Customs Modernization Hearing Will Address 'Myths' on de Minimis, Smith Says

Eighteen months after a senator launched a discussion draft on customs modernization (see 2111030035), the House Ways and Means Committee is beginning its examination of how to shape a bill to update CBP's authorities.

Brenda Smith, former CBP trade executive and global director for government outreach at Expeditors International of Washington, as well as a trade data company's CEO and a representative from a company that imports bike and ski helmets, camping gear and Camelbak water bottles and backpacks, will testify, along with two witnesses focused on the policy problems imports can cause, as the Ways and Means Trade Subcommittee holds a hearing May 25 called "Modernizing Customs Policies to Protect American Workers and Secure Supply Chains."

In a Senate hearing in February, testimony focused on reducing red tape created by reporting requirements from CBP's partner government agencies, what data is needed by CBP, how the government could offer better trade facilitation benefits to importers, the problem of enforcing the import ban on goods made with forced labor and de minimis (see 2302160065).

Subcommittee Chairman Adrian Smith, R-Neb., told International Trade Today in a telephone interview that he has an open mind about what updates need to be made to CBP's authorities, and that he wants to address issues with nuance. He noted the last major overhaul of CBP authorization was in 1993.

He said he wants to learn: "How are our policies working? What improvements do we need to make? What are some things that might be working?"

"We want to, I think, get a very accurate, broad picture of facilitation and enforcement," he said.

He also said he wanted to learn about unintended consequences of past policy changes. The ranking member of the trade subcommittee, Rep. Earl Blumenauer, D-Ore., has called the surge of de minimis packages an unintended consequence of the 2015 Trade Facilitation and Trade Enforcement Act, which raised the threshold from $200 to $800.

Blumenauer announced at a press conference May 24, ahead of the hearing, 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. He introduced a similar bill during the last Congress in January 2022 (see 2201180006).

"It was never envisioned years ago that we would have this massive loophole and we would have a flood of products, not just untaxed and uninspected -- these are products that we know involve forced labor, unsafe products, products that are involved with prohibited substances," and CBP is "overwhelmed," Blumenauer said during the press conference. "They have no idea what's coming in and have no way of keeping up. This is a simple expedient to be able to correct the situation, to be able to level the playing field a little bit and be able to keep these products out of American market," he said.

The legislation "gets us started down that path" to work with CBP, industry and the Commerce Department on other tweaks to de minimis, including how it applies to foreign-trade zones and whether to change the dollar threshold for shipments to qualify, Blumenauer said.

Smith said that whether the threshold returned to $200 or stayed at $800, "some of the same concerns would probably and likely exist. So I'm anxious to get beyond that, so how can we sort through this to get a good evaluation of current policy and what might need modified moving forward."

Brandon Lord, executive director of trade policy and programs at CBP, said earlier this year the "vast, vast majority" of de minimis entries are well under $200, and CBP is not seeking changes to de minimis in its request for changes to its authorities. It is focused on data sharing in both directions, as well as the possibility of more facilitation for detailed supply chain mapping (see 2304260028).

Lord has also pushed back against the language commonly used by de minimis critics in Congress, who say it is a "loophole" and that millions of packages are entering without scrutiny.

Smith said he has heard that message from CBP, that they do inspect packages that enter through de minimis.

"I've heard comments from colleagues that there's absolutely no screening, and that's not accurate," Smith said. "I want to get a good, accurate picture of what is taking place [in de minimis], what needs to take place, let's maybe look at dispelling some myths that may exist and to fashion policy moving forward that ultimately is hopefully better policy, that can contribute to positive results."

Blumenauer, on the other hand, said CBP's assertions that they are able to screen de minimis packages are "just simply not accurate." He said CBP is "overwhelmed with this volume of business, and they cannot keep pace with abuses and problems." Cutting the "workload back dramatically" by not allowing de minimis shipments from China is "the first step towards getting their arms around it," giving CBP "some breathing room" to deal with the collection of data and what the agency's approach should be, he said. "They're not equal to this challenge. It's not their fault. They don't have the resources. And the number of packages keeps going up,"

"I've been getting a lot of input on the de minimis issue. So I think we can't talk about CBP without talking about de minimis," Smith said in the interview. "I think it's important that we have a good, broad view of what is taking place. We always need to be mindful of the cause and effect of certain policies that are in place -- to examine what it has achieved, what has it not achieved?"

"A lot of members, including myself, have concerns about China, what is the best way to address that," he said. "I hear more and more about nearshoring or friendshoring. How are those issues impacted by our policies?

He emphasized that he will not just hear from the witnesses, but will continue to seek input from stakeholders as the committee considers customs modernization legislation.

"Tomorrow's hearing is just going to be a tip of the iceberg," he said.