High de Minimis Level Spurs Growth of Hubs to Send Smaller Shipments to US, NCBFAA Says in Trade Deficit Comments

After an increase in the de minimis limit from $200 to $800 by the Trade Facilitation and Trade Enforcement Act (TFTEA) (see 1603010043), the U.S. level is high relative to its trading partners. “Other nations, almost unanimously, maintain limits substantially below those of the United States,” NCBFAA said, comparing the $800 U.S. de minimis threshold with Canada’s $15 de minimis level and Mexico’s $50 limit. The association noted that while CBP is reviewing how to administer the increase, goods are being entered directly “off the manifest,” which often contains imprecise merchandise descriptions, making it difficult for CBP and other agencies to scrutinize goods through their respective targeting processes.

Commerce had asked for comments in mid-April on the causes and impacts of significant U.S. trade deficits in goods with other countries in 2016 (see 1704140002). Entities including the National Retail Federation (NRF), the Footwear Distributors and Retailers of America (FDRA) and the EU Delegation to the U.S. cautioned the U.S. government not to read too much into its country’s trade deficit, downplaying any notions that trade deficits are sound indicators of economic health or unfair trade practices, or that they are strongly correlated with employment. NRF noted (here) that the U.S. had a goods trade surplus with Argentina last year, but that the Office of the U.S. Trade Representative’s 2016 National Trade Estimates report included 14 pages of trade barriers maintained by the country against U.S. exports. NRF also cautioned that reducing imports from one country often shifts sourcing to other nations, not to U.S. manufacturers.

“There is no correlation either in theory or practice between unemployment and a trade balance,” the EU said in its submission (here). The EU has a small trade surplus but high unemployment, while the U.S. has an overall trade deficit with low unemployment, the EU said. Trade balances are closely aligned with national debt and don’t necessarily indicate that other nations are trading unfairly or that the U.S. isn’t deriving significant benefits from free trade agreements, FDRA said (here). The executive branch report due June 29 to the White House on the U.S. trade deficit (see 1704030036) should take into account the connections between the deficit and the national debt, savings and investment, the group said. “In addition, an analysis of trade deficits that suggests imports are ‘negative’ for the U.S. and exports are ‘positive’ for the U.S. discounts the tremendous benefits that imports provide to American consumers and the U.S. economy,” FDRA said. “Imports provide American individuals and families with value and choice in a range of products including footwear and apparel.”

But the American Iron and Steel Institute (AISI) in its submission (here) directly tied unfair overseas trade practices like dumping and illegal subsidies to the U.S. trade deficit, saying strong trade enforcement would have a “demonstrable effect” on the deficit and benefit the U.S. economy and workforce. The U.S.’s $350 billion goods trade deficit with China in 2016 impacts the U.S. steel industry through direct trade in steel and significant imports of steel-containing manufactured goods, which have disrupted the entire steel supply chain and reduced domestic demand for steel products, AISI said.

The Coalition to Enforce Antidumping and Countervailing Duty Orders arrived at conclusions similar to AISI's, saying in its submission (here) that duty evasion increases U.S. trade deficits. Risk assessment-based bonding requirements aren't sufficient to address evasion, and CBP should send proper bills to importers that may evade duties, the coalition said. While the group called for full implementation of TFTEA's Enforce and Protect Act (EAPA) provisions, it also criticized several elements of CBP's interim final rule implementing EAPA (see 1608190014). The coalition expressed concern about the fact that the interim final rule doesn't set forth an administrative protective order process to facilitate exchange of confidential information in evasion investigations, which would allow interested parties to fully participate in proceedings.

The EAPA rule's definition of "parties to the investigation" covers only the filer of the allegation and the alleged evader, much narrower than Congress' definition of "interested parties," which included all manufacturers, producers, wholesalers, unions, trade associations, importers or processors of similar products. CBP's "artificial narrowing" of EAPA provisions will "improperly limit" those who can participate in evasion investigations, the coalition said. The group also said CBP shouldn't limit evasion allegations to cases in which the identity of the importer of record is known.

Writing on behalf of the American Furniture Manufacturers Committee for Legal Trade, King & Spalding said (here) imports of furniture, especially wooden bedroom furniture, “materially contribute” to the U.S.’s significant trade deficits. The law firm pointed out that the U.S. imported $21.7 billion of furniture from China and exported $0.2 billion of furniture to China last year, composing 6.2 percent of the U.S.’s total trade deficit with the country.

The U.S. had a deficit in textiles and apparel trade with all countries except Canada and Mexico in 2016, four textile groups, including the National Council of Textile Organizations, said in a joint submission (here). The submission pointed to International Trade Commission statistics showing textiles and apparel as being second to electronics in terms of their yearly contribution to the U.S. trade deficit. Although U.S. textile and apparel exports had a near-record 2016, totaling $26.3 billion, the sector’s trade deficit is expanding because of “extreme predatory trade practices,” the groups said. To end the U.S. textile and apparel trade deficit, the groups recommended, among other things, eliminating “yarn-forward” exceptions in free trade agreements, strengthening customs enforcement, improving “Buy American” programs, and addressing currency manipulation.