‘Past Time for Congress to Act’ on De Minimis Reform
Stakeholders debated de minimis reform during a Washington, D.C. roundtable hosted by House Ways and Means Trade Subcommittee Ranking Member Earl Blumenauer (D-Ore.) on Wednesday. Representatives from American manufacturing industry and law enforcement discussed the pitfalls of the Section 321 trade provision, saying it gives foreign competitors unfettered access to the U.S. market.
Blumenauer, who wants Congress to adopt legislation aimed at limiting that access, slammed de minimis as “a dangerous loophole that threatens American competitiveness, consumer safety, exploits forced labor, and contributes to the fentanyl crisis in our communities.”
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Under Section 321, individual shipments of foreign origin are allowed to enter the U.S. duty free if they’re worth less than $800—a threshold many say is too high. The Obama administration raised the cap from $200 to $800 to boost trade and economic activity in 2016.
While the law was originally enacted to improve trade efficiency, new legislation is needed to “stop areas of abuse,” Blumenauer said. China-based e-tail titans like Shein and Temu have built multi-billion-dollar empires on de minimis entry, skirting customs enforcement with small, low-value packages. Congressional research shows that their sales account for at least one-third of all de minimis imports.
Andy Warlick, chairman and CEO of North Carolina yarn-maker Parkdale Mills, said de minimis has hurt American industry and stifled competition. “Ask yourself a simple question: If I am an apparel or other consumer product company, why would I bother with investing in domestic retail stores, warehouses, and logistics operations, paying U.S. wages to a significant domestic workforce and seeking out regional supply chains that offer duty-free market access through [a free trade agreement], when I can simply centralize all of my production in the lowest-cost, lowest-standard regions of the world and convert my operations into a duty-free, direct-to-consumer model?” he said. “How else will any U.S. company be expected to compete against this irrational and exploitative de minimis system?”
Warlick said throughout his 44-year career, he has seen “massive industry upheavals due to the adoption of NAFTA, the granting of PNTR to China, the accession of China to the WTO, and the incredibly difficult economic downturn of the Great Recession,” but, “our industry and my company have never seen the level of economic difficulty that we are currently facing.
“Nearly every textile facility in the country is now running at significantly reduced capacity, and many production lines are completely idle,” he added. U.S. textile companies have seen eight plants close over the past three months, affecting 1,000 workers. “These closures are just the proverbial canary in the coal mine,” he said.
“Unless something is done immediately to address this dire situation, we will see these American manufacturing closures accelerate in the weeks and months ahead,” Warlick said.
United Steel Workers legislative director Roy Houseman believes “there is a basic issue of fairness at play” in the trade relationship between the U.S. and China, and de minimis has tipped the scales in China’s favor.
“Our nation’s trade laws let billions of goods in from China into the U.S. market duty free… but American workers and businesses face significant market hurdles to nearly 900 million consumers in China,” he said. “We strongly believe that Congress should start with a view of de minimis with a simple eye toward reciprocity,” he continued, noting that the U.S. has one of the highest de minimis thresholds of any country. By contrast, many nations impose duties on imports worth much smaller amounts—including China, which taxes all foreign shipments worth more than $10.
Beyond exacerbating the trade imbalance, de minimis has also fueled the spread of dangerous drugs, according to Andrea Edmiston, director of governmental affairs for the National Association of Police Organizations. “Law enforcement is battling the trafficking of illicit narcotics on multiple fronts—from our southern border to Asian supply chains selling via e-commerce and shipping drugs like fentanyl in small packages by air cargo and the international mail system,” she said. “Fentanyl traffickers seek to mimic normal e-commerce shipments to avoid detection by [Customs and Border Protection], and they often declare these international shipments as relatively low-value consumer goods.”
Last year, 83,000 people in the U.S. died from overdosing on fentanyl, which is often mixed with other drugs. CBP has seized 27,000 pounds of fentanyl so far this year. “The de minimis provision has exploded in popularity, creating a supercharged black market for counterfeit products, goods produced with slave labor, hazardous materials and illicit drugs such as fentanyl,” Edmiston said.
Blumenauer’s Import Security and Fairness Act, introduced in June, would prevent imports from non-market economies, as well as from countries like China that are on the U.S. Trade Representative’s priority watch list, from utilizing de minimis. It would also require CBP to gather more information on such shipments. “It is past time for Congress to act,” he said.
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