How Trump and Obama Created Shein Together

Summary

The video explores the complexities of importing goods into the U.S., focusing on tariffs, customs checks, and the Dominus exception that allows small packages under $800 to bypass certain regulations. It highlights how this exception led to a surge in small imports, especially from China, and how loopholes have been exploited by companies like Amazon and Shein. The discussion touches on inefficiencies in the system, its impact on retail businesses, and the unintended consequences of trade policies, with the speaker reflecting on personal experiences in navigating the import process.

Takeaways

• 😀 The De Minimis Exception allows small shipments under a certain value threshold to bypass customs scrutiny and tariffs.
• 😀 In 2016, the value threshold for the De Minimis Exception was raised from $200 to $800, resulting in a significant increase in small packages entering the U.S.
• 😀 This policy, originally designed to ease Customs workload, has led to a rise in loophole exploitation, especially by e-commerce companies like Amazon, Temu, and Shein.
• 😀 Free trade zones in countries like Canada and Mexico allow products from China to be repackaged and shipped to the U.S. without tariffs.
• 😀 The volume of small shipments entering the U.S. increased dramatically, from 13 million in 2016 to over 1.4 billion annually, due to the $800 threshold.
• 😀 E-commerce companies can ship goods directly from China without paying tariffs if the goods are valued under $800, making them more competitive than traditional retailers.
• 😀 The increase in small packages has overwhelmed U.S. Customs and Border Protection, creating inefficiencies in inspections and enforcement.
• 😀 Companies that exploit these loopholes often bypass customs regulations, making it harder for small businesses to compete fairly.
• 😀 The decision to raise the threshold and change tariff rules was influenced by inflation and increased workloads at Customs, but it has had unintended negative consequences.
• 😀 There are concerns that this policy encourages the use of forced labor and poor working conditions, as incredibly cheap goods are often produced in countries with questionable labor practices.

Q & A

What is a tariff, and why does the US government impose it on imported products?

A tariff is a special tax on a product coming into the US from another country. The US government imposes it to discourage imports and protect domestic industries, though the specific reasons behind tariffs are complex and multifaceted.

What is the role of customs when importing products into the US?

Customs is responsible for checking whether the products being imported match the declared details, ensuring they comply with legal requirements, verifying the value of the goods, and confirming that all necessary tariffs are paid.

What is the 'Dom Minimus' exception, and how does it work?

The 'Dom Minimus' exception allows small packages with a value under a certain threshold (previously $200, later raised to $800) to pass through US customs without being checked. This exception was implemented to reduce the workload on customs and facilitate more efficient imports.

How did the change to the 'Dom Minimus' threshold in 2016 impact the number of packages entering the US?

In 2016, the threshold was raised to $800, which significantly increased the number of small packages entering the US, from about 130 million to over 1.4 billion packages annually.

What is the significance of free trade zones in countries like Canada and Mexico for US imports?

Free trade zones allow products to be imported, repackaged, and then exported to the US without paying tariffs. This has led to large shipments of products being sent to these zones before being broken down into smaller packages and shipped into the US under the 'Dom Minimus' exception.

What problems arise from companies exploiting the 'Dom Minimus' loophole?

Exploiting the 'Dom Minimus' loophole creates inefficiencies, undermines legitimate businesses that follow the rules, and leads to unfair competition, especially for smaller companies. It also shifts tax burdens and regulatory costs onto the US government and other businesses.

How did the US-China trade relationship impact the import of goods under the 'Dom Minimus' exception?

The US-China trade relationship, particularly during Donald Trump's presidency, made it more cost-effective for products to be shipped directly from China rather than going through US warehouses, leveraging the 'Dom Minimus' exception to bypass tariffs.

Why do some businesses prefer to build their operations around loopholes like 'Dom Minimus'?

Businesses may prefer to exploit loopholes because they can reduce operational costs and avoid paying tariffs. However, this practice is seen as unsustainable, as the loopholes could be closed at any time, and it contributes to inefficiency in the system.

What are the potential consequences if the 'Dom Minimus' loophole is closed or reformed?

If the 'Dom Minimus' loophole is closed or reformed, it could lead to increased inspection times, higher costs for small businesses, and more complexity in the import process. Larger businesses that rely on this loophole might face significant disruptions to their operations.

What is the role of brokerage companies in the import process?

Brokerage companies assist businesses with navigating customs, ensuring compliance with regulations, and paying the necessary tariffs. They act as intermediaries between the importer and customs authorities, but their services add additional costs to the import process.