Whitehouse Executive Deminimis Announcement Puts the Train on the Tracks
What is the de minimis exemption?
Not Much Yet, But More to Come... Possibly on Deminimis.
A shipment is eligible for the de minimis exemption if the aggregate fair retail value of the articles imported is $800 or less. De minimis shipments enter the United States with less information than other imports and are not subject to duties and taxes.
What was announced by the Biden administration?
The new announcement from the Biden administration issued a notice of proposed rulemaking. Which is basically legalese for sometime soon we will think strongly about releasing a plan which might lead to some action.
What exactly happened with the announcement?
Not Much, Yet.
We are asking Congress to do a bunch of things.
That's it? Pretty much at this point yet. A lot of heat and light over a wait-and-see.
Is Congress likely to act on this issue?
Isn't this the same US Congress which can't fund the country's existing obligations on time each year without shutting itself down?
Yes, this same Congress.
What numbers related to de minimis exemptions were released?
What numbers did they release?
Number of items with deminimis exemptions increased from 140 million to over 1B a year in the last ten years.
Over half of all deminimis exemptions come from Chinese founded eCommerce platforms. (As if the country of founding makes a difference -- notice they have all moved headquarters). This number was updated from last year's CBP report saying "likely almost half."
I can believe this number did surge given public reports.
What are the reasons for the proposed changes?
What are the reasons they are doing this?
They do not get as much information about deminimis shipments which makes it hard to track illicit and unsafe items.
Items subject to tariffs cannot be tracked if they are under the deminimis.
Consumers are being harmed by bad products entering the country.
How have consumers been harmed?
How have consumers been harmed specifically that they presented?
No specific instances of harm were called out, but I am sure they are compiling this.
What actions are being proposed to improve the situation?
What are they interested in doing?
Adding additional specific protections for US textile manufacturers.
Asking Congress to force electronic collection of 10 digit HTS codes (which are very specific) about all shipments coming in, even under the deminimis.
Setting restrictions on who is claiming the exemption.
Ensuring the Consumer Product Safety Commission gets electronic Certificates of Compliance for all items, including under the deminimis.
Why is this issue being addressed now?
Why Now?
Do you really have to ask? It's an election year!
What are the implications of this ruling?
Isn't this the same Administration that has a 50/50 chance of being voted out this year?
Yes, that's correct. However, there does seem to be broad bipartisan support on this issue. Which that and $2.90 will get you on the subway.
All told, this ruling does sound like a boon for Avalara and other cross-border players with technology to automate HS code classification and filing. It also highlights the fact that without Congress, we will be in a waiting game with lots of important-sounding rhetoric until a reform bill is passed and signed.
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