Section 321 of the U.S. Tariff Act of 1930 contains a small provision known as ‘de minimis,’ a Latin phrase that translates to ”the law does not concern itself with trifles.”
From a trade perspective, de minimis is supposed to simplify shipping so that packages under a certain dollar value can be sent to U.S. consumers from overseas without bothering U.S. Customs and Border Patrol from their core mission. With the rise in global ecommerce, however, this provision – or loophole – is proving to be far more than a trifle’s worth of trouble.
De Maximis Problem
First introduced in 1938, the de minimis exception was intended to facilitate the flow of small packages valued at no more than $5, about $106 today.
Logically, de minimis makes a lot of sense. Customs should be focused on large value shipments and shipping containers. Bulk shipments have to pass Customs inspection, but under the de minimis provision, packages go through a simplified procedure to reach individual consumers with minimal scrutiny.
No one expected the scale of those packages to reach the numbers being seen today.
Over a billion shipments entered the U.S. tax-free under de minimis rules in 2023. They account for 94 percent of all import transactions and 90 percent of all illegal narcotics, agricultural products, and counterfeits.
By March 1, 2024, 485 Million packages had come into the U.S. under de minimis, compared to 685 Million during all of 2022. If that trajectory continues, there will be just shy of 3 Billion de minimis packages brought into the U.S. in 2024.
De Minimis Reform Proposals
In response to the question about what is in these packages, Customs and Border Patrol has started to crack down on the whole system.
On April 13th, Customs had planned to require that complete shipment information for de minimis packages be submitted in advance rather than up to 15 days after import. Packages without full information would have been rejected, but the new rule was delayed just before it took effect.
There are also two pending pieces of legislation working their way along with bipartisan backers. One would bar certain countries (most notably, China and Russia) from using the de minimis provision, and the other would tie a country’s de minimis value cap to whatever level that country has for goods shipping into it. Rather than allowing packages from China to come in under the $800 U.S. threshold, they would have to be under China’s own $8 allowance.
Pro and Con De Minimis
Despite all of the challenges and complexity, not everyone agrees that the current de minimis provision is a problem. Groups have come forward to advocate for and against reform.
Of the groups in favor of reform, is the National Association of Police Organizations. They testified before the House Ways and Means trade subcommittee in December of 2023 that much of the fentanyl seized last year came into the country in de minimis packages.
There is also a Coalition to Close the De Minimis Loophole, which includes notable U.S. manufacturers, labor unions, groups focused on the impact of fentanyl, and law enforcement organizations.
On the other side of the matter is the National Foreign Trade Council. Their members include shippers including FedEx, UPS, and DHL as well as eCommerce retailers like Amazon and eBay. They argue that restricting the use of the de minimis provision would make goods more expensive for consumers and small businesses and increase the administrative burden to shippers.
It is one thing to say that rules are made to be broken, but in this case, following the rule seems to be breaking the supply chain all on its own.
