The Biden administration announced on Friday that it was moving to drastically limit a trade rule that allowed more than a billion packages from China to enter the United States last year without being subject to tariffs.
The administration, which has kept stiff levies in place on Chinese products, said a flood of shipments under the rule had hurt American manufacturers and allowed fentanyl and counterfeit products to come into the country.
The trade rule, called de minimis, allows packages to be shipped from foreign countries directly to consumers or businesses without paying tariffs, as long as the shipments do not exceed $800 per recipient per day. The new proposal would strip that exemption from a wide array of products and most likely have a significant effect on large importers of Chinese goods such as Shein and Temu.
The de minimis provision stems from a century-old trade law and was originally intended for shipments that would be too trivial to require scrutiny from U.S. customs officials.
But in recent years, online companies like Shein — and some sellers of Chinese goods on Amazon — have used the provision to gain market share in the United States, shipping cheap clothing and other items directly from Chinese factories to consumers’ doorsteps. In addition to bypassing tariffs, the companies can eliminate costs for warehousing in the United States.
The number of packages entering the United States each year under the de minimis rule reached more than one billion in 2023, compared with 140 million a decade ago, according to federal statistics.
The new measure, to be finalized after a public comment period, would eliminate de minimis protection for any product subject to tariffs under several legal provisions, including those that the Trump and Biden administrations have used to levy tariffs on global metals, foreign solar panels and a vast array of products from China.
As a result, the exemption will no longer apply to more than 40 percent of overall U.S. imports, as well as 70 percent of Chinese textile and apparel imports, the Biden administration said. That could result in notable price increases for certain items sold online, particularly clothing from China.
“The drastic increase in de minimis shipments has made it increasingly difficult to target and block illegal or unsafe shipments coming into the U.S.,” said Daleep Singh, the deputy White House national security adviser for international economics.
“This is about enforcing our laws,” Mr. Singh added. “We’re making sure foreign companies respect our laws and don’t endanger American families.”
Traditionally, to bring goods into the country, retailers would arrange for a shipping container of products to be brought into U.S. ports from China. They would then move the goods into warehouses or stores before selling them to consumers.
But more and more, companies are bypassing that step by shipping items directly to individual consumers. The shopper becomes the official importer, rather than the retailer or e-commerce platform, making it easy to keep the value of shipments under $800, and importers do not have to provide as much information to U.S. Customs and Border Protection as with other packages.
The de minimis model has taken off in the past few years, since the Trump administration imposed tariffs on many goods retailers brought in from China through traditional channels. The surge in online ordering during the pandemic also helped to popularize such shipments, which now make up roughly a fifth of e-commerce orders. China is by far the biggest source for such packages, sending more than all other countries put together, according to the customs agency.
Both Shein and Temu have said that, while they use de minimis, it is not core to their success. A Temu spokeswoman said the company was open to changes that helped consumers and that they would not affect the competitive landscape as long as they were fair.
Donald Tang, the executive chairman of Shein, said in an interview on Thursday that he would be “very happy to embrace” the end of de minimis. As long as it is there, “then we’re going to use the channel,” he said, but if it is eliminated, “then we’re going to find different ways to to satisfy our customers.”
The Biden administration’s decision to clamp down appeared to be an attempt by Democrats in Washington to capitalize on Republican inaction on an issue related to China, trade and fentanyl ahead of the election.
House Republicans had discussed taking up legislation to limit de minimis shipments in a package of bills targeting China this week, but ultimately could not agree on which import measure to move forward. In recent years, lawmakers of both parties in the House and Senate have proposed legislation to clamp down on de minimis shipments.
In a letter to the Biden administration on Wednesday, more than 100 Democratic lawmakers urged it to use “the full range” of its authorities to limit de minimis shipments.
Groups including the U.S. Chamber of Commerce and shippers like FedEx and UPS have opposed the changes to de minimis proposed by lawmakers.
The National Foreign Trade Council, which lobbies on behalf of major importers, argues that getting rid of de minimis would create more work for Customs and Border Protection and cost American consumers billions of dollars annually, particularly burdening low-income households. The group also contends that eliminating de minimis would not do much to stop illegal substances from entering the United States.
“The only outcome here is that it’s a tax increase,” said John Pickel, the senior director of international supply chain policy at the National Foreign Trade Council. “It’s a collection of a small amount of money at a high amount of cost to the government.”
“It’s not going to improve the enforceability of U.S. trade laws at the border — full stop,” he added.
A study by the right-leaning American Action Forum found that ending de minimis entirely would add $8 billion to $30 billion of costs for American consumers each year.
But other U.S. businesses have complained about the de minimis exception creating an unlevel playing field with China — putting pressure on retailers that employ American workers in their distribution centers and shuttering some of the remaining textile plants around the United States.
Mike Hesse, the chief executive of Blue Ox, a Nebraska manufacturer of tow bars and other equipment for recreational vehicles, said his company was proud its products were American made. But he said the tariff exemption was helping Chinese copycat versions of his products enter the country cheaply through Amazon, damaging his brand and risking consumers’ safety.
“You’re talking about these 45-foot motor homes towing 10,000-pound vehicles,” he said. “They’re a safety issue, plus the consumer is being duped into thinking they’re buying an American-made product. That’s how de minimis is affecting me.”
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