Closing the Loophole: Biden Administration Takes Action Against De Minimis Imports from China

On September 12, 2024, the Biden Administration announced a number of new trade-related measures related to imports of Chinese-manufactured goods. This announcement comes as the latest action in the Biden Administration’s efforts to reinforce American manufacturing and supply chains.

De Minimis Shipments
For some time, bipartisan political pressure has been building to restrict use of a “de minimis” exception in U.S. customs law, which allows shipments of less than $800 to be imported into the United States uninspected and free from import duties and taxes. The criticism reflects concern that foreign companies, particularly from China, are believed to have abused the exception to evade tariffs and consumer safety rules.

In reaction to this pressure, on September 12, the Biden Administration announced its intention to restrict the use of the de minimis exception for shipments containing products subject to tariffs imposed under any of the following three laws:

• Section 201 of the Trade Act of 1974, the statute that authorizes global “safeguards” measures;
• Section 301 of the Trade Act of 1974, the statute under which special tariffs have been imposed on a wide range of products from China; and
• Section 232 of the Trade Expansion Act of 1962, under which “national security” tariffs have been imposed on imports of steel and aluminum from a number of countries.

Products covered by antidumping and countervailing duties are already excluded from de minimis exemption eligibility.

As a practical matter, the Section 301 duties are the most relevant, as those duties currently apply to approximately 40% of all imports into the United States, including 70% of apparel imports from China.

The Biden Administration stated that it intends to propose that de minimis shipments will be subject to certain additional requirements, including the identification of the 10 digit tariff classification number and the person claiming the de minimis exemption, as well as the provision of certificates of compliance at the time of entry.

We expect proposed rulemaking outlining the points announced to be published shortly. The Administration has also called for Congress to advance additional de minimis reforms legislatively by the end of this year.

A Continued Focus on Apparel
Imports of apparel have been a focus of the United States government over the course of the last year, including by House Select Committee on the Chinese Communist Party. In April 2024, the Department of Homeland Security (“DHS”) published a strategy to combat illicit imports of apparel into the United States. Among other things, the plan identified a need to target the de minimis exception, as well as to increase customs audits.

The plan also underscored the need to ensure that apparel imported into the United States is not in violation of the Uyghur Forced Labor Prevention Act (“UFLPA)”. The UFLPA, enacted in June 2022, imposes a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (“XUAR”) of China or by an entity which appears on the UFLPA Entity List are prohibited from import into the United States. The law does not include a de minimis exception, which means that items which include any component manufactured or produced in the XUAR or by an entity on the UFLPA Entity List may not enter the United States.

Since 2022, apparel and other cotton products have been identified as a high priority under the UFLPA by the Forced Labor Enforcement Task Force. Since 2022, CBP has allocated resources to utilize isotopic testing to trace cotton back to the XUAR. In May 2024, DHS added 26 textiles companies to the UFLPA Entity List, including a number of cotton traders and warehouse facilities located outside of the XUAR.

Important Details to be Determined

The Administration’s announcement did not address important details of how the new restriction will be implemented. For example, it is unclear how an individual U.S. consumer would be able to provide tariff classifications and certificates of compliance at the time of importation. Also, noting that the measure is motivated as a reaction to foreign companies that make high volume sales to the United States and likely have resources to institute new compliance measures, it remains to be seen whether foreign companies that make only occasional individual shipments to the United States will be forced to discontinue sales entirely.