Calls for de minimis reform have been growing louder over the past 12 months, and recently they’ve reached a crescendo. But with just days to go before the end of the year, a Magic 8 Ball might characterize a 2024 resolution as “unlikely.”
With bipartisan support in Washington and much agreement across the American business sector, though, the issue won’t be relegated to the back burner, even with a new administration on the way.
De minimis (second only to tariffs) is the hot-button trade issue of the moment. Section 321 of the Tariff Act of 1930 allows foreign shipments worth $800 or less to enter the U.S. market duty free, and use of the trade exemption has ballooned with the advent of marketplaces like Shein and Temu. The meteoric rise of these platforms has prompted outcry from competitors, Congress and the enforcement bodies tasked with managing what has become a tsunami of mostly cheap, China-made goods.
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The Scope of the Issue
De minimis trade volume has “skyrocketed over the past several years,” according to Felicia Pullam, U.S. Customs and Border Protection executive director of the Office of Trade Relations, who said in October that 2024 had seen record numbers of packages entering the country through the trade exemption.
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By the end of the third quarter, de minimis shipments surpassed 1 billion — blowing past 2023’s total volume one quarter early. During fiscal 2023, shipments netted out at an average of about 2.8 million a day; this year, that number will be closer to 4 million a day — a projected total of 1.4 billion, Pullam said.
The explosion in de minimis hasn’t been met with a parallel expansion of resources for CBP, she added. Staffing has not kept pace at all, in fact. “We still have roughly the same number of officers processing cargo as we did in 2016 when the Trade Facilitation and Trade Enforcement Act increased the de minimis limit from $200 to $800,” she said. “We are doing a lot of things to explore how we can use our authorities to better enforce, but we do need more resources to work on this.”
For American brands and retailers, the issue is clear — small, low-value foreign shipments (often worth less than $50) are eating away at their market share. While some U.S. businesses drop ship directly to consumers from their overseas suppliers’ factories, taking advantage of the de minimis benefit themselves, many believe that foreign platforms like Shein have been given an unfair advantage in that they’re able to evade costly import duties.
The issue is also hurting U.S. manufacturers, according to the National Council of Textile Organizations (NCTO); over the past 18 months, the sector has lost 18 plants, a phenomenon the group attributes to the unbridled influx of de minimis shipments.
Drugs, Dupes and Danger
De minimis isn’t just a risk to U.S. industry. With millions of individually packaged parcels crossing borders and coming through ports each day, it’s been tough, if not impossible, to ferret out illicit shipments, according to CBP.
Bad actors are more than aware of the blind spots; Customs data shows that 89 percent of all cargo seizures since July 30 have originated as de minimis shipments, including nearly all cargo narcotics seizures (97 percent), which include fentanyl and chemical precursors, as well as other illegal drugs.
What’s more, the vast majority of counterfeits and fake products entering the U.S. market are transported via de minimis packages. A whopping 92 percent of intellectual property seizures come in small packages.
The limited oversight facilitated by de minimis shipping can also serve as a cover for truly dangerous products — faulty electronics or items that contain chemicals and substances banned from products sold on store shelves in the U.S. CBP data showed that 72 percent of health and safety seizures came from de minimis shipments since the summer.
With rumors swirling about the lackluster product safety standards of China’s biggest e-conglomerates, the U.S. Consumer Product Safety Commission in September called upon its staff to specifically evaluate Shein and Temu for goods that violate the Consumer Product Safety Act by posing an “unreasonable risk of injury.”
The issue looms large in the eyes of regulators. “The growth of smaller, China-based sellers on U.S. e-commerce sites and the rising popularity of Chinese e-commerce platforms present a novel and growing risk to U.S. consumers and the ability to enforce safety regulations and other laws,” the U.S.-China Economic and Security Review Commission wrote in its yearly review in November. “Insufficient data, personnel, and overwhelming volume mean these shipments receive less scrutiny.”
Solutions Stalemate
With ample support from both sides of the aisle, a smattering of Congressional proposals for de minimis reform have been introduced over the course of the past year. The White House has even weighed in with a rule-making framework of its own.
March saw the launch of the bipartisan Coalition to Close the De Minimis Loophole, made up of members of Congress, labor unions, American manufacturers and law enforcement groups. Spearheaded by Rep. Earl Blumenauer (D-Ore.), ranking member of the House Ways and Means Trade Subcommittee, the effort aimed to raise awareness about the dangers of de minimis — from U.S. jobs lost to fentanyl being smuggled into the country.
Blumenauer, a longtime proponent of de minimis reform, introduced the Import Security and Fairness Act in Congress last year.
In August, Sens. Ron Wyden (D-Ore.), Cynthia Lummis (R-Wyo.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine) and Bob Casey (D-Pa.) unveiled the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for America Act, which they said would help empower Customs and Border Protection to better stop illicit products from making their way into the country by barring certain categories of products from using de minimis, including those deemed “import-sensitive” under the Generalized System of Preferences — most notably, textiles, apparel and leather goods, as well as those subject to Section 301 duties.
With growing concern from the business community and little movement in Washington, Congress leaned on President Biden to use his executive authority to address the issue. In early September, 126 Democratic members of Congress wrote to Biden. “In the absence of a legislative solution at this time, we urge you to use the full range of your authorities to disqualify commercial shipments from de minimis treatment,” they said.
The Biden administration moved quickly, suggesting that a framework had been in the works. One day after receiving the letter from Congress, the White House said it would take action by issuing a Notice of Proposed Rulemaking surrounding several issues, including the exclusion of all shipments of products that are subject to tariffs under Section 201 and Section 301 of the Trade Act of 1974 as well as Section 232 of the Trade Expansion Act of 1962 and strengthening data requirements for de minimis shipments to help CBP screening.
The administration’s announcement also said the CPSC would propose a final rule for importers of consumer products, including through de minimis, requiring them to file Certificates of Compliance with CBP and CPSC.
While a former Biden Administration official said de minimis reform was one of the President’s topmost priorities, and that a NPRM was expected by early December, the administration has not made any such announcement.
The Congressionally appointed U.S.-China Economic and Security Review Commission came out with its annual recommendations last month, however, and it urged lawmakers to take a hard line with online marketplaces across the globe by cutting off access to de minimis for all e-commerce shipments.
The 12 commissioners took their targeting of China a step further, recommending that Congress revoke the Asian country’s permanent normal trade relations status, which has given it access to the U.S. market under the same conditions and trade terms as U.S. allies for more than two decades.
What’s Next?
Fall of 2024 has seen an uptick in rhetoric but little concrete action when it comes to de minimis reform. As the year — and Biden’s term — come to an end, it appears likely that a new administration and a new Congress will be tasked with moving the ball down the field.
While President-elect Donald Trump has remained mum on de minimis throughout his transition period, he’s been more outspoken than perhaps any leader in recent history with regard to tariffs.
A universal baseline tariff, steeper duties on China and even taxes on Mexico- and Canada-made goods have been floated throughout the holiday season, suggesting that the incoming commander in chief is loathe to give foreign entities free access to American shoppers.
Trump has made it clear that that privilege will come at a cost. And if he does decide to impose new duties, addressing de minimis would be a logical next step.