De Minimis Package Volume Hit 4 Million Per Day in 2024, CBP Says
When it comes to discussions about foreign trade, “de minimis” may be both the top-used term and the most controversial talking point of 2024.
The trade provision, which allows shipments worth $800 or less to enter the country duty free, has been the subject of simmering debates in recent months, both within consumer goods industries and on The Hill. The Biden administration recently took executive action, through a multi-pronged framework, to constrain the impacts of de minimis on the consumer market along with its enforcement challenges.
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At a session hosted by Washington International Trade Association (WITA) Wednesday industry stakeholders, enforcement officials and logistics leaders spoke to the reality of managing the ballooning volume of small, duty-free parcels entering the country each day.
Felicia Pullam, executive director of the Office of Trade Relations, U.S. Customs and Border Protection (CBP) said the number of de minimis shipments has “skyrocketed over the past several years.”
She noted that in fiscal year 2015, the U.S. saw about 140 million packages annually entering the country using de minimis. In 2023, that number hit 1 billion for the first time. “That’s an increase of about 660 percent, and for us, it was very big deal when we hit a billion,” she said.
But 2024 has seen record numbers of de minimis parcels that threaten to overwhelm CBP’s capacity for inspection. By the end of the third quarter, de minimis shipment numbers surpassed 1 billion. “That means we were a full quarter ahead of where we were last year; that’s about 2.8 million shipments per day in fiscal year ‘23 and close to 4 million per day in fiscal year ‘24,” Pullam said. “That is a big jump, and it shows you how fast this is growing.”
What’s more, as of July 30, 89 percent of all seizures in the cargo environment originated as de minimis shipments. “That’s a lot of staff time, a lot of workload put towards that number. And it also matters to the individual people who would otherwise be receiving these violative shipments,” she added.
According to Pullam, 97 percent of cargo narcotics seizures (like precursor chemicals and other drugs), 92 percent of intellectual property seizures (like trademark violations and counterfeits) and 72 percent of health and safety seizures that pose risks to the health of American shoppers originate from de minimis shipments.
“At the same time, amid this explosive growth, our staffing has not grown at the same pace, so 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.
Staff vice president of regulatory affairs at FedEx Ralph Carter expressed an opposing view, saying, “The torches and pitchforks that are coming at de minimis recently are a bit misguided in our view.”
“This idea that de minimis doesn’t get any scrutiny from CBP—it does,” he said. “FedEx provides about 30 data elements for every shipment that we clear off our manifest, and CBP maintains customs offices in our facilities so that they can inspect any shipment they want to, any time.”
Carter said the shipper does what it can to facilitate the flow of goods while also helping CBP to ensure compliance. “What we think we need to do is use the data that we already have in much more effective ways,” Carter said. “Now, the way to do that is to greatly increase information sharing between the private sector and law enforcement agencies.”
The FedEx VP also pointed to the economic benefits of de minimis as factors that can’t be ignored. Increased customs clearance, efficiencies, affordable products for consumers “and lots of commercial opportunities for businesses of all sizes” are among the upsides of growing de minimis trade.
“On the other hand, if we crack down too hard on de minimis, it will result in really a regressive tax increase, because it’s going to hurt the low-income Americans. That hurts, and it’s also going to raise the cost of living for all Americans at a time when we really can’t afford that,” he said.
National Council of Textile Organizations president and CEO Kim Glas, who serves as commissioner of the U.S.-China Economic and Security Review Commission, said the damage being done to American industry is reason enough for the government to take a proactive stance to stem the flow of de minimis shipments immediately.
“Over the last 18 months, we have lost 18 plants—18 plants that have survived the Great Recession… and Covid are not surviving the influx of these small packages coming in, receiving duty free treatment, little scrutiny and facilitating forced labor product,” she said.
“This is not just a wildfire for the U.S. textile industry, while it’s estimated that half of de minimis packages coming in of the 1.4 billion projected this year are expected to be textile and apparel goods,” she added. “This is a gut punch to an industry that is critical to the U.S. economy and critical to our supply chains.”
Glas believes the de minimis trade provision has served as a loophole primarily for cheap, China-made products to enter the country—and given the ongoing trade war with the country due to its non-market trade practices, the privilege of unfettered access to U.S. consumers is not just un-earned, but violative.
“The U.S. Congress didn’t vote for a free trade agreement with China and the rest of the world, but yet this is undermining all of our free trade agreements and trade preference programs,” she said. The U.S. has more than 20 free trade agreements and preference programs benefitting 50 countries, including regional partners and allies.
Glas also disagreed with the assessment that closing the de minimis “loophole” would harm shoppers. “We look at consumer pricing, because this is our business, and since 2011, on unit pricing coming out of China, we’ve seen a 50-percent unit price drop on textile and apparel products. Rock bottom prices,” she said. “We are a deflationary industry that has historically been deflationary. This is not going to impact consumer prices whatsoever in this environment.”
John Pickel, senior director of international supply chain policy for the National Foreign Trade Council cautioned against the total reform of de minimis, saying that it boosts the economy and even offers certain advantages to American companies.
De minimis “benefits the U.S. economy to the tune of $1.4 billion and particularly benefits low-income consumers in low-income zip codes,” he said. “It allows U.S. exporters to offer free returns so that they can be more competitive in the international marketplace.”
What’s more, he said, “I also I disagree with the characterization is de minimis is a free trade agreement with China. Every country that imports into the United States has access to de minimis, provided that they’re acting in a compliant way.” De minimis shipments are indeed subject to entry requirements aside from paying duties, he argued. “So we are really looking at here is a reduction red tape, a lowering of transaction costs.”
Glas contended that “the de minimis environment is impossible to police and requires a lot less information than normal entry of products and there’s an avalanche of boxes making it very difficult, if not impossible, for CBP officers who are working really hard on the ground.”
Several countries have taken action to get rid of de minimis altogether, including Brazil and South Africa, while the EU is looking into the possibility of closing its duty-free trade exception. “Most countries are recognizing…the ancillary impacts that are happening in their local communities,” she said.
“It is critical for Congress to come together; this is a bipartisan issue,” she added. “Everybody’s talking about this issue on both sides of the aisle, and I think consensus could be for actually helping bring down the volume of boxes.”