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On 13 September 2024 the Biden-Harris Administration published a Fact Sheet outlining its intent to publish two Notices of Proposed Rulemaking (NPR) and one Final Rule relating to de minimis shipments. Section 321 of the Tariff Act of 1930 defines the de minimis program, which allows shipments valued at US$800 or less to enter the United States (US) without duties and taxes, and with less stringent import documentation, when imported by one person in one day. According to the Fact Sheet, over the past decade, the number of de minimis shipments has increased from 140m to more than 1b annually, posing significant challenges to US enforcement agencies in terms of trade law compliance, intellectual property rights and consumer safety.

The first NPR would exclude from the de minimis exemption all shipments containing products covered by tariffs imposed under Sections 201 or 301 of the Trade Act of 1974 (Section 201 or Section 301), or Section 232 (Section 232) of the Trade Expansion Act of 1962. The second NPR would seek to strengthen information collection requirements, while the Final Rule would require importers of consumer products to electronically file Certificates of Compliance (CoC) with US Customs and Border Protection (CBP) and the Consumer Product Safety Commission (CPSC) at the time of entry, including for de minimis shipments.

In the Fact Sheet, the Administration also calls on Congress to pass legislation this year to reform the de minimis exemption comprehensively.

1. Proposed rulemaking to reduce de minimis volume and strengthen trade enforcement

   This NPR would make goods subject to trade remedies under Section 301, 201 and 232 ineligible for the de minimis exemption and provide consistency across US trade laws. This action targets e-commerce platforms, specifically Chinese companies that ship items from China to the US claiming the exemption.

2. Proposed rulemaking to improve accountability and enforcement in de minimis shipments

   The other NPR would enhance the information collection requirements for de minimis shipments. The Administration proposes to mandate the submission of specific data, including the 10-digit tariff classification number and the identity of the person claiming the exemption. This measure is designed to improve the targeting of shipments that could violate US regulations and expedite the clearance of legitimate de minimis imports.

3. Final rule to prevent de minimis shipments from circumventing safety standards

   This regulation will be designed to strengthen the ability of CBP and CPSC to prevent the entry of unsafe products into the US market. It will also aim to stop foreign companies from using the de minimis exemption to bypass consumer protection testing and certification requirements.

Action for businesses

The Administration's focus on reforming the de minimis exemption underscores the importance of compliance and the need for businesses to adapt to the evolving trade landscape. By taking proactive steps to assess the impact of these changes and by implementing strategic measures, companies can work to safeguard their operations against potential disruptions and focus on thriving in the competitive global market. In particular, any company involved in US-China e-commerce and/or small parcel trade should identify the potential impact of these changes, both financially and operationally.

Immediate actions for companies include:

• Supply chain mapping: Conduct a comprehensive end-to-end supply chain mapping to fully understand the extent of products impacted, potential costs, alternative sourcing options and alternative manufacturing options, including relocation of all or a portion of production outside of China with a focus on country-of-origin planning as a means to mitigate impact.
• Duty mitigation strategies: Identify strategies to defer, eliminate or recover the excess duties paid under Section 301, such as bonded warehouses, Foreign Trade Zones, substitution drawback, eligible Free Trade Agreements and Chapter 98 (Special Classification Provisions).
• Customs value reduction: Explore strategies to reduce customs value of imported products subject to the additional duties, such as reevaluating current transfer pricing approaches, reviewing the potential to bifurcate product and non-product costs, and considering First Sale for Export into the US, particularly if potentially establishing a US entity. Moreover, in lieu of utilizing first sale and where practical, businesses may want to consider restructuring transaction flow to allow declaring customs value based on the lower price transaction in a multi-tiered import transaction.
• Compliance processes and procedures: Develop compliance processes and procedures that demonstrate reasonable care in the face of increased CBP enforcement and scrutiny, particularly around supply chain security.