I am the CEO of a U.S.-based bicycle supplier and retailer that does $250 million in annual sales. The U.S. bike industry is dealing with newly imposed tariffs on products from China, the center of our supply chain, even though we don’t suffer from the unfair trade practices that have been used to justify these sanctions. These additional tariffs are harmful to our companies, our customers, and our prospects for growth.
And the rarely discussed “de minimis exemption,” the maximum value of a shipment of merchandise that may be imported into the U.S. free of duties and sales taxes, is making the destructive tariffs on my industry (and others) even worse. Under the de minimis exemption, foreign manufacturers and retailers are allowed to ship up to $800 of products into the U.S. without paying any duty or sales taxes whatsoever.
If federal policymakers want to help U.S. businesses and stop foreign trade partners (including China) from cheating, they should immediately lower this de minimis threshold to $50.
When the threshold was raised from $200 to $800 during the Obama administration, it immediately made a bad situation worse for U.S. retailers.
Today, U.S. customers shop online from retailers and manufacturers in other countries and buy products duty-free. These companies advertise that they don’t have to pay tariffs on shipments below $800 and can thus pass the savings on to their customers.
These foreign businesses do not collect local and state sales taxes, an additional pricing advantage over U.S. retailers and an additional loss of revenue for U.S. government agencies.
This de minimis threshold enables foreign businesses to set artificially low prices by avoiding tariffs on goods that are collected when the products are shipped here for sale by U.S. companies. Unfortunately, the new, higher tariffs imposed on China actually increase the harm that de minimis inflicts on American businesses. The higher the tariff, the bigger the advantage for the Chinese sellers who can exploit their advantage in their advertising.
This rule incentivizes sales out of the U.S. and reduces the number of jobs industries can provide to Americans, while indirectly facilitating a shift toward an unfair and often fraudulent sector of imports. In many cases, consumers are also frequently given no recourse for warranty or service concerns when their imported products fail. Legal remedies are rarely available when a business has no American presence.
While almost every nation specifies a de minimis amount for which tariff and duties are not collected to reduce administrative burden, those amounts are generally much lower than our $800 de minimis threshold. For example, Canada sets de minimis at $15, Mexico at $50, Japan at $90, South Korea at $150, and the European Union sets de minimis at $170. The U.S. threshold doesn’t treat our domestic industries fairly, and it should be lowered to protect U.S. businesses like mine.
I testified on Aug. 23 that the de minimis exemption that China and every other foreign country pays for shipments into the United States ought to be reduced from $800 to $50.
Unlike higher tariffs, a de minimis reduction won’t create higher prices for U.S. consumers who purchase their products through American retail channels and rightfully pay federal, state and local taxes. I urge our elected officials to recognize the role that the current de minimis exemption plays in harming U.S. businesses, and lower the limit to $50.
Pat Cunnane is CEO of Advanced Sports Enterprises.
