Online shopping has delivered various benefits to the U.S. economy. Consumers find the exact product needed at a low price. The online marketplace brings convenience and quick orders but presents challenges to businesses, including RV suppliers and dealers.
Cardboard boxes from foreign countries slide through U.S. Customs and Border Protection duty-free through a special tax loophole. The loophole allows foreign entities to ship products valued up to $800 directly to U.S. consumers without paying an extra duty, tax, custom or tariff.
The RV industry is collaborating with leaders to amend the tax code and protect U.S. businesses competing against these lower-cost imports. Various legislation has been proposed to address the issue, including HR 7979, the End China’s De Minimis Abuse Act, which has passed through the U.S. House Ways and Means Committee and is awaiting further action.
What Is the Big Deal?
The U.S. tax code’s Section 301 addresses imported products to the U.S. Section 301 provides “de minimis” exemptions to products costing less than a defined threshold. For years, the de minimis threshold was $200 or less. In 2015, a new law raised the de minimis threshold to $800.
Foreign companies export products costing less than $800 into the U.S. with no or minimal fees. U.S. importers, including suppliers such as Stromberg Carlson, pay nearly 30% of a product’s value in tariffs.
In addition to paying import fees, RV industry members’ costs rise because they must vet products and materials to ensure consumers receive reliable products. When RV devices or materials break, dealers can often fix products.
When consumers use eCommerce resources to buy imported goods online, their product may be unfamiliar to a dealer, who may be unable to fix it.
RV companies say foreign, non-vetted items’ price tags draw the consumer’s eye while quality material and fees increase domestic RV company values.
Stromberg Carlson President Bob Brammer said, “As an importer, I can tell you right now, there is no way that we are going to be able to compete with Chinese cost.”
Brammer estimated that around 75% to 80% of retail items sold in an RV dealership cost under $100. In a 2023 survey conducted for the RV Aftermarket Association, consumers said they averaged spending $443 on aftermarket products in store and averaged $471 on online purchases.
With an $800 cap on de minimis imports, many RV retail products can be bought online from overseas companies and avoid adding duties or tariffs to the final price.
“Everybody is interested in this,” Brammer said. “Nobody is ignoring it or on purpose blowing it off, and they realize it is a problem for American manufacturers and American jobs.”
Action
RVIA Director of Federal Affairs Samantha Rocci has been collaborating with various government officials to procure a solution for the industry.
From her efforts during RVs Move America Week and July meetings with senators, Rocci said, “It is looking more and more realistic and possible that we do see something happen this year.”
Rep. Greg Murphy (R-N.C.) introduced the HR 7979 bill that passed through the House Ways and Means Committee in April. In July, House Speaker Mike Johnson (R-La.) said he intended to bring the bill to the House floor.
Johnson said the House would “rein in the de minimis privilege for any good subject to Section 301 trade enforcement tariffs, to stymie China’s attempts to exploit American trade.”
The bill will end the de minimis privilege for any product subject to Section 301 trade enforcement tariffs. A 2018 investigation determined that China’s acts, policies, and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory. Products falling under this umbrella are subject to tariffs under Section 301.
According to the bill, 60.8% of current de minimis entries are from China.
Rocci said according to the House Ways and Means Committee estimates, “Denying benefits for these goods subject to 301 tariffs would immediately eliminate the de minimis for more than half of all de minimis entries from China, which is the biggest problem we face right now.”
The bill would add more transparency and data collection on de minimis in the supply chain. HR 7979 would add a 10-digit Harmonized Tariff System classification requirement (HTS code) for each de minimis entry from external countries subject to Section 301 tariffs. The code provides product tracking that enables law enforcement to crack down on unfair or illegal trade practices, such as the transshipment of fentanyl.
Civil penalties would also be enforced for those who violate de minimis laws. First-time violators would have to pay $5,000. Each additional offense would be a $10,000 fine. Currently, the penalty is forfeiture of shipments, including products often valued at $55 or less.
Impending Change
On Aug. 8, Sen. Ron Wyden (D-Ore.) introduced the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for America Act of 2024. The bill would prohibit de minimis exemptions on certain goods, including those subject to Section 301 tariffs.
The bill would establish a $2 fee per shipment for products receiving de minimis exemptions. The legislation also outlines Customs and Border Protection (CBP) procedures to collect additional data on low-value shipments to target unlawful imports. The bill provides CBP guidelines to increase penalties for de minimis rule violations.
In addition to legislative action, the CBP and the Department of Homeland Security also have acted to stem the tide of de minimis imports.
The organizations launched a pilot program called the Section 321 Data Pilot. The departments accept data from eCommerce supply chain partners including online marketplaces. The data collected pertains to de minimis activity for risk segmentation purposes.
Rocci said, “What we really know right now is the momentum is building and there is the appetite to move.”
If legislation such as HR 7979 is passed, change could arise in various industries.
Brammer said de minimis changes would create an even playing field by making online and brick-and-mortar stores’ prices similar. He said more consumers are likely to support dealers if pricing is closer.
Brammer said, “I would just like to be competitive again.”
