De Minimis Pull-Back Leaves Heads Spinning

The reversal of an order banning Chinese products from de minimis startled importers and members of the Senate Finance Committee, who were puzzling about how long it would be until the policy flipped again, and why the Commerce Department, which has never had involvement in de minimis before, has been put in charge of deciding when to implement the order.

President Donald Trump had on Feb. 1 ordered that CBP require that all low-value shipments containing Chinese goods pay duties, and that international mail shipments from China and Hong Kong be required to make formal entry, beginning Feb. 4. On Feb. 4, the U.S. Postal Service stopped accepting any packages from China and Hong Kong, but quickly reversed that decision on Feb. 5.

As recently as Feb. 6, when CBP was briefing the Senate Finance Committee on de minimis, agency officials wouldn't tell staffers how the order was being implemented.

According to an email to Senate Finance Committee trade staffers obtained by International Trade Today, "Committee staff were told CBP could not discuss how de minimis would be impacted by the EO until the Department of Commerce had decided 'its vision.' We had several questions, which I’m sure you will all share -- Why Commerce? Does this apply to Canada and Mexico if the tariffs on those EOs are put in place? What is the statutory authority for this action? And so forth and so on. CBP could or would not answer anything. For now, we’re working to get a briefing with Commerce."

Also on Feb. 6, when members of the trade were on a call with CBP officials about ACE updates and had questions about how to follow the executive order on Chinese goods, CBP didn't tell them the government was no longer collecting duties on these shipments. The agency refused to answer any questions about the administration's China order at all. Even questions on how to prove that bulk shipments were on the water before Feb. 1 were left unanswered.

However, the executive order delaying the implementation of the de minimis restriction is dated Feb. 5. It was not made public until Feb. 7. That subsequent order tacitly acknowledged that the government does not have "adequate systems ... in place to fully and expediently process and collect tariff revenue" from low-value shipments. It said that Chinese goods will again be barred from de minimis entry once the Commerce Department notifies the White House that the government is ready to collect the revenue.

The Commerce Department has never had authorities related to de minimis entries before. The Treasury Department is the agency that oversees Section 321, with DHS in charge of collecting data for the entries and whatever duties are owed. In the previous administration, it was CBP that proposed rules to restrict some goods from de minimis entry.

The Coalition for a Prosperous America, an advocate of ending de minimis for all commercial purchases, took the news in stride, however. "It's our understanding that Wednesday's order is the White House giving Commerce time to put in place the right process to enforce the de minimis prohibition on China."

Amy Magnus, director of customs affairs and compliance for customs broker A.N. Deringer, said after the latest announcement: "We’re all flummoxed. I don't believe we saw it coming.

"We’re not clear what systems are being referred to in the Executive Order that need to be put in place.

"We just don’t know what systems will be put in place and how those are going to work. There’s not much we can do but wait and see. Brokers already have systems in place. And they are perfectly capable of making entries with a given value. That’s what we do. So I don’t know what is being referred to by 'adequate systems.'"

She said it's not bad to have a slower rollout, but the way the order was written, "it continues to keep us in an environment of uncertainty. There’s no specific dates or times when it might be put back in place."

"But if this pause is indefinite, are people really going to prepare? We now are in a situation where we are doing a lot of guessing," she added.

Magnus said it would be prudent for companies to expect the restriction to return, but she wonders if there still will be a blanket ban on Chinese products.

Magnus said that since de minimis was paused for Chinese goods, she's been handling entries that would have been de minimis before, and is seeing that they should not have been manifest entries, since they are goods subject to partner government agency oversight. "There’s probably an array of discoveries happening across the industry," she said in an interview.

"We invested hours preparing for the first orders. We had to make adjustments, working overtime, struggling to meet the compliance. So now we did it and we have to undo it. It’s exhausting. There’s probably a lot of people who are celebrating the reversal, but it impacts shippers and brokers to make these changes," she said.

She said she had expected changes to de minimis to be done through Congress. "It would have been a better approach to do this thoughtfully, engaging with the industry, without all this whipsaw."

House Ways and Means Committee ranking member Richard Neal, D-Mass., and Trade Subcommittee ranking member Linda Sánchez, D-Calif., reacted angrily to the Feb.7 release of the amended order.

"President Trump flip-flopping on his China trade executive order is just the latest sell-out of the American public by this White House,” they said in a press release. "In less than a week, he has gone from closing the China de minimis loophole to reopening it, leaving businesses, workers, USPS, and our Customs officials scrambling to keep up, and Elon Musk’s interests protected yet again.

"How can we expect American businesses and workers to adapt to his trade policies when the President himself can’t keep them straight? And more importantly, why is he repeatedly going softer on China while simultaneously threatening our closest neighbors and allies?"

“We need a clear, strategic and stable approach to China, not more chaos.”