The express shippers responded to the last blog, on the de minimis loophole. Out of respect for the time and effort they put into responding, the comments are, with the shippers’ permission, set out below. In addition, the National Council of Textile Organizations sent this letter to Customs in regards to de minimis.
The shippers’ letter:
“The members of the Express Association of America – DHL, FedEx and UPS – take strong exception to the recent article, entitled “The De Minimis Loophole,” published on your website. The article does not accurately portray the relevant facts, shows a misunderstanding of the benefits of ecommerce, and mischaracterizes the express industry’s relationship with USTR.
The article fails to acknowledge the basic reason why the de minimis process for low value shipments was established in the first place, which is to ensure the Government is not collecting small, nuisance tariffs that are less than the cost of the time and effort customs officers must expend to process and collect them. This is not an aberration specific to any country or group of countries. To the contrary, de minimis is an international standard recognized in international treaties and regional agreements across the globe.
The article seems to be based on the misconception that the tariffs not being paid on shipments under $800 constitute some huge revenue loss for the U.S. Government. Let’s use the article’s own numbers: the average U.S. tariff is 3.4%, so the tariff on an $800 import would be $27. Turning to the article’s example of a person “all day driving back and forth to Canada and Mexico and bringing back $800 of [sic] worth of stuff made anywhere in the world.” — that person would spend far more on gasoline than they would save by avoiding the miniscule tariffs they would avoid. In fact, the Congressional Budget Office previously scored a bill to increase the de minimis level from $200 to $1000 and found the revenue loss to the U.S. Government would be $44 million annually, less than 0.0013% of a $3.4 trillion federal budget. On the other side of the cost-benefit equation, the de minimis process has been a real benefit for both the Government and U.S. businesses, particularly small and medium enterprises, which is why a bipartisan majority in Congress saw the wisdom of raising the level to $800 in 2016. In that law, Congress described the change as “provid[ing] significant economic benefits to businesses and consumers in the United States and the economy of the United States through costs savings and reductions in trade transaction costs.”
The article seems to dismiss the way a small business avoids red tape thanks to the de minimis process, but this cost-saving is in no way trivial. The border clearance processes of the United States set a gold standard for best practices that is not matched by any other country. Our relatively high de minimis value is one of these best practices, as it allows small and medium businesses to import low value components for a manufacturing process or goods for retail sales without the burden of contracting with a broker or concerns over customs entry, which can be handled by the carrier. These competitive advantages would be lost if the U.S. de minimis value were lowered.
Reducing or eliminating the de minimis level, a policy change the article suggests, is the equivalent of raising taxes, as it will cause more shipments to be subject to tariffs, which is just a tax by another name. This would be a highly regressive tax, as it falls mostly on small businesses and individual consumers for whom paying the tariff could be particularly burdensome. This is why a lower de minimis rate is strongly negative for the U.S. or any other economy. It imposes higher costs on the small businesses likely to be the most dynamic entrepreneurs in the business community.
We also believe that the article’s criticism of ecommerce in general as some type of pernicious form of “consumerism” fails to account for the benefits ecommerce bestows on the U.S. (and the world). For example, ecommerce has allowed U.S. consumers to gain access to the highest quality products in the world at the lowest prices. More generally, consumption is the backbone of the U.S. economy – i.e., consumption is the largest component of GDP – and, as a result, weakened consumption constitutes a road to a recession. All the other economies mentioned in the article have lower de minimis levels than the United States, which inhibits the participation of their businesses and consumers in the ecommerce revolution.
USTR has done a very good job negotiating the customs and trade facilitation chapters of trade agreements with other countries. De minimis is an important part of those agreements, and by achieving higher levels in other countries USTR is opening markets for our exporters, particularly small and medium enterprises which ship more low-value products. U.S. entrepreneurs, a major manufacturing sector of the U.S. economy, benefit when trade agreements result in higher de minimis levels in other countries, not just the express industry. But the express industry does not always agree with USTR – the footnote inserted in the USMCA to the effect that the U.S. could consider lowering its de minimis level was a mistake, and we and Congress have let USTR know that.
De minimis is not a loophole. It is a key component of a healthy economy that facilitates stronger participation in the enormous benefits of ecommerce. U.S. small businesses and consumers would be more disadvantaged without it.”