The U.S.-China Economic Security and Review Commission (USCC) heard alarming testimony from legal experts and government officials at a recent hearing, highlighting the rise in dangerous and toxic imported consumer products from China and the lack of resources and effective enforcement by the U.S. Consumer Product Safety Commission (CPSC) to monitor a surge in imports coming in through the de minimis provision in U.S. trade law.

The hearing, titled, “Consumer Products From China: Safety, Regulations and Supply Chains,” focused on consumer product imports from China and examined product safety, counterfeits and the challenges and risks associated with the e e-commerce and de minimis environment. It further examined China’s evasion of safety regulations and supply chain shifts.

Kim Glas, an appointed USCC Commissioner, who co-chaired the hearing, said in her opening remarks that China remains the largest supplier to the United States of a wide range of consumer products.

“However, ongoing and emerging trade issue are challenging the U.S.’ ability to protect the United States market and consumers from harm,” Glas noted. “The recent Section 301 duties on Chinese imports have fueled efforts by Chinese exporters to avoid or evade tariffs and continue selling to the U.S. consumer marketplace.”

Glas said their tactics range from illegal schemes such as transshipments through legitimate channels to avoiding tariffs. “In particular, the de minimis exception allows for importation of duty-free products to the U.S. market through the international mail system as long as the declared value of these items is less than $800.”

See her remarks here:

She pointed to recent reports indicating that close to 4 million de minimis shipments are being shipped to the United States every day, up 30% since last year.

“This trade is exploding. Such packages arrive to the U.S. with minimal inspection, minimal scrutiny and minimal information, challenging the United States’ capacity to monitor product safety at our borders and making it impossible to police and have the legal authority to go after predators peddling these unsafe products,” she added.

Glas also said the flood of small packages not only poses “a substantial threat” to U.S. manufacturers and workers, but it also undermines our consumer safety laws and trade laws, including Section 301.

“E-commerce has become a superhighway of the Wild West rewarding de minimis shipments with duty-free market access, facilitating unsafe products, illegal products, stealing intellectual property, harming domestic manufacturers, retailers and the American people,” she said.

The hearing highlighted dangerous Chinese imports such as children’s toys and pool filters that claim to be made to U.S. safety standards but fail to fulfill U.S. safety regulations and “all too sadly some of these stories have ended in severe tragedy,” she said.

Meanwhile, Chinese producers continue to grow market share by investing in alternative manufacturing hubs including Mexico and Vietnam, Glas said.

“While data may indicate these countries are taking market share from China, further examination notes how Chinese manufacturers are key suppliers of component parts to these countries, further solidifying China’s dominance in supply chains.

“The trade data can’t mask the influence China continues to have on the world stage directly and indirectly through other markets,” Glas said.

CPSC Faces Challenges Monitoring Surge in De Minimis Shipments from China

James Joholske, director of the Office of Import Surveillance at CPSC, testified that e-commerce has changed consumer purchasing patterns “in ways that challenge our enforcement efforts.”

Consumers continue to shift from purchasing directly from retailers to purchasing directly from manufacturers via e-commerce, he said.

The agency’s data shows more than 80 percent of shipments it examined at U.S. ports had China listed as the county of origin.

CPSC has developed and prioritized targeting high-risk shipments through its Risk Assessment Methodology (RAM) system which leverages information from U.S. Customs and Border Protection (CBP) entry data to assess risk to shipments.

However, he acknowledged that CPSC faces “numerous challenges relating to consumer product safety of imported product from chain and elsewhere.”

“First and foremost, the sheer volume of imports from China remains overwhelming and difficult to monitor, given our resource limitations,” he said. “Another challenge has to do with the rise of e-commerce,” he added, noting that 60 percent of imports to the U.S. are e-commerce shipments.

“This trend is growing every year,” Joholske said.

“CPSC has little ability to act against third-party sellers who are small manufacturers based overseas. Products including baby mattresses, lithium-ion batteries, magnets, baby loungers and more are left unrecalled because the manufacturers cannot be held responsible,” he said.

“Moreover, most online marketplaces assert that they do not fall under CPSC’s jurisdiction for some or all of their sales,” he added. “They state that for purposes of consumer safety, they are not retailers, manufacturers, distributors or importers.”

Many of these goods shipped directly to consumers are packaged and sent under the de minimis threshold of $800. “Shipments of products from China and elsewhere fall under this value and enter our country with minimal requirements and duty free,” Joholske said.

“Without the same data we receive for higher value shipments, CPSC cannot utilize its RAM system to know what is to be targeted or inspected,” he noted.

He also said de minimis shipments often enter the U.S. through express courier and international mail facilities, locations where CPSC has “very limited coverage.”

“The bottom line is that we have many goods coming from China about which CPSC receives limited data,” he added. “That coupled with the volume of imports and limited staff at major entry points presents significant challenges to CPSC and our ability to stop dangerous products before entering our stream of commerce.”

 Lack of Penalties and Inspections Sends Message to the Chinese—”We are not Looking”

Glas said later during the hearing it is “horrifying to read what penalties have been assessed when somebody has lost their lives because a product has failed.”

She pointed to one claim involving BJ Wholesale Club, which sold faulty air conditioning that resulted in a fatality. The civil settlement in the case was $9 million and in other cases up to $16 million.

“If I’m a parent that buys a defective toy that ends up killing my child, or compromising their health, I want someone to go to jail,” Glas said.

“Right now, this panel is confirming for me…that we do not have any defective deterrents. We are sending a signal to China which is in desperate times as their economy is slowing down, that we’re really not going to do much about this that is effective.”

“We’re also sending a message to importers who are facilitating some of these products, ‘we’re not going to hold you fully accountable.’”

The fact that the government has not provided enough resources to CPSC or CBP to allow them to do their jobs signals to the Chinese and the rest of the world: “We’re not really looking,” Glas said.

“What all of you are saying—there are costs on intellectual property; there are costs on human life; it’s fueling Chinese bad behavior; there is no way to hold those manufacturers accountable—it’s horrifying,” Glas said.

“In the de minimis environment, do we only seize and destroy one package? Are we saying to the Chinese: ‘send your products this way to the U.S. because no one is really looking and there is not a lot that may be destroyed in this?’”

She posited that the de minimis makes the environment even more challenging because it’s “sending a signal to the Chinese that if you want to send a product to the U.S. that does not meet U.S. standards, this is a pretty good channel to do it.”

 The Decline in Product Safety in Chinese Products Continues to Worsen

 The problem is only getting worse, according to Dan Harris, a partner at Harris-Sliwoski, LLP. “Since around 2017, I’ve observed a decline in Chinese product quality and safety,” he said. “I base this assertion mostly on the number of companies that have sought help from my law firm after having received such products, and on the number of plaintiffs lawyers who have sought our law firm’s help in pursuing Chinese manufacturers on behalf of their injured clients.”

See his remarks here:

Harris said prior to 2017, Chinese product quality and safety was improving, but several factors arose in 2017 and beyond that have led to a “downshift” in product safety.

“Chinese companies are in financial trouble due to reverberations from Covid lockdowns and the decline of the country’s economy, which has led to reduced demand for Chinese products,” he said. “In an effort to reduce costs, these suppliers are cutting corners by using lower quality components that increases the likelihood of dangerous or defective products.”

“The second cause for the decline in product safety is that Chinese manufacturers see less value in maintaining long-term relationships with the American companies that buy their products,” Harris added. “And this is because they believe these companies are looking to leave China, and they’re probably right. I’ve had Chinese manufacturers tell me that with China’s economy declining and American companies seeking China alternatives we should expect the problem of unsafe Chinese products to worsen.”

According to Harris, U.S. firms that refuse to pay for defective goods are barred from purchasing from any China-based supplier on credit, effectively cutting off access to the country’s supply chain. Meanwhile, the manufacturer in question is usually made whole by insurance schemes.

“Why should a Chinese company worry about product safety, if it can get paid in full no matter how bad its products are, especially when it is at little to no risk of getting sued?” Harris said.

 Administration Has Existing Authority to Close De Minimis

Elizabeth Drake, a partner at Schagrin Associates, LLP, told the Commission that the current statute on the books authorizes Customs to afford de minimis treatment but does not require the agency to do so.

“The statute also explicitly says that Customs can grant any exception from de minimis in order to protect the revenue or ensure the effective enforcement of import regulations—dealing with all the health and safety regulations, Uyghur Forced Labor Prevention Act, fentanyl and all imports that may be violating those regulations,” Drake said.

“There is no new legislation needed. The way I read the regulation, there’s also no new regulation needed. Customs already says in its regulations the same thing that is in the statute—it has the discretion to deny de minimis treatment, in order to protect the revenue or ensure effective enforcement of import admissibility standards,” she added.

See her remarks here:

Drake also noted that “in 2023, for the first time in over 20 years, China fell to our third largest source of imports behind Mexico and Canada, rather than our first largest source, since Section 301 duties were imposed on China in 2018.”

At the same time imports from other countries such as Mexico have risen considerably but Drake warned this “may represent a “cause for concern.”

She said these shifts in trade followed the implementation of Section 301 tariffs and “may indicate that the duties are being circumvented or evaded,” for example, through the growing use of de minimis.

“They may also suggest that unfair Chinese trade practices are continuing to distort the U.S. market through investments in exports from third countries,” Drake said.

Finally, she said it is “vital” that the U.S. ensure that any shifts in trade resulting from the Section 301 duties aren’t actually undermining American supply chain resiliency.

Chinese subsidies and investment are likely funding the growth of other sourcing markets across the globe, introducing new means for Chinese-made goods, or products made with Xinjiang cotton, to enter the U.S. market.

Other witnesses also examined the Chinese trade shifts through countries like Vietnam and Mexico through transshipment and investment.

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