Blumenauer Floats Alternative de Minimis Proposal
House Ways and Means Trade Subcommittee Chairman Earl Blumenauer, D-Ore., speaking at an event about his proposal to remove Chinese exports' eligibility for de minimis, suggested that if the provision does not pass as part of a compromise China package, he's got a Plan B. The language in his bill says that de minimis won't be available to any non-market economy that's on the priority watch list. "Now, coincidentally, that's just China," Blumenauer said with a grin during the Rethink Trade webinar March 9.
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"As you know, there’s been some reluctance [to change de minimis], but I think we can hold the line and get this moving," he said. "But I’ve got a fallback position that I'm willing to discuss with you and explore. What if we just gave other countries five times what they give us?"
He gave the example of China, whose de minimis threshold is $7. So packages from China would owe duties if they were worth more than $35, under this conception. He said Congress could consider making this change even if the China carve-out passes.
This backup plan would be much more complex to administer, given that each exporting country has its own de minimis level, generally in their own currency, which would make the reciprocity shift with the shifting value of currency. For instance, packages from Canada would be eligible for de minimis if they were valued at less than $587.46.
Congress previously increased U.S. de minimis from $200 to $800, and Blumenauer voted for it, but he said it unleashed "all sorts of unintended consequences." He said the argument for the high level is administrative efficiency. "Well, hardly," he said. "It's a loophole you can drive a cargo airplane through. We know how the Chinese operate. There's no doubt there are products coming into the country without being inspected ... that are the result of forced labor."
Blumenauer also alleged there is fraud among Chinese sellers to avoid tariffs. "Actually, the $800 threshold is kind of winked at. It's well-known that if you've got a product that is $850, some enterprising Chinese company will work with you to mark down the invoice, so it's $799."
Bob Margevicius, executive vice president of Specialized Bicycle Components, an importer of bicycles and accessories, also spoke at the event. He said he understands that "simplifying transactions is essential for trade facilitation." But he said that the EU has found ways to collect both the value-added tax and tariffs on small packages, and the U.S. should do the same. He said he'd like to see formal business registration requirements for any importation, a requirement that all shipments have a Harmonized Tariff Schedule code and detailed description, and that he thinks a threshold of $200 or less would be more appropriate.
Blumenauer said he was inspired to introduce this bill in part because of Rep. Jan Schakowsky's hearing two years ago (see 2003040040). He said that he and the Illinois Democrat "had great success with NAFTA 2.0," challenging trade orthodoxy and winning. He gave the example of getting a provision in the renegotiated NAFTA dropped that would have required Canada and Mexico to offer more years of patent exclusivity for biologic drugs.
"I think we can do the same here," he said.
Schakowsky, who was also at the event, said that Congress has increased funding for the Consumer Product Safety Commission, allowing it to take additional action to fight the import of counterfeits, and that Congress required that CPSC investigators be placed at two ports of entry with the most de minimis shipments, "knowing that what we call the Amazon loophole was really poised to take advantage of and to exploit consumers." She said removing China from de minimis eligibility is the next logical step.
National Council of Textile Organizations CEO Kim Glas cheered the proposal, asking what's the point of levying trade penalties "if you can just find a way around it with the de minimis loophole?" She said her group is encouraging Congress to include it in the final China package, adding: "It’s hard to imagine any China bill without it."