Deminimis – Caught in the crosshairs of partisanship

It’s important, during this period of intense partisanship and strong sentiments towards our elected leaders and their policies, to understand the origins of trade policies and legislation. These days, too frequently, political bias replaces knowledge of history and facts. The saga of deminimis is an apt example.

Until deminimis were not controversial, not partisan, and applied to minimal, non-consequential volumes of imports. Many countries had “low value” duty exemptions in the 1990s. The purpose was to relieve their Customs inspectors, or in our case, the Customs Service (predecessor of CBP), from the time and effort to determine the appropriate duties to apply to the odds and ends that tourists might bring home following a vacation. Real examples: handicrafts, yak fur hats, homemade child’s tricycle, carved doll house, etc. Rather than have Customs agents try to calculate and collect the minimal duty revenue (which would be minimal), these items were exempted. Many countries did the same, in 1994 the World Trade Organization urged ‘simplification’ and 1995 codified a “Deminimis” duty exemption for imports valued under $200. The volume of such imports was very small.

In 2015-2016, international air couriers (FedEx, UPS, etc.) led a successful legislative campaign to increase the volume of imports qualifying for the ‘deminimis’ import duty exemption and the significantly expedited import procedures (Section 321 clearances), by raising the threshold to $800. With e-commerce growing dramatically, the volume of imports made exempt from US import duties and the scrutiny that had applied to ‘regular’ imports jumped. All who enjoy inexpensive (dare one say “cheap”?) goods delivered to the doorstep overnight can attest. The flow has turned into a flood, particularly from China. Powered by retailers such as TEMU, Shein, Walmart, and Amazon who can offer lower cost imports, exempt from import duties.

In the past 4 years, ‘deminimis’ has become increasingly controversial on Capitol Hill. The pros were lower costs of e-commerce goods for retailers and consumers, who flocked to the dramatic cost-savings of un-tariffed e-commerce. The con’s being the loss of millions, then billions of dollars of import duty revenue to the US Treasury. Manufacturers here in the US now face increased competition from imports entering the US without having to pay Customs duties. Customs professionals claimed the significantly reduced Customs inspections of “deminimis” imports were a security loophole whereby illegal drugs, ammunition, counterfeits, and other contraband were flowing into the US, benefiting from the expedited processing of massive volumes of imports exceeding CBP’s capacity to inspect. On Capitol Hill, leading Republican and Democratic Senators and Representatives introduced bills to rescind deminimis, or to reduce the qualifying threshold from $800. But they did not advance.

This year, President Trump took up the issue, and just as quickly, it has become yet another partisan battle (as if we needed another one). Even though Trump is now proposing exactly what Members of Congress were vigorously advocating for as recently as last year: elimination, or at least narrowing, of deminimis. Suddenly, this year, they are framing it as another Trump tariff action that will increase the costs of imports from China, and thus increase the cost of living for Americans. Did they suddenly see the light and reverse their position on deminimis, or could it have something to do with who is in the White House? How quickly does politics overwhelm trade policy! In case anyone forgets, this is nothing new; every trade agreement that comes before Congress (NAFTA, China Normal Trade Relations, USMCA, Trans-Pacific Partnership, it’s a long list), has descended into a partisan, mud-slinging battle. Neither Party has anything to be proud of. Sometimes Democrats forego trade policy for politics, other times it’s the Republicans. Always, US trade policy suffers.

This article does not necessarily reflect the opinion of the AJOT editorial board or Fleur de lis Publishing, Inc. and its owners.