Select Committee Recommends Changes to de Minimis

In a unanimous vote May 24, the committee said that's one action Congress should take to strengthen enforcement on the prohibition on importing goods made with Uyghur forced labor. The report also said that Congress should send more money to the Department of Homeland Security so it can make a comprehensive entity list of companies that utilize forced labor from Xinjiang minorities, can do more investigations, and can begin to improve targeting of shipments.

Chairman Mike Gallagher, R-Wis., in a press conference after the vote, said the committee, which is formally the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, will work with the Ways and Means Committee to act on changing the de minimis statute. "What makes me cautiously optimistic about doing something on this issue is that the chairman of the Ways and Means Committee, Jason Smith, has talked about fixing the de minimis loophole, and Democrats on the committee, like Mr. [Earl] Blumenauer, have talked about it. So I gotta believe there's something we can do this Congress to fix it," he said. "And that would be a big deal."

Blumenauer, D-Ore., announced at a press conference later on May 24 that he would be again introducing a bill that would bar non-market economy countries on the U.S. Trade Representative's intellectual property rights watch list from de minimis. Currently, that includes China and Russia (see 2305240046). He introduced a similar bill during the last Congress in January 2022 (see 2201180006).

Chairman Smith has not explicitly said he will introduce legislation to bar China from de minimis, but said in a recent hearing, "It appears that loophole is almost an $800 free trade agreement for China. That’s what it looks like to me" (see 2305090056). That language echoed a joke made by a CBP official last year at a conference, who said: "China has a free-trade agreement with the U.S. -- it's called de minimis."

Packages from China that enter under de minimis do not pay normal or Section 301 tariffs, but they can be detained for containing counterfeits or goods made with forced labor, and CBP says both enforcement actions do happen in the de minimis entries category.

Gallagher said that this recommendation is only the first one on the treatment of imports coming from China, as they will be digging into the issue, given the testimony they heard at a recent hearing on tariffs on Chinese goods (see 2305190064).

"This is our first attempt at a policy process, where we can identify the center of gravity for action in this Congress, in terms of pushing back against [Chinese Communist Party] aggression, and then we'll continue to iterate off of that," he said.

In addition to the recommendation on de minimis, the committee has begun an investigation on how Shein, Temu, Nike and Adidas work to avoid forced labor in their supply chains (see 2305190064). In the case of Temu and Shein, the committee's questions focused on both cotton and de minimis shipments.

Ranking Member Raja Krishnamoorthi said, in response to a question from International Trade Today: "They've been somewhat cooperative."

Gallagher interjected, "None of them have completely stonewalled us."

Gallagher said reports that clothing sold by Shein had cotton from Xinjiang, as detected by DNA testing, is an example of why the committee "launched the investigation, to ascertain the truth of these claims, and to make sure nobody's subverting the intent of U.S. laws.

"I think Americans want to be able to have the confidence to buy a piece of clothing and have the confidence it's not being made with slave labor."

A follow-up question from another reporter asked about Shein's assertion that a tiny majority of the cotton it uses comes from Xinjiang.

Krishnamoorthi said that this sort of scrutiny is a "good dry run" for Shein, since it is seeking to go public on a U.S. stock exchange.

Gallagher added, "I'm also not sure that 'mostly not made with slave labor' is like a good advertisement."

The report said: "Products made with Uyghur forced labor continue to contaminate global supply chains," and cited reports from Sheffield Hallam University, the Uyghur Human Rights Project" and news coverage from CNN, Bloomberg, Reuters and The Wall Street Journal.

The committee also approved a report on Taiwan, which mostly concerned military policies, but also addressed economic deterrence.

"The flip side of economic deterrence is economic engagement with Taiwan. Accordingly, Congress should support efforts to reduce the taxation burden on U.S.-Taiwan cross-border investment as well as broader trade negotiations with a particular focus on developing shared standards and regulations to combat the CCP’s unfair economic policies," the report said.