Biden’s administration will overhaul US trade regulation with a rule that aims to close the loophole of “de minimis”, which allows imports at low value to avoid tariffs.
This policy change was announced on Friday and aims at imposing tariffs on imported goods that are covered by Sections 201, 301 of 1974 Trade Act or Section 232 of 1962 Trade Expansion Act.
This rule targets Chinese giants in e-commerce, such as Temu or Shein. They have used this exemption to flood US markets with cheap goods. It could reshape US-China trading dynamics.
Tariffs are not applicable to shipments that do not exceed $800.
This loophole allows Chinese firms to export low-cost goods to the US, without having to pay import tax.
White House reported a drastic increase of these shipments, from 140 millions to more than 1 billion per year.
This proposed rule will close the gap between imports and exports by applying tariffs on all goods imported under certain trade categories, thus reducing Chinese firms’ ability to take advantage of this exemption.
Temu Shein and other E-commerce Giants
This new rule will have an impact on Chinese companies that deal in ecommerce, such as Temu or Shein.
The de minimis exemption has enabled these firms to sell ultra-cheap goods, especially in the clothing and textiles sector, helping them gain a substantial share of the market.
These companies could face increased costs, and a less competitive price compared with domestic options.
The US is reducing its economic dependence on China in key sectors such as electric vehicles and advanced technologies.
Biden’s administration is focused on protecting emerging US industries against foreign competition by limiting Chinese imports.
This policy change could strain the relationship between the largest economies of the world.
This proposed rule introduces more stringent standards, such as a 10 digit number of the tariff classification and information on the individual claiming exemption.
The measures will increase transparency, and help customs enforcers to prevent fraudulent declarations.
Imports of illegal goods are a concern
The current rule exemption does not allow for the importation of illegal drugs such as synthetic drugs and fentanyl. This is a major driver in the change.
Biden Administration argues the de minimis rules has allowed these substances to enter the US and pose a grave public health risk.
The tightening of the criteria for exemption is expected to strengthen controls and curb the flow of illegal drugs.
Tariffs under Section 301 and Trade Disruptions
Currently Section 301 Tariffs cover about 40% of US Imports from China including 70% of Textile and Apparel Products.
The extension of these tariffs on low-value products could disrupt the trade flow and force Chinese exporters into adjusting their strategies.
Losing the de minimis exclusion could have a significant impact on Chinese manufacturers, who depend heavily on exports at low prices. This may lead to higher operational costs or adjustments made in business models.
This proposed rule demonstrates the Biden Administration’s desire to address perceived imbalances between the US and China trade relationships, which could have long-term impacts on both markets.
As new information becomes available, this post Biden targets Chinese Imports with New Rule to Eliminate Tariff Exemption Loophole could be updated.
