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Amazon Using De Minimis Loophole Like a ‘Duty-Free Portal,’ NCTO Says

The U.S. apparel and textile industry lauded the government’s action plan announced Friday to increase enforcement and penalties against counterfeit goods sold online and imported to the U.S.

“This is a very important and long overdue move on the part of the administration to increase enforcement activity and penalties against counterfeit goods sold online and imported into the United States,” Kim Glas, president and CEO of the National Council of Textile Organization (NCTO), said.

“We commend the administration for making a commitment to bolster efforts to crack down on counterfeits, particularly in the textile and apparel sector, which has been hit hard by fake imported products for decades,” she added.

Nearly 2 million shipments of goods are exported to the U.S. duty free each day, often from countries with poor labor, human rights and environmental track records, under a provision known as Section 321 de minimis, NCTO said. This provision allows goods valued below an $800 threshold to enter the U.S. duty free when imported directly to an individual on a single day.

“This massive increase in de minimis shipment trade poses significant security risks and threats to public health and safety, while incentivizing customs fraud and creating a loophole to our entire tariff structure,” Glas said. “Our concerns regarding the de minimis loophole are exacerbated by the belief that the domestic textile industry and other U.S. manufacturing interests are directly and negatively impacted, particularly since e-commerce sites like Amazon and others are using de minimis as a duty-free portal into the U.S. for products under $800.”

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Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA), welcomed the release of the “Combating Trafficking in Counterfeit and Pirated Goods” report by the Trump administration, pointing to growing concerns with the availability of counterfeit products via third-party online marketplaces.

“The administration’s report is the latest in a string of government research that has highlighted the growing counterfeit crisis, a crisis caused by counterfeiters taking advantage of third-party online marketplaces that service the needs of millions of American families,” Lamar said.

“This is about more than just lost sales and damaged brand reputation,” he added. “Counterfeit products that are unknowingly purchased–whether a winter coat for yourself or pajamas for your newborn–can put Americans in direct contact with materials that do not meet federal safety regulations, support unsafe working conditions or enable illegitimate factories to ignore sustainable best practices.

“It is past time that we attacked this pervasive problem head-on,” Lamar charged.

An annual report from Customs and Border Protection (CBP) on intellectual property seizures, including large volumes of counterfeits, revealed that U.S. authorities made seizures totaling $1.4 billion in fiscal 2018. Over 90 percent of all intellectual property (IPR) seizures occur in the international mail and express shipment environments, according to the report, which is a common method of shipping by e-commerce sites.

Chinese products accounted for 46 percent of all IPR seizures with a total suggested retail price $761.1 million in 2018. Apparel and accessories were the top counterfeit products seized by U.S. authorities.

“We think this is an important step forward by the administration to deepen the analysis on de minimis products—that are often not thoroughly examined and undercut our domestic manufacturing industries,” Glas added.

“We don’t know what the products are, where they are coming from, whether they meet U.S. safety requirements, who is making them or the country of origin,” she said. “We believe it is long past time for the administration to address the issue of de minimis shipments and counterfeiting head on.”