Biden Administration Announced a Limit on De Minimis Rule

U.S. Government to Curb Impact of De Minimis: Key Insights

• A Tax Exemption That Got Out of Control: In the 1930s, the de minimis rule was created to exempt American tourists from paying taxes on small vacation purchases. Today, it serves as a gateway for undetected imports of unregulated products.

• Biden Administration Announces Closing the Gap: White House officials responded to lawmakers' call to reduce the impact of low-cost products crossing the U.S. border unregulated. New trade rules would address Section 301 tariffs on Chinese goods, Section 232 tariffs on steel and aluminum products, and Section 201 tariffs on solar products and washing machines.

The Biden administration has announced the implementation of new rules to curb the de minimis rule. This comes after Democratic lawmakers raised the issue in an open letter earlier this week, calling for steps that would limit the current tax exemption for imports under US$800, known as the de minimis rule.

The new rules would apply to Section 301 tariffs on Chinese goods, Section 232 tariffs on steel and aluminum products and Section 201 tariffs on solar products and washing machines.

The changes would be the result of a bipartisan effort to close the loophole that allows low-cost goods from international eCommerce platforms to enter the U.S. without further inspection or payment of duties. The new law would impose a US$2 fee on each shipment that passes through customs on this route.

Before the new rule can go into effect, it will be subject to a public comment period during which interested parties can respond to the proposed changes.

The National Foreign Trade Council, which represents large importers in the country, criticizes that a reduction of the de minimis threshold would complicate the import process for Customs and Border Protection and increase costs for U.S. consumers, as well as small businesses. Delivery companies like FedEx and DHL note that a change in the law would significantly complicate processing, increasing time and costs.

Faster Processing Through de minimis, But No Control

De minimis was created in 1930 to exempt American tourists from paying taxes on their small vacation purchases. The threshold of US$200 was raised to US$800 in 2016, as cross-border eCommerce became more common. De minimis relieved U.S. Customs and Border Protection (CBP) from having to inspect every incoming small package, as the number of packages falling under the rule grew.

But lawmakers now acknowledge that the faster processing allowed by the de minimis exemption enables a flood of dubious goods to pass through customs unnoticed. In addition to low-cost goods from companies like Temu and Shein that fall under the de minimis rule, the influx is facilitating the increased importation of illicit substances like fentanyl and products with questionable human rights conditions in their supply chain. 

Shein representatives conceded that reducing de minimis would not change their operations in the U.S., as they would find "different ways to satisfy [their] customers." These different channels could include shipping products from other countries, such as Mexico. Shein and Temu have been anticipating a response from the U.S. government, as they have been actively recruiting sellers with local logistics operations to avoid reliance on the de minimis exemption.

Sources: New York Times – Reuters – U.S. Committee on Finance – WSJ: 1 2