Blumenauer Says de Minimis Reforms, GSP, MTB Belong in China Package, but Delay Likely

House Ways and Means Trade Subcommittee Chairman Rep. Earl Blumenauer said Congress would never have raised the minimis level to $800 if it had known how many products would be sold through e-commerce channels from China and shipped directly to customers. "It was never intended to be anything like this, and not only are they evading payment of duty, but they are escaping any sort of meaningful oversight," he said in a phone interview from Oregon with International Trade Today. "And as you know, we're deeply concerned about forced labor."

"This is, I think, a reassessment that is long overdue," he said. "I'm happy to work to refine things further. The point is, the way that it is now is unbalanced, unfair, potentially dangerous, and we need to be able to address it."

The bill Blumenauer introduced this week would no longer allow packages from China to qualify for de minimis, because China is classified both as a non-market economy and is on the priority watch list for intellectual property rights violations. Blumenauer confirmed that the bill only covers China at this time and that the "watch list" referred to in the text means just the priority watch list.

With more than 2 million packages a day entering under de minimis, Blumenauer said the government has no way of knowing how many of the packages that contain counterfeits are being stopped. Express Carriers Association CEO Mike Mullen said that about half of the dollar amount of products seized for violating intellectual property are in the de minimis stream, and that shows that CBP has a handle on enforcement.

Blumenauer says CBP can't know what proportion of counterfeits it's catching among small packages. "I've talked to CBP myself," he said. "The volume that's involved is such that we don't have any confidence in what's happening." Even though the U.S. has a higher de minimis level than most of its trading partners, Blumenauer said it makes more sense to target the bill rather than seek reciprocity, as the previous administration emphasized when it renegotiated NAFTA.

Blumenauer didn't have specifics on the advance data the bill would require of exporters, and how that differs from the Type 86 pilot program. He said, "We want to work with our authorities to be able to refine the analysis, be able to have greater precision. And they realize there's a potential problem. They're overwhelmed and they're under-resourced." Blumenauer brushed off the argument that ending China's eligibility for de minimis would hurt small businesses that import in low enough volumes to qualify for the duty-free treatment. "I'm not hearing from any small business," he said. "This is big business that's using this."

He also dismissed concerns from some Republicans that making the change would further fuel inflation. And he said the argument that changing the treatment of imports would hurt businesses is one that "for years paralyzed Congress from moving forward" to close the consumptive demand loophole in the ban on importing goods made with forced labor.

Blumenauer said the forced labor ban, the efforts to stop illegally forested timber, and the greater scrutiny of low-value imports may have limited capacity to change damaging trade practices. "Is it going to change the world? Well, who knows," he said. "But it's an important signal."

Ways and Means has not yet moved on a renewal of the Generalized System of Preferences benefits program or the Miscellaneous Tariff Bill, and the lack of action on those pieces of legislation is preventing the House and Senate from forming a conference committee to consider the U.S. Innovation and Competition Act, the Senate's China package that seeks to bolster domestic high-tech industries (see 2112150035).

Blumenauer declined to offer a timeline on when either those bills or the de minimis bill might be considered in the committee, or even to say whether it is more than a month away. "I want to see what the reaction is and gauge the potential for wrapping these together in a big package. ... The Speaker, I think, is inclined for us to go big," he said. He said so far the reaction has been pretty predictable. A coalition of trade groups that cover retailers, apparel companies and express shippers all oppose the change. "I think we can respond thoughtfully to some of the critique," he said, and still include changes to de minimis in the House version of a trade chapter in the overall China package.

He also said that the COVID-19 omicron variant is scrambling the schedule. Even before more members were getting infected, the House was planning to spend three of the next six weeks outside of Washington. "I think circumstances are such that we are going to likely take more time, and be patient and do it in a way that's safe, and in a way that allows people to participate," he said. "I know the [House] speaker and the chair of our committee are very interested in being able to move a China package, being able to move things that are expired."

Blumenauer said he hasn't talked to Republicans on the committee yet about his de minimis proposal, but said, "I'm very interested in the reaction from other members of Congress, in both parties." He did not talk about reaching out to Republicans in the Senate who are likely to be on the conference committee, and therefore have a say in how its trade provisions ultimately come out. "I am mostly concerned with the House," he said. "I look forward to the conference with USICA, being able to deal with the pieces we put forward."

He noted that his version of GSP renewal adds a plank on violence against women in the workplace and has a stronger emphasis on environmental protection than the one that passed the Senate. "Our GSP adjustments are simple fixes," he said.

Blumenauer said he was "surprised and disappointed" by the Trade Act of 2021 that passed the Senate, and he discounted its strong Democratic support. His version of MTB has a significant difference from the Senate legislation -- it would eliminate its use for consumer goods in the cycle after the current cycle. "I mean, this was never meant to be an 'open the flood gate for finished goods,'" he said. "That's who have taken advantage of it, and again, primarily China. I think that raises questions with my Republican colleagues, as well."

He expressed confidence that the policies he's advancing are "popular, are important, and well-founded," and that he and the Republicans on the conference committee will not be so far apart that the trade provisions are dropped entirely. "I think it will stand up," he said.