China Commission Advises Congress to End de Minimis, PNTR

The U.S.-China Economic and Security Review Commission, in its annual report to Congress, said that ending de minimis for all e-commerce is one of its top 10 recommendations, and said that if Congress passes such a law, it should provide CBP adequate resources to implement and enforce the change.

Ending de minimis for all online purchases is an ask of the National Council of Textile Organizations, whose CEO, Kim Glas, serves on the commission. That is a more expansive restriction than has been considered in Congress, the first Trump administration, or the Biden administration, though both sides of Pennsylvania Avenue are working on restricting de minimis.

Glas, in response to an International Trade Today question about this recommendation at a press conference unveiling the report, called the de minimis recommendation in the "top two," and called it critical.

"According to CBP, it is impossible to police what is in these boxes," she said. "The e-commerce environment has become a funnel for Chinese products to enter duty free," as well as products from other countries.

"From a consumer product safety perspective, everything from children's toys to makeup, to pool filters that ended up killing people" are entering in the small package environment without proper scrutiny.

Commissioner Michael Wessel said that if de minimis is going to be repealed, "there needs to be a dramatic increase in the number of personnel and the resources that we give" CBP.

The commission also recommended that Congress terminate permanent normal trade relations with China. In its 2022 annual report (see 2211150045), the commission also suggested PNTR be suspended, but it included the caveat that the decision should be taken after policymakers decide if China didn't comply with its World Trade Organization accession provisions.

This report just said PNTR should be repealed, because of China's market manipulation and intellectual property theft. Commissioner Jacob Helberg, in response to an ITT question, said that the commission is not recommending that tariffs on Chinese goods go to Column 2 with this repeal, but rather, that the president would have the authority to adjust tariffs. "The president, I think, deserves the flexibility to recalibrate America's trading relationship with China," he said.

Helberg said that since the commission was founded in 2000, every year, it has concluded that China hasn't lived up to its WTO commitments. "It hasn't done so in all 23 years of being part of the WTO, I think it's fair to assume that it's not going to start suddenly abiding by its commitments, it will never abide by commitments, and therefore, we need to take stock of that and recalibrate our relationship accordingly."

Helberg said the "China shock" of imports was devastating to "a substantial number of [manufacturing] communities in this country," and that the pandemic revealed national security implications of being overly reliant on Chinese goods.

After the report's release, House Select Committee on China Chairman John Moolenaar, R-Mich., said the recommendations of the commission buoy his legislation, which both ends PNTR on Chinese goods (and hikes tariffs in many cases beyond Column 2) and restricts de minimis.

"I think it's a very important step forward and really reinforces the message of our bill," he said in a hallway interview. "The reality is, China has violated trade agreements, they've not kept their bargain, and this is a prudent and reasonable next step."

Ways and Means would have to act on tariff changes for China, and has already acted on de minimis restrictions similar to those in Moolenaar's bill. Moolenaar said he has gotten "very good feedback" from Ways and Means members, and said he has made it clear to Ways and Means Chairman Jason Smith that he understands Smith's committee will be in the driver's seat for these issues.

He added, "Of course, the incoming administration, Chairman Smith and the president have a very strong relationship, so I'm confident we'll be able to do good things in this [next] session."

The U.S.-China Economic and Security Review Commission also suggested in its top 10 recommendations that Congress consider legislation "to restrict or ban the importation" of certain technologies coming from Chinese-owned firms, including autonomous humanoid robots and energy products that include remote servicing or monitoring, "such as batteries supporting the electrical grid, batteries used as backup systems for industrial facilities and/or critical infrastructure, and transformers and associated equipment."

Also among the top 10 was a recommendation to give the Consumer Product Safety Commission "unilateral mandatory recall authority over products where the Chinese seller is unresponsive to requests from the CPSC for further information or to initiate a voluntary recall" when the CPSC has evidence that the product either fails to comply with any CPSC standard or regulation, or it poses "a substantial risk of injury to the public."

Another import-related recommendation, but not in the top 10, was that DHS and the Commerce Department join "to develop assessment tools capable of identifying the true origins or parts, components, and materials contained in products entering the United States to prevent tariff evasion and limit safety and security risks in light of the increasing complexity of global supply chains."

This recommendation follows an essay over the summer from Commissioner Aaron Friedberg (see 2408200040) that suggested that countries tariff the value of components from China in certain essential or national-defense related goods that are vulnerable to Chinese supply dominance, even if the goods themselves originate from a country other than China.

Glas said the recommendation would help the government "ensure that there's not misclassification of goods, duty evasion, illegal transshipment ... ."

Friedberg said that while it would help uncover transshipment, it also would help the U.S. to encourage manufacturers to seek "alternative sources of supply," and lessen over-reliance on Chinese intermediate goods. He said it's clear that at this point, CBP doesn't have the ability to see how much Chinese content is in a good that was substantially transformed in another country.

Wessel said that the administration's rule on connected vehicles, which restricts certain inputs if they come from China, not just cars made in China, is a step in the right direction, but it only looks into the supply chain for one product. If this recommendation were followed, it would allow the government to "be much more granular" in its targeting of Chinese goods.