In recent years, American manufacturers have found themselves competing on an uneven playing field, one that favors foreign companies exploiting loopholes in U.S. trade policy. The Import Security and Fairness Act (H.R. 4148) seeks to address one of the most significant of these loopholes: the de minimis rule. This trade provision allows shipments valued at $800 or less to enter the United States duty-free and without rigorous customs oversight. Initially designed to facilitate trade and reduce administrative burdens on low-value imports, this policy has instead become a backdoor for mass-produced foreign goods, primarily from China, to bypass tariffs and flood the American market.
The consequences of this loophole have been far-reaching. It has allowed e-commerce giants such as Shein and Temu to ship millions of packages into the U.S. each year without paying import duties or undergoing meaningful inspection. While American companies must comply with labor laws, safety standards, and environmental regulations, foreign businesses leveraging de minimis enjoy cost advantages that domestic manufacturers cannot match. At the same time, the lax oversight of these shipments has enabled the inflow of counterfeit products, forced labor goods, and even illegal drugs like fentanyl precursors.
The Import Security and Fairness Act is a legislative attempt to curb these abuses by barring non-market economy countries—primarily China—from benefiting from de minimis treatment. Additionally, the bill calls for stronger customs data collection to ensure better enforcement of trade laws. This paper examines the background and rationale behind the bill, its potential impact on the U.S. economy and national security, and the perspectives of stakeholders on both sides of the debate.
The De Minimis Loophole: A Growing Problem
The de minimis provision has been a feature of U.S. trade policy for decades, but its importance grew significantly when Congress raised the threshold from $200 to $800 in 2016. At the time, lawmakers saw the increase as a way to modernize trade practices, allowing for faster processing of small consumer purchases without burdening customs authorities. However, the sharp rise in e-commerce, particularly from China, has turned what was once a relatively minor provision into a major regulatory blind spot.
Between 2016 and 2022, the number of de minimis shipments entering the U.S. grew exponentially, surpassing one billion packages per year. According to U.S. Customs and Border Protection (CBP), more than 60 percent of these shipments originate from China. This has allowed Chinese sellers to evade tariffs that were originally designed to protect American industries. For example, under Section 301 of the U.S. Trade Act, certain Chinese goods are subject to additional import duties. By keeping individual package values under $800, companies like Shein and Temu effectively sidestep these tariffs altogether.
Beyond the economic consequences, the loophole has presented serious security risks. The Government Accountability Office (GAO) has reported that a significant percentage of de minimis shipments contain counterfeit goods, many of which bear fraudulent safety certifications. This raises concerns not only for consumer protection but also for national security, as unregulated shipments can include electronics and components that are vulnerable to cyber threats. Additionally, there is mounting evidence that forced labor is being used in the production of some of these goods, particularly those tied to China’s Xinjiang region, where the Chinese government has been accused of widespread human rights abuses against Uyghur Muslims.
Important Provisions of The Import Security and Fairness Act
The Import Security and Fairness Act addresses these issues by implementing two key reforms. First, it prohibits non-market economy countries—such as China, Russia, and North Korea—from utilizing de minimis rules. This would close a major tariff evasion strategy that has disproportionately benefited Chinese manufacturers and e-commerce platforms. By removing this duty-free advantage, the legislation seeks to restore fairness for American businesses that have long struggled to compete with artificially low-priced imports.
The second major provision of the bill strengthens customs oversight by requiring importers to provide detailed supply chain information for de minimis shipments. This is a crucial step in improving enforcement, as the current system allows packages to enter the country with little to no traceability. Enhanced data collection will enable CBP to identify high-risk shipments more effectively, reducing the influx of illicit goods and ensuring compliance with U.S. labor and safety standards.
Economic and Security Implications
For American manufacturers, closing the de minimis loophole would be a welcome development. Domestic industries—particularly textiles, steel, and consumer goods—have long suffered from unfair competition facilitated by duty-free imports. By eliminating tariff-free access for Chinese shipments, the bill would help level the playing field, allowing American producers to compete on more equitable terms. In addition, the policy could incentivize companies to reshore production, bolstering domestic supply chains and creating jobs.
However, the legislation is not without its challenges. Retailers and e-commerce giants have argued that stricter de minimis rules could lead to higher costs for consumers. Companies such as Amazon and Walmart, both of which rely on global supply chains, have voiced concerns that limiting de minimis shipments from China could increase prices on everyday consumer goods. While this may be true in the short term, proponents of the bill argue that the long-term benefits—job creation, fair competition, and enhanced national security—outweigh these potential drawbacks.
From an enforcement perspective, the bill provides CBP with much-needed tools to combat illicit trade, but challenges remain. The volume of de minimis shipments is so high that even with enhanced data collection, enforcement agencies will need additional resources and staffing to effectively process and inspect packages. This raises the question of whether additional reforms, such as lowering the de minimis threshold for all countries or investing in automated screening technologies, might be necessary to fully close the loophole.
Global Trade Considerations
The United States currently has one of the highest de minimis thresholds in the world. Canada, for instance, sets its de minimis level at just $150, while the European Union maintains a threshold of approximately $180. Many trade experts argue that the U.S. should bring its threshold in line with international standards to prevent further abuse.
Restricting de minimis treatment for China and other non-market economies is likely to provoke a response. In the past, when the U.S. imposed tariffs on Chinese goods, Beijing retaliated with trade barriers of its own. It is possible that China could respond to the Import Security and Fairness Act with countermeasures targeting American exports, particularly in the agriculture and technology sectors. While this remains a concern, proponents argue that the risks associated with maintaining the status quo—job losses, supply chain vulnerabilities, and security threats—far outweigh the potential diplomatic fallout.
This Act Is a Necessary Response
The Import Security and Fairness Act is a necessary response to a growing trade problem that has undermined American manufacturing and national security. By targeting the de minimis loophole, the bill seeks to restore fairness to the U.S. market, ensuring that domestic businesses are not undercut by foreign companies exploiting duty-free access. While some retailers worry about potential cost increases, the long-term benefits of the legislation—greater economic stability, improved trade enforcement, and enhanced consumer protections—make a compelling case for its passage.
If Congress is serious about strengthening American industry and securing supply chains, reforming de minimis trade rules should be a top priority. Closing this loophole is not just about tariffs; it is about ensuring that the principles of fair trade and economic sovereignty remain intact. The passage of this bill would be a crucial step in reasserting control over U.S. trade policy and putting American manufacturers back on equal footing in the global marketplace.
Citations
Blumenauer, Earl. Import Security and Fairness Act, H.R. 4148. 118th Congress, 1st Session, 21 June 2023, https://www.congress.gov/bill/118th-congress/house-bill/4148/text
Government Accountability Office (GAO). Counterfeit Goods: Better Data and Enforcement Actions Needed to Address Risks Posed by E-Commerce. GAO-22-105000, 2022, https://www.gao.gov/products/gao-22-105000
United States Customs and Border Protection (CBP). E-Commerce and Section 321 Data Pilot Report. Department of Homeland Security, 2023, https://www.cbp.gov/document/report/e-commerce-section-321-data-pilot
United States Trade Representative (USTR). Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974. Executive Office of the President, 22 Mar. 2018, https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF
United States Senate Committee on Finance. Illicit Trade and the Role of De Minimis in U.S. Imports. Hearing, 12 Oct. 2023, https://www.finance.senate.gov/hearings/illicit-trade-and-the-role-of-de-minimis-in-us-imports
National Council of Textile Organizations (NCTO). Testimony on the Impact of De Minimis on the U.S. Textile Industry. 2023, https://www.ncto.org/issues/trade-policy/de-minimis/
Alliance for American Manufacturing. The De Minimis Loophole and Its Impact on U.S. Manufacturing. 2023, https://www.americanmanufacturing.org/research/de-minimis-loophole-report/
United States Department of Homeland Security. Forced Labor in Global Supply Chains: U.S. Response and Customs Enforcement Actions. 2023, https://www.dhs.gov/forced-labor
United States International Trade Commission (USITC). Economic Impact of Section 321 De Minimis Provision on U.S. Trade and Manufacturing. USITC Publication No. 5400, 2023, https://www.usitc.gov/publications/332/pub5400.pdf
