China Commission Tells Congress to End De Minimis for E-Commerce Shipments
Tasked with investigating and assessing China’s trade behaviors and reporting on inherent risks to American interests, the U.S.-China Economic and Security Review Commission released its annual findings and recommendations on Tuesday, underscoring deepening anxieties about the country’s influence on the U.S. consumer and manufacturing markets.
The premier investigatory body on China’s economic impacts is urging lawmakers to fully eliminate the de minimis trade provision for imports sold through online marketplaces amid a “rapid escalation of e-commerce sales” originating from China.
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Section 321 of the Tariff Act has created a superhighway for cheap and dangerous products to reach American shoppers, allowing them to circumvent tariffs and regulatory scrutiny, it reported—and the situation has impeded U.S. government efforts to ensure the safety and regulatory compliance of consumer goods.
Comprised of 12 non-partisan, Congressionally appointed commissioners and staff, the Commission also recommended that Congress revoke the country’s permanent normal trade relations (PNTR) status—a change that would further fray the tenuous trade ties between the world’s largest superpowers.
China’s PNTR status, which has been in place since the country joined the World Trade Organization (WTO) in 2001, has afforded it the same benefits and trade terms as U.S. allies for more than two decades. If revoked, China would be subject to annual reviews of its trade practices—and “a shift toward a more assertive trade policy aimed at protecting U.S. industries and workers from economic coercion,” the Commission wrote in its review.
Stripping China of PNTR would also likely pave the way for the introduction of new tariffs, which President-elect Donald Trump has been promising for months.
At a hearing in Washington on Tuesday, Commissioner Jacob Helberg said a repeal of PNTR would give the president “the flexibility to recalibrate America’s trading relationship with China” in light of its failure to comply with its WTO commitments.
Meanwhile, burgeoning channels like Shein and Temu, “combined with China’s reinvigorated focus on export manufacturing as a pillar of economic growth, mean that Chinese factories will remain major suppliers across the consumer products space,” the report said. The U.S. is currently a major facilitator of that growth, taking in a total of 4 million de minimis parcels each day, many originating from China.
“Holding Chinese manufacturers and exporters accountable remains challenging—if not virtually impossible—under the Xi regime,” the Commission wrote.
“Our Commission’s bipartisan report recommends to Congress to immediately eliminate de minimis exemption for any product coming in through e-commerce. This is an important and critical recommendation; it is our top two in terms of recommendations,” Commissioner and National Council of Textile Organizations (NCTO) lead Kim Glas said at the hearing.
“We’re not going to have a fashion industry across the West if we keep these types of loopholes,” Helberg added. “It’s very clear that platforms like Shein and Temu shop around the world to different fashion brands, steal all the designs and then ship copycats of these products in three days, tax-free, to customers around the West… And so we can either have a fashion industry or we can have de minimis, but we probably can’t have both.”
Chatter about the dangers of de minimis—both to consumers receiving counterfeit or “shoddily made” products and U.S. businesses losing market share to foreign competitors—has reached a fever pitch in Washington in 2024.
Earlier this month, a former Biden Administration official said he expects the president to issue a Notice of Proposed Rulemaking (NPRM)—which would lay out a plan for curbing de minimis package volumes—before the end of the year. Bipartisan legislation has also been introduced calling for guardrails that would keep China from abusing the provision. The Commission’s recommendation that the trade “loophole” be eliminated for e-commerce altogether is especially notable within the context of these proposals.
Another notable recommendation from the Commission centered on addressing the growing issue of transshipment, in which goods made in China—or with China-made inputs—are entering the U.S. via third countries.
Congress should require the U.S. Trade Representative (USTR), in concert with the U.S. Department of Commerce, the U.S. International Trade Commission, and other appropriate entities, to dig into the operation of the U.S.-Mexico-Canada Trade Agreement (USMCA) and whether it has inadvertently facilitated the ferrying of more Chinese products over the border. The Commission recommended that the agencies compile a comprehensive report on the issue within 90 days.
“Obviously, they’re trying to export their way out of some of the economic crisis that they are facing internally,” Glas said of China. “So this recommendation to Congress is: we need these agencies to coordinate to ensure that there’s not misclassification of goods, duty evasion, illegal transshipment… to ensure that the component parts are, in fact, meeting rules of origin or requirements.”
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