Trade Law Daily is a Warren News publication.
Subscriber Login

Select Committee Asks Administration to Consider Excluding Textiles From de Minimis

January 22, 2024 by Mara Lee|Top News

The House Select Committee on China is asking the Treasury Department to assess if "altering de minimis eligibility for textile and apparel and other high-risk items," such as not allowing these goods to enter under de minimis, would improve enforcement of the Uyghur Forced Labor Prevention Act.

In a nine-page letter that the committee published Jan. 22, the committee asserted that "the de minimis provision has created a major avenue for goods made by forced labor -- as well as fentanyl, counterfeit products, and other unsafe goods -- to enter the U.S. market. Moreover, we do not believe CBP pilot programs to collect additional data on de minimis shipments will adequately stem the flow of these goods into the United States."

The committee also complained that despite $184 billion worth of textiles, apparel and footwear imports in 2022, and the identification of cotton as a priority sector in UFLPA," CBP detained an anemic $43 million in shipments" in the category between June 2022 and September 2023, and that the average detentions per month dropped in 2023.

"Given the massive volume of imports in a sector flagged for priority enforcement, we would expect to see regular large-scale detentions of these products," the committee's leaders wrote.

The letter, addressed to Homeland Security Secretary Alejandro Mayorkas, also complained that the Forced Labor Enforcement Task Force, or FLETF, has not designated any companies with operations outside Xinjiang that employ transferred Uyghur laborers, despite that being a directive in the law.

"There is an urgent need to expand the UFLPA Entity List to include numerous companies and entities located outside the [Xinjiang Uyghur Autonomous Region] because of the affiliation to companies and entities in the region, particularly those involved in the seafood, gold, and critical minerals industries," they argued. They said a failure to identify these companies is undermining effective enforcement of UFLPA. They said since FLETF doesn't have its own funding line, "what resources does DHS need to fully implement a robust and efficient UFLPA Entity List process," and how many more staffers does the interagency task force need?

A little more than a week ago, CBP's Eric Choy, who leads the office tasked with forced labor enforcement, told the House Homeland Security Oversight Subcommittee that CBP is in close contact with the Outlaw Ocean Project, which detailed Uyghur labor transfers in Eastern China's seafood processing houses (see 2401110073). He also said seafood may become a priority sector for enforcement.

In his opening statement at that hearing, Choy noted that nearly 17% of all shipments stopped under UFLPA are textiles, and that approximately 63% were denied entry after the initial detention.

The committee leaders noted that more apparel from Vietnam has been detained under the UFLPA than apparel from China, and said that FLETF should list companies outside China that profit from the use of forced labor. They also said that the detained goods coming from Southeast Asia or Nicaragua were transshipped, but these goods are usually considered to have originated from the second country. The ban on goods made with forced labor applies to goods made in part with forced labor, so it does not require transshipment to violate the statute.

Select Committee Chairman Mike Gallagher, R-Wis., and ranking member Rep. Raja Krishnamoorthi, D-Ill., asked Mayorkas: "How does CBP prioritize different sectors for UFLPA enforcement and how are those determinations made? What level of attention have targeted sectors received in terms of enforcement, respectively?"

They also asked why CBP contracted with just one isotopic testing company, and asked if there were other forms of testing that might be more effective for enforcing the ban on Xinjiang cotton. At that same hearing, Choy said CBP has its own isotopic lab now, in Savannah, Georgia, and is working to open isotopic testing labs in New York and Los Angeles.

Gallagher and Krishnamoorthi asked: "Why is isotopic testing not being aggressively expanded, and what impact would CBP expect an expansive isotopic testing program to have on finding and stopping UFLPA imports of textiles and apparel?" They asked if CBP could test garments from retail stores, and if not, why not?

They also asked:

Although the committee didn't get to de minimis issues until the third page of the nine-page letter, that was the issue that outside groups seized on when reacting to the letter.

National Council of Textile Organizations CEO Kim Glas said, "The government’s failure to fully enforce the UFLPA and the de minimis loophole is devastating US textile and apparel manufacturers. Chinese cotton from Xinjiang is flooding the global marketplace, making its way to our doorsteps and into our closets. As a result, we need a comprehensive and aggressive solution from the administration to confront these practices head on."

She said "the gaping de minimis loophole" leads to "millions of illegal and dangerous products" entering the U.S. daily.

Alliance for American Manufacturing President Scott Paul said, "Chairman Gallagher and Ranking Member Krishnamoorthi rightly point out the near impossibility of monitoring shipments by companies such as Shein and Temu arriving in the United States via the de minimis provision. It's important for Congress and the administration to act swiftly to close that loophole enabling an import surge, and passage of the bipartisan Import Security and Fairness Act would be a good first step." That bill would bar Chinese shipments from de minimis.

Paul added, "Importers are actively seeking loopholes in enforcement of the law, and they unfortunately are succeeding. The Alliance for American Manufacturing supports the Select Committee's efforts to hold CBP accountable and push for stronger enforcement." Paul said the group belies the rebuttable presumption standard is "too weak, and that efforts to stem circumvention of the law through transshipments and other tactics are falling short."

Coalition for a Prosperous America CEO Michael Stumo said the letter exposed "serious deficiencies at DHS" in enforcing UFLPA.

"Not only has DHS failed to add Chinese companies complicit in forced labor to the UFLPA Entity List, but DHS has also failed to take action to prevent the CCP from exploiting the de minimis loophole to evade UFLPA enforcement. The CCP is using the de minimis loophole to ship forced labor goods and illicit drugs like fentanyl to the United States. The Biden administration must take swift action to close this loophole, it should issue nationwide withhold release order on all Chinese textiles, and Congress should pass legislation immediately," he said.

Express Association of America Executive Director Michael Mullen, in a telephone interview with International Trade Today, said, "I just don't know of any evidence that supports the claim that de minimis is more likely to have illicit goods than any other channel."

Mullen noted that 60% of the goods detained by value were electronics from Malaysia -- a category dominated by solar panels, which arrive on container ships.

When asked if the Bloomberg story that showed some Shein garments that arrived in small packages contained Xinjiang cotton (see 2211210071) was evidence that there is a forced labor problem in de minimis, he responded, "I'm not saying that there isn't forced labor in a de minimis shipment every now and then, I'm sure there are some." He said he believes only 4% of Shein's products contain cotton, and added that Shein is getting away from direct to consumer shipments from China.

"I've heard that Shein has kind of gotten out of the de minimis business; they've leased a warehouse in Los Angeles and are bringing all their goods in by ocean and that's the way they're going to distribute all their product," he said.

Although Mullen said he thinks the claims are overblown in the letter, he's concerned about the political pressure to curtail de minimis.

"We have a coalition that's trying to get the facts out about de minimis, so that those decision-makers will have all the information they need to inform whatever action they're going to take," he said, which includes the National Foreign Trade Council, the U.S. Chamber of Commerce and his organization.