to you by a company in a foreign country. If the product is under $800 in value, it isn’t inspected by Customs & Border Protection (CBP) and no duties or tariffs are charged. How does this happen?
A White Paper, titled “Trade and Tariffs” on the website of the Coalition for a Prosperous America explains: “De minimis imports are the gateway for every fly-by-night foreign vendor to ship directly into the United States. When a package receives de minimis treatment, it arrives without the need of a customs broker or bond, without paying any tariffs or taxes, and without meaningful possibility of regulatory oversight.” [“de minimis” is Latin for “too trivial or minor to merit consideration.”]
The de minimis rule was added as Section 321 to the Tariff Act of 1930…The 1938 Congress set low-dollar thresholds for three different importation scenarios, assigning a $5 threshold for bonafide gifts and personal effects travelers brought with them, and a $1 de minimis for any other situation…There are three types of import situations covered by De minimis:
- ‘Bona fide gifts’ mailed to Americans from their friends and family abroad
- Articles accompanying travelers from abroad for household use
- A “catch all” anything else provision to ensure no undue burden was spent.”
The law’s opening line states its purpose: “to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected.” It was meant to serve as an administrative tool to ensure that customs officers aren’t forced to do assessments on low-value goods which would end up costing the government more money than they would generate.”
“ For regular imports, the law requires importers to provide Customs & Border Protection (CBP) an advance manifest of the incoming cargo describing it. But de minimis shipments, including millions of e-commerce packages, typically arrive with no advance information. The information scrawled on the packages is often incomplete and unverifiable. CBP has to process a whopping 2 million of these shipments daily and does not have the capability to detect and seize illicit and dangerous goods.” Goods eligible for de minimis treatment enter the U.S. free of duties and taxes.
For most of Section 321’s history, the lowest threshold of $1 only rose to $5 by the 1990s. However, de minimis was increased to $200 by Congress in 1994, and in 2015, Congress raised the de minimis threshold to a whopping $800 after intense lobbying by express consignment companies like FedEx and UPS and e-commerce sites like Amazon and eBay. In comparison, China’s de minimis is 50 yuan, which is less than $8 USD.
The CPA paper states, “The predictable result is a major calamity putting U.S. producers and traditional retailers out of business and destroying jobs. Our permissiveness is also causing lawlessness at the ports, allowing a tidal wave of counterfeit and dangerous goods to flood in.”
Not only are U.S. companies and workers subjected to a new level of job-destroying competition but dangerous illicit drugs, such as fentanyl, and counterfeit goods are shipped directly to US consumers while evading detection.
In 2022, the U. S. had a trade deficit with China of $382.9 billion up from $353.4 billion in 2021, but down from a high of $418.2 billion in 2018. The question is: If de minimis imports were counted, wouldn’t they increase our trade deficit with China?
The answer is “yes.” On May 15, 2023, Jeff Ferry, CPA’s Economist, released an analysis that found that the impact of de minimis on the U.S. economy is large and getting larger. Key findings were:
- “Our new estimate puts de minimis China revenue last year at $187.9 billion.
- The uncounted imports increase the actual 2022 U.S. goods trade deficit by 16% from $1.19 trillion to $1.38 trillion, representing some 8.3 million lost U.S. jobs.
- De minimis imports are deeply damaging to U.S. manufacturing industry and U.S. brick and mortar retailers.
- With the incursion of Chinese-owned retailers like Shein and Temu into the U.S. market, we may be witnessing a historic shift away from U.S.-owned e-commerce giants like Amazon.”
CPA has been urging Congress to fix the problem of de minimis by lowering the threshold back to $9 ($5, but adjusted for inflation). The good news is that some Senators and Congressional Representatives have listened to CPA’s statement of the problem and introduced bills that would partially rectify the problems caused by de minimis.
On Thursday, June 15, 2023, U.S. Representatives Earl Blumenauer (D-OR) and Neal Dunn (R-FL) introduced the Import Security and Fairness Act in the House. U.S. Senators Sherrod Brown (D-OH) and Marco Rubio (R-FL) introduced a companion bill of the same name into the Senate. The purpose of the bills is “to stop China and Russia from exploiting the de minimis threshold and require Customs and Border Protection (CBP) to collect more information on de minimis shipments.”
While these House/Senate companion bills don’t reduce the dollar value of de minimis, they restrict what countries are allowed to ship de minimis shipments. The Blumenauer/Dunn House Act states:
‘‘(1) IN GENERAL. —An article may not be admitted free of duty or tax under the authority provided by subsection (a)(2)(C) if the country of origin of such article, or the country from which such article is shipped, is—
‘‘(A) a nonmarket economy country (as such term is defined in section 771(18)); and
‘‘(B) a country included in the priority watch list (as such term is defined in section 182(g)(3) of the Trade Act of 1974 (19 U.S.C.32242(g)(3))).”
According to an article titled, “Is China a Non-Market Economy?” datedApril 2, 2019 by Daniel Griswold and Danielle Parks of the Mercatus Center at George Mason University, “The US Department of Commerce currently labels 11 countries as NMEs: Belarus, Georgia, the Kyrgyz Republic, the People’s Republic of China, the Republic of Armenia, the Republic of Azerbaijan, the Republic of Moldova, the Republic of Tajikistan, the Republic of Uzbekistan, the Socialist Republic of Vietnam, and Turkmenistan. In the past, some countries designated as NMEs were then converted to market economies (MEs), such as Poland (1993), Russia (2002), and Ukraine (2006).” This means that imports from China would not be admitted free of duty or tax.
With regard to the priority watch list or “Section 182 of the Trade Act of 1974…requires the U.S. Trade Representative to identify countries that deny adequate and effective IP protections or fair and equitable market access to U.S. persons who rely on IP protection.” China is the county that most flagrantly violates U. S. Intellectual Property rights, so is most certainly on the watch list.
On Wednesday, June 14, 2023 Senators Bill Cassidy, (R-LA), Tammy Baldwin (D-WI) and JD Vance (R-OH) introduced the De minimis Reciprocity Act of 2023 “to stop Communist China and other countries from abusing U.S. trade laws that allow small dollar imports into the U.S. duty free.”
Senator Cassidy’s press release states, “The bill would bar Chinese exports from entry via the expedited “de minimis” channel and reduce the threshold for duty-free imports into the U.S. to an amount that matches the threshold our trade partners use, ensuring reciprocity and increasing transparency at our borders.”
Additionally, “The De Minimis Reciprocity Act would also:
- Exclude untrustworthy countries from using the ‘trusted’ de minimis channel.
- Only allow express carriers to facilitate de minimis imports into the U.S. to help better at stop counterfeits and fentanyl at the border.
- Require more information on every package entering the U.S.
- Use the revenue proceeds to establish a fund for reshoring industry from China.”
While China may be the most egregious in taking advantage of de minimis shipments, we also have trade deficits with India, Vietnam, South Korea, and many other countries. I am sure that uncounted de minimis shipments from these other countries would increase our trade deficits for those countries also. I personally would like to see a much simpler bill that incorporates CPA’s recommendation of reducing de minimis shipments to $9 for every country. In my opinion, this is the only fair, long-term solution.
