How Trump’s Orders to Close Trade Loophole Could Help US Businesses

An Amazon Prime delivery person lifts packages while making a stop in Denver on Nov. 28, 2023. AP Photo/David Zalubowski, File

A little-known trade loophole could have a significant impact on imports coming into the United States from China and on domestic businesses.

On Feb. 1, President Donald Trump signed several executive orders directed at Canada, China, and Mexico. Those three executive orders mentioned the cancellation of “de minimis treatment” for “all articles” produced in any of the three countries.

Removing the de minimis standard means that goods of any value will be subject to all duties assessed by the United States. Previously, items worth less than $800 were imported duty-free.

On the morning of Feb. 3, Trump and Mexican President Claudia Sheinbaum announced a deal to delay 25 percent of U.S. tariffs on Mexican goods that were to take effect on Feb. 4.

The Globe and Mail and The National Post, two of Canada’s largest newspapers, are labeling the tariffs a “trade war.”

Xinhua, a media agency run by the Chinese Communist Party, quoted a spokesman of China’s foreign ministry who used similar language. Both countries have pledged retaliatory measures, too.

In a press conference on Feb. 2, Trump said the levies’ eventual benefits would be worth any pain—which he said would be short-term—Americans feel in the form of elevated prices.

Targeting Fentanyl

Saturday’s executive orders said that ending the de minimus exemption is primarily aimed at stopping the flow of the synthetic opioid fentanyl and its chemical precursors into the country.

The order about China said Chinese companies “go to great lengths to evade law enforcement and hide illicit substances in the flow of legitimate commerce.”

“To conceal the true contents of the parcels and the identity of the distributors includes the use of re-shippers in the United States, false invoices, fraudulent postage, and deceptive packaging,” the order said.

Closing the Loophole

Trump’s move to remove the de minimis exemption escalates a proposed rule published by U.S. Customs and Border Protection during the final days of President Joe Biden’s administration.

On Jan. 17, the Biden administration’s CBP officially proposed dropping the de minimis exception for “merchandise subject to specific trade and national security action.” The move mentioned protecting the U.S. from unfair business practices.

“We cannot let Chinese-founded e-commerce platforms gain an unfair trade advantage while American businesses play by the rules,” Lael Brainard, former director of the National Economic Council, said in a Jan. 17 release.

According to a study of the de minimis exemption published by the Congressional Research Service (CRS) on Jan. 31, the exemption’s value was last hiked in 2015 to $800 from $200.

Since that change, the number of de minimis entries processed annually by U.S. Customs and Border Protection increased by 470 percent to about 685 million units, compared with about 120 million between fiscal year 2013 and fiscal year 2022.

Christopher Casey, a CRS analyst specializing in international trade and finance, wrote in the report that “by the late 2010s, policymakers ... began expressing concerns about the impact of raising the de minimis threshold on foreign policy, national security, and the economy.”

Casey said in his report that critics of the $800 de minimis standard said that the loophole undermines existing tariffs. Furthermore, the loophole allows a hugely inflated number of small packages to enter the U.S., harming “CBP’s ability to enforce U.S. customs laws, such as prohibitions on importing narcotics or goods made with forced labor.”

In fiscal 2023, the agency processed more than 1 billion de minimis shipments, Casey said, citing an unnamed CBP official.

Casey also said the volume of de minimus packages limits CBP’s capacity to use modern screening technology designed for intercepting contraband.

“As one CBP employee put it, ‘de minimis brought us back to the 1990s in terms of enforcement,’” Casey said.

The same report said the U.S. de minimis exemption is one of the highest in the world. China, for example, restricts the equivalent of $7, while the European Union places it at the equivalent of $163.

The largest impacts will likely be felt by Chinese-based online retailers like Temu and Shein, which ship low-cost goods to the United States.

The Epoch Times previously reported that the $800 duty-free de minimis loophole makes it easier for importers to compete with U.S. online retailers like Amazon.com Inc.

In a Monday interview published by Reuters, Cameron Johnson, a senior partner at Tidalwave Solutions, predicted that removing the exemption will negatively affect Temu and Shein, as well as some sellers doing business on Amazon.

“The players that will benefit most from this are companies that make those products domestically, or other companies that may make raw materials or other intermediate inputs that go into the supply chains of the U.S,” Johnson said.