Deminimis -- A Reference on the Deteriorating US-China Relationship

July 2023

 

What’s Deminimis? – Under Section 321, 19 USC 1321 imports into the US are exempt from import duties as long as the import value is under $800, the product is sent to the ultimate user/purchaser. In addition, the usual Customs documentation and import compliance scrutiny is significantly reduced, allowing for expedited arrival  and entry into the US distribution channels, making possible the eCommerce bringing us so many deliveries to our homes, seemingly overnight. In 2016 Congress increased the threshold, imports that were exempt from US import duties as long as valued under $200, now escape import duties as long as under $800.  By comparison, imports escape Mexican import duties if valued under US$10, Canada $40, China $7, European Union$130 - 170. See all the countries here.

 

First, as deminimis is new and a bit complicated, few members of Congress every really understood it. Now, due to attention directed by the Select Committee on the Chinese Communist Party in the House of Representatives, increasing numbers of members of Congress understand what deminimis actually is., and they don’t seem to like it. Three bills have been introduced to curtail or restrict deminimis.

 

Second, the deminimis debate is no longer about revenue, it’s about national security, and the balance of power conflict between US and China. 

 

Third, it’s clear by now, nobody in Congress is going to defend the status quo.

 

Fourth, the press is picking up on deminimis for imports from China; nothing gets Congress’s attention faster than that. 

 

Fifth, Congressional, Presidential and public skepticism of our trade relationship with China is not new. Five years ago we got a glimpse of Congressional embrace of White House imposition of broad tariffs on imports from China when not one member of Congress offered any legislation, even a modest amendment, to counter the Trump China tariffs. During the 2020 elections, both Presidential candidates gauged public opinion, and hammered on the need to restrict imports. Once in the White House, Biden embraced and extended those tariffs; since then, no member of Congress is contesting them.

 

Sixth, is CBP going in the opposite direction from Congress?. While Congress is advancing legislation to eliminate or severely restrict deminimis, CBP appears to be ramping up efforts to make the status quo ($800 threshold) work; perhaps a bit late.

 

Seventh, all members of the House of Representatives, President Biden and a third of the Senate are gearing up their campaign themes. Now, just a month before the first Presidential debates for the Republicans, and approaching one year before Biden stands for re-election, count on “Tough on China” being of everyone’s theme tunes. 

 

Eighth, once members of Congress make a complicated issue part of their campaign arsenal, anything can happen. Treating favored constituencies (such as air courier who originally lobbied Congress to increase the demininimis threshold from US$250 to US$800) more favorably, or imposing a simplistic “all or nothing” solutions (such as eliminating all deminimis entirely).    

 

Ninth, while the US-China trade relationship is of most immediate interest to many in the trade community; no one should forget the bigger picture confronting the President and Congress: economic, military, currency, political stresses reported daily: China’s tightening grip on Hong Kong, military threats against Taiwan, naval challenges to international transit of the South China Sea, endorsing Russia’s invasion of Ukraine, threatening our access to minerals essential for our own technology, challenges to the dollar’s global economic primacy, competing in space exploration, too many to list. 

 

Lastly, all this motivated the establishment of the Select Committee on the Chinese Communist Party in the House of Representatives. While this was one result of the midterms – a Republican Majority in the House – the Committee is bi-partisan, and as we have seen with the China tariffs, both Republicans and Democrats appear glad to let the others, in this case the Committee, be the point of the spear against China; while most are eager to jump on the bandwagon.  

 

Peter