By Kristi Ellis

Congressional scrutiny and action over the de minimis loophole took center stage on Capitol Hill this week, as lawmakers underscored the severe economic impacts to American manufacturing and dangers to U.S. consumers wrought by this provision in U.S. trade law, during two days of action that culminated in a markup of de minimis legislation Wednesday.

Over the two days of hearings, several other key policy issues important to the industry were discussed, including Section 301 tariffs, legislation that calls for a study and seeks to ultimately expand the Generalized System of Preferences (GSP) and, separately, the Miscellaneous Tariff Bill (MTB.)

But the debate over de minimis legislation and the exploitation and impacts of the loophole garnered the most attention. In addition, fentanyl was a key part of the discussions, in light of the meteoric rise of de minimis shipments and the rise in opioid deaths in this country.

The markup was the kickoff in what is expected to be a lengthy legislative process to shape a law intended to crack down on the abuse of the de minimis loophole by China and other countries, as well as e-commerce juggernauts such as Shein and Temu that are profiting off this provision at the expense of domestic businesses, law enforcement and consumers.

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, and the numbers have continued to increase in 2024, reaching nearly 4 million de minimis packages a day, a 30 percent increase over last year.

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 loophole acts as a gateway to a flood of millions of uninspected shipments a day, undoubtedly containing goods made with forced labor, tainted and unsafe children’s and consumer products and illicit narcotics such as fentanyl which is rapidly killing American citizens.

Its impact on the U.S. textile industry, coupled with other factors, has been devastating.

The committee’s markup Wednesday followed two congressional hearings Tuesday that shined a spotlight on de minimis as well as USTR’s statutory review of Section 301 tariffs and other critical trade issues.

Separately, the House Select Committee on the CCP released a report on Tuesday, calling for the elimination of the de minimis loophole, among many other recommendations to counter the Chinese Communist Party’s role in the deadly fentanyl epidemic that has killed hundreds of thousands of Americans.

Heated Debate over De Minimis Erupts at Ways and Means Markup

 Tensions flared on both sides of the aisle during the House Ways and Means’ markup of the de minimis legislation, a bill that NCTO and many groups argued does not go far enough to address the underlying issues with the de minimis provision.

The House Ways and Means Committee passed legislation would block de minimis eligibility for any imported Chinese products subject to a trade remedy action, such as the Section 301 tariffs and other trade remedy tariffs or AD/CVD actions.

The legislation, introduced by Rep. Greg Murphy (R-NC) and shepherded through the committee by Chairman Jason Smith (D-MO) and the Majority Republicans. It is still not clear when the bill may go to the House floor or a Senate plan of action in response.

Smith and other Committee Republicans touted the provisions in the legislation, arguing it would cover 50 percent of all Chinese imports, implement a new data requirement or the covered imports to provide a 10-digit HTS number and create new civil penalties of $5,000 or the first violation and $10,000 for subsequent violations.

See a link to a fact sheet on the bill released by Ways and Means.

Chairman Smith said in his opening remarks that the legislation would make sure China can no longer use de minimis to escape the tariffs it rightfully owes and would cut the de minimis value shipments from China in half.”

He said the “de minimis privilege is being abused by foreign companies that import products into our country without paying duties. China is a master at this exploitation.”

Over 60% of the de minimis entries into America are from China alone, something which has grown exponentially since the implementation of 301 tariffs on China, Smith said.

“This bill is an important first step to curbing the flow of de minimis shipments into the U.S. from China,” he stated.

Striking a conciliatory note, Smith later said while the legislation is an important first step “in countering China’s grip over American markets, our work doesn’t end here.”

He noted he is committed to working with members on both sides of the aisle to “ensure that we see this issue to the end and make all necessary reforms to prevent de minimis shipments that violate our law or give an unfair advantage to foreign interests.”

Ranking Member Richard Neal (D-MA) pointed to “mothers who have lost children to fentanyl ordered from China and transported by public and private domestic shipping channels right to their homes.

“How can the majority consider their de minimis legislation? It has been suggested as ready for primetime when in fact it fails to address this very issue,” Neal said. “Or what about the influx of gun silencers making their way into Americans hands from China? These are major public safety concerns, and we have the power and the obligation to do something. We are living through a pivotal moment for American workers as companies continue to notch record profits.”

See Congressman Neal’s remarks here:

NCTO and several business, labor and law enforcement groups issued statements to varying degrees of opposition to the bill, all with a singular message that it does not go far enough and will continue rewarding China.

NCTO called the markup an “initial step” but underscored the urgent need for a “comprehensive solution.”

See the statement from NCTO President and CEO Kim Glas here.

“Specifically, we do not believe the bill goes far enough in restricting China’s enormous privileges under de minimis. In addition, we strongly believe the bill, at the very least, should preclude de minimis treatment for trade-sensitive sectors, such as textiles and apparel, which according to U.S. Customs and Border Protection accounts for a full 50 percent of all de minimis entries,” Glas said.

Rep. Blumenauer Led Heated Debate Among Democrats Opposing Ways & Means Bill

Rep. Earl Blumenauer (D-OR), Ways and Means Trade Subcommittee Ranking Member, said in his opening remarks: “In January, 13 state Republican attorneys general sent a letter urging the total closure of the de minimis loophole to address the de minimis’ efforts facilitating an illegal narcotics trade, he said. “Even Customs acknowledges the immense challenge of identifying and interdicting high-risk shipments that contain narcotics in the deluge of more than three million packages per day and increasing.”

Blumenauer said that “far from “Ending China’s De Minimis Abuse,” as this legislation purports to do, this bill would redirect China’s de minimis abuse toward other shipments while Customs can’t keep up.”

“China is counting on Congress to continue to fail to act, to look the other way and facilitate their criminal activity while they undercut legitimate American businesses,” he added. “There is no reason to allow a few large shippers who profit at the expense of the American people. The Chinese have a have a quarter trillion dollar e-commerce industry that relies on our lax de minimis rules.”

See Rep. Blumenauer’s full remarks here:

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.

His bill would cut off all eligibility of Chinese products from receiving de minimis vs. more than half of Chinese goods. He also noted that the Republican bill is only as good as the 301 tariffs remaining in place – while his bill would be a permanent ban on eligibility from China.

He was joined by Reps. Mike Thompson (D-CA) and Donald Beyer (D-VA) on Wednesday in voicing opposition to the Murphy legislation and countering arguments put forth by several Republicans that the majority of fentanyl and illicit drugs do not come in via international mail and that 99 percent of the illicit drugs come in through the Southern border.

Republican committee members defended the statistics, saying they were provided by Customs.

But the Democrats fired back that there are millions of de minimis packages a day entering the U.S. uninspected with no information, which essentially renders data on seizures meaningless. When CBP does open packages, they are finding fentanyl and precursors.

Rep. Bill Pascrell (D-NJ) highlighted the U.S. textile industry and support for Rep. Blumenauer’s bill, which  would exclude all Chinese imports from de minimis treatment, while calling the bill marked up by the Ways & Means Committee “a distraction that does not end Chinese abuse.”

See his remarks here:

Chairman Smith did provide encouraging remarks as he reiterated that he believes de minimis is a free trade agreement for China and repeatedly stressed the bill the committee passed was a first step in a process he believes will deter China, other countries and bad actors from circumventing trade laws and undermining American business and endangering citizens.

To view the full debate, see a link to the Committee’s markup here: Markup of H.R. 5179, H.R. 7981, H.R. 7979, H.R. 7983, H.R. 7980, and H.R. 7986 (youtube.com)

In separate action, the Committee passed a GSP trade package, including a bill introduced by Rep. Carol Miller (R-WV) that would “create an expedited process for stakeholders to petition the addition or removal of products from the GSP trade program. The International Trade Commission (ITC) would provide a report to Congress on the economic impacts of potentially adding or removing products, so Congress has a clear understanding of how to best expand the program and protect American manufacturing.”

Currently, textiles, apparel and footwear are excluded from this preferential trade program and this legislation could be highly damaging to the industry. NCTO will continue to monitor it closely and raise concerns.

Separately, an MTB package is expected to be introduced soon but the contours of that bill are still being considered.

House China Select Committee on the CCP Recommends Eliminating De Minimis Loophole

On Tuesday, the Committee released a report and held a hearing on the CCP’s role in the fentanyl crisis, attended by many family members who have lost loved ones to the fentanyl scourge.

Among findings outlined in its report, the Committee called on Congress to eliminate trade and customs loopholes like the de minimis exception that is facilitating illicit fentanyl trafficking.

Committee Chairman Mike Gallagher (R-WI) released a video highlighting the findings and recommendations.

“Both political parties have acknowledged that the ultimate source of the fentanyl crisis is the People’s Republic of China, which produces over 97% of fentanyl precursors that fuel the global illicit fentanyl trade,” Gallagher said in the video.

“While we knew where fentanyl comes from, until now, we did not know why. The Select Committee’s bipartisan investigation has uncovered the answer: It is because the Chinese Communist Party promotes the fentanyl crisis through government programs, protects fentanyl traffickers operating within its borders, and directly benefits from the fentanyl crisis.

The CCP provides government subsidies to PRC companies that manufacture fentanyl analogues, precursors, and other synthetic narcotics, so long as these companies sell them outside China.”

See the full video here:

Rep. Neal Dunn (R-FL) voiced concern about the PRC being the primary source of fentanyl and precursors shipped through the international mail system and de minimis, and touted a bill, the Import Security Fairness Act, that he has co-sponsored with Rep. Blumenauer to close this deadly loophole.

“I hope it will find the light of day across our floor soon, Dunn said.

His concerns were echoed by other Select Committee members.

Rep. Ro Khanna (D-CA) said: “One of the committee’s getting rid of this de minimis exception up to $800 is important. My understanding is that some of the fentanyl is still coming across into the United States because it comes under $800. That is not being monitored. That is something we should do.”

And Rep. Kathy Castor (D-FL) asked RAND Professor David Luckey where he ranks action on the de minimis threshold for duty-free imports as Congress prioritizes actions to tackle the flood of deadly fentanyl into the U.S. Luckey said any financial tool we can leverage against China should be used.

Weighing in on de minimis as well, Chairman Gallagher acknowledged Ways and Means was “wrestling” with a legislative solution and said it would require “given and take on both sides.”

That goes all the way back to our hearing on Uyghur genocide, that was one of our core recommendations. We’re hoping there is a productive outcome and we don’t let the perfect become the enemy of the good,” Gallagher said.

House Ways and Means Hearing On The U.S. Trade Agenda with Ambassador Katherine Tai

In opening remarks of a sometimes testy, hours-long hearing with U.S. Trade Representative Ambassador Katherine Tai, House Ways and Means Chairman Jason Smith (R-MO) remarked on the de minimis legislation his committee was planning to take up the following day.

“Tomorrow, this Committee will advance legislation to make sure that countries like China can no longer use trade tools like de minimis to escape tariffs they rightfully owe,” Smith said.

See the chairman’s exchange with U.S. Trade Representative Ambassador Katherine Tai here:

Rep. Earl Blumenauer (D-OR) noted the De Minimis bill being considered by the House Ways and Means Committee tomorrow does not go far enough to address serious underlying problems exposing consumers to dangerous imported products and illicit fentanyl, which will continue to reward China.

Hear his remarks here:

Rep. Mike Thompson (D-CA) said de minimis puts consumers at risk because, among other dangers, it facilitates the importation of unsafe bicycles, particularly electric bikes, and helmets.

Hear his exchange on de minimis legislation in the House Ways & Means Committee with Ambassador Tai here:

The timing of the completion of USTR’s statutory review of Section 301 tariffs was also a key topic of discussion during the hearing, with Ambassador Tai fielding questions from several lawmakers on when they expect to announce a decision.

NCTO has long advocated for a continuation of the penalty tariffs on billions of imported Chinese apparel and textile products, with limited exceptions for some inputs that are no longer produced in the United States.

“We started the four-year review in September of 2022 and this has been a whole-of-government effort,” Tai told Ways & Means Chair Jason Smith. “It is a tremendously consequential exercise in examining the use of tariff tools in addressing the inequities in the U.S.-China trade relationship, which are significant. So let me just say that we are making progress and it is my belief that we are very close to the conclusion of this review.”

Videos by: Rebecca Tantillo