US senators Sherrod Brown and Rick Scott are calling on the Biden administration to use executive action under the Tariff Act of 1930 to close a key loophole known as the ‘de minimis’ rule, which they believe foreign competitors exploit to evade duties and fees, giving them "unfair" advantage over American businesses.

Senators Brown and Scott explained that based on “de minimis” rule, packages under $800 in valuation are exempted from US duties, taxes and fees and allowed to enter the country with little to no inspections. 

The senators argue the loophole has led to a surge in the number of packages arriving in the US to more than three million per day. They are now calling for urgent action to prevent the “unfair competition and exploitation” of US manufacturers.

In a letter sent to the Biden administration, the senators allege that foreign competitors split large shipments into many small packages in order to cheat the rules and evade the duties they owe, gaining an unfair competitive advantage over American businesses.

The senators claim ‘de minimis’ shipments often include counterfeit products and items made with slave labour.

The senators said: “The Chinese Communist Party (CCP) — one of the worst trade and human rights abusers — directly benefits from duty-free access to the US market for shipments valued under $800. This generous gift comes with no rule of origin requirements, reciprocal market access or labour or environmental standards. Simply put, the CCP and others utilising ‘de minimis’ can get rich while getting away with a host of trade infractions that undermine US manufacturing, harm American workers and expedite the flow of fentanyl and other harmful goods into our communities.”

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They warned that the situation has reached a tipping point where vast sections of American manufacturing and retail are at stake if the ‘de minimis’ loophole is not immediately addressed — including a large portion of US textile production and employment.

Key priorities in addressing the ‘de minimis’ loophole

The senators called on the Biden adminstration to address three priorities in order to address alleged abuse of the Section 321 ruling:

• End the abuse of the ‘de minimis’ loophole by ensuring the application of the same Importer of Record and Entry Summary requirements for Section 321 shipments that already exist for other informal entry imports;
• Ensure accurate shipment reporting by directing the US Treasury, per section 321(b), to ensure ‘de minimis’ is not being used by commercial operators to avoid paying duties; and
• Protect domestic industries and ensure the proper application of the law by excluding from ‘de minimis’ goods that are subject to partner government ggencies import notification requirements, Section 301 and Section 232 penalty tariffs, and UFLPA import restrictions, as well as products in sectors designated as priority trade Issues by Congress.

The letter also noted that the Biden government can address the ‘de minimis’ exception through executive action, by issuing an executive order or new rules, in accordance with existing laws and regulations.

According to the senators, these actions can align with customs regulations, empowering Customs and Border Protection to deny ‘de minimis’ treatment and require a formal entry for law enforcement or revenue protection purposes.

Kim Glas, president and CEO of the National Council of Textile Organisations (NCTO) exclusively told Just Style: “The Section 321 ‘de minimis’ mechanism allows nearly 3 million imported packages a day into the US market duty-free and virtually uninspected by US Customs and Border Protection. It is a black box of little information that is facilitating tainted and dangerous products, products made with forced labour, and illicit drugs such as fentanyl into our homes at the click of a button.

“Today, in the e-commerce superhighway of ordering, this provision has exploded and grown to 1 billion packages a year, effectively handing a free trade agreement to China and the rest of the world. The impact on the US textile industry has been devastating. The industry has closed ten plants in the past four months, in part due to the unfettered flow of imports coming in through the ‘de minimis’ loophole, which is undermining our industry and workforce.”

Glas echoed the same point of view as the senators, pointing out that the administration has existing executive authorities to close this loophole today. She continued: “It must decouple ‘de minimis’ from all e-commerce shipments immediately to protect our citizens from dangerous products and to preserve and grow a vital domestic manufacturing supply chain.”

Recently, the NCTO urged the Department of Homeland Security to step up its enforcement of the Uyghur Forced Labor Prevention Act and the ‘de minimis’ loophole saying it is destroying US apparel manufacturing.

By Just Style