New Bill Aims to Close Import Tariff Loophole

Jan 18 2022 |
Photo by Ozzy Trevino, U.S. Customs and Border Protection

A U.S. trade law that was intended to ease the burden of processing imports has been abused to circumvent tariffs.

Rep. Earl Blumenauer (D-Ore.) introduced legislation Tuesday that would strengthen U.S. trade law and close a tariff loophole that has been exploited by bad trade actors and their corporate accomplices.

The Import Security and Fairness Act would prohibit the application of the de minimis threshold on goods imported from countries that are both non-market economies, such as China, and on the U.S. Trade Representative’s Watch List, as China often is.

Originally designed to relieve the burden of processing low-value imports for the U.S. government, the de minimis threshold allows these goods to forgo a formal import process and skip duties, taxes and fees due to the U.S. government. The threshold for this exemption was originally set for goods valued at $1 or less.

However, in the 1990s, that limit was extended to $200 and then to $800 in 2016. According to Blumenauer’s office, that latest increase has been accompanied by an “explosion in e-commerce packages that use the de minimis provision to enter the United States.”

Meanwhile, China’s staggering trade surplus is reaching ever greater heights, soaring to $94.5 billion in December and $676.2 billion for the 2021 year.

“The number of packages we receive in the United States has skyrocketed to more than two million daily packages—a number that will only climb in the coming years,” Blumenauer said. “As long as foreign companies that sell their goods in America are splitting up their shipments to evade tariffs and oversight, American businesses will continue to be put at a competitive disadvantage cost-wise.”

If passed, the Import Security and Fairness Act would also prohibit goods subject to enforcement action, such as Section 301 and 232, from using de minimis to evade duties, as well as require the U.S. Customs and Border Protection (CBP) to collect more information on all de minimis shipments.

Concerns that forced labor in China has contaminated much of the global supply chain has prompted more stringent CBP enforcement of late, and Blumenauer’s bill may help limit the import of such goods into the U.S. as well.  

“This loophole also makes it easier for people to import illegal goods and harmful products, because there is virtually no way to tell whether these packages contain products made through forced labor, intellectual property theft, or are otherwise dangerous,” Blumenauer said.

Alliance for American Manufacturing Scott Paul expressed his support for the bill, saying:

“We support introduction of this legislation to reform the de minimis threshold, which is routinely exploited to evade U.S. enforcement actions against China and other trade cheats. The bill takes aim at the worst offenders, while also addressing loopholes used by bad actors to avoid paying taxes, duties and fees. We strongly encourage Congress to adopt these reforms while also ensuring that additional steps are taken to monitor transshipments and increases in de minimis volume from other countries.”

As U.S. manufacturing continues to grapple with trade cheating, enforcing and strengthening our nation’s current trade law is critical to establishing a fair playing field. Congress should pass this bill.