Lawmakers and stakeholders reacted mixedly to the Biden administration’s announcement of tighter restrictions on a de minimis threshold above which foreign goods can enter the United States duty-free.
The administration also asked Congress to pass legislation by the end of the year because the proposed rule changes did not go far enough. It is unclear how quickly the administration will pass new rules.
Products subject to three trade restrictions – namely Sections 301 and 201 of a 1974 Trade Act and Section 232 of a 1962 Trade Act – will no longer be subject to the de minimis threshold, which allows shipments valued at $800 or less to avoid tariffs and undergo few or no controls.
These restrictions are typically imposed on countries that violate U.S. trade agreements or engage in unfair trade practices and imports that threaten domestic industry and national security.
The administration’s move comes after an explosion in shipments from abroad, particularly e-commerce goods from China. Use of the exemption has increased dramatically over the past decade, from 140 million shipments a year to more than 1 billion, according to the Biden administration.
“The majority of shipments entering the United States under the de minimis exemption originate from several e-commerce platforms founded in China. This puts American consumers at risk, disadvantages American workers and businesses, and results in massive quantities of low-quality products such as textiles and apparel being imported into the U.S. market duty-free,” the White House said in a statement.
Failure to take advantage of the exemption for countries subject to Section 301 tariffs could hurt the growth of the fast-fashion industry. These tariffs affect about 40 percent of U.S. imports and 70 percent of textile and apparel imports from China, the administration said.
Fashion and clothing companies based in China such as Shein and Temu will struggle with the new rules.
“Temu’s growth does not depend on the de minimis policy. We are reviewing the new rule proposals and remain committed to creating value for consumers,” a Temu spokesman said in a statement.
Shein did not respond to a request for comment, but sent a letter to the American Apparel and Footwear Association in July 2023 saying Shein was open to discussions with industry leaders, Congress and the Biden administration. “We believe the exemption needs a complete overhaul,” the letter said.
Amazon.com Inc. and its suppliers could be affected by the new rules. Amazon declined to comment.
Tiffany Smith, vice president of the National Foreign Trade Council, said in a statement that expanding tariffs on imports from China “continues a disappointing trend and is an unfortunate step in the wrong direction.”
“Section 301 tariffs were put in place to make it easier for U.S. companies to compete internationally by targeting a very specific set of Chinese actions related to intellectual property protection. It is unclear how additional tariffs like those announced today will solve a problem that six years of tariffs have failed to resolve,” Smith said.
Smith added that U.S. importers and consumers have paid about $221 billion in additional costs over the past six years because of Section 301. Instead of new tariffs, “the Biden administration should focus on working with likeminded allies and trading partners to address the underlying structural problems in China that these tariffs were designed to address,” she said.
House Democrats released a letter on Wednesday urging President Joe Biden to take action to close what they call a legislative loophole. Lawmakers from both parties have already introduced bills to address the problem, but work on the bills has stalled.
Republican chairman of the House Budget Committee, Jason Smith, praised the new restrictions in a statement.
“The Biden-Harris administration has not only maintained President Trump’s Section 301 tariffs on China for nearly four years, but is now initiating a legislative process directly modeled on legislation passed by the House Appropriations Committee to prevent China from evading those tariffs,” Smith said, referring to a bill by Rep. Greg Murphy, R-N.C., that would exclude certain imports from de minimis treatment.
The measure passed the committee in April on a 24-18 party-line vote, but failed to advance in the House.
House ranking member Richard E. Neal, Democrat of Massachusetts, said in a statement that the tighter restrictions were the first step “to close the de minimis loophole, but the danger remains. The American people need comprehensive action from Congress.”
The committee chairmen disagree about how to proceed.
Neal referred to a bipartisan bill by Representatives Earl Blumenauer (D-Oregon) and Neal Dunn (Republican, Florida) that is scheduled to be introduced in June 2023. Senate Banking Committee Chairman Sherrod Brown (D-Ohio) introduced a similar bill at the same time, but it has not yet been implemented.
