Editor's Note: Zach Mottl is the chief alignment officer of Atlas Tool Works and a past chairman of the Technology and Manufacturing Association of Illinois and on the CPA board.
Each year, the United States imports more than $2 trillion worth of goods. And whether it’s cars, flat-screen TVs, or medical devices, these products all face import duties when entering the country. However, thanks to an obscure rule, there’s now a flood of smaller goods entering the country duty-free each day. And that means overseas manufacturers can increasingly access America’s consumer market without paying any fees whatsoever.
[Zach Mottl | November 25, 2019 | Rockford Register Star]
This should matter to Illinois residents, now that five members of the state’s Congressional delegation are opposing efforts to reduce something known as the “de minimis” rule. It may sound obscure, but what this bipartisan group of representatives — Cheri Bustos, Darin LaHood, Bradley Schneider, Danny Davis, and Mike Quigley — is doing will help China and Amazon increase profits at the expense of Illinois manufacturers.
If you’ve ever traveled outside of the United States, you’ve encountered the de minimis rule. It’s what allows travelers to bring home a trivial amount of souvenirs without paying a customs duty.
However, there’s also an “express shipment” measure included in de minimis. It allows articles valued at $800 or less to be imported duty-free through “informal” entry. And that’s where the problems start, since Amazon and manufacturers in China are now exploiting the rule to circumvent duties on e-commerce shipments.
Consider this: China’s de minimis level is a mere $8. That means any company shipping a product to China valued at more than $8 must pay a duty. But there’s no reciprocity; a Chinese good priced as high as $799 can enter the U.S. duty-free.
As part of its efforts to renegotiate NAFTA, the Trump administration is looking to raise the de minimis rate of Canada and Mexico, and is also considering a lower U.S. threshold. But Reps. Bustos, LaHood, Schneider, Davis, and Quigley have written to U.S. Trade Representative Robert Lighthizer, explaining that they “strongly oppose any effort ... to lower the $800 de minimis threshold” in the U.S.
These representatives are essentially arguing for a lopsided policy that enables Amazon — one of the world’s most profitable companies — to keep importing subsidized, low-cost goods from China at absolutely no cost. This is doubly egregious considering that Amazon paid zero federal and state taxes in 2018 on more than $11 billion in profits.
In 2016, Congress increased the de minimis limit from $200 to $800. And that opened the floodgates, allowing companies like Amazon to further incentivize imports. My manufacturing company, Atlas Tool Works, has been in operation in Illinois since 1918. We are a textbook example of the kind of domestic American company that has been surviving for years in the face of heavily subsidized imports. And our nearly 80 employees depend on Atlas for their jobs and livelihoods.
To help companies like mine, America’s de minimis threshold should be lowered substantially. That could help domestic manufacturers better compete against imports. It would also address the growing number of fraudulent goods entering the country. For example, 60 counterfeit Chicago Cubs jerseys were recently seized at O’Hare Airport. The jerseys were listed at a value of only $177. But a Customs official estimated the merchandise would have actually sold for $7,200.
Illinois is an industrial state — and home to nearly 600,000 manufacturing workers. It makes no sense that our members of Congress would want to continue a de minimis level that is already too high — and allows far too many goods to enter the U.S. without adequate inspection or duty collection.
Congress could better serve America’s manufacturers by passing the U.S.-Mexico-Canada Agreement (USMCA). The pending deal contains helpful enforcement mechanisms and also directs Canada and Mexico to raise their current de minimis levels — which are a paltry $20 and $50 respectively. Matching America’s de minimis levels to those of our trading partners could help to ensure a more level playing field.
Illinois’ Members of Congress should not undermine our state’s manufacturers. Unfortunately, what Reps. Bustos, LaHood, Schneider, Davis, and Quigley propose will help Amazon to import more, and could open the door to more fraudulent imports. That won’t help companies like mine create good-paying jobs while competing in a tough global market. And it won’t protect Illinois consumers from fraudulent imports.
Read the original article here.