CBP Says Its Cost of Collecting Section 301 Duties in de Minimis to Be 'Negligible'

Felicia Pullam, executive director of trade relations at CBP, defended the administration's proposal to end de minimis eligibility for goods subject to Section 301 tariffs as workable, arguing that charging a $2 fee per de minimis package will allow the agency to hire more staff to screen for contraband, and pushing back on industry arguments that collecting tariffs on low-value packages costs the agency more than that revenue.

Pullam, who was speaking on a panel on de minimis policy at the Washington International Trade Association, responded to that assertion from the National Foreign Trade Council's John Pickel, saying that most of the revenue collection is automated.

"That’s negligible to us, the incremental cost to collecting those duties," she said.

What is expensive, she said, is the current procedure for disposing of abandoned small packages. She said each time that happens, it can cost between $1,100 and $2,300 in staff time.

The customs modernization legislation that CBP is advocating for would make it easier and quicker to dispose of abandoned goods.

Pullam also argued that collecting Section 301 duties on direct-to-consumer imports is also important, since brick and mortar retailers have to pay those duties when they import goods, and so the current policy puts them at a disadvantage.

Panelists didn't agree on how big a problem violations are in the de minimis environment. National Council of Textile Organizations CEO Kim Glas, who says e-commerce shouldn't qualify for de minimis at all, calls it a threat to domestic businesses, consumers and societies, due to the fentanyl-related imports sneaking in among what she called "an avalanche of packages."

Pullam said 89% of all the seizures CBP does were in the de minimis channel; 97% of narcotic and illicit drug precursors and pill presses were from de minimis; 92% of intellectual property violations were in de minimis; and 72% of health and safety violations were seized in de minimis.

She allowed that's a count of shipments, not a measure of volume or value, but said, "numbers matter to us. That's a lot of staff time ... put towards that number."

But Ralph Carter, staff vice president for regulatory affairs at FedEx, noted that 89% of all cargo entries were de minimis, so he said the fact that 89% of seizures come in that channel is misleading. He also pushed back against the argument that duty-free imports are destroying domestic fabric manufacturers or apparel retailers. "De minimis as a percentage of the value of U.S. imports is 4% or 5%," he noted.

Pickel, senior director of International supply chain policy at the NFTC, went further and said the packages that enter through de minimis are "broadly compliant," based on Pullam's figures. Importing in this channel saves the economy $1.4 billion annually, he estimated.

He said that the proposed rulemaking and discussions in Congress about restricting de minimis have already chilled investment for a company that employs U.S. workers and owns intellectual property, because the investors think a restriction in de minimis could hurt that business.

The moderator asked how changes to de minimis might change the pattern of imports, and Glas said they expect fewer people would buy apparel directly from China.

Carter disagreed. "The volumes will still be coming in, Americans will just be paying more -- and we will not have changed any of the problems we have today."

CBP hopes there would be fewer de minimis packages than the nearly 4 million a day currently entering, but even if the volume does not diminish significantly, it believes that a fee on all those imports, rather than just those coming via express carriers, could help it ramp up staffing and technology for screening.

Pickel argued that imports would shift from air cargo and express shipments to the international mail, and that would be more dangerous for American consumers, because CBP doesn't have the same authority to demand advance data from foreign countries' postal services. Carter also made that argument.

Pullam agreed that there are some limits due to international treaty requirements, but added, "We are able to screen packages that are coming through international mail."

She said to argue that charging duties and fees would only shift goods to international mail is letting the perfect be the enemy of the good.

"We need to address the problems we have in other environments," she said. She said there's a massive amount of de minimis goods coming through non-express air cargo, and a growing number coming by truck, as importers in Canada and Mexico import containers of goods and then distribute them to U.S. consumers as orders come in.

"No matter what changes we make, businesses will continue to adapt, bad actors will continue to adapt, so we have to stay as vigilant as we can," she said. "These proposed reforms are the first reforms, and we have to keep watching."

In response to a question from International Trade Today on the fact that CBP opened a box of fentanyl precursor chemicals destined for a Reuters reporter, but still sent it on, Pullam said, "This gets to the heart of why we think de minimis needs to be reformed." She said CBP is investing in screening technologies. "We do need additional personnel," she said, and requiring fees from those other than express carriers, who pay $1.31 a package, will help. She noted that proposals would also increase penalties for trafficking, which are currently limited to the value of the package.

The same story from Reuters revealed that FedEx stopped a package of chemicals from China and asked the U.S. buyer to confirm that the package contained $10 worth of pigment ink, but the reporter responded that it was really $150 worth of (2-bromoethyl)benzene, and FedEx and CBP sent it on.

Carter said, "There’s no place in the FedEx network in trafficking of illicit goods," and said FedEx supports charging other shippers a per-package fee as well as more data reporting requirements, based on what CBP learned in the Type 86 data pilot and Section 321 pilot.

"We’re actually very optimistic about the future of advanced collaboration between the private sector and CBP," he said.

Pickel said: "We definitely believe that the current status quo, as it relates to integrity of information reported to CBP, needs to improve."

Glas scoffed at the idea that a data-only approach would solve anything. "Nobody labels their box precursors or fentanyl."