The Evolution of Import Regulations: Exploring Section 321 De Minimis and the Security Fairness Act (Spring Update 2024 - Part 1)

The global marketplace is constantly evolving, shaped by regulatory changes to balance economic efficiency with fairness and border security. For almost 100 years now, the intention of de minimis (Section 321) in U.S. trade law has been the same—simplifying the import process for low-value shipments. However, in the last decade or so, we have seen many challenges that come with these benefits, prompting lawmakers to introduce the Import Security and Fairness Act, and more recently, the End China’s De Minimis Abuse Act.

Current Environment 

The revision of Section 321 in 2016 was to support U.S. e-commerce and economic growth, and to address the Customs Border Protection (CBP) resource issues. This change increased the incentives for global e-commerce in the United States and generated more productivity by redeploying revenue collection resources toward larger value imports.

As we know in our industry, being profitable as a footwear and/or apparel brand is not a given. If this law is to change again, it could affect U.S. businesses negatively by removing opportunities for importers to benefit from existing trade laws as it pertains to direct-to-consumer shipments. In the end, it could be the difference in a business being viable or not.

Updates from Washington Insiders

In a recent conversation with a key U.S. Government official, our team gained valuable insights into the evolving landscape surrounding Section 321. Lawmakers’ focus is on China since they benefit the most from the current loophole in the system. Currently, there are two competing bills surrounding this conversation. One bill seeks to eliminate de minimis treatment for all Chinese products while another targets specific products with Section 301 exclusions. However, we do not expect movement on either bill anytime soon. It is not expected that either bill will be brought to the House for a vote or considered until after the U.S. Presidential elections in November.

Zefyr’s Insights

With all of the current data, we believe in limiting to small parcels that are China direct shipments. This would address the drug trafficking and possibly the forced labor issue which is at the center of this debate. Removing the opportunity for brands to improve their margins on direct-to-consumer shipments under existing trade laws as a whole, however, will obviously not support American companies. It will not create more American jobs or revive the retail landscape, as some lawmakers suggest. We would argue the opposite effect would be more likely. 

Our team is regularly communicating with lawmakers, and furthering the conversation regarding our concerns on how this impacts businesses, especially in our industry. Stay tuned for more updates as we receive them. Want to continue the conversation? Follow us on LinkedIn. Or, if you need help planning around this current legislative environment, chat with our team today.

Further Reading: If you are unfamiliar with Section 321, check out this in-depth timeline of the bill and what it means: A Historical Overview of Section 321

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