Lawsuit Possible on Trump's de Minimis Rug Pull on China, but Could Face 'Uphill Battle'
President Donald Trump's decision to eliminate the duty-free de minimis threshold for goods from China, issued as part of his 10% tariff hike on Chinese products, likely will face legal challenges due to the economic importance of the de minimis rule, customs attorney Lawrence Friedman told us. However, many questions remain on the precise scope of any resulting change, along with the legal theory underpinning it.
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CBP issued a message concurrent with Trump's recent tariff move announcing that "requests for de minimis entry and clearance for ineligible shipments" from China and Hong Kong "will be rejected" (see 2502030034). The change rocked various U.S. industries, including e-commerce retailers, fast fashion and third-party warehouse and logistics providers, many of which rely on the de minimis rule.
The central question for any impending litigation on this change would be on what grounds could a party challenge the decision. The most likely basis for any challenge would be a statutory claim against the decision, customs attorney Lewis Leibowitz said.
De minimis rules are implemented under Section 321 of the Tariff Act of 1930, which allows CBP to waive or reduce duties where the expense of collection wouldn't be justified, given that the revenue realized would be too small. Leibowitz said that in ordering CBP to inspect and collect duties rather than waive or reduce them, the president "arguably" acted inconsistently with the statute.
However, Leibowitz said this claim would face an uphill battle, given that the law "permits CBP to adopt regulations altering the duty exemptions to 'prevent unlawful importations.'"
John Peterson, partner at Neville Peterson, similarly said that there's "probably a basis for a challenge to the President's action in imposing [International Emergency Economic Powers Act (IEEPA)] tariffs on Chinese goods in such a way that the Section 321 de minimis procedure has been denied to Chinese goods." Peterson noted that Section 321 is implemented through regulations by the Treasury Department, which recently has proposed two regulatory changes to the procedure and is seeking public comment (see 2501130006).
As a result, a party could claim that "the President is exercising a power he doesn't have, one which Congress delegated to the Secretary of the Treasury," Peterson said. The specific claim would allege that the president "is acting ultra vires, and in contravention of the statute, which requires rulemaking by the Treasury Secretary."
Another basis for challenge could be the Administrative Procedure Act, which allows for challenges to final agency determinations. An immediate issue with this route would be the fact that the de minimis revocation decision was a presidential decision and not an administrative one. Peterson offered a potential out, suggesting again that parties could claim to have been denied proper rulemaking procedures by the executive "short-circuiting" the proper processes.
However, Liebowitz and Friedman both stressed the fact that nothing in the law compels CBP to grant companies' requests for de minimis treatment. As a result, no final agency decision is made when CBP administers the president's decision, the attorneys said.
Friedman suggested that a likely basis for challenging the decision would be Trump's invocation of the IEEPA -- the statute under which Trump imposed 10% tariffs on China and made the de minimis move.
Executive orders are subject to a "rational basis" review standard, which is "very deferential," Friedman noted, additionally speculating that courts will be even more deferential where the president has invoked national emergencies. Thus, as is the case in any challenges to the tariffs themselves (see 2502030044), the battle lines would be "whether this is a real 'emergency' and whether fentanyl is a pretextual basis for a revenue measure," Friedman said.
Peterson suggested a different approach under IEEPA, arguing that parties could challenge the applicability of IEEPA at all to de minimis shipments. The statute specifically says the president can regulate or prohibit the importation or exportation of property "in which a foreign country or a national thereof has an interest." Peterson questioned whether a foreign party truly has an interest in "goods shipped under [Section] 321 from a foreign company and paid [for] before the goods were sent to the United States."
"It wouldn't seem so," he said.