Two bipartisan bills were introduced in Congress this week seeking to change a nearly 100-year-old trade law that allows imported packages that fall under a certain price threshold to receive less oversight while moving through the United States customs process.
The trade rule is called “de minimis” and critics say it gives an unfair advantage to e-commerce companies from other countries, including some where forced labor is an issue. Currently, companies importing packages valued under $800 are not charged duties, taxes or fees to the United States government.
A bill introduced Thursday looks to bar countries such as China and Russia, which are considered “nonmarket economies,” from being eligible to use this trade law. It also seeks to have U.S. Customs and Border Protection collect more information on all shipments under the $800 threshold. That would include a description of the article, the article’s country of origin and the identity of the shipper and importer.
The bill was introduced by Senators Marco Rubio, a Republican from Florida, and Sherrod Brown, an Ohio Democrat, and Representatives Earl Blumenauer, Democrat from Oregon, and Neal Dunn, a Florida Republican. It argues that a change to the trade law would eliminate a loophole that allows companies to get products into the U.S. that may have been made with forced labor and also would level the playing field for American companies that do face the financial fees associated with importing goods made in other countries.
“I think our legislation is targeted very narrowly in areas of abuse, and this has the potential of getting very strong bipartisan support,” Mr. Blumenauer said in an interview.
Why It Matters: The law impacts prices for e-commerce companies.
In 2016, the de minimis limit was raised to $800 from $200. The move was done to relieve burdens on the customs department. Then the pandemic hit and online shopping boomed.
Some online retailers have financially benefited from the law because they ship small batches of orders directly to shoppers from overseas.
That is unlike many traditional retailers, which usually import large batches of apparel into the U.S. — paying the requisite fees — and then deliver individual online orders from warehouses based in the U.S.
Shein, an online clothing retailer founded in China, is one of the companies the bill would affect. Shein has become popular among U.S. shoppers for its ultra-low prices and sophisticated mobile app and website. Its $11 smock dresses and $6 floral print bikinis are shipped directly to shoppers, allowing it to bypass any import fees.
In recent months, Shein has opened distribution centers in the U.S. to send merchandise to American shoppers. That could lead to more fees at customs as it directs bulks of goods to its warehouses before going to consumers.
But Shein has faced scrutiny for some of its business practices, such as claims that it has copied designs and used cotton in its clothes from Xinjiang, a region in China where U.S. officials say Uyghurs have been abused by the government. Investors anticipate an initial public offering from Shein this year, which has only increased questions about the company.
The bill introduced Thursday does not mention the company, but “Shein is probably the most obvious example of a company that has exploited the de minimis loophole the most,” Mr. Blumenauer said.
“Maybe there’s a modest financial savings to consumers, but at what price?” he said about the affordable items Shein sells. “I just think that we’ve made a determination that we’re going to respect environment, human rights and product safety, even if it’s a cost of a few more pennies.”
Shein said in a statement that it had “zero tolerance for forced labor” and has implemented a system to comply with the Uyghur Forced Labor Prevention Act. The system includes a “code of conduct, independent audits, robust tracing technology and third-party testing. We have no manufacturers in the Xinjiang region,” a Shein spokeswoman said.
“Since entering the U.S. market in 2012, Shein has been compliant with U.S. tax and customs laws,” she added.
Background: The U.S. is becoming more critical of Chinese companies.
This current bill is the latest sign of the U.S. government seeking to assert more oversight on companies with ties to China.
A bill introduced Wednesday by Bill Cassidy, a Louisiana Republican, and Tammy Baldwin, a Wisconsin Democrat, called for barring Chinese companies from using the de minimis rule and requiring more information on packages that enter the U.S.
In March, U.S. lawmakers questioned TikTok’s chief executive in a five-hour hearing about the platform’s ties to China. Other companies like the e-commerce retailer Temu have also faced scrutiny about its ties to China. This month, Mr. Rubio sent a letter to other lawmakers warning them of Shein’s business practices and lobbying efforts.
“People were less concerned about China then than they are now,” William Reinsch, senior adviser at Kelley, Drye & Warren LLP and former president of the National Foreign Trade Council, said of 2016, when the law was last adjusted.
What’s Next: The bills are a long way from being passed.
The bills need to be considered separately in the House of Representatives and Senate. Both likely face a long road ahead before they have a chance of being passed.
Meanwhile, Shein has gone on the charm offensive in recent months, becoming more vocal about its sustainability practices and its work with independent designers — two topics where it faces lots of questions.
Jordyn Holman is a business reporter covering retail for The Times. She previously worked at Bloomberg News, where she covered retail and diversity in corporate America. @JordynJournals
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