The Biden administration appears to be expanding the scope of trade measures on China to reduce U.S. dependence on Beijing and bolster homegrown industry, with the latest move aimed at cracking down on the import of cheap retail products.
Yet, that could trigger higher prices for U.S. consumers who flock to popular shopping sites like Temu and Shein.
President Joe Biden's proposed rule says foreign companies can't avoid tariffs simply by shipping goods that they claim to be worth $800 or less. Sellers, mainly from China, have used the so-called de minimis exemption to flood the U.S. market, shipping dresses, shoes, toys and bags directly to American shoppers in small packages.
The number of these shipments has jumped from 140 million annually to over 1 billion last year, according to a White House statement. The U.S. government says the exemption also makes it harder to block banned imports like fentanyl and synthetic drug content, raising fears that unsafe and unlawful products are slipping through.
The White House move comes at a delicate moment for the world’s two largest economies. The U.S. has tried to lessen its reliance on Chinese products, protect emerging industries such as electric vehicles from Chinese competition and restrict China’s access to advanced computer chips.
For its part, China has seen manufacturing and exports as essential for driving economic growth as it has struggled with deflation following pandemic-related lockdowns.
Biden's proposal comes the same week that the U.S. House targeted China in a largely bipartisan series of bills, showing the breadth of Washington's efforts to compete with Beijing in a global race for dominance and the effects that can have on everyday Americans in areas from health care to shopping.
The House was not able to bring a bill to meaningfully narrow the de minimis exemption to the floor this week, prompting 126 House Democrats to call on Biden to use his executive authority to close a loophole that they say poses growing dangers to American workers, manufacturers and retailers and "threatens our health and safety.”
Democratic Reps. Earl Blumenauer and Rosa DeLauro said they welcomed Biden's announcement on Friday but called it the first step that "does not negate the need for Congress to act on a comprehensive solution.” The White House called for legislative action.
China is the biggest source of retail packages entering the U.S., accounting for the bulk of parcels worth $800 and less, according to Customs and Border Protection data.
Homeland Security Secretary Alejandro Mayorkas has acknowledged that it is impossible to screen the 4 million packages that enter the U.S. every day under the tariff exception, which he said is "built on a false premise that low value means low risk.”
At a talk at the Center for Strategic and International Studies in July, Mayorkas said customs workers had seized narcotics, ghost guns and other contraband from these small packages. He signaled that legislative changes could give Homeland Security greater authority to address the issue.
Leah DeVere, a Georgia mother, has been campaigning against the exception since her son Cory was shipped a counterfeit pill laced with fentanyl two years ago. He died after taking the drug, she said.
"By tracing the package in which the pill was delivered, my family learned that the shipment originated abroad and breezed past U.S. Customs enforcement without so much as a second glance,” she wrote in an opinion column in May for the Atlanta Journal-Constitution. "My son's life was worth more than $800.”
Such concerns led several U.S. groups – from law enforcement to manufacturing – to form a coalition to lobby lawmakers and the administration to act.
But the National Foreign Trade Council (NFTC) – whose members include international shippers FedEx, UPS and DHL and retailers Amazon and Walmart – has defended the exception, arguing it is "an essential component of America's economic health and supply chain efficiency.”
Without the exemption, costs would go up for American consumers and small businesses, it says.
The U.S. government stressed that Chinese e-commerce sites have abused the exemption to sell cheap clothing and textiles to Americans, possibly harming domestic workers and companies.
Ending it could be a blow to Chinese-founded companies such as Temu and Shein, which compete by keeping their prices low and might now have to face additional scrutiny. The government said its tariffs cover about 40% of U.S. imports, including 70% of textile and apparel imports from China.
Temu said it was reviewing the proposal. The company has managed to sell its products at affordable prices "through an efficient business model that cuts out unnecessary middlemen, allowing us to pass savings directly to our customers,” a Temu statement said. "Temu’s growth does not depend on the de minimis policy.”
Shein said it complies with all import requirements, including for de minimis parcels. The company also said it supports "responsible reform” of the exemption rule to create "a level, transparent playing field” where the same rules are applied, "regardless of where a company is based or ships from.”
The proposed regulatory changes would include new standards for smaller shipments, such as a 10-digit tariff classification number and details on the person claiming the exemption.
Biden's forthcoming proposed rule will undergo a public comment period before being finalized, a process that the Biden administration would likely need to complete before its term ends.
