[CTC] Imports Under Closely Watched U.S. Trade ‘Loophole’ Surge

[Arthur Stamoulis]

Imports Under Closely Watched U.S. Trade ‘Loophole’ Surge
Shipments have shot up as more use a low-scrutiny route favored by Temu and others

By Richard Vanderford <https://www.wsj.com/news/author/richard-vanderford>March 1, 2024 5:30 am ET

More packages than ever are entering the U.S. under a trade provision—frequently used by e-commerce giants Temu and Shein—that allows duty-free entry with little scrutiny, even as lawmakers call for action.

The so-called de minimis provision allows packages with contents under $800 in value to enter the country under a simplified procedure. Critics say that is a loophole <https://www.wsj.com/business/u-s-trade-loophole-fuels-rise-of-chinas-new-e-commerce-firms-05cf2e05> helping companies end run tariffs and defy bans on imported goods made with forced labor.

So far in fiscal year 2024, at least 485 million packages have entered the U.S. under the provision, according to data provided to The Wall Street Journal by Rep. Mike Gallagher, a Wisconsin Republican who chairs the House Select Committee on the Chinese Communist Party. 

That compares with 685 million packages in all of fiscal year 2022, according to U.S. Customs and Border Protection. A representative for Customs said Gallagher’s 2024 figure is accurate.


“Exploitation of the de minimis loophole is accelerating the export of American jobs and giving Chinese companies using Uyghur forced labor a complete pass,” Gallagher said in a statement to Risk & Compliance Journal. “We can’t expect American companies to compete with foreign companies that don’t have to pay taxes.” 

Most Americans encounter the de minimis provision when they return from abroad and bring souvenirs without paying duty. Businesses such as Temu and Shein <https://www.wsj.com/business/retail/behind-cheap-stuff-from-shein-and-temu-a-hard-bargain-with-suppliers-fa7ba7c0>, though, have used the program to let them bypass the scrutiny Customs gives bulk shipments by sending goods directly to U.S. consumers.

The House Select Committee estimates Temu and Shein alone account for about a third of all de minimis shipments. Both companies have also faced allegations that some of the goods they sell might be made using forced labor.

Temu has said allegations it sells goods made with forced labor are “completely ungrounded” and that it doesn’t depend on the de minimis provision for growth. 

Shein has previously said it has zero tolerance for forced labor and the de minimis provision isn’t critical for its success.

A growing group of bipartisan lawmakers are calling for action to rein in the program. Gallagher and Rep. Raja Krishnamoorthi (D., Ill.), the Select Committee’s ranking member, in January pushed for a potential rule change <https://www.wsj.com/articles/enforcement-of-china-forced-labor-import-ban-needs-to-be-much-tougher-say-u-s-lawmakers-4fce562f> to block apparel and some other goods entering the U.S. via the de minimis route.

U.S. Sens. Sherrod Brown (D., Ohio) and Rick Scott (R., Fla.) called for changes in a letter to the White House, saying de minimis harms U.S. manufacturers <https://www.rickscott.senate.gov/2024/2/sens-rick-scott-sherrod-brown-demand-administration-close-de-minimis-trade-loophole-that-undermines-american-manufacturers>. “I’m pushing President Biden to take immediate executive action to close this massive loophole,” Brown said Wednesday.

Law enforcement agencies also have flagged the shipments as a way to smuggle fentanyl and other contraband into the U.S. The U.S. has barred the import of goods allegedly made with forced labor <https://www.wsj.com/articles/u-s-official-warns-against-efforts-to-defy-forced-labor-crackdown-11668714008> in China’s Xinjiang region, home to the country’s Uyghur people and other minority groups. 

U.S. businesses broadly are split on the provision. Homeland Security Secretary Alejandro Mayorkas in January met with members of the National Council of Textile Organizations and heard complaints the exception is being exploited.

Others see the de minimis provision as enabling businesses of all sizes to get goods to American consumers without being hindered by red tape that can add costs and delay.

“De minimis is not a loophole; it has been endorsed in statute several times, is largely compliant based on government data, and promotes economic competitiveness of U.S. businesses,” said John Pickel, senior director of international supply chain policy at the National Foreign Trade Council.
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