Urgent Calls for De Minimis Loophole Reform: A High-Stakes Debate for U.S. Manufacturers
Advocates for reforming the de minimis loophole have been highlighting the pressing need to close a gaping loophole in U.S. trade law, which has opened the door to a surge of imports that are harming American manufacturers and consumers.
National Council of Textile Organizations (NCTO) President and CEO Kim Glas outlined the gravity of the situation and severe economic and health and safety impacts of de minimis at a webinar organized by the Washington International Trade Association (WITA) on Wednesday.
Glas was joined in a panel discussion by a key U.S. Customs and Border Protection (CBP) official who outlined the administration’s support for reform and explosive growth of de minimis shipments, while depicting stark examples of the dangerous products customs officials are finding in de minimis shipments.
The panel also included opponents of comprehensive de minimis reforms including executives from FedEx and the National Foreign Trade Council.
WITA hosted the discussion following the Biden administration’s September announcement of new actions aimed at limiting de minimis shipments through a rulemaking process. At the same time, lawmakers on Capitol Hill are working toward a bipartisan solution, exploring several legislative proposals to overhaul the system.
Underscoring the issue’s importance, nearly 200 participants, including regulators, lawmakers, and representatives from the trade and business sectors, tuned into the discussion.
The stakes are high for all parties, with tens of thousands of companies, workers, and consumers suffering from the loophole, while others continue to benefit from it at the expense of U.S. manufacturers and retailers.
Currently, the de minimis provision allows 4 million shipments per day—over 1.4 billion annually—to enter the United States duty free and with minimal inspection by U.S. Customs and Border Protection (CBP).
With the explosion of e-commerce, the mechanism has become an unchecked gateway to facilitating the importation of goods made with forced labor, toxic and counterfeit products, illicit narcotics such as fentanyl and scores of other unsafe products, threatening the health and safety of consumers and undermining vital domestic manufacturing.
De Minimis: A ‘Gut Punch’ to U.S. Textile Industry
NCTO’s Glas highlighted the U.S. textile industry’s resilience and strength as a strategic supplier of PPE, U.S. military items and products for the commercial marketplace, employing more than 500,000 workers.
But “over the last 18 months the industry has lost 18 plants–18 plants that have survived the Great Recession, the Great Depression and COVID are not surviving the influx of these small [de minimis] packages coming in receiving duty free treatment, little scrutiny and facilitating forced labor product,” Glas said.
It is estimated that half of de minimis packages coming in—some 1.4 billion de minimis shipments are projected this year—are textile and apparel goods.
“This is a gut punch to an industry that is critical to the U.S. economy and critical to our supply chains,” Glas said. “It’s not just us that are impacted. Many of our retail customers who are playing by the rules are also impacted. The U.S. Congress did not vote for a free trade agreement (FTA) with China and the rest of world, but yet this is undermining all our FTA and trade preference programs.” She added the industry welcomes the demand for duty-free textile and apparel goods through carefully negotiated FTAs, of which there are 20, and trade preference programs benefiting more than 50 countries.
“I also want to address some other things that are even more important. It is one thing to lose U.S. textile companies in some of these rural communities. It is another thing to lose a family member because fentanyl and precursors are coming into the de minimis environment,” she noted. “This is very personal to them.”
“Consumer risks are great in the de minimis environment. We have had a multitude of reports on this. Would you want to hand your child a pacifier that came in through the de minimis environment virtually unchecked?,” Glas asked.
Customs and Border Protection: “A Very Big Deal” when De Minimis Shipments Hit a Billion
Felicia Pullam, Executive Director, Office of Trade Relations, at CBP, provided startling numbers on the increase of de minimis shipments and outlined the Biden administration’s support for de minimis reform as well as a more comprehensive congressional solution.
The number of shipments has “skyrocketed” over the past several years, Pullam said.
In fiscal year 2015, de minimis shipments totaled 140 million shipments per year, but in fiscal year 2023, these shipments hit 1 billion for the first time—an increase of 660%.
“For us, it was a very big deal when hit a billion,” Pullam said.
She said de minimis shipments surpassed 1 billion by the end of the third quarter in FY 2024, “so that means we were a full quarter ahead where were last year. That is a big jump and shows you how fast this is growing.”
Notably, she said 89 percent of all our seizures in the cargo environment originated as de minimis shipments as of July 30, 2024. “That is the number of shipments—it is not volume and not value, but the number of shipments—and numbers matter to us.”
“That’s a lot of staff time, a [heavy] workload put toward that number. It also matters to the individual people who otherwise receive these violative shipments,” she said.
See her full remarks here:
Pullam said those shipments also represent 97% of cargo narcotics seizures, which largely include items like pill presses, dye sets, precursors for fentanyl and other drugs; 92% of intellectual property seizures such as trademark violations and counterfeits; and 72% of health and safety seizures.
“These are things directly impacting health and safety of consumers. That is within the cargo environment,” she added.
Pullam ticked off a list of shocking and dangerous products that CBP officials are finding in the de minimis cargo environment.
She said her most “shocking example” was a stolen helicopter that had been disassembled and shipped in small packages claiming the de minimis exemption.
Among the dangerous products threatening consumers’ health and safety coming in through the de minimis environment highlighted were: counterfeit airbags that could malfunction during a crash; counterfeit lithium ion batteries that explode; counterfeit helmets may not protect people during a fall; misbranded unapproved or counterfeit contact lenses could steal someone’s eyesight; counterfeit prescription drugs may not contain active ingredient promised or lead to accidental overdoses; faulty crib bumpers or children’s sleepwear that don’t meet U.S. standards; and many more items.
Fentanyl and its precursors and pill presses are also a “very serious issue,” she noted.
“This is one of the most important things we at CBP are focused on.”
“We are talking about numbers here but these individual packages impact real peoples’ lives,” she said, pointing to the fact that just 2 milligrams of fentanyl is enough to kill one person, while just 1 kilo of fentanyl could kill 500,000 people.
“These are very potent and each individual is impacted, whether from fentanyl or some other counterfeit good, and those are the Americans we want to protect.”
“We have been banging the drum about this to raise awareness of how important this challenge is. It really gets to the heart of why we believe de minimis needs to be reformed,” Pullam said.
Debunking the Myth about Consumer Price Impacts
The event also highlighted misconceptions spread by those opposing significant changes to de minimis.
Ralph Carter, Staff Vice President, Regulatory Affairs at FedEx, argued that “cracking down too hard on de minimis will result in a regressive tax increase, particularly on low-income Americans.”
This is a misconception that some in the trade community have been stating to slow reform efforts.
FedEx is one of several express shippers that has reportedly been lobbying against comprehensive reform of de minimis.
Carter claimed comprehensive reform of de minimis would “raise the cost for all Americans at a time when they really can’t afford that” and added that there are more effective tools to catch bad actors that don’t necessarily impose large costs on U.S. consumers, businesses and supply chains.”
But Kim Glas debunked those claims, citing studies showing that Chinese import prices have fallen dramatically and tariffs resulting from de minimis reform will not lead to higher consume prices.
“This is very personal to the U.S. textile industry,” Glas said.
“We look at consumer pricing because this is our business. Since 2011, we’ve seen unit pricing coming out of China, drop 50% on textile and apparel products—rock bottom prices. We are a deflationary industry, one that has historically been deflationary. This is not going to impact consumer prices whatsoever in this environment.”
See the exchange here:
Confronting Calls to Expand US Foreign Trade Zones to De Minimis Shipments
Glas also addressed calls to expand U.S. FTZs to de minimis shipments.
Melissa Irmen, director of advocacy and strategic relations at the National Association of Foreign-Trade Zones, a trade group representing companies in the U.S. Foreign-Trade Zones program, argued expanding de minimis eligibility to allow foreign-trade zones to benefit from duty-free treatment could preserve U.S. warehouse jobs and help U.S. companies compete internationally.
“We should be giving our U.S. companies the same privilege as these non-U.S. companies are receiving,” Irmen said.
Glas noted that none of the debate in Washington is centered around expanding de minimis; rather the discussion is around limiting these shipments—from both sides of the aisle.
She warned that expanding de minimis eligibility to include companies in U.S. FTZs would pour fuel on a “wildfire” already ravaging the U.S. textile sector.
“Allowing all of our foreign-trade zones here in the United States to essentially be de minimis shipment hubs — where you get product shipped in from China, put it into separate boxes, people click buttons at home, coming to their doorstep — it will hypercharge a wildfire already out of control,” Glas said.
“We as a manufacturing industry are opposed to any sort of expansion of de minimis,” Glas added. “We think the best way to level the playing field is getting rid of de minimis altogether, curtailing the boxes, not rewarding this trade, closing this loophole — and we’d love to work with you on that.”
Closing
“Every day I worry that I am going to get a call that a U.S. textile company is going down or one of our regional allies is, or one of our customers in the retail supply chain is going down,” she said.
That is why NCTO is part of the Coalition to Close the De Minimis Loophole fighting to close this loophole. “We’re glad the administration took this initial action and we are calling on Congress to do comprehensive reform. It’s urgent. We need an urgent solution.”
Glas said the costs associated with de minimis cannot be calculated.
“The cost of human life and consumer protection; the cost to U.S. manufacturing…illustrates this is an urgent crisis,” she said.
“This is why other countries (South Africa, Brazil and the European Union) are taking immediate action. They are not taking partial action. There is not enough information that can be provided to CBP,” to eliminate the dangerous impacts.
“Nobody labels boxes as precursors or fentanyl. We need to bring down the volume of boxes, help CBP get the resources they need and enact systematic, comprehensive reform on de minimis now.”
Videos by: Rebecca Tantillo