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Obscure Rule Could Hurt Biden's 'Build Back Better' Plan

April 27, 2021
It was originally established to help vacationing Americans bring home small amounts of souvenirs, but Amazon and manufacturers in China are exploiting it.

Opinion/Analysis

The Biden administration has made clear it wants to re-industrialize the United States. President Biden has already issued executive orders to reshore critical U.S. supply chains and to ramp up federal Buy American rules. He’s also pledged to shift the federal vehicle fleet to American-made electric vehicles (EVs) and to rebuild the nation’s infrastructure with domestic steel and other components. These are smart steps to restore America’s manufacturing competitiveness. However, they could easily be stifled by an obscure rule known as “de minimis” that’s currently enabling a wider flood of imports into the United States.

Right now, when imports enter the U.S. market, they face specified tariffs. Imports from China in particular receive duties of up to 25 percent. Despite these clearly prescribed tariffs, the de minimis rule allows a flood of smaller goods to enter the country duty-free each day. As a result, manufacturers in China and elsewhere can ship goods into the U.S. consumer market without paying any tariffs whatsoever.

The de minimis rule was originally established to help vacationing Americans bring home small amounts of souvenirs from their travels abroad. Essentially, they could reenter the country and bring back trivial items without having to pay a customs duty.

However, included in the de minimis rule is something known as “express shipment.” It allows articles valued at $800 or less to be imported duty-free through “informal” entry. The idea, of course, is that vacationing Americans will rarely pack large valuables in their luggage, and $800 would be a fair cap on the value of what they might bring home. 

In recent years, though, the import lobby has made sure to corrupt the intent of the de minimis rule. As a result, Amazon and manufacturers in China are now exploiting the rule to circumvent duties on e-commerce shipments.

Consider this: China’s de minimis level is a mere $8. That means any company shipping a product to China valued at more than $8 must pay a duty. But there’s no reciprocity; a Chinese good priced as high as $799 can enter the U.S. duty-free.

In 2016, Congress increased the de minimis limit from $200 to $800. That opened the floodgates, allowing companies like Amazon to further incentivize imports. Now, Amazon and other e-commerce platforms are continually bringing in individual shipments of non-tariffed items from China. To make matters worse, China’s heavily subsidized, state-owned manufacturers already underprice their products in order to outcompete U.S. manufacturers. With de minimis also removing tariffs from these goods, many of China’s imports are now entering the country cheaper than ever.

To help U.S. manufacturers better compete with China, Congress must substantially reduce the de minimis threshold. Doing so would help to eliminate the incentives for China to simply route its products through Amazon. It would also increase the revenues being generated for the U.S. Treasury. That’s because the current 25 percent tariff on goods from China is simply being waived on many products valued at less than $800. As a result, the U.S. Treasury is losing as much as $200 in duty fees per each import.

With the Biden administration working hard to “Build Back Better,” it would be a shame if a shadow part of U.S. trade law were allowed to keep working against the interests of America’s domestic manufacturers and the workers they employ. But that’s exactly what’s happening with the “de minimis” rule. As long as the rule remains embedded in U.S. law, the well-financed import lobby will work to keep chipping away at America’s industrial prosperity. Congress and the administration should fix this obscure rule now in order to maximize the results of the “American Jobs Plan.”

Michael Stumo is CEO of the Coalition for a Prosperous America (CPA). Twitter: @michael_stumo.

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