Just in time for Spooky Season, the Biden Administration announced executive actions related to the much used – and much lamented, depending on who you ask – de minimis exemption, which allows shipments valued at $800 or less to enter the United States duty-free and with reduced information requirements. Among other changes, the executive actions propose to remove de minimis treatment for merchandise subject to Section 301 Chinese-origin goods.
If that's not scary enough, on Friday the 13th of September 2024, the U.S. Trade Representative ("USTR") finalized its modification of the Section 301 tariffs on Chinese-origin goods. This finalization is the culmination of the USTR's statutory four-year review of the Section 301 tariff action initially started in 2018. Pursuant to the modifications, additional tariffs on certain Chinese-origin products will begin as soon as September 27.
Lastly, over the summer, the Forced Labor Enforcement Task Force ("FLETF") added another eight entities to the Uyghur Forced Labor Prevention Act ("UFLPA") Entity List, bringing the total number of listed entities to 73. The UFLPA creates a rebuttable presumption that any goods, wares, articles, or merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China, or produced by an entity on the UFLPA Entity List, are produced by forced labor and are prohibited from entering the United States.
For importers of Chinese-origin goods, the convergence of these actions can be more frightening than the creepy masks, costumes, and decorations that are ubiquitous during the Halloween season (and many of those Halloween staples are made in China).
Proposed De Minimis Exemption Changes
On September 13, 2024, the Biden Administration announced certain actions to "improve accountability and enforcement in de minimis shipments." As a refresher, in 2016 the United States implemented legislation revising 19 U.S.C. § 1321 ("Section 321") to increase the de minimis amount for imports into the United States from $200 to $800. Importantly, most shipments falling below the de minimis threshold may be entered free of duty and without adhering to certain information requirements. For this reason, de minimis shipments have been widely used by eCommerce companies, including Chinese giants Temu and Shein, and the use or abuse of de minimis shipments has come under fire from domestic companies, politicians, and others. For a more detailed description of the de minimis shipment controversy, see our previous article, Section 321 De Minimis Imports Can Pose Compliance Risks.
Following its recent announcement, the Administration will issue a Notice of Proposed Rulemaking ("NPRM") to propose the removal from de minimis eligibility all products subject to Section 301 tariffs on Chinese-origin goods, Section 201 safeguard tariffs, and Section 232 tariffs on certain steel and aluminum products. The Administration also proposes to strengthen information collection for de minimis shipments by requiring these shipments to include the 10-digit Harmonized Tariff Schedule of the United States ("HTSUS") code and the name of the person claiming the de minimis exemption.
The announcement also pressures Congress to pass comprehensive reforms to the de minimis exemption, including exclusion from de minimis eligibility for "import-sensitive" items such as textile and apparel products. Despite announcing an upcoming NPRM to remove items subject to Section 301, Section 201, and Section 232 tariffs from de minimis eligibility, the Administration also requests that Congress pursue this same reform via legislation, which "would help to achieve this important reform more quickly."
Section 301 Tariff Modifications
The forthcoming proposed changes to the de minimis exemption relate in part to Section 301 tariffs on Chinese-origin goods, and the USTR has recently finalized modifications to the tariffs. On the same day that the Biden Administration announced the proposed action on de minimis shipments, the USTR announced that it had largely adopted proposed modifications to the tariff action on Chinese-origin goods announced in May 2024, following its review of more than 1,100 public comments. For more information on the May 2024 proposed modifications, see our previous trade alert, USTR Announces Publication of Four-Year Review Report and Additional Tariffs on Chinese Products, and article, USTR Provides Detail on Products Subject to Additional Section 301 ("China") Tariffs.
The finalized modifications differ from the initially proposed action in a few ways, including new timing and duty rates for certain face masks, medical gloves, needles, and syringes covered by the modification; exclusions for certain products initially covered by the proposed action; and other modifications related to exclusions.
Annex A to the Federal Register Notice announcing the finalized modifications contains an informal table with the nearly 400 tariff codes subject to the tariffs modified pursuant to the four-year review, the timing of tariff applicability, and the tariff rate.
Addition of Companies to UFLPA Entity List
Earlier in the summer, the FLETF, chaired by the Department of Homeland Security ("DHS"), added several entities to the UFLPA Entity List. On June 11, DHS announced the addition of three Chinese entities, representing three industry sectors: seafood, footwear, and aluminum. Specifically, the entities added in June were:
- Shandong Meijia Group Co., Ltd. (aka Rizhao Meijia Group), which processes, sells, and exports frozen seafood products and vegetables, among other foodstuffs;
- Dongguan Oasis Shoes Co., Ltd. (aka Dongguan Oasis Shoe Industry Co., Ltd.; Dongguan Luzhou Shoes Co., Ltd.; and Dongguan Lvzhou Shoes Co., Ltd.), which manufacturers shoes; and
- Xinjiang Shenhuo Coal and Electricity Co., Ltd., which produces electrolytic aluminum, graphite carbon, and prebaked anodes.
But the FLETF was just warming up. On August 8, 2024, DHS announced a further five entities added to the UFLPA Entity List, including three entities based in mainland China and two Hong Kong entities. Three of the five newly added entities are involved in the magnesium industry. The entities added in August include:
- Xinjiang Habahe Ashele Copper Co., Ltd., which mines non-ferrous metals, including zinc, copper, and silver;
- Kashgar Construction Engineering (Group) Co., Ltd., which is involved in real estate development, construction engineering and operations, general construction, and the manufacture of construction materials and components;
- Century Sunshine Group Holdings, Ltd., which is based in Hong Kong and manufactures magnesium alloys and magnesium fertilizer;
- Rare Earth Magnesium Technology Group Holdings, Ltd., which is based in Hong Kong and manufactures and sells magnesium alloys; and
- Xinjiang Tengxiang Magnesium Products Co., Ltd., which manufactures magnesium and magnesium alloy products.
Items imported from a company on the UFLPA Entity List are presumed to be produced through forced labor and are prohibited from entering the United States pursuant to Section 307 of the Tariff Act of 1930. An importer may overcome the presumption by providing clear and convincing evidence that the goods were not produced with forced labor, which requires evidence mapping its entire supply chain. For more information about the UFLPA and the FLETF, see our previous articles, Forced Labor and the Uyghur Forced Labor Prevention Act and Updates to the Uyghur Forced Labor Prevention Act Strategy and Additions to the UFLPA Entity List.
The UFLPA Entity List now contains 73 entities, and there is certainly the potential for the list to grow further in the near future. Could the next round of additions occur before Halloween? Possibly, but that would be spook-ulation.
Looking Ahead
The three actions discussed above are similar in that they all relate to imports and are either exclusively or primarily focused on imports from China. Regardless of the outcome of November's US presidential election, the U.S. government's focus on China will continue, including imports of Chinese-origin goods, Chinese eCommerce competition, and the products of forced labor by Uyghurs and other persecuted minority groups. In early September alone, the House of Representatives advanced 25 legislative proposals related to China, with impacts ranging from export controls and protection of genetic data to agriculture and electric vehicles. And the ever-active House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party shows no signs of easing up. Importers of Chinese-origin goods should ensure compliance with the variety of laws and regulations potentially affecting these items or investigate alternative sourcing for their products if they have not already.
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