by Taylor Buck, Program Associate
With the temperature and humidity in D.C. soaring during the past few weeks, I’ve been scouring the internet to refresh my hot weather staples. My searches are often flooded with offerings from Shein, a Chinese online fast fashion retailer: $4 halter tops, $12 linen dresses, $8 denim shorts, $5 sandals. I could order an entire new summer wardrobe for under $100, and it would arrive at my doorstep in two weeks.
But what I would find inside the distinctive ziplocked opaque plastic shipping packages Shein uses is no guarantee. Sure, I might receive all the items I ordered, and they may more or less resemble what I saw online. But my package would probably not have undergone U.S. Customs or safety inspections. The clothes could be tainted with toxic chemicals. They may be knockoffs of independent designers’ work passed off as original.
And, if the clothes were made with illegal Uyghur forced labor — bear in mind that 85% of China’s cotton comes from the Xinjiang region, where Uyghurs are locked up in forced labor camps — trade enforcement officials wouldn’t know, much less stop the shipment as is required by U.S. law.
And the package would have dodged all U.S. duties and taxes.
This is because of a startling loophole to U.S. trade law called the “de minimis” rule. It allows a person to import $800 per day without complying with normal Customs procedures. The goods enter the United States “informally,” meaning that packages receive little Customs oversight. It’s the program that used to mainly be used for souvenirs brought back from international trips. But in the era of ecommerce, online retailers like Shein and Amazon exploit the rule by shipping small packages from locations across the world directly to consumers, instead of making large shipments to warehouses that then are distributed to consumers. The individual consumer becomes the importer, not the company itself, so the $800 cap is rarely reached.
Normal inspections, tariffs and taxes are waived. And, because de minimis items enter without the basic classification and other information required for higher-value shipments, the U.S. systems that would normally flag safety, environmental, labor rights and other violation risks are evaded.
As a result, more than two million de minimis packages enter the United States every day without inspection, allowing the companies behind them to grow rapidly while exposing U.S. consumers to unexamined and potentially unsafe, unethical, unhealthy, or fake products.
The original intention of de minimis was to reduce processing burdens on low-value imports where the revenue collected wasn’t worth the effort. But the U.S. de minimis value, which was raised from $200 in 2015, is now absurdly high, leading to an explosion of these kinds of shipments. Globally, only Australia and Uzbekistan have equally high de minimis levels. European countries set de minimis at $200, while many countries have much lower rates, such as $15 in Canada and $10 in China.
Two bipartisan bills recently introduced aim to tackle this problem: the Import Security and Fairness Act (IFSA) and the De Minimis Reciprocity Act of 2023 (DMRA). Each bill approaches closing the de minimis loophole from a slightly different angle. Let’s get into the nitty-gritty of both.
The Import Security and Fairness Act comes from Senators Sherrod Brown (D-Ohio) and Marco Rubio (R-Fla.) and Representatives Earl Blumenauer (D-Ore.) and Neal Dunn (R-Fla). The IFSA excludes packages originating from “nonmarket economies” that are also on the U.S. Trade Representative’s priority watch list for intellectual property protection violations from receiving de minimis treatment. China and Russia currently are on both lists and thus would be disqualified from sending de minimis shipments.
The bill also forbids de minimis treatment for goods from any country that are subject to U.S. unfair-trade enforcement actions, so such imports cannot evade enforcement-related duties like those imposed under Section 301. And it forbids goods that are shipped in bulk to Canadian or Mexican distribution warehouses to enter the United States in small de minimis parcels.
Rep. Blumenauer previously introduced a similar bill, which became part of a broader China-focused package passed by the U.S. House of Representatives in February 2022. But the de minimis fix was removed from what ultimately became the CHIPS and Science Act signed in August 2022. The 2023 version of Rep. Blumenauer’s bill also requires shippers to provide more information for de minimis imports, including a description of the item, the item’s country of origin and the country from which it shipped, and the identity of the shipper and the importer.
The IFSA focuses mainly on boxing out certain countries and certain types of goods from using the de minimis loophole. However, this approach leaves the door open for other countries to continue using it. The bill’s improved data requirements could counteract efforts to game the system, with the same firms slipping in de minimis shipments through other countries. (Consider Shein again, for example, which relocated its headquarters to Singapore in 2022, as scrutiny was growing on its use of cotton produced with forced laborforced labor in its clothes’ cotton and maybe in apparel production as well.
The DMRA, introduced by Senators Cassidy (R-La.) and co-sponsored by Senators Baldwin (D-Wis.) and Vance (R-Ohio) focuses on the de minimis value. It requires reciprocity, meaning the United States de minimis level would be set according to what another country’s de minimis level is. Given how low the de minimis value is in most other countries, this aspect of the bill effectively lowers the U.S. de minimis value.
The DMRA also outright bans China and Russia from receiving de minimis treatment. It also instructs the Treasury Secretary to create a list of other countries whose shipments may not enter under the loophole, including countries that violate the Uyghur Forced Labor Prevention Act, countries that export counterfeit items, and countries listed on the State Department’s “Tier 3” worst category of human trafficking violators.
Finally, the DMRA allows de minimis treatment only for packages transported to the United States by a “contract carrier.” Such entities are required to provide the additional data required by IFSA on the goods and collect taxes and tariffs owed on them. A contract carrier is defined as a private shipper incorporated in the United States, such as FedEx and UPS.
The DMRA and IFSA are complementary policies. Both close the de minimis loophole for shipments from China and Russia and increase the data required. Both would reduce de minimis shipments overall and thus protect consumers from fake or unsafe products, limit access for goods made with forced labor and reduce the competitive edge bad players get from dodging inspections and not paying taxes and duties.
Together, these bills terms would go a long way to fixing the de minimis problem.
