The Biden White House responded on Friday to a plea from House Democrats by proposing new rules for foreign shipping to close the notorious “de minimis” loophole but took no immediate action.
Democrats are apparently looking to steal the issue from congressional Republicans, who have been demanding action for years.
The “de minimis” loophole exempts low-value parcels, worth less than $800, to enter the United States without much of the scrutiny directed at larger shipments. Of particular concern to human rights activists is that de minimis packages are exempted from the Uyghur Forced Labor Prevention Act (UFLPA), a 2021 law that requires exporters to prove their products are not tainted by the use of Uyghur slaves in the oppressed region of occupied East Turkistan, which China refers to as the “Xinjiang Uyghur Autonomous Region” (XUAR).
The exemption for low-value parcels might have seemed like a reasonable accommodation to ease the burden on customs officials when it was created in the 1930s, but what its authors did not foresee was the explosion of micro-shipment online sales operations from China, including “fast fashion” operations Temu and Shein.
These companies operate by letting consumers order very small shipments of cheap products and sending them directly to the consumer, without passing through stateside warehouses or retail operations.
Virtually all of the shipping traffic from these direct-to-consumer online stores falls through the de minimis loophole — and fast-fashion outlets are selling precisely the sort of garment products that have a high probability of contamination by Uyghur slavery.
An estimated four million packages per day are skating through the loophole. Besides skirting the UFLPA, these micro-shipments are also thought to be a major source of importing deadly fentanyl and its precursor chemicals from China.
Sens. Marco Rubio (R-FL) and Sherrod Brown (D-OH) introduced the Import Fairness and Security Act in June 2023, a fairly straightforward bill that ends the de minimis exemption for goods from China and Russia. Companion legislation was put forward in the House of Representatives by Reps. Neal Dunn (R-FL) and Earl Blumenauer (D-OR).
“Chinese companies like Temu and Shein exploit a loophole in U.S. law to avoid tariffs and accountability for their ties to slave labor,” Rubio told Breitbart News in February 2024, when Temu made news by running an expensive ad campaign during the Super Bowl.
Rubio said two things should be done quickly: “First, the Biden Administration needs to enforce my Uyghur Forced Labor Prevention Act to crack down on slave-made goods entering the U.S. Second, Congress needs to pass my bipartisan Import Security and Fairness Act to close this loophole entirely for Chinese imports.”
Other Republicans, such as Rep. Blaine Luetkemeyer (R-MO) of the House Financial Services Committee, lamented that the Biden administration was waiting for legislation to creep through Congress when it could have been taking action immediately.
The Biden administration has been talking about plugging the de minimis loophole for much of this year, at the urging of industry groups, unions, and lawmakers from both parties, but has yet to take any action.
On Wednesday, a group of 126 Democrat lawmakers sent an open letter to President Joe Biden, asking him to use his “broad discretion” under U.S. trade laws to block commercial shipments from using the de minimis exemption.
The letter mentioned both fentanyl and Uyghur slavery as reasons for Biden to take urgent action. It also talked about American textile plants shutting down because a tidal wave of cheap Chinese imports is slipping past tariffs that were designed to prevent product dumping.
CNBC noted on Friday that traditional importers like Gap and H&M pay hundreds of millions of dollars in import duties per year – but Shein and Temu pay “no import duties at all,” thanks to the de minimis loophole. This is one reason the Chinese titans are able to undercut other apparel retailers with bargain-basement prices.
The Biden White House responded by proposing rules that would only partially close the loophole. One of these proposals would eliminate the de minimis exemption for products subject to certain tariffs, which even the White House admitted would affect 70 percent of Chinese textile and apparel imports at best.
The White House also proposed some new reporting requirements for de minimis shipments, and then tossed the issue back to Congress by suggesting it draft new shipping legislation.
“With today’s announcement, the Administration is using executive authority to stop the abuse of the de minimis exemption,” the White House said, seeking credit for taking action over a year after the Import Fairness and Security Act was introduced.
Even this tentative response from the White House was enough to drive Temu shares down by four percent on Friday.
Rep. Jason Smith (R-MO), chair of the House Ways and Means Committee, said on Friday that the Biden administration has “finally embraced Republicans’ common-sense reforms to prevent China’s abuse of the de minimis threshold.”
Smith said he hoped House Democrats would “work with us to codify this policy into law and make other common-sense reforms.”
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