De Minimis Bill Drawing Opposition From Express Shippers, Apparel Companies, Retailers

Express Association Executive Director Mike Mullen said the express companies could implement the change if it were to become law. "The problem with this legislation is it’s totally unclear what goal is trying to be achieved with this legislation. It’s singling out China," he said, because that country is both a non-market economy and on the priority intellectual property watch list. No other country is on both, though Vietnam is on the broader IP watch list.

He said that if lawmakers think "we’ll somehow be able to get China to change its behavior and not be a non-market economy," he doubts it will work. If the idea is that it would steer consumers to other countries' goods, or to U.S. products, he also wonders how much difference it would make.

"It certainly is going to drive up prices" for online purchases that require a direct import from China, he said. "The burden of this is going to fall on the U.S. consumer and also on small and medium businesses in the United States who import inputs for their manufacturing process and also goods to be sold."

He said express carriers' databases show that even though the current de minimis level means only $800 worth of imports can enter in a day, that's high enough for manufacturing companies to import inputs under the statute.

Rep. Earl Blumenauer, D-Ore., said in a press release that when exporters avoid tariffs, it puts American businesses at a competitive disadvantage. He also said: "This loophole also makes it easier for people to import illegal goods and harmful products, because there is virtually no way to tell whether these packages contain products made through forced labor, intellectual property theft, or are otherwise dangerous.”

Blumenauer told International Trade Today in December that 83% of packages that qualify for de minimis treatment are from China (see 2112020055). Roughly $250 billion worth of Chinese imports annually are subject to an additional 25% tariff under Section 301; another $112 billion worth of imports are subject to an additional 7.5% tariff. None of those tariffs are collected when packages enter under de minimis, but if this bill became law, they would be, even if China was not on the intellectual property priority watch list. Goods subject to Section 232 tariffs would also be ineligible for de minimis.

CBP has said the rise in these shipments also heightens the risk of brand counterfeits; dangerous counterfeits, such as medical devices; auto parts and medicines; and narcotics destined for the black market (see 2105060021). The agency has said it wants to collect more advance data on these packages so they can allocate resources by risk. Although partner agencies such as the FDA have no value-based de minimis, medical devices and medicines are still arriving with too little scrutiny, CBP has said.

Mullen said he'd like to see the evidence that supports the view that an increase in de minimis levels also increases the amount of counterfeit product arriving. He said when you evaluate the value of seized shipments for intellectual property rights violations, about half the volume is in packages moved by international mail or express carriers, and the other half arrives by ocean or rail. "An IPR violator will use any transportation mode they can," he said.

He questioned the post office's ability to implement this change, but said it's possible it could be done through e-commerce platforms, as the value-added tax is levied in other countries. "We’ve long favored moving the collection of duties and taxes off the border. Having those duties charged at the point of sale. We think there are ways to do that," Mullen said. But still, he said, the bill is "highly inflationary" in a time that inflation is higher than it's been in 40 years. Because the vast majority of e-commerce purchases are domestic shipments, Mullen said, the change from $200 to $800 for de minimis in 2016 "doesn't even make a blip" as you look at e-commerce growth.

Bill Reisch, the international business chair at the Center for Strategic and International Studies, said that a lot of imports are entering without paying duties and "without even minimal customs scrutiny." He said the explosion in online shopping did not happen because of the higher threshold, "but it does seem clear that this has not turned out how Congress expected six years ago when it made the change. The question now is what to do about it."

He said the fact that it is big businesses arguing that this will be a burden on small businesses lacks some credibility, since the small businesses aren't the ones lobbying. He also noted that some voices in favor of the legislation are protectionist. He said that increasing advance data, as CBP has been working to do through the Type 86 pilot, is "untargeted," and Blumenauer's solution is more targeted, but creates its own problems.

"Treating [World Trade Organization (WTO)] members differently -- and a number of the countries on the Commerce Department list, including China, belong to the WTO -- is inconsistent with the national treatment principle. Treating countries differently also encourages those being treated more harshly to redirect their shipments through a third country that has not been penalized, which creates a significant new enforcement challenge for CBP," he wrote. "It would be wise for the committee to consult with stakeholders from both the business and enforcement communities before deciding what course to take."

Mullen said his coalition is starting by reaching out to the offices of members of the Ways and Means Trade Subcommittee, and then will branch out to the larger committee. The committee is looking to pass a trade bill so that the House has something to bring to the conference committee on the U.S. Innovation and Competition Act. That bill has a trade section that renews the Generalized System of Preferences benefits program and the Miscellaneous Tariff Bill, and asks the Office of the U.S. Trade Representative to take a more generous view of Section 301 exclusions.

Moving through the conference committee would seem to be the most likely path for the bill to become law. "If this does actually get into a vehicle like USICA, we’ll then talk to the Senate about it," Mullen said.