Banning Apparel From de Minimis Under Discussion in Ways and Means

It's not clear whether removing all Chinese goods or apparel from de minimis would shrink the universe of duty-free imports the most, but the latter approach, combined with a restriction for Section 301 tariff targets, may be gaining support on the Hill.

CBP has said that 641 million low-value packages came from China in FY 2023, when 1 billion packages entered through de minimis; it hasn't published data on its estimate of how many packages contain clothes, but a textile mill CEO said the agency told him it was half (see 2312140046). CBP didn't confirm that number by press time.

House Ways and Means Trade Subcommittee ranking member Rep. Earl Blumenauer, D-Ore., said that adding restrictions on apparel in de minimis is one of the things his team and House Ways and Means Republican leadership are talking about as they seek new legislative language on restricting de minimis that could get bipartisan support.

The Ways and Means Committee earlier in the year passed a bill with only Republican votes that would remove Section 301 goods from de minimis; a new study, commissioned by de minimis advocates, estimated that would mean 330 million packages in 2025 would be subject to duties. The same study said removing China and Russia from de minimis would mean 646 million packages would be subject to duties that year. That was the approach of a bill Blumenauer introduced.

Senate Finance Committee Chairman Ron Wyden, D-Ore., introduced a bipartisan bill last month that would target Section 301 goods and goods that are "import sensitive" in other trade legislation -- which means apparel wouldn't be eligible.

Blumenauer, during a hallway interview at the Capitol, referred to that measure, adding, "I think there are things here that can make a difference."

He said he has been talking to Chinese companies about changes to de minimis, and said he heard from an American company this week, but the American firm just wanted to know what might happen -- it wasn't lobbying for any particular outcome.

"People are just monitoring, trying to keep on top of it, because things are happening," he said. "There's an outside chance that we can put this together."

Ways and Means member Rep. Ron Estes, R-Kan., who supported the Section 301 restriction bill, said he wasn't privy to the negotiations about carving out clothes, but wondered if product carve-outs make the most sense for reducing the volume of packages. The acting head of CBP has said that the agency wants Congress to reduce the volume so that CBP can manage enforcement better.

"What is unique about clothes vs. toys? What's the value on clothes, in terms of being a special category, vs. food, vs. toys, vs. shoes, vs. small tools or other things," he asked. "What's the driver, in terms of one category or another?"

One of the two Republicans who joined Wyden, Sen. Cynthia Lummis, R-Wyo., wasn't aware that the bill she introduced targeted apparel. The text doesn't include the word "apparel," it merely says that "import sensitive" goods would be barred; it also explicitly gives the administration the authority to bar goods that have seen a significant increase in imports, faster than the rise of all de minimis entries, or if the class of product shows "persistent and significant evidence of hiding the shipment of illicit goods, fraud, counterfeiting or other malfeasance."

Lummis said in a hallway interview at the Capitol: "Our big concern is that small packages are being used to bring in the underlying chemical components of fentanyl and such. I haven't specifically dived in to understanding whether clothing is being used as a ruse to traffic in illegal chemicals."

Wyden declined to talk about whether he thinks his approach on restricting apparel may help House Democrats and Republicans come together on a bill. "I can't get into the negotiations. We're talking to all the parties, we're talking to the White House, and I've got to leave it at that, because one of the reasons that I feel we've been able to get things done is that people can negotiate with us in good faith."

Wyden also declined to explain why he decided to bar apparel from any country in his bill, suggesting that could hurt progress toward a compromise. He just said, "We thought it was good policy."

He said one of the things giving him hope that language could be hammered out between the chambers and the two parties is the widespread "awareness that fentanyl is a wrecking ball. It is pounding our communities, particularly in Oregon, but across the country." He said it's important to deal with the weakness of de minimis packages as a smuggling avenue. "I think we've got a good shot at doing it fairly soon."

The National Foreign Trade Council, which supports data collection and non-intrusive technology to see inside packages rather than restricting how many boxes come through de minimis, made that argument again Sept. 12, sharing a report it commissioned to assess what might happen if either all Chinese goods or Section 301 goods were removed from de minimis eligibility.

The trade group argues that determining if low-value packages are subject to special tariffs "would be impossible with CBP’s current staffing levels. CBP's most recent workload staffing model already shows a gap of over 4,800 CBP Officers between what the agency has determined is necessary and what Congress has appropriated funds for."

The independent Congressional Budget Office estimated that removing Section 301 goods from de minimis would only require ACE programming and not more front-line officers.

The economists who did the study estimated it would cost $5 for each package that CBP removed from the de minimis stream, more than the $2 per package merchandise processing fee included in Wyden's bill and the $2.22 minimum MPF for dutiable informal entries.

Based on that, they estimated that removing Section 301 packages from de minimis would cost $600 million annually more than the additional $1 billion in tariffs collected, and that removing Chinese packages would generate $627 million in tariffs and cost an additional $2.6 billion. The study didn't explain why removing all Chinese goods would result in lower tariffs than only removing the Section 301 subset of Chinese goods.

"This study does not attempt to estimate the number of workers the CBP would need to hire under the two bills, there is no question that these bills would require the CBP to hire additional officers to process the increased number of packages subject to import duty," the report said.

Although NFTC says CBP should be able to detect contraband via scanning and algorithms, CBP has tried to develop technology, to analyze data and scan boxes, that would allow better screening without slowing the flow too much (see 2304170052), but has not yet found a solution. Brandon Lord, executive director of CBP's Trade Policy and Programs Directorate, testified earlier this year that with dramatic increases in volume and the speed with which shipments move, CBP has not been able to increase its facilities, tools and staffing to keep up (see 2405070063). His testimony at a House hearing stated: "The de minimis exemption was created to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected; however, the opposite is proving true." He said there are "high rates of non-compliance found in this environment."