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Comment by echoangle | Hacker News Reader

What’s the definition of loophole? How is shipping small packages without taxing them a loophole if that’s the exact thing the exemption was introduced for? Is driving an electric car and getting a tax credit a loophole too?

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I think loophole is probably appropriate. The spirit of the law was of course low value goods are not worth the burden. The increase to 800 in 2016 was probably a little much but who would have guessed whole business models would run off of this ruling. The spirit is for small shipments, not entire business models running off of it.

> but who would have guessed whole business models would run off of this ruling

Anyone who thought about it critically for like 10 minutes?

The de minimis threshold dates back to the 1930s and has only been adjusted a handful of times—most recently in 1993 and then in 2016. The 2016 increase was substantial, and in hindsight, probably too high. Still, at the time, few could have anticipated just how fully it would be exploited. The business models we’re now seeing at scale—like Temu’s—didn’t meaningfully exist back then. Even Shein was far from the force it is today.

The loophole may have been visible, but the ecosystem to take advantage of it at this level simply wasn’t in place yet. So no, this wasn’t as obvious as you’re pretending it was.

> Still, at the time, few could have anticipated just how fully it would be exploited

In 1930? Sure, you couldn't expect them to know that everyone would have a wireless telegraph in their pocket and they'd have cheaper and more skilled Chinese labor/manufacturing available.

In 2016? Really? Amazon was already going full steam. Ali Express was well known. It absolutely should have been obvious to legislators and those that lobby them professionally what would happen. How many people regularly, or even annually, buy items for over $800 from either of them?

You are either naive or a wishful thinker. Government moves slow and I have zero expectation they would have been able to see the writing on the wall. Again I think $800 was too high of a limit but I also think you give too much credit to your hindsight.

Either naive or wishful thinker. No other option.

As far back as the 1950s the textile industry was against raising the de minimis threshold because they wouldn't be able to compete with duty free mail order imports. We keep increasing it. We get SHEIN. Surprised Pikachu, nobody could have foreseen this.

I’m convinced that a small proportion of people fundamentally can’t consider beyond first order consequences. Others can’t consider or imagine beyond second order consequences. One could argue third order relies more on domain knowledge than anything, which could explain why career politicians and bureaucrats genuinely can’t fathom the inevitable downstream effects of an action even if blindly obvious to those with business experience.

It’s the same pattern with discussions of rent control. Despite overwhelming evidence that the third-order consequences make things worse for far more people than the first- and second-order effects help, proponents seem unable to reconcile that “preventing rent from increasing” could possibly make housing less affordable.

Aliexpress was already huge in 2016. And obviously the government could see the volume of parcels arriving via international mail and getting dumped off on USPS, because they did something about that.

I don't think this is exactly correct. One purpose of a de minimis exemption is to clear the way for small overseas businesses to integrate more easily into the national economy by minimizing border wait times and overhead importation costs on cheap goods / goods only found overseas. It has the dual benefit of reducing customs labor costs for the taxpayer. From an economic perspective, business models like these are a desirable and purposeful consequence.

We focus on businesses like Temu because everyone agrees they sell cheap garbage, but a lot of overseas businesses sell high-quality or even essential goods. (And clearly, for many people, whatever Temu sells is good enough.)

This rule goes back to the 30s and for most of its history the goal is to reduce administrative burden. The fact that small business around the world might benefit from it is indirect and never the main goal.

We focus on Temu because they are running a large dollar value business on imports that skirt duty tax. The dollar volume is the important piece here as they playing on an unfair advantage.

If the purpose of the exemption were only to reduce the labor cost of importation, some other scheme (such as prohibiting the importation of cheap goods entirely) would be far more effective. Several other options would be at least equally effective. Factors besides labor are clearly also considered.

In your view, what are the factors in addition to customs labor costs that were weighed in 2016 the choice to increase the de minimis exemption? I'm curious, because you seem to feel very strongly that global economic integration is not one of them.

I’m not saying global integration wasn’t ever discussed or considered, just that historically, the primary driver behind de minimis was administrative efficiency. You can trace it all the way back to original rule in the 30s. The idea was that the cost of collecting duty on low-value goods often exceeded the revenue collected, so it made sense to wave them through.

That’s very different from encouraging large-scale commercial exploitation. When entire logistics chains are built specifically to stay under the threshold, intentionally bypassing duties that domestic importers would have to pay, that’s a policy failure, not a success. You can absolutely argue that it incidentally helped smaller exporters or increased consumer access, but that’s a long way from saying it was intended to support global e-commerce platforms arbitraging regulatory gaps.

You asked what factors were weighed—labor costs and shipment volume handling, sure. Maybe some light consumer benefit. But "building duty-free pipelines for billion-dollar drop-shippers" probably wasn’t in the memo.

The argument was that grandma would be shipping you nice cookies and it'd be annoying if you had to pay tarriff on receive foodstuff.

Temu is not grandma so that's where the loophole comment comes from. It wasn't meant to be used large-scale commercially where you ship 100 small packages instead of 1 large package to avoid the tarrif.

Why was it set at $800 if it’s for grandma’s cookies?

It was an example. There's no need to be pedantic.

$800 is a meaningful exception for personal use. If you want a turkish $400 rug or a $300 indian wedding dress, it was always meant to be for personal, not corporate, use.

Can we agree that the law as it was intended was completely abused ?

EDIT: for graphic language

Would paying extra 24$ on a 400$ rug be unreasonable when importing it?

To me well it is a tax, but in the end not that significant one.

> Can we agree that the law as it was intended was completely raped and abused ?

Not really, is there a source for the rationale of the de minimis exemption?

$800 was set out of desperation. CBP was overwhelmed and underfunded, so the executive increased the de minimis to significantly higher than any other country ti relive their workload. The proper solution would have been for Congress to increase funding to maintain a reasonable de minimis (many countries use around $50-200), but that wasn't happening.

Spot on. But humans aren't perfect.

So now we have to deploy a less than perfect solution. Doesn't make it wrong, its just flawed.

(The likely result looks like CBP problems from before are coming back, correct? Curious on your take - has demand shifted since the rules were set ?)

From talking to friends workings in imports and manufacturing, they expect what will happen is weeks or months of delay on most shipments as CBP is utterly unequipped to deal with the volume.

800 US $ is second highest, but not the highest limit around. Uzbekistan has a de minimis limit of 1000 US $ (yes, US $)

Can we agree that the language of sexual violence is inappropriate in this context?

The last time congress changed the de minimus threshold, it gave the following context in the corresponding Act:

FINDINGS.—Congress makes the following findings: (1) Modernizing international customs is critical for United States businesses of all sizes, consumers in the United States, and the economic growth of the United States. (2) Higher thresholds for the value of articles that may be entered informally and free of duty provide significant eco- nomic benefits to businesses and consumers in the United States and the economy of the United States through costs savings and reductions in trade transaction costs. (b) SENSE OF CONGRESS.—It is the sense of Congress that the United States Trade Representative should encourage other countries, through bilateral, regional, and multilateral fora, to establish commercially meaningful de minimis values for express and postal shipments that are exempt from customs duties and taxes and from certain entry documentation requirements, as appro- priate

What exactly does suggest to you that this is intended for personal, non-commerce use?

No, the argument for de minimis is that the cost to collect taxes on a $20 parcel is less than the collected tax.

Granted, the US' $800 de minimis, which was created because of a lack of funding to deal with the volume of shipping, was probably a bad decision in retrospect. But removing it entirely is another extreme.

The issue is that when the law was crafted, it wasn’t feasible for foreign companies to directly sell to consumers at scale.

The internet facilitated a direct to consumer model that allows foreign companies to almost completely bypass import taxes.

The $800 limit was set during the Obama administration, well after internet direct to consumer sales existed.

Yeah but the scale wasn’t apparent yet. Normal people didn’t commonly order firstly from Ali express in 2015.

If you look at the amount of de minimis goods shipped the year after the amount was raised vs today, they have increased over 10x.

Also the pre 2016 limit was $200, still low enough to allow the temu business model.

The EU generally has a de minimis limit of 150 EUR for custom duties but individual members levy sales tax from the first EUR onward. The USA could do the same. Of course, this would make things more expensive, too, but less so than sinking your trade boat through tariffs ;)

So why wouldn’t you specify on the law that the sender has to be a private person, not a legal entity? If the law is that broad, I am struggling to see it as a loophole.

humans are not perfect.

That's why it is called a loophole

Its semantic.

Temu and Shein were exploiting the rule.

When the law was crafted it wasn’t feasible for foreign companies to directly sell to individual consumers at scale.

The new business model enabled by the internet and cheap/fast international shipping created a loophole that allowed companies to import billions of dollars of goods without paying any import taxes on them.

Essentially the reason why this is a loophole, is because Chinese companies like Shein and Temu have structured their entire businesses around shipping directly from China and marketing directly to the United States so that a company like Amazon would need to pay tariffs on all it’s goods, because it imports into the US directly and Shein and Temu would have to pay no tariffs.

It makes no sense for the United States to charge 145% tariffs to normal American companies, and then allow a loophole so that large Chinese e-commerce giants essentially benefit by structuring their business to not operate in the United States. The purpose of the tariff’s is to increase American employment not decrease it.

A loophole to minimize administrative burden makes no sense when applied to companies selling tens of billions of dollars into the US every year.

It was a loophole. The country taxes imports of X, the intent is for those who sell X in the US to pay the tax.

Standard retailers using distribution have to pay it. But if you put the warehouses outside the US and ship direct you don’t. That’s not how the law was supposed to work.

De minimus is a legal term that means something. It means so small as to not matter. When retailers figured out how to use this approach to send hundreds of billions of dollars of goods without the intended tax, they were exploiting a loophole.

It being closed should have happened ages ago it’s just confusing now because it’s in the midst of a lot of other tariff activity that makes a lot less sense.

We start talking about carve-outs and credits as loopholes when the use begins to violate the spirit. No one has figured out how to capture the electric car tax credit without meeting the spirit, so it’s not a loophole yet.

As an example if you ship a $3196 product in four packages, each valued at $799, you are following the letter of the law but not the spirit.

It’s a “loophole” because the system didn’t anticipate that consumers could basically place all their orders directly from suppliers halfway across the world, and that shipping would become inefficient that individual goods could be delivered for pennies.

The exemption existed for stuff like samples, initial batches, one-off items, etc. not so the entire industry could run off these exemptions.

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