De Minimis Reform in the Spotlight on Capitol Hill
House Ways & Means Democrats elevated congressional concerns over the Section 321 de minimis loophole—which has become a black market for illicit goods—at a roundtable Wednesday that highlighted the devastating implications of this gaping loophole for a diverse group of stakeholders spanning the domestic manufacturing supply chain, law enforcement, labor, and human rights organizations.
Rep. Earl Blumenauer (D-OR), Ways and Means Trade Subcommittee Ranking Member, led Democratic members in a roundtable, titled “Examining the Pernicious Impact of the De Minimis Loophole,” at which Democrats on the full committee voiced serious concerns about this legal loophole in U.S. trade law that is a gateway facilitating nearly 3 million imported shipments a day that may contain goods made with forced labor, counterfeits, toxic products, and illicit narcotics such as fentanyl.
“What was once intended to improve efficiency has morphed into a dangerous loophole that threatens American competitiveness, consumer safety, exploits forced labor, and contributes to the fentanyl crisis in our communities. My legislation is narrowly tailored to stop areas of abuse. It is past time for Congress to act,” Blumenauer said in his opening remarks.
Blumenauer has reintroduced the Import Security and Fairness Act, bipartisan, bicameral legislation to stop non-market economies—namely China—from exploiting the de minimis threshold and to require U.S. Customs and Border Protection (CBP) to collect more information on de minimis shipments.
Blumenauer was joined by Reps. Don Beyer (D-VA), Jimmy Panetta (D-CA), Judy Chu (D-CA), Brian Higgins (D-NY), and Suzan DelBene (D-Wash.)
The legislation previously passed in the House of Representatives in the 117th Congress as part of the America COMPETES Act but subsequently stalled.
With the explosion of e-commerce, the de minimis mechanism is now being aggressively used, allowing millions of products into the U.S. market duty free that otherwise would be subject to tariffs, penalty tariffs, taxes and customs inspection. Under the mechanism, a package of goods valued at $800 or less per person is allowed to come into the country duty free everyday through e-commerce.
CBP estimated 1 billion de minimis shipments entered the U.S. market in the fiscal year alone, which equates to approximately 2.7 million shipments a day. This is estimated to be the highest spike in de minimis imports—up from 2 million shipments per day in fiscal year 2021. To provide further context to the alarming nature of this exponential growth in de minimis shipments, CBP data estimates that these shipments totaled only 150 million in fiscal 2016—the year Congress increased the de minimis threshold from $200 to $800.
The impact of the loophole on the U.S. textile industry, coupled with other factors, has been devastating.
Andy Warlick, Chairman and CEO of Parkdale Mills, testified at the roundtable and painted an alarming picture of the state of the industry and the implications of U.S. trade policies that allow foreign suppliers to circumvent and undermine the domestic manufacturing base.
“I am here today because this issue is important to our company, our employees, our industry, and all U.S. manufacturers,” Warlick told the lawmakers. “Currently, our company is running at 60% capacity and we have shut down four factories and laid off 1,000 employees in 2023. Most companies in the textile industry are experiencing the same devastating demand destruction partly fueled by the explosion of 1 billion de minimis shipments—half of which CBP estimates to be textile and apparel goods.”
Warlick thanked Blumenauer and other members who support closing the de minimis loophole and mitigating its impact on domestic manufacturers.
“De minimis has become blatantly unfair, unjust, and a threat to our country’s economy and citizens,” he said. “American businesses and American workers pay taxes that build the roads and cities of our nation, and we are now fighting against those who don’t. We pay a price to be an American and we are being replaced by those who are astonishingly rewarded by U.S. government trade policies that are putting us out of business.”
“Our de minimis program has become the world’s largest, lawless Silk Road Black Market that has only benefited a few at the expense of many. The shippers and transporters of these packages have been gifted a windfall. However, this gift is actually a Trojan horse for our nation. If left unabated, it will hollow out our industrial and retail base, destroy jobs and the tax base, and endanger our citizens.”
Not only is the de minimis program undermining the U.S. Trade Representative by handing countries like China an unnegotiated free trade deal without reciprocity for the U.S., but it is also being aggressively used by Chinese e-commerce retailers who have built their empires around de minimis.
Countering the arguments by opponents of reforming de minimis, Warlick said ending de minimis for e-commerce shipments “will not spark inflation.”
“These are the same arguments made prior to the implementation of the China 301 penalty tariffs,” he added. “The U.S. International Trade Commission studied the effect of 301 tariffs on import prices of apparel and other consumer products and found either no or minimal increases for importers, adding that Section 301 boosted domestic manufacturing ‘without substantially increasing prices for final consumers.’”
He told the lawmakers the only real solution to fixing the de minimis problem is to decouple e-commerce shipments from this dangerous loophole.
“When our nation needed our industry to bail the country out of critical shortages of PPE during the pandemic, we answered that call by delivering millions of face masks, protective gowns and testing swabs,” Warlick said. “We now need Congress to answer our call and close this loophole right now because it’s a crisis. We need the Administration to review and exhaust all its authorities to address this superhighway of economic destruction.”
Michael Stumo, CEO of the Coalition for a Prosperous America, reiterated in his opening statement that de minimis should “ultimately be decoupled from e-commerce.”
“The fact that a few Chinese companies like Shein and Temu and a few U.S. companies have built businesses, or part of their businesses on the exploitation of this Amazon loophole is not in the national interest,” Stumo said. “The de minimis goods volume hit 1 billion packages this year. In future years, it will be 2 billion and 3 billion. This will not go away; it will be worse.”
“We have laws against the importation of narcotics, of forced labor goods, dangerous toys, exploding batteries. They are all a joke with de minimis. We might as well repeal them. U.S. companies that follow the law, pay taxes here, employ workers here, are suffering as national policy provides powerful de facto preference for duty avoidance and lawless goods from other countries,” Stumo said.
Andrea Edmiston, Director of Governmental Affairs at the National Association of Police Organizations, outlined the role de minimis shipments is playing in thwarting law enforcement efforts to crack down on fentanyl, which led to 83,000 deaths last year alone, and other illicit drugs.
Edmiston stressed that fentanyl traffickers are using these loopholes and the international mail system to “avoid detection by CBP.”
In FY 2023, CBP seized 27,000 pounds of fentanyl. “The de minimis provision has exploded in popularity, creating a supercharged black market for counterfeit products, goods produced with slave labor, hazardous materials and illicit drugs such as fentanyl,” Edmiston said.
“Law enforcement is battling the trafficking of illicit narcotics on multiple fronts, from our southern border to Asian supply chains selling via ecommerce and shipping drugs like fentanyl in small packages by air cargo and the international mail system,” she said. “Fentanyl traffickers seek to mimic normal e-commerce shipments to avoid detection by CBP [Customs and Border Protection], and they often declare these international shipments as relatively low-value consumer goods.”
“The de minimis loophole is severely exacerbating the opioid crisis by allowing fentanyl and the illicit drugs to enter our market duty free and largely uninspected,” Edmiston said. “The administration has the authority to close this loophole and we have written a letter and asked the administration to do so immediately. And Congress also has the authority to close the loophole. We stand ready to work with you all to remove all e-commerce shipments from de minimis treatment to help protect the health and safety of the American people.”
Roy Houseman, Legislative Director at the United Steelworkers, said de minimis has tipped the scale in favor of China in the U.S. trade relationship with the country.
“Our nation’s trade laws let billions of goods in from China into the U.S. market duty free… but American workers and businesses face significant market hurdles to nearly 900 million consumers in China,” he said. “We strongly believe that Congress should start with a view of de minimis with a simple eye toward reciprocity,” he added, noting that the U.S. has one of the highest de minimis thresholds of any country, at $800. By contrast, China’s de minimis threshold is much smaller, at approximately $8 a package.
“This has dangerous ramifications for American manufacturing,” he added.
Questions from the Democratic committee members ranged from whether Blumenauer’s bill aimed at fixing the problem by banning nonmarket economies like China from benefits would merely migrate it to other countries and allow them to exploit the loophole and $800 threshold, to requesting more data on the nature of de minimis shipments, to whether CBP needs more resources and tools to track fentanyl and de minimis shipments overall.
During the round of questions, Rep. Blumenauer inquired about his own legislation, saying: “There have been some concerns that if we go ahead and crack down on de minimis, the same shippers would simply go through other countries to avoid detection.
Stumo responded, “Certainly one country, China, is where most counterfeits and a lot of drugs come from. If you start there; it’s a good first step to take China out,” which is what Blumenauer’s bill would do.
Rep. Beyer followed up with a similar question: “As long as de minimis exists at the $800 level and keeps China out, what will keep it from migrating to other countries Cambodia, Vietnam?
Warlick said that has been the textile industry’s experience in terms of countries finding ways to transship products to avoid free trade deals such as USMCA and CAFTA-DR, and trade laws and duties.
“One thing we are looking at now, is this need for de minimis to be decoupled from e-commerce platforms,” he said.
Rep. Higgins was concerned about the lawlessness associated with de minimis but also highlighted the benefits it allows through access to U.S. markets.
“Our economy is 70% consumption so it seems to me that we are going to be a magnet for trade and all of this business of getting cheap goods into the U.S., including illegal drugs as well,” he said. “Between 1990-2017, global poverty fell from 36% to 9% and a billion people came out of poverty because of trade,” he noted.
Reps. DelBene and Panetta focused their questions on data collection and tracking tools and asked what kind of tools could be developed to track fentanyl in particular and de minimis overall.
Former White House Drug Czar Testifies at Senate Committee on Aging: De Minimis is Fueling Importation of Illicit Narcotics
At a separate hearing Thursday on “Understanding A Growing Crisis: Substance Use Trends Among Older Adults, held by the Senate Committee on Aging, a former White House drug czar testified about the dangers of de minimis and fentanyl, while and senators raised questions about de minimis facilitating the illicit importation of opioids and other narcotics, making it easy for seniors to gain access to them.
James Carroll, former Director, White House Office of National Drug Control Policy and currently a partner at Frost Brown Todd, LLP, painted a bleak picture of opioid deaths fueled by Chinese traffickers undoubtedly exploiting the international mail system and de minimis loophole.
“Overdose deaths are staggeringly high, with nearly 110,00 American lives lost driven almost entirely by synthetics, up almost 40,000 deaths from when I was in office. This equates to someone dying every five minutes. It is a major airliner going down every day. This is just not acceptable,” Carroll said in his opening remarks.
“I led a White House delegation to China to end the shipping of fentanyl through the U.S. postal system. The percentage at the point dropped to nearly zero. Sadly, bad actors have now resumed and shovel it into the U.S. by exploiting weaknesses at our border. And specifically in our import roles,” Carroll said.
He further noted de minimis has been a tool that allows 3 million packages in a day, “unchecked, unlabeled, with virtually no way to identify what is in there.”
Senator Rick Scott (R-FL) asked for an “everyday” example of how bad actors are using Section 321 to export deadly fentanyl directly to American consumers.
Carroll reiterated that a billion de minimis packages enter the U.S. every day but are largely unchecked by CBP due to lack of manpower and technologies to detect fentanyl.
“Right now the best technology we have are canines. That is a shame. There is wonderful technology to look for anomalies in packages but at 1 billion a year they are not being checked and we are not holding 60 percent of a billion incoming from China, he said.
See the exchange here:
Asked by Scott what percentage of fentanyl is coming into the U.S. via de minimis versus the southern border, Carroll said there is no data tracking it.
We have no idea but when you look at the number of deaths that are happening, you have to believe it is because of the dramatic rise of 321. We don’t know how many drugs are coming across the southern border; all we know is what we are catching. The same is true [with de minimis]; all we know is what we are intercepting. It is less than 1 percent actually being checked.
Sen. JD Vance (R-OH) asked Carroll to state for the record why it is important to close the de minimis loophole, particularly as it relates to drug imports.
See the exchange here:
“What really concerns me on 321 [de minimis], is how it is being used and how it is being exploited, including for seniors who might not understand; they think they are buying a prescription online, but they are actually buying illegitimate pills that are being snuck into our country unchecked. They think it is a legitimate prescription and pill. They have no idea that in fact the prescription they think is being filled by an online pharmacy is [facilitated] by the loophole of 321 and they are losing their lives for it,” Carroll said.
See Carroll’s full written testimony here.
The Coalition For a Prosperous America joined two key associations representing law enforcement and national nonprofit and community-based organizations devoted to fighting against the fentanyl crisis, in sending a letter to congressional leaders calling for immediate action to close the de minimis loophole.
View their press releases and a link to the letter here:
