U.S. Experiences Surge in Chinese Imports; Questioning $800 Duty-Free Exemption

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Concerns among conservatives about America’s primary economic rival, China, are mounting as they look to address the labor unions and progressives’ chief trade concern: the inundation of duty-free packages from China.

This shifting political landscape could carry significant implications for e-commerce businesses and consumers purchasing goods valued under $800 from China, potentially escalating existing tensions between the nations.

Currently, U.S. law allows most imports under $800, if packed and addressed to individual recipients, to enter the United States without import duty. This is known as the de minimis rule. There are increasing calls to either decrease this duty-free limit or exclude certain countries entirely from this exemption. This could emerge as a contentious trade dispute in Congress.

“The de minimis rule has become a reflection of the broader anxieties related to China and other trade issues,” John Drake from the U.S. Chamber of Commerce commented, advocating for the preservation of the existing law.

The rule boosts commercial activity, reduces consumer costs, and enables U.S. Customs and Border Protection to prioritize larger, more tariff-revenue-generating items.

There has been a significant surge in the volume of imports benefiting from the de minimis rule recently. The threshold for expedited, duty-free treatment was increased by Congress from $200 to $800 in 2016, and the volume of such imports has escalated dramatically since.

Former U.S. trade representative Robert Lighthizer questioned the implications of the rule during a recent House panel, suggesting a revision of the de minimis rule to a significantly lower limit or its complete elimination.

House Democrats last year sought to disallow Chinese-manufactured goods from benefiting from this special treatment for cheaper goods. However, due to lack of bipartisan agreement, the provision did not make it into the final bill.

Now, the political dynamics have quickly changed. A newly formed House committee has recommended legislation reducing the threshold for duty-free imports into the U.S., focusing particularly on “foreign adversaries, like the People’s Republic of China.”

This committee has concerns over retailers like Temu and Shein, who ship directly to U.S. consumers. A recent report suggests these two companies may be responsible for over 30% of daily de minimis shipments entering the U.S.

Trade-related committees are also showing a shift in their attitude. Current leader of the House Ways and Means Committee, Rep. Jason Smith, stated his interest in holding discussions about the $800 threshold.

Several bills addressing this issue were recently introduced in the Senate. Some propose preventing duty-free, expedited treatment of imports from specific countries like China and Russia. Others suggest aligning the duty-free threshold with that used by other nations.

Many attribute this shift in Republican perspective to former President Donald Trump, who highlighted China’s job theft through subsidies and forced labor.

Back in early 2022, when the de minimis trade provision was under consideration for a semiconductor bill, business groups including the Chamber of Commerce and the National Association of Manufacturers urged congressional leaders to omit it. They warned of substantial costs for American businesses, inflationary pressure, and potential exacerbation of supply chain disruptions.

However, Drake argues that reducing the threshold could mean a significant tax hike for many U.S. small businesses, who might then need to hire a customs broker for their shipments. He emphasized the rationale behind Congress’s decision to raise the level in 2016, citing the competitive advantage it provides for U.S. businesses, and the impracticality of collecting duties on these low-value shipments.

Frequently Asked Questions (FAQs) about U.S. de minimis rule

More about U.S. de minimis rule

• U.S. Customs and Border Protection
• U.S. Chamber of Commerce
• House Ways and Means Committee
• Senate
• National Association of Manufacturers
• Select Committee on the Chinese Communist Party
• Congress.gov