Home PublicationsCommentary Congress Should Reform De Minimis Rules For High-Volume Sellers  

Congress Should Reform De Minimis Rules For High-Volume Sellers  

by Becca Trate
by
Cargo Ship from aerial perspective.

One reason that e-commerce is flourishing in the United States is that consumers can easily purchase goods from overseas sellers. The de minimis value exemption expedites the import of low-value goods, allowing them to enter without customs inspections, duties, taxes, or fees paid to the U.S. government. Recently, some members of Congress have raised concerns that the de minimis threshold makes it easier for foreign companies to send illicit goods and products made with forced labor to the  United States. To address this problem without undermining legitimate e-commerce, Congress should increase the documentation requirements for all foreign shipments and cap the use of the de minimis exemption for high-volume sellers.

The de minimis exemption—a threshold originally created in 1938 and raised by Congress from $200 to $800 in 2016—benefits foreign sellers and domestic buyers. For example, craftspeople in Vietnam or Guatemala can use the de minimis exemption to sell ceramics or textiles to consumers in the United States without navigating the complexities of import tariffs. American consumers, in turn, gain access to a wider variety of goods.

Advancements in e-commerce have streamlined buying and selling foreign goods online. Many e-commerce sellers employ drop shipping, where the foreign manufacturer ships directly to the consumer, cutting out extra costs for storing and shipping products to an intermediary. Goods that fall under the de minimis exemption receive expedited screening, and many of these imports are not inspected by customs officers.

Some members of Congress are concerned that foreign companies, particularly Chinese companies, exploit the de minimis exemption rules. Select Committee on the Chinese Communist Party Chairman Mike Gallagher (R-WI) said, “Temu and Shein are building empires around the de minimis loophole in our import rules—dodging import taxes and evading scrutiny on the millions of goods they sell to Americans.” Indeed, a record one billion packages entered the United States under the de minimis value exemption from October 2022 to September 2023, and nearly one-third originated from Chinese e-commerce companies Shein and Temu. This increase is not because Congress raised the de minimis threshold, but because the products are so inexpensive. For example, the average dress from Shein costs around $15, in contrast to the average  $30 dress from Sweden-based fashion retailer H&M. Given that the average order from Shein is only $71, even if Congress were to lower the de minimis threshold to its pre-2016 level, most of these shipments would remain unaffected.

 

Policymakers have legitimate concerns about product safety and legal compliance for imported goods. Customs officials do not rigorously inspect items shipped under the de minimis exemption, potentially allowing unsafe or illegal products into the country. The Select Committee on the Chinese Community Party noted that goods entering the market under the de minimis rules may violate the Uyghur Forced Labor Prevention Act, which prohibits the use of cotton from China’s Xinjiang region, and infringe on trademarks.

To address these issues, Sen. Marco-Rubio (R-FL), Sen. Sherrod Brown (D-OH), Rep. Earl Blumenauer (D-OR), and Rep. Neal Dunn (R-FL) have introduced the Import Security and Fairness Act. It would revise the de minimis rule in two critical ways. First, it would require Customs and Border Protection (CBP) to collect detailed information on all de minimis shipments, regardless of its country of origin, enabling better scrutiny of potentially counterfeit, dangerous, or illegal goods. CBP could use this additional information to identify and stop counterfeit, dangerous, or illegal goods from entering the country, as well as ensure that products meet the $800 threshold. Second, the legislation would prohibit packages from entering the United States under the de minimis exemption if they are shipped from countries, such as China, that are on both the United States Trade Representative’s priority watch list (meaning they have insufficient IP protection and enforcement) and the International Trade Administration’s non-market economies list (meaning they are not considered market economies under U.S. antidumping standards).

These are useful provisions, but they do not address the root problem which is that Congress did not create the de minimis exemption so that high-volume sellers could avoid import duties and customs inspections. Yet the reality is these high-volume sellers now make extensive use of this exemption because of how easy it has become to ship small packages internationally.

Merely targeting shipments from China will not suffice because Chinese manufacturers could just relocate operations or products to other countries before shipping them to the United States. This would lead to inflated prices for consumers and the products still entering under the de minimis threshold. A more effective approach would be to limit shippers who can use the de minimis exemption only to those whose annual aggregate shipments fall below a certain threshold. The goal would be to maintain the de minimis exemption for low-volume sellers, not high-volume sellers who should adhere to standard import requirements.

E-commerce has made it easier than ever to buy and sell goods anywhere in the world, and the de minimis exemption has played an important role in facilitating these transactions. However, Congress should act to prevent high-volume foreign from abusing this exemption and ensure they follow the same rules and pay the same tariffs as any other importer.

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