Importer Challenges Elimination of de Minimis Threshold for Chinese Goods at CIT
Gibson Dunn brought a suit to the Court of International Trade on behalf of a small Michigan-based importer, Detroit Axle, to challenge President Donald Trump's revocation of the de minimis threshold for Chinese goods. The complaint, filed on May 16, argues that Trump exceeded his statutory authority in eliminating de minimis for goods from China and acted arbitrarily and capriciously in violation of the Administrative Procedure Act (Axle of Dearborn, d/b/a Detroit Axle v. Dep't of Commerce, CIT # 25-00091).
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The complaint said that if Trump wanted to end de minimis for China, he should have done it through notice-and-comment rulemaking.
Detroit Axle noted that, in 1993, the de minimis statute was amended to serve as a "tool useful for trade liberalization by essentially requiring" that the treasury secretary "provide de minimis treatment." The 1993 amendment replaced the phrase "shall not exceed" in the statute with the phrase "shall not exceed an amount specified by the Secretary by regulation, but not less than” certain thresholds.
Previously, the secretary had the authority to exempt goods up to $5 from tariffs per importer per day. Then, the statute required the secretary to exempt at least $200 of goods per importer per day with the discretion to raise the threshold, the complaint said. In 2016, Congress raised the de minimis threshold to $800.
The statute has only one source of "exception-making authority," which says exceptions can be established when the treasury secretary "finds that such action is consistent with the purpose of" the de minimis statute or is "necessary for any reason to protect the revenue or to prevent unlawful importations." This provision doesn't let the secretary make exceptions below the "statutory fixed floor," but even if it did, such exceptions would have to be enacted through notice-and-comment rulemaking, the brief said.
Nothing in IEEPA lets the president skirt this statutory process, the complaint said. IEEPA lets the president "regulate" imports to address unusual and extraordinary threats, and this "general grant of authority cannot be interpreted to give the President power to create at will new exceptions to the de minimis exemption," the complaint said. The "specific governs the general," Detroit Axle argued, adding that this precept has additional weight where Congress has passed a "comprehensive scheme and has deliberately targeted specific problems with specific solutions."
Detroit Axle added that the elimination of de minimis for Chinese products violates the APA, arguing that courts have subjected agency actions that "incorporate a presidential directive to APA review."
The importer laid out four reasons why the move was arbitrary or capricious under the APA: the government "changed its longstanding position on the de minimis exemption without considering 'serious reliance interests,'" failed to consider "other important aspects of the problem," failed to consider "reasonable alternatives," and failed to show a "rational connection between means and ends."
Detroit Axle began its complaint against the decision to unilaterally eliminate the threshold by detailing its reliance on Chinese products. The company said it sourced many of its auto parts from China, since Chinese manufacturers can make parts that U.S. producers can't and can do it for less. After Trump imposed tariffs on China during his first administration, however, the company began sourcing products for its customers in the western U.S. from a factory in Mexico, which sources its parts from China.
The importer said it frequently takes advantage of the de minimis threshold, since all shipments from the Mexican facility are shipments under $800. The result has let the company "essentially cut in half the effects of the increased Chinese tariffs by splitting imports between its two facilities" and grow its U.S. operations, Detroit Axle said.