US moves to curb 'trade loophole' over China worries

The US government said Friday it will work to curb the "overuse and abuse" of a mechanism allowing lower-value imports to enter the country duty-free, as concerns grow over Chinese shipments.

Under a new regulatory effort, US officials will be seeking to disqualify certain products from this trade exemption -- a move that could impact Chinese textile and apparel imports.

While roughly 140 million annual shipments entered the United States under the de minimis exemption a decade ago, this surged to over a billion last year.

A key factor behind the rise is the growth of Chinese-founded online retailers Shein and Temu, according to US officials. Both platforms are known for selling items at low prices.

"American workers and businesses can outcompete anyone on a level playing field, but for too long, Chinese e-commerce platforms have skirted tariffs by abusing the de minimis exemption," said Secretary of Commerce Gina Raimondo in a statement.

"Foreign companies, predominantly China-founded e-commerce platforms, are flooding the US market with low-value products," National Economic Council deputy director Navtej Dhillon told reporters.

"This exponential increase in de minimis shipments makes it more challenging to enforce our laws," he added.

As the exemption stands, such foreign shipments enter the country with fewer oversights, potentially allowing unsafe products and illicit substances to avoid scrutiny as they enter the United States, said Dhillon.

To prevent this, President Joe Biden's administration will seek to disqualify certain products from the exemption.

This includes goods facing Section 301 tariffs -- a key tool used to justify levies against China in recent years.

Section 301 tariffs hit approximately 70 percent of Chinese textile and apparel imports, meaning the move would drastically reduce the number of shipments entering through the de minimis exemption, said Daleep Singh, deputy national security advisor for international economics.

Also targeted are packages containing products subject to Section 232 tariffs on steel and aluminum goods, as well as Section 201 safeguards impacting solar manufacturing.

Officials said tighter rules do not apply to imports from a single country.

On Wednesday, a group of over 120 US lawmakers raised "grave concerns" over the de minimis "trade loophole" in a letter and urged Biden to close it.

They said such imports threatened US manufacturers and charged that these "expose American consumers to great risk by flooding the market with fake and sometimes dangerous imported goods, including fentanyl and precursor chemicals from China."

US officials will also look to introduce rules for those who continue using the de minimis exemption, such as new information collection requirements.

"The administration is calling on Congress to pass legislation this year to comprehensively reform the de minimis exemption," said Singh.