Lawmakers Call for Action to Close Loopholes Allowing Duty-Free Packages to Enter U.S.
As the influx of packages entering the United States under the “small value exemption” rule continues to rise, U.S. lawmakers are calling for action to close loopholes that allow e-commerce giants like Temu and Shein to take advantage of the rule.
The “small exemption” provision allows packages worth less than $800 to enter the United States duty-free and with minimal scrutiny. Critics argue that this loophole enables companies to evade tariffs and ignore import bans on products made using forced labor.
According to data provided by Rep. Mike Gallagher, chairman of the House Select Committee on the Chinese Communist Party, at least 485 million packages have entered the U.S. under this rule in fiscal 2024. This number is significantly higher compared to the 685 million packages that entered in all of fiscal 2022, as reported by U.S. Customs and Border Protection.
Gallagher expressed concerns about the impact of exploiting the small exemption loophole, stating that it accelerates the loss of U.S. jobs and provides Chinese companies using forced labor a way to bypass regulations. He emphasized the need for American companies to compete on a level playing field.
While most Americans benefit from small exemptions when bringing back souvenirs from abroad, companies like Temu and Shein use the program to ship goods directly to U.S. consumers without facing customs scrutiny.
The House Select Committee on China estimates that Temu and Shein account for a significant portion of all small-value exempt shipments. Both companies have faced accusations of selling products made using forced labor, although they deny these claims and state that small exemptions are not essential to their success.
Lawmakers from both parties, including Gallagher and Rep. Raja Krishnamoorthi, are advocating for a rule change to prevent abuse of the small exemption program. They argue that the current system harms U.S. manufacturers and creates unfair competition.
U.S. Customs Administrator Troy Miller supports modernizing trade laws to address potential risks associated with these packages, including health, safety, and economic security concerns. Law enforcement agencies also highlight the use of small exemptions as a pathway for smuggling contraband into the U.S.
While some U.S. businesses support the small exemption rule for streamlining imports and reaching American consumers, others believe it is being exploited unfairly. The debate over the rule continues, with calls for President Biden to take executive action to address the loophole and protect American businesses.
Overall, the issue of small exemptions and their impact on U.S. trade and security remains a contentious topic, with lawmakers, businesses, and enforcement agencies grappling with the need for reform and regulatory oversight.