The U.S. de minimis program can be adjusted to address congressional concerns without lowering the $800 threshold for duty-free imports or excluding shipments from China, the National Foreign Trade Council’s John Pickel tells Inside U.S. Trade.
In an interview, Pickel, the trade association’s senior director for supply chain policy, identified several ways in which he believes de minimis implementation could be strengthened to crack down on noncompliant shipments without taking up legislative efforts in the House and Senate to exclude Chinese goods from the expedited channel. NFTC has set up a de minimis tax exemption “fact checker” to highlight the benefits of the program for the U.S. economy.
Pickel previously served as a trade and policy adviser at the Homeland Security Department; he also spent more than a decade at U.S. Customs and Border Protection.
In June 2023, House Ways & Means trade subcommittee ranking member Earl Blumenauer (D-OR) introduced a new version of the “Import Security and Fairness Act,” originally passed in 2022 as part of the America COMPETES Act but omitted from the legislation that became the Chips and Science Act signed last August. The bill would prohibit non-market economies on the Office of the U.S. Trade Representative’s Special 301 “priority watch list” – including China – from benefitting from the de minimis duty-free import channel due to concerns about goods made with forced labor, intellectual property theft and illegal products entering the U.S. but escaping notice, what Blumenauer calls the de minimis “loophole.”
A bill in the Senate introduced by Sens. Bill Cassidy (R-LA) and Sen. Tammy Baldwin (D-WI) also would eliminate Chinese and Russian goods from the de minimis pipeline. Additionally, it would lower the $800 de minimis limit for duty-free shipments to match those of U.S. trading partners.
Pickel, however, says the idea that the de minimis channel is a “loophole” is “100 percent inaccurate.” He argued the trade facilitation program “has been very successful in terms of lowering transaction costs for U.S. consumers and small businesses and allowing for the seamless flow of low-value cargo into the United States, which is very much the congressional intent.”
The problem with legislation seeking to remove Chinese products from the de minimis channel, as Pickel sees it, is that it would add significant costs for importers and put new demands on CBP without addressing lawmakers’ concerns.
“If there are well-defined concerns about illicit narcotics or counterfeits or forced-labor issues, those are risks that exist across all environments in any way that cargo comes into the United States,” Pickel said. “It's not something that's specific to de minimis, and there are mechanisms in place to address those issues.” Excluding Chinese goods from de minimis duty exemptions would only move these threats to alternate import channels, Pickel argued.
“There have been multiple trade outreach events where CBP leadership has confirmed that they process de minimis cargo in the same way that they process other cargo,” Pickel added. “They have said it's not a loophole.”
A more measured approach to de minimis reform, Pickel argues, would involve the improved use of existing data to better identify shipments that might violate de minimis requirements.
“CBP gets information on de minimis shipments ahead of products coming into the United States,” Pickel said, “and that is by and large done electronically.” If this information could be aggregated more quickly, Pickel says, it could be used to identify where shipments are trying to circumvent duties.
Chair of the House Select Committee on the Chinese Communist Party Rep. Mike Gallagher (R-WI) and House Oversight and Accountability Committee Chair James Comer (R-KY) recently accused Chinese companies Shein and Temu of breaking large shipments into numerous smaller shipments worth under $800 to skirt U.S. duties – a practice that is already prohibited under de minimis criteria. Such circumvention of duties, Pickel said, could be combatted by “improving visibility in real time to where packages are entering the United States.”
“If packages that are valued in aggregate at $300 are coming into Miami, and then another set of packages at $300 is coming into Seattle, and more is coming in through Long Beach, and more coming through Newark, and those are attributable to the same person, giving CBP the real-time visibility into what that looks like would allow them to require that additional step of filing an informal or formal entry to comply with current de minimis requirements,” Pickel said, referring to two types of customs declarations not typically required for goods imported under the de minimis threshold.
CBP already has the discretion to require additional information from importers on de minimis shipments through the request of an informal or formal entry. Applying artificial intelligence and machine-learning models to existing CBP data, Pickel contended, could help direct officials to packages with higher likelihood of noncompliance, including those that might contain narcotics, counterfeit goods or products made with forced labor.
Further, Pickel said more data-sharing between the private sector and CBP could help focus the agency’s enforcement efforts on shipments that pose the greatest threat of noncompliance and accelerate the entry of low-risk products – a “win-win scenario” for both importers and CBP.
“My sense from my members is that there would be interest in working with CBP ... about what information would be helpful to them,” Pickel said. But he stressed that requests for additional data should not put additional administrative burdens on importers without directly furthering enforcement capabilities.
“Sometimes more is just more, and if there is particular information that would be helpful, that's one thing,” Pickel said, but “it has to be targeted in the approach.”
Pickel and the NFTC also contest lawmakers’ claims that excluding China from the de minimis program would raise significant revenues. An NFTC graphic estimates a $50 package – around the average value of a de minimis shipment – could cost importers around $47 more to import without the de minimis exemption, but Pickel says the majority of the added costs would go to brokers and other fees. “Only $2 of that would actually be duty that's paid to the United States,” he said. “It costs the government more resources to process these transactions then they would receive in return if they were collecting revenue through duties, taxes and fees.”
Blumenauer’s “Import Security and Fairness Act,” a version of which was introduced in the Senate by Sens. Marco Rubio (R-FL) and Sherrod Brown (D-OH), would require the submission of further information on goods eligible for de minimis treatment, including the Harmonized Tariff Schedule classification. This provision, Pickel argued, would eliminate many of the benefits of de minimis by necessitating the use of customs brokers and slowing down the arrival of packages.
Pickel says he has been speaking to congressional staff members about alternative policy options for de minimis reform and claimed they “have been very receptive.”
Blumenauer’s office did not respond to Inside U.S. Trade’s request for comment.
“There's been quite a bit of misinformation about what is a particular risk in the de minimis space,” Pickel said. “Being able to address those concerns in a way that doesn't degrade the economic benefit of allowing goods to come into the U.S. – by lowering transaction costs and duty but also not imposing additional timelines, slowing down the flow of cargo into the United States – is a much more measured approach to addressing perceived concerns.” -- Oliver Ward (firstname.lastname@example.org)