Millions of American consumers and businesses will be part of the paradigm shift sweeping through e-commerce this holiday season. With the click of a button, they will order directly from manufacturers around the globe — skipping the red tape, warehouses, supply chain delays, and, importantly, the taxes and fees that come with them. Unless Congress gets in their way.
Right now, Congress is debating whether to take away consumers’ and businesses’ ability to import products duty-free under $800. Known as the “de minimis threshold,” this law that Congress passed in 2016 allows American small businesses to overcome barriers to entry that complex supply chains have historically created. It empowers them to compete in a world dominated by big box stores and mega distribution centers.
In 2016, Congress foresaw the e-commerce wave and raised goods defined as “low-value” from $200 to $800.
Despite its name, de minimis is a significant provision that cannot easily be discarded to score political points. But that is what some in Congress are working to do. The House Committee on Homeland Security recently held a hearing that spread misinformation about the policy and called for its elimination.
Primarily because of scandal-ridden Chinese fast fashion retail stores like Shein and Temu, critics are quick to label inaccurately de minimis as a “loophole” and a pathway for illegal substances to slip through our borders uninspected.
De minimis is not a loophole. It’s been around for a century and is a very intentional component of Congress’s approach that helps small businesses and reduces customs entry-processing expenses for low-value merchandise — of which the cost to process totals more than the cost of the merchandise or the duties that would be collected.
The shipments that arrive via de minimis are processed the same way as the cargo that comes off airplanes, trucks or ships. While there may be enforcement or screening challenges with de minimis, they are the same challenges Customs and Border Protection (CBP) faces with other standard conventional cargo.
In a recent interview, Brandon Lord, the executive director of CBP’s trade policy and programs directorate, pushed back on the mislabeling of de minimis as a loophole, saying: “There’s a misconception that we don’t target or screen de minimis — it’s not true. People throw around the phrase ‘loophole.’ De minimis is not a loophole.”
We must set the record straight because following the political winds on this issue would hurt consumers and small businesses with higher taxes and supply chain clogs.
Small businesses seeking to sell their products — clothes, shoes, home appliances, first aid and much more — have built their business model around Section 321 and cannot afford a tax increase, particularly if they try to compete with mega-companies.
Christine McDaniel, a senior research fellow at the Mercatus Center, recently wrote that “without de minimis, a $50 purchase would nearly double to $97 because of administrative fees — and that’s before adding on tariffs.” McDaniel concluded that its elimination could “translate to an additional $47 billion in costs for consumers and business owners annually.”
If there are enforcement improvements that can be made with de minimis, let’s make them. But let’s also understand the facts.
Import statistics of Section 321 for the years 2018-2021 obtained from CBP via a Freedom of Information Act request reveal that trade compliance for de minimis shipments in 2021 was 98.5 percent compliant for non-express shipments and 95.5 percent compliant for express shipments. Of 771 million de minimis imports in 2021, there were only 115,000 CBP seizures.
Congress must look at this new industry through a clearer lens to accept suggestions from businesses that use de minimis.
Chinese companies are not going away if we curtail de minimis — in fact, they are building warehouses right now in the United States.
Degrading de minimis would create uncertainty and costs for businesses and consumers when they need relief most.