White House says Congress has to act on 'de minimis' tariffs

WASHINGTON — Lawmakers and stakeholders had mixed reactions to a Biden administration announcement imposing tighter restrictions on a de minimis threshold that allows foreign goods to enter the U.S. duty-free.

The administration also urged Congress to enact legislation by the end of the year, saying the proposed changes to rules don’t go far enough. It isn’t clear how quickly the administration will finalize new rules.

Products subject to three trade restrictions — under Sections 301 and 201 of a 1974 trade law and Section 232 of a 1962 trade law — will no longer be eligible for the de minimis threshold that allows shipments valued at $800 or less to avoid tariffs and undergo little to no inspection.

Those restrictions are typically imposed on countries that violate U.S. trade agreements or engage in unfair trade practices and imports that threaten domestic industries and national security.

The administration’s move comes after explosive growth in shipments from abroad: in e-commerce goods from China, in particular. The use of the exemption has dramatically increased over the last 10 years, from 140 million shipments a year to more than 1 billion, according to the Biden administration.

“The majority of shipments entering the United States claiming the de minimis exemption originate from several China-founded e-commerce platforms, putting American consumers at risk, undercutting American workers and businesses, and resulting in the importation of huge volumes of low-value products such as textiles and apparel into the U.S. market duty-free,” the White House said in a statement.

Barring the use of the exemption from countries subject to Section 301 tariffs could impact the growth of the fast fashion industry. Those tariffs cover about 40% of U.S. imports, and it would apply to 70% of textile and apparel imports from China, the administration said.

Fashion apparel companies based in China like Shein and Temu will have to contend with the new rules.

“Temu’s growth does not depend on the de minimis policy. We are reviewing the new rule proposals and remain committed to delivering value to consumers,” a Temu spokesperson said in a statement.

Shein didn’t respond to a request for comment but the company sent a letter to the American Apparel and Footwear Association in July 2023 that said Shein is open to engaging with industry leaders, Congress and the Biden administration. “We think the exemption needs a complete makeover,” the letter said.

Amazon.com Inc. and its vendors could be impacted by the new rules. Amazon declined to comment.

Tiffany Smith, the vice president of the National Foreign Trade Council, said in a statement that expanding the tariffs on China imports “continues a disappointing trend and is a regrettable move in the wrong direction. “

“Section 301 tariffs were put in place to make it easier for U.S. companies to compete internationally by addressing a very specific set of actions by China relating to intellectual property protection. It is unclear how additional tariffs like those announced today will solve a problem that six years of tariffs have not been able to address,” Smith said.

Smith added that U.S. importers and consumers have paid about $221 billion in extra costs because of Section 301 over the last six plus years. Instead of new tariffs, “the Biden Administration should be focusing on working with like-minded allies and trade partners to eliminate the underlying structural issues in China that these tariffs were intended to solve,” she said.

House Democrats on Wednesday released a letter urging President Joe Biden to take action to end what they called a loophole. Lawmakers from both parties have introduced legislation to address the issue, but action on the bills has stalled.

House Ways and Means Chairman Jason Smith, R-Mo., praised the new restrictions in a statement.

“The Biden-Harris Administration has not only kept President Trump’s Section 301 tariffs on China in place for nearly four years, but it now is beginning a rulemaking process that would directly mirror Ways and Means Committee-passed legislation designed to prevent China from evading those tariffs,” Smith said, referring to a Rep. Greg Murphy, R-N.C., bill that would bar certain imports from receiving de minimis treatment.

The measure was reported out of the committee in April in a 24-18 party line vote but hasn’t reached the House floor.

Ranking member Richard E. Neal, D-Mass., said in a statement that the tighter restrictions are the first step in “closing the de minimis loophole, but danger remains. The American people need comprehensive action from Congress.”

The committee leaders are in disagreement about the approach.

Neal pointed to a bipartisan bill by Reps. Reps. Earl Blumenauer, D-Ore., and Neal Dunn, R-Fla., introduced in June 2023. Senate Banking Chairman Sherrod Brown, D-Ohio, introduced a companion bill at the same time, but neither has seen any action.