White House Takes Executive Action Against Deluge of De Minimis Shipments
Following months of escalating pleas from lawmakers and industry groups, the White House has announced a new executive strategy to crack down on a growing barrage of foreign de minimis shipments.
“Today, the Biden-Harris administration is taking new actions to enforce our laws and protect American consumers, workers and businesses by addressing the significant increased abuse of the de minimis exemption, in particular China-founded e-commerce platforms, and strengthening efforts to target and block shipments that violate U.S. laws,” read a statement released on Friday.
More from Sourcing Journal
The multi-pronged framework includes actions that will prohibit parcels subject to other trade laws from using de minimis, strengthen Customs and Border Protection (CBP) enforcement, provide safety standards for shoppers and safeguard the American textile industry against unfair competition.
According to the memo, the administration’s rulemaking intends to reduce de minimis volume overall. That means excluding certain shipments from the de minimis exemption, including those subject to tariffs under Section 201 or Section 301 of the Trade Act of 1974. Products subject to duties under Section 232 of the Trade Expansion Act of 1962 (for posing a risk to national security) will also be excluded from using de minimis.
“Section 301 tariffs currently cover approximately 40 percent of U.S. imports, including 70 percent of textile and apparel imports from China,” the White House wrote, noting that the country’s biggest e-commerce players have circumvented paying these taxes by shipping directly to consumers using the de minimis exemption. If finalized, apparel goods from retailers like Shein, for example, would no longer be eligible.
The administration also announced new rulemaking to improve accountability and enforcement for de minimis shipments, which includes a proposal to require specific data for such shipments, such as a 10-digit tariff classification number, as well as the name of the person claiming the de minimis exemption. According to the brief, this will improve the targeting of illicit de minimis shipments and also expedite clearance for lawful ones.
The regulatory changes, if imposed, would also help clarify who is actually eligible for the de minimis exemption, and would aid CBP in more efficiently stopping goods that don’t meet the requirements.
To strengthen these provisions, the Biden-Harris administration said the Consumer Product Safety Commission (CPSC) intends to put forth a final rule requiring importers of consumer products to file Certificates of Compliance (CoC) electronically with both CBP and CPSC when a shipment reaches the U.S. According to the memo, this digital documentation would further bolster customs’ ability to target unsafe products that don’t have the proper safety certifications or product testing.
Notably, the administration laid out specific proposed actions to protect the American textile and apparel manufacturing sector, noting that these producers “play a critical role in the U.S. defense industrial base and support hundreds of thousands of direct and indirect jobs in the United States.”
China’s e-commerce juggernauts are creating unfavorable and unjust market conditions for them, the White House wrote, and it is exploring decisive actions to remediate the issue. Expanding federal procurement of certain textile and apparel products across different government agencies, as well as specifically targeting small packages coming into the country, engaging in joint trade special operations, increasing customs audits and verifications, and adding the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, are among the proposals.
“With today’s announcement, the administration is using executive authority to stop the abuse of the de minimis exemption,” the announcement said—”But further comprehensive de minimis reforms are needed, and these reforms require congressional action.”
The Biden-Harris administration is requesting expedited movement on these initiatives, saying it “stands ready to work with Congress to pass comprehensive de minimis reform legislation by the end of the year.”
The reforms co-signed by the administration include the exclusion of import-sensitive products like textiles and apparel from the de minimis exemption and the congressional ratification of rulemaking surrounding shipments of products subject to Section 301, Section 201 or Section 232 trade enforcement actions “to achieve this important reform more quickly.”
The National Council of Textile Organizations (NCTO), which has been at the forefront of de minimis reform advocacy on behalf of an embattled American textile production sector, applauded the White House announcement, with CEO and president Kim Glas calling the proposed actions a “critical first step.”
“We amplify the need to expedite rulemaking to the fullest extent possible and appreciate their strong engagement with our industry,” she said. “Further, the administration underscored the need for a comprehensive solution beyond this action announced today—underscoring the magnitude of the problem, and the inability to effectively enforce our laws with the flood of de minimis packages coming in daily and the need for an urgent solution.”
Glas called upon both Congress and the administration to work together to “immediately close this disastrous loophole once and for all.”
“De minimis has facilitated illegal and forced labor products to our doorsteps at the cost of American jobs and our manufacturing sector,” she said. “We will continue pressing for comprehensive reform given the urgency of the crisis—not just for our industry, which has lost 19 plants this last year, but for all industries and consumers and families impacted by this loophole.”
The Retail Industry Leaders Association (RILA), which counts more than 200 retailers, product manufacturers and service suppliers among its membership, said the Biden-Harris administration’s directives to improve compliance obligations “will ensure that foreign businesses cannot exploit the de minimis privilege, protecting American consumers and disadvantaged American companies.”
“These actions will also take a needed step toward addressing concerns that CBP and CPSC cannot adequately prevent non-compliant or dangerous goods from entering the United States through the de minimis channel,” the Washington, D.C.-based group wrote.
RILA and other retail groups whose members produce goods in China have spoken out against the continued application of Trump-era Section 301 tariffs, which have remained in place throughout President Joe Biden’s term in office. While the group said it remains opposed to the duties “and will continue to advocate for their removal,” it said it also believes that “as long as such tariffs remain in place, they should be applied evenly and fairly.”
Pointedly, the retail trade association said that the administration’s “welcome step” toward de minimis reform “does not absolve Congress from moving swiftly to reach a bipartisan agreement that permanently levels the playing field for American businesses and, at the same time, protects consumers.”
The Alliance for American Manufacturing also weighed in on the announcement, with president Scott Paul saying “it is essential that the Biden administration move as quickly as possible to execute its plans to exclude shipments containing products covered by tariffs from the de minimis loophole in U.S. law.”
“American manufacturers and their workers have fought valiantly for decades against the waves of offshoring, but Chinese companies have saturated the market with a torrential flood of shipments that enter the United States with no inspection or tariffs,” he added. “Manufacturers in critical sectors, including textiles and apparel, are battling to restore our domestic supply chain and hanging on by a thread.”
“This proposal from the administration is an important step in the right direction, but Congress must enact legislation immediately to deny de minimis treatment to the worst offenders, with China at the top of that list.”
American Apparel and Footwear Association (AAFA) president and CEO Steve Lamar said the D.C. trade group looks forward to learning more about the administration’s forthcoming proposals surrounding de minimis reform.
The association alongside its membership will continue “to advocate for updated trade and customs policies that ensure fair and effective enforcement, while facilitating trade with trusted partners so that only safe, authentic, responsibly made items are sold in the United States,” he added.
Meanwhile, New York Congressman Tom Suozzi, who, alongside 126 House Democrats penned a letter to President Biden this week pushing for executive action on de minimis, expressed his approval of the White House’s Friday brief.
“Today’s announcement from the Administration about taking such action is a step in the right direction,” he said. “It will help to address current abuses, protect American consumers, and begin to create a fair playing field for American workers and manufacturers. Furthermore, it will safeguard our children and families from illicit fentanyl and related products.”
But he agreed that congressional consensus and cooperation is needed to create a solution that will stick. “Ultimately, it is our bipartisan legislation that will ensure the permanent closure of the de minimis trade loophole,” he said.