By Bruce Leeds, Senior Counsel, Braumiller Law Group
There is an increasing demand to do something about the de minimis shipments under §321 of the Tariff Act (19 USC 1321).
What is §321? Let’s take a look at some of the text from Title 19:
“The Secretary of the Treasury, in order to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected, is authorized, under such regulations as he shall prescribe, to—
(2) admit articles free of duty and of any tax imposed on or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed an amount specified by the Secretary by regulation, but not less than—
(C) $800 in any other case.”
In other words, if it isn’t worth Customs time to process an entry and collect revenue, no entry or duty payment is required. The current §321 upper threshold – set in 2016 – is $800. Import shipments having a value of less than $800 are eligible for §321 and may be imported without entry or duty payment.
Not only are shipments under $800 exempt from duty but they are also exempt from Section 301 duties on Chinese products, Consumer Product Safety Commission requirements, import quotas and other requirements. Although they are supposed to be subject to Antidumping and Countervailing duty and Food & Drug Administration requirements, many low value shipments pass through the system without meeting these requirements.
The use of §321 entries has dramatically increased in recent years from 140 million shipments to over one billion shipments per year over the last ten years. This is largely a result of e-commerce. Individuals and companies place orders online that are shipped to the US by mail or small package companies. While this may be convenient for individual consumers, some businesses are taking advantage of §321 to import articles that would ordinarily be subject to duty and restrictions. Although users of §321 are supposed to be restricted to one shipment per day, it is exceedingly difficult to police and enforce this requirement. Unscrupulous companies can get away with splitting up orders and receiving several packages a day. As an alternative they can receive a shipment every day or 365 shipments a year. This puts legitimate “go by the rules” importers at a disadvantage; thus, the calls for increased rules and enforcement.
On Sept. 12, 2024, the White House issued a statement and proposal regarding §321 de minimis shipments. The statement said that there is a significant abuse of the §321 exemption – in particular by Chinese e-commerce platforms. The Administration said that §321 serves as a loophole through which dangerous goods, trademark and copyright violations, health and safety risks and other non-compliant goods can enter the US.
The White House will propose new regulations to reduce the risks and abuse of 321. These include:
- Prohibiting §321 for goods subject to Sec. 201, 301 and 232 duties
- Requiring 10-digit HTS# for §321 shipments and name of the person or party claiming de minimis treatment
- Establish rules on who is eligible to claim §321 entry
These regulations must go through the proposed rulemaking process which includes publication in the Federal Register, collection and analysis of comments and publication as a Final Rule. The Administration also recommended that Congress pass legislation on this issue and thereby bypass the rulemaking process.
Congress has already acted on this. The Senate introduced bipartisan legislation that would:
- Prohibit use of §321 for tariff sensitive items, including textiles and leather goods
- Require CBP to collect additional data on §321 imports
- Enhance seizure procedures and increase penalties for violations
- Impose a $2 per shipment fee for use of §321
Of course, this can also take time so don’t expect anything significant until 2025.
There are some impediments to implementing any of these proposals. The first is the sheer volume of §321 shipments – over 1 billion a year. A visit to any of the small package shipping company hubs will illustrate this problem. The other issue is US Customs & Border Protection having the resources to implement and enforce any of the proposed changes.
So – what will happen? Our best prognostications are:
- Restrictions on use of §321 de minimis for textile products
- Increased enforcement of trademark and copyright violations – including seizure of violating shipments
- The same for some shipments of products made with forced labor
- Requirement of a Consumer Products Safety Commission Certificate of Compliance for imports of CPSC regulated products
- The $2 per shipment fee enacted by Congress and implemented
So, stay tuned – this issue is not going away anytime soon.
