CPSC Official Says More Staff Needed; Commissioner Suggests Adding Bonding Requirements

U.S.-China Economic and Security Review Commissioner Kimberly Glas, calling e-commerce "a superhighway of the Wild West," asked witnesses at a hearing on Chinese exports and product safety if de minimis is a major contributor to unsafe products.

Jim Joholske, director of the Office of Import Surveillance in the Consumer Product Safety Commission, said that getting Harmonized Tariff Schedule codes on de minimis shipments is critical, but that he didn't take a position on reducing the de minimis level and said that if there was no de minimis, it wouldn't end the challenge of screening imports for dangers to consumers.

"The volume coming in is just overwhelming," he said, no matter what kind of entry it is.

Roughly half of current de minimis entries do include HTS codes through a voluntary Type 86 test, but those classifications are not reliable, according to a CBP official tasked with shaping a national de minimis policy (see 2402270082).

At the March 1 hearing on consumer products and Chinese supply chains, Joholske said CPSC inspectors don't need to be stationed at every one of the country's more than 300 ports of entry, but they need more than they have now -- fewer than 50. He said as more inspectors are hired, they need to go to express shipment hubs and international mail facilities, as well.

Commissioner Aaron Friedberg asked Joholske if it's true that de minimis packages aren't screened at all.

"No," he replied. "Some screening happens."

Glas characterized the treatment of de minimis shipments as "minimal inspection, minimal scrutiny and minimal information," and called the segment of entries "impossible to police."

Glas's day job is being the CEO of the National Council of Textile Organizations, which has been lobbying to either disallow de minimis for e-commerce purchases, or at least to bar apparel from that mode of entry.

Joholske said in the last fiscal year, CPSC had a $152 million budget, and it has requested $212.6 million for the current fiscal year. (Five months into this fiscal year, Congress has not established funding levels).

Joholske said that more than 80% of the shipments CPSC examines are of Chinese origin, but China was not disproportionately in violation, compared with its market share of the high-risk products.

Almost 60% of imports CPSC looks at come via e-commerce. Joholske said the biggest problem there is that e-commerce platforms say they aren't distributors, importers or retailers, so that would mean they don't fall under CPSC jurisdiction. CPSC is suing Amazon, saying its fulfillment model does make it fall under CPSC jurisdiction.

This is important, because "CPSC has little ability to act against third-party sellers that are small manufacturers based overseas," he said.

Because the agency is seeing violations of its testing and certification requirements, it is in the process of promulgating a rule that would require that those certificates be filed electronically before import.

CPSC continues to see violations of our testing and certification requirements, he said.

Commissioner Leland Miller asked Joholske if there are particular bad actors, and he replied that first-time exporters that are sending a product in a tariff code that is of interest to the agency is something that's flagged. He said targeting repeat violators is the agency's most successful targeting.

In a later panel, Daniel Shapiro, senior vice president at Redpoints, an AI service that helps to detect counterfeits in e-commerce, said that Congress must mandate seller identifications for both marketplaces and social media companies, as "that makes it easier to identify bad-faith actors, especially repeat infringers."

If companies that hosted listings would institute stricter penalties for repeat sellers of counterfeit goods, that would help, too, he said.

Shapiro said his company identified 4.6 million intellectual property infringements last year, up 26% from the previous year.

He said Alibaba, Shein, AliExpress and other foreign ecommerce platforms accounted for 86% of the counterfeits; Amazon, E-Bay and Walmart were 6%. Drop-shipping platforms, which connect Western customers with internal Chinese sales platforms, were another 8.5%.

Teresa Murray, director of the consumer watchdog program at U.S. Public Interest Research Group, said the best thing to do to protect U.S. consumers from dangerous imports would be to hire more staff at CSPC.

Commissioner David Wessel asked if bonding requirements could be linked to product safety so that the burden of detecting non-compliant goods would be shifted from government enforcement to importers.

Murray said that idea could have merit for products with past known problems.

Panelist Dan Harris, a partner at the Harris-Sliwoski law firm, agreed it could work. "It kind of makes me angry. We’re allowing China to change the way we operate," he said. But while it would make it more expensive for U.S. companies, he thinks the current state of commerce requires changes.

Harris said some Chinese exporters are fully compliant; others aren't, but would like to be, once educated. "Unfortunately, however, there are some companies in China that do not know the regulations on making safe products and either do not care to know, are not sophisticated enough to understand them, or are not able to overcome the language barrier to understand them. Oftentimes, the goal of these companies is to just to make as much money as they can before moving on to other products, and innocent Americans are the ones who may suffer. It is this last category of firms for which enforcement is so difficult. Not only are they not interested or able to follow U.S. safety rules, but as foreign firms, we do not have adequate tools to stop them. We generally are not able to exercise jurisdiction over foreign firms to impose financial consequences," he said in his written testimony.

At a third panel of the daylong hearing, Schagrin Associates partner Elizabeth Drake advocated for passage of the Level the Playing Field Act 2.0, which she said could tackle the problem of firms that were found guilty of dumping in China jumping to other countries to continue exporting to the U.S.

She said that Chinese state-owned enterprises setting up in other Asian countries are exporting equipment or materials for free. She said given that all but one evasion finding was against Chinese firms, it shows how China is in a different category, because China doesn't have such a high share of all antidumping orders.

Drake said China's share of U.S. imports has fallen sharply since Section 301 tariffs were imposed -- more than 20% -- and China lost its rank as America's top import source in 2023, a rank it had held since 2007.

But she said that's not necessarily a signal that Section 301 tariffs worked, as Vietnamese exports have lots of Chinese inputs, and she questions whether goods from other countries deserve to be the country of origin listed on entries. "Are they simply serving as conduits for transshipment or only minor processing that does not fundamentally transform the product in question? In such cases, strict enforcement of existing anti-circumvention and transshipment disciplines is needed, as well as the consideration of new tools to counteract such practices," she said in her written testimony.

Drake said the commission should recommend that the Enforce and Protect Act apply to evasion of safeguards and sections 301 and 232 duties, not just trade remedies.

She praised a proposal in the Customs Modernization bill, which would allow CBP to share the names of importers of concern with petitioners who submit EAPA allegations, and added that CBP should be allowed to add more importers to the investigation.

She said that while Commerce has the discretion to make circumvention findings retroactive, it rarely does so, and she recommends the presumption should be that retroactivity is warranted, "or, at a minimum, to provide guidance to parties on the factors Commerce will consider in making its findings retroactive."

Drake said the commission should recommend that goods that are subject to Section 301 tariffs or other higher-than-MFN (most favored nation status) tariffs should not be allowed to enter under de minimis. "CBP already has the ability to deny de minimis eligibility to protect the revenue, and it should invoke this authority to exclude any entries subject to Section 301, Section 232, Section 201, or other elevated duties from de minimis eligibility," she wrote.