In a new, bipartisan initiative, the Biden administration is taking aim at products manufactured abroad, specifically in China, with values under $800. The initiative focuses on Section 321 of the Tariff Act of 1930, known as the De Minimis Exemption. The exemption allows shipments valued at $800.00 or less to enter the United States without duties or taxes, allowing E-commerce companies to circumvent U.S. tariffs and keep prices low.
These E-commerce companies have become so successful with this business model that over the past year, according to the White House, the number of shipments using the De Minimis Exemption rocketed from 140 million packages to one billion packages. Also helping these companies are shipping options, such as OEC Group’s OECommerce, which allows businesses the ability to quickly import small shipments and samples, by either air or sea, at a much lower cost – giving them advantages over much larger companies.
“The problem is the majority of these E-commerce companies that have taken full advantage of this exemption are Chinese, and their ability to use this duty exemption along with their manufacturing advantage is having a negative effect on many competing American businesses,” said Anthony Fulbrook, president of OEC Group’s North American region. “Fairly or not, this has given American politicians another reason to penalize Chinese E-commerce businesses and assess more tariffs on products entering the U.S. These penalties also create an unnecessary amount of bureaucracy for all shippers to navigate.”
The Biden administration’s action foreshadows that more loopholes will soon be identified and eliminated and that additional tariffs will be assessed on products in industries that threaten American businesses. These inevitable actions have the potential to create an atmosphere of uncertainty in the industry and create additional pitfalls for shippers in unrelated industries. The potential import laws will be wrought with all sorts of new details, rules, and nuances that they will need to know and follow in order to not have their shipments delayed at the port or prevented from entering into the American marketplace.
“The problem with the Biden administration targeting the De Minimis Exemption is that it creates another layer of fear among shippers about the impact that additional tariffs may have on their businesses, as well as uncertainty about what new laws they need to adhere to,” said Matt Haffner, vice president for OEC Group’s Customs and Brokerage Division. “The best way for shippers to combat this fear and uncertainty is to reach out to their Customs and Brokerage advisor and create an import plan around these potential new regulations. This will not only create peace of mind, but it will also ensure that their supply chains continue to operate in the most economically efficient way possible, which will lessen the blow of any upcoming and unforeseen tariff and regulation.”
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