Editor's note: Patrick J. Cunnane is a CEO and business consultant, and former CEO of Advanced Sports Enterprises. He is active in trade issues and has been for the past 35 years and has testified on this and other trade issues. He wrote and submitted this guest editorial prior to President Trump's temporary closure of the de minimis loophole on Feb. 4. Cunnane told BRAIN he supports the legislation introduced by Rep. Sanchez on March 4.
By Pat Cunnane
Welcome to 2025. President Trump and Congress are back. The talk of tariffs is everywhere right now – from boardrooms to newsrooms – and perhaps finally one tariff may finally receive the scrutiny it deserves. The delay on this one tariff may be because of its name – de minimis, something Merriam Webster defines as: “lacking significance or importance, so minor as to merit disregard.”
Yet de minimis is not minor; it’s major and deserves our attention. And it may finally get the attention it needs – on January 17th the Customs and Border Patrol* issued a rule-making plan, and on January 20th the issue made it into President’s Trump American First Trade Policy**.
De minimis impacts nearly everything sold in the U.S., from car accessories and undergarments to barbells and highchairs. That’s why addressing this issue can – and should – become a rare bipartisan priority. De minimis is a policy loophole that allows goods of $800 or less to enter the U.S. without any scrutiny, tariff, duty, or sales tax. This disadvantages U.S. businesses, costs our government billions, and undermines consumer safety and national security.
My life’s work has been in business – navigating global trade, tariffs, and manufacturing. Over the past 40 years, I’ve managed operations in the United States, Japan, Taiwan, China, Korea, Mexico, Vietnam, and Europe (Poland, Germany, and Norway) – constantly adapting to shifting trade policies and competitive pressures. That’s why I know one of the most pressing and overlooked trade issues is the de minimis rule.
Some have called this “The China Free Trade Agreement” or by Reuters in a recent article “The Fentanyl Express,” where the author details how de minimis shipments of fentanyl precursors are sold from China into the United States. These shipments are then smuggled from the U.S. to Mexico to be made into fentanyl, only to be smuggled back into the U.S., often as de minimis shipments. In 2022 alone fentanyl killed more than 73,000 people. That is 200 people every single day.
The Mexican government prohibits fentanyl precursors from being legally imported into Mexico – but de minimis provides a low risk means to ship the precursors to the U.S. and then to Mexico. A change in the de minimis rule will both strengthen the economy and stiffen border security.
Here’s how it works (or doesn’t): De minimis exempts goods valued under $800 from import tariffs, duties, and the regulatory scrutiny that U.S.-based businesses face. It was originally enacted in 1938 to simplify low value imports at a threshold of $1 (about $21 today). By 1994, the limit had risen to $200, and in 2015, it jumped to $800, largely due to lobbying from global shipping giants and foreign-based online retailers.
The consequences of de minimis
The 2015 Obama-era increase in de minimis to $800 exacerbated a massive problem that was harming U.S. businesses at the previous $200 level in effect since 1994. For years, non-U.S. sellers have exploited this rule to flood the U.S. market with untaxed goods — many of which are unsafe, counterfeit, or linked to illegal activities like the fentanyl precursors.
I have been a CEO in the bicycle industry. Consider this example from my experience. The Consumer Product Safety Commission (CPSC) once tested a helmet my company sold, and it failed their test. Even though the helmet had been independently tested by a third party, we were rightly required to recall the helmet under the guidance and reporting required and approved by the CPSC — and required to reimburse consumers who purchased them. Most of the helmets we sold were through a marketplace website, as a marketplace retailer. At about the same time, the CPSC found another helmet that was sold on the same marketplace e-commerce site that did not meet its standards. However, because of the de minimis loophole that shields offshore sellers, the CPSC had no recourse. Fortunately, the marketplace retailer did the right thing, at least, and stopped selling additional helmets from that supplier — but the marketplace retailer had no legal responsibility to recall the helmet themselves, and the helmets were not recalled. In this case the Chinese-based seller likely created a new marketplace retail site to continue to sell the unsafe product, in a practice often referred to as a game of “Whack-a-mole.”
Meanwhile, U.S.-based wholesalers and retailers pay tariffs, collect sales taxes, and comply with strict regulations, leaving them at a competitive disadvantage. Think about what you buy. How many items do you purchase that cost more than $800? Not many. Of the more than 120,000 items that an average Walmart Supercenter sells, fewer than 2% have a retail price higher than $800.. This means simply that almost all consumer products can be purchased from a foreign country that does not pay the U.S. any tariff, is not required to meet the import regulations of a U.S.-based company and does not collect local sales tax.
Think of the losses. Consider these staggering figures:
• In 2014, 140 million shipments entered the U.S. under the de minimis rule.
• By 2023, that number ballooned to 1.4 billion shipments annually – a ten-fold increase according to U.S. Customs and Border Protection.
• These shipments in 2023 represent an estimated $70 billion in goods, with states losing $4.2 billion in uncollected sales taxes based on a rate of 6%.
The argument for reform and a solution.
Proponents of the current $800 threshold argue that lowering it would overwhelm Customs and Border Protection (CBP). Yet this claim doesn’t hold up. The government’s job is to protect American businesses, collect revenue, and ensure public safety. Our current high de minimis threshold undermines all three. A simple solution: use the same process shippers currently use and impose a flat tariff on all imports under $800. A reasonable 10% tariff on de minimis goods in 2023 would have generated $7 billion in federal revenue, which is more than enough to enhance CBP operations to meet the challenges of inspecting 1.4 billion packages. Penalty tariffs like the Section 301 tariffs on specific products from China should be collected in addition to the 10%.
And if 10% is not enough, charge more: CBP should not be subsidizing foreign-based sellers at the expense of U.S.-based businesses.
Of course, there is the argument that consumers will have to pay more – the same argument that can be made against any tariff – and it is certainly possible that companies could pass on the increased cost to consumers. Still there is no silver bullet. Everything is a tradeoff when you’re talking about global trade. The benefits more than outweigh the risks when you consider that this loophole hurts one of the largest sectors of the U.S. economy, which is retail – and closing it would lead to increased local, state, and federal revenue, as well as the vast improvement in consumer safety that will be paid for by this simple solution.
It’s time to close the de minimis loophole, to simplify, and create a fair, reasonable tariff and de minimis policy that ensures competition in the U.S. market happens on an even footing—one that prioritizes safety, fairness, and American jobs and revenue.
*cbp.gov/newsroom/national-mediarelease/cbp-proposes-new-rule-strengthen-enforcementand-limit-duty
**whitehouse.gov/presidentialactions/2025/01/america-first-trade-policy/
