Surge of Chinese Packages into the United States Raises Concerns About Duty-Free Limit

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The influx of packages from China into the United States has sparked a new focus among conservatives, who seek to address the country’s leading economic rival. Their attention is now directed towards curtailing the overwhelming number of duty-free packages arriving from China, a priority shared by labor unions and progressives. The potential changes in trade policy could have significant implications for e-commerce businesses and consumers who import products from China valued below $800, further straining the already tense relationship between the two nations.

According to the current U.S. law, most imports valued below $800 are exempt from duties when addressed to individual buyers. This provision, known as the de minimis rule, has become a subject of intense debate in Congress, with efforts underway to lower the threshold amount or even exclude certain countries from duty-free treatment. John Drake, a vice president at the U.S. Chamber of Commerce, argues in favor of preserving the current law, stating that de minimis has become a symbol of concerns related to China and other trade challenges.

The de minimis rule facilitates faster trade and reduces costs for consumers, while allowing U.S. Customs and Border Protection to focus their resources on higher-value items that generate more tariff revenue for the federal government. The volume of products benefiting from the de minimis rule and entering the U.S. has witnessed a significant surge in recent years. In 2016, Congress raised the threshold for expedited duty-free treatment from $200 to $800, resulting in a rise from approximately 220 million packages in that year to 720 million in 2021, with China accounting for roughly 60% of the total.

Robert Lighthizer, the former U.S. trade representative during the Trump administration, expressed his concerns about the situation, stating that the surge in packages from China, nearly 2 million per day, was an unforeseen development. He advocated for the complete elimination of the de minimis rule or a substantial reduction in the threshold, suggesting amounts like $50 or $100. Lighthizer argued that foreign companies were taking advantage of this “loophole” and causing job losses in retail and manufacturing sectors.

Last year, House Democrats attempted to prevent Chinese-made goods from benefiting from special treatment for lower-cost products, as part of a broader bill aimed at boosting semiconductor manufacturing and research. However, due to opposition from influential U.S. business groups and key Republican members of Congress, the provision did not make it into the final bill.

In recent months, the political landscape has experienced a rapid shift. The newly established House Select Committee on the Chinese Communist Party, focusing exclusively on China-related matters, recommended legislation to lower the threshold for duty-free shipments into the U.S., particularly from foreign adversaries like China. The committee highlighted the exploitation of the $800 threshold as a potential avenue for Chinese companies to circumvent U.S. laws designed to prevent the sale of goods made with forced labor. Additionally, it pointed out the overwhelming number of products entering the U.S. under the $800 threshold, making it challenging for Customs and Border Protection to scrutinize them effectively for forced labor concerns.

The committee expressed specific concerns about retailers Temu and Shein, which directly ship products to American consumers. According to the committee’s report, these two companies alone accounted for over 30% of all de minimis shipments entering the U.S. each day, totaling nearly 600,000 shipments per day in the previous year. The committee also raised concerns about competitiveness, highlighting the substantial import duties paid by U.S. retailers like Gap and H&M, in contrast to the virtually duty-free status enjoyed by most goods sold by Temu and Shein.

Furthermore, congressional committees overseeing trade are signaling a shift in mindset. While the top Republican on the House Ways and Means Committee, Rep. Kevin Brady, cautioned against hasty changes to de minimis limits last year, the current committee leader, Rep. Jason Smith, expressed a willingness to engage in discussions about the $800 threshold. The Senate has also introduced bills this month addressing the issue. One bill aims to prevent the expedited, tariff-free treatment of imports from specific countries, particularly China and Russia, while another proposes aligning the duty-free threshold with the amounts used by other nations, such as Belgium.

Sen. Bill Cassidy emphasized that former President Donald Trump reframed the Republican perspective on trade with China by highlighting the unfair advantages gained through subsidies and forced labor. However, in early 2022, business groups, including the Chamber of Commerce and the National Association of Manufacturers, opposed placing the de minimis trade provision in the semiconductor bill, warning about its potential negative impact on American businesses, workers, consumers, and the economy as a whole.

Drake noted that reducing the de minimis threshold would impose a substantial tax increase on many small U.S. businesses and necessitate hiring customs brokers to process shipments. He emphasized that Congress had raised the threshold in 2016 to not only provide a competitive advantage for U.S. businesses but also because collecting duties on low-value shipments was not worth the effort.

The surge of Chinese packages into the United States and the debate surrounding the de minimis rule underscore the complex trade relationship between the two countries and the efforts to balance economic interests, labor concerns, and fair trade practices.

Frequently Asked Questions (FAQs) about duty-free packages

More about duty-free packages

• U.S. Customs and Border Protection: De Minimis Value
• U.S. Chamber of Commerce
• House Select Committee on the Chinese Communist Party
• Bipartisan House Bill on Duty-Free Treatment of Imports
• Bipartisan Senate Bill on Duty-Free Treatment of Imports