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U.S. to propose trade rules to reduce China package volume

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Seeks to end exemption for goods subject to punitive

tariffs

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White House wants more information disclosure on small

packages

(Adds U.S. Secretary of Commerce comment in paragraph 4, PDD

shares in paragraph 9)

By David Lawder

Sept 13 (Reuters) - The Biden administration said on

Friday it was moving to curb low-value shipments entering the

U.S. duty-free under the $800 "de minimis" threshold that has

been exploited by Chinese e-commerce firms such as Shein and PDD

Holdings' ( PDD ) Temu.

White House officials said they will propose the new trade

rules to deny the duty-free exemption to packages that contain

low-value goods subject to the Section 301 tariffs on Chinese

goods, the Section 232 tariffs on steel and aluminum products

and Section 201 on "safeguard" tariffs on products including

solar products and washing machines.

The proposed rule includes new information disclosure

requirements for small packages to help U.S. Customs and Border

Protection agents to better identify contents for illicit or

unsafe products such as precursor chemicals that can be made

into the deadly opioid fentanyl.

"American workers and businesses can outcompete anyone on a

level playing field, but for too long Chinese e-commerce

platforms have skirted tariffs by abusing the de minimis

exemption," said U.S. Secretary of Commerce GinaRaimondo.

The White House announcement comes two days after Democratic

lawmakers in Congress urged President Joe Biden to use executive

powers to close the de minimis provision, which they called a

"loophole" that has allowed Chinese imports to evade tariffs and

ship narcotics to the U.S. without customs inspection.

The exemption has been part of U.S. trade law since 1930 to

accommodate individual travelers, but the threshold was

increased to $800 from $200 in 2015 as an aid to small

businesses, including sellers on e-commerce platforms such as

eBay ( EBAY ).

Packages under the limit enter duty-free and with less

customs scrutiny as long as they are addressed to individuals'

residences.

Since then, the volume of packages entering the U.S. under

the $800 threshold has exploded to over 1 billion last year from

around 140 million a decade ago, White House officials said,

attributing most of the growth to Chinese e-commerce firms.

Among the biggest beneficiaries have been Shein and Temu,

which ship direct to U.S. consumers from China. The news sent

shares of Temu-owner PDD Holdings down more than 5% before the

bell.

Temu and Shein did not respond to Reuters requests for

comment.

U.S. textile manufacturers blame the exemption for allowing

low-value clothing packages to skirt U.S. Section 301 tariffs,

which cover some 70% of large-scale Chinese textile and apparel

imports.

"The drastic increase in de minimis shipments has made it

increasingly difficult to target and block illegal or unsafe

shipments coming into the US through this pathway," White House

Deputy National Security Adviser Daleep Singh said.

"That's why the administration is starting a regulatory

process to curtail de minimis overuse and abuse."

The goal of the new rules is to reduce the volume of de

minimis shipments to a more manageable level to better screen

packages, a senior administration official said.

Another proposed rule would require de minimis packages to

contain product tariff codes and other information to help

better identify suspect shipments.

It was unclear how quickly the proposed rules could be

implemented. They would require public comment periods to allow

interested parties to weigh in before they are finalized.

Administration officials said they are working with

lawmakers to pass reforms to the trade provision for blanket

exclusions of certain import-sensitive products.

The action was announced on the same day that the Biden

administration locked in steep U.S. tariff increases on some $18

billion worth of Chinese imports, including 100% duties on

electric vehicles, 50% on semiconductors and solar cells and 25%

on lithium-ion batteries, steel and aluminum.

(Additional reporting by Stephen Eisenhammer in Mexico City and

Savyata Mishra in Bengaluru; Reporting by David Lawder; Editing

by Miral Fahmy)