Trump’s executive orders directing 25% levies on Canada and Mexico — plus a 10% duty on China — specify that the “de minimis” exemption for small packages no longer applies, Bloomberg has reported.
The full scope of the de minimis changes — whether they apply just to the new tariffs issued Saturday or to older existing trade levies — was not clear, as per the Bloomberg report. However, trade lawyers told Bloomberg Trump’s language cracking down on the de minimis exemption could apply broadly, even to existing duties against China, Canada and Mexico.
Regardless, the impact of the change threatens to fall most squarely on China, affecting retailers including Alibaba, JD.com Inc., PDD Holdings Inc.’s Temu and fashion-focused Shein. American shoppers and companies imported about $48 billion worth of shipments from the world under that loophole in the first nine months of last year, according to US Customs and Border Protection estimates.
The smaller-value shipments account for more than a tenth of China’s exports to the US, according to research from economists at Nomura Holdings Inc.
How de minimis came under spotlight
In 2023, Conservatives anxious to counter China set their sights on de minimis, a top trade priority for labour unions and progressives: cracking down on the deluge of duty-free packages coming in from China. A bipartisan group of lawmakers planned to introduce a bill to eliminate the de minimisCongress raised the US government’s threshold for expedited, duty-free treatment from $200 to $800 in 2016.
“I think everybody’s got to kind of wrap their head around what kind of mistake this was,” Robert Lighthizer, the former US trade representative during the Trump administration, told a House panel in 2023. Lighthizer urged Congress to get rid of the de minimis rule altogether, or take it to a much lower amount, say USD 50 or USD 100. He said foreign companies are taking advantage of the “loophole” and “putting people out of work in stores, they’re putting people out of work in manufacturing.” Last year, House Democrats pushed to prohibit Chinese-made goods from benefiting from the special treatment for lower-cost goods. That move was part of a larger measure that boosted investments in semiconductor manufacturing and research.
The Select Committee on the Chinese Communist Party, a US congressional committee, had said that exploiting the $800 threshold may be a major avenue through which Chinese companies selling directly to American consumers can circumvent US law designed to prevent the sale of goods made with forced labour. The committee also said Customs and Border Protection “could not reasonably scrutinize” goods sent under the USD800 threshold for forced labor concerns because of the sheer amount of products coming in. The committee is most concerned about retailers Temu and Shein, which ship directly to consumers in the US In a report released in 2023, the committee said the two companies alone were likely responsible for more than 30 per cent of all de minimis shipments entering the US each day, or nearly 600,000 a day last year.
The committee also had competitiveness concerns. It pointed out that US retailers such as Gap and H&M paid $700 million and $205 million in import duties, respectively, in 2022. In contrast, virtually all of the goods sold by Temu and Shein are shipped using the de minimis exception in which the importer paid no duty.
In early 2022, when the US Congress was considering putting the de minimis trade provision in the semiconductor bill, several business groups led by the Chamber of Commerce and the National Association of Manufacturers wrote congressional leaders urging them to keep it out. They said the changes would “impose sweeping costs on American businesses, workers and consumers, add new inflationary pressures on the US economy, and exacerbate ongoing supply chain disruptions at US ports.”
De minimis speeds the pace of commerce and lowers costs for consumers. It also allows US Customs and Border Protection to focus its resources on the bigger-ticket items that generate more tariff revenue for the federal government.
John Drake, a vice president at the US Chamber of Commerce, who argued that the current US law should be preserved, had told AP at that time that cutting back the threshold not only would represent a big tax increase for many US small businesses, but many would would have to hire a customs broker to process their shipments. “There’s a reason Congress raised the level back in 2016,” Drake said. “They knew in addition to it being a competitive advantage for the US business community, they also recognised that collecting duties on these low-value shipments, you know, really wasn’t worth the trouble.”
(With inputs from agencies)
Article by:Source:
