9 ms·

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

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?

lesuorac 1y ago
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.
- Gracana 1y ago
  Why was it set at $800 if it’s for grandma’s cookies?
  - IG_Semmelweiss 1y ago
    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 $300 indian wedding dress, it was always meant to be for personal, not corporate, use. Can we agree that the law as it was intended was completely abused ? EDIT: for graphic language
    - Ekaros 1y ago
      Would paying extra 24$ on a 400$ rug be unreasonable when importing it? To me well it is a tax, but in the end not that significant one.
    - echoangle 1y ago
      > 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?
    - dharmab 1y ago
      $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.
      - IG_Semmelweiss 1y ago
        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 ?)
        dharmab 1y ago
        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.
      - Propelloni 1y ago
        800 US $ is second highest, but not the highest limit around. Uzbekistan has a de minimis limit of 1000 US $ (yes, US $)
    - ipsin 1y ago
      Can we agree that the language of sexual violence is inappropriate in this context?
    - detaro 1y ago
      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?
- dharmab 1y ago
  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.
  - sarchertech 1y ago
    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.
    - dharmab 1y ago
      The $800 limit was set during the Obama administration, well after internet direct to consumer sales existed.
      - sarchertech 1y ago
        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.
        Propelloni 1y ago
        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 ;)
- echoangle 1y ago
  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.
  - IG_Semmelweiss 1y ago
    humans are not perfect. That's why it is called a loophole
  - nonethewiser 1y ago
    Its semantic. Temu and Shein were exploiting the rule.
  - sarchertech 1y ago
    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.
CPLX 1y ago
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.
infecto 1y ago
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.
- fkyoureadthedoc 1y ago
  > but who would have guessed whole business models would run off of this ruling Anyone who thought about it critically for like 10 minutes?
  - infecto 1y ago
    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.
    - fkyoureadthedoc 1y ago
      > 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?
      - infecto 1y ago
hshdhdhj4444 1y ago
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.
ip26 1y ago
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.
daft_pink 1y ago
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.

lesuorac 1y ago

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.

Gracana 1y ago
Why was it set at $800 if it’s for grandma’s cookies?
- IG_Semmelweiss 1y ago
  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 $300 indian wedding dress, it was always meant to be for personal, not corporate, use. Can we agree that the law as it was intended was completely abused ? EDIT: for graphic language
  - Ekaros 1y ago
    Would paying extra 24$ on a 400$ rug be unreasonable when importing it? To me well it is a tax, but in the end not that significant one.
  - echoangle 1y ago
    > 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?
  - dharmab 1y ago
    $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.
    - IG_Semmelweiss 1y ago
      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 ?)
      - dharmab 1y ago
        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.
    - Propelloni 1y ago
      800 US $ is second highest, but not the highest limit around. Uzbekistan has a de minimis limit of 1000 US $ (yes, US $)
  - ipsin 1y ago
    Can we agree that the language of sexual violence is inappropriate in this context?
  - detaro 1y ago
    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?
dharmab 1y ago
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.
- sarchertech 1y ago
  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.
  - dharmab 1y ago
    The $800 limit was set during the Obama administration, well after internet direct to consumer sales existed.
    - sarchertech 1y ago
      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.
      - Propelloni 1y ago
        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 ;)
echoangle 1y ago
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.
- IG_Semmelweiss 1y ago
  humans are not perfect. That's why it is called a loophole
- nonethewiser 1y ago
  Its semantic. Temu and Shein were exploiting the rule.
- sarchertech 1y ago
  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.

CPLX 1y ago

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.

infecto 1y ago

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.

fkyoureadthedoc 1y ago
> but who would have guessed whole business models would run off of this ruling Anyone who thought about it critically for like 10 minutes?
- infecto 1y ago
  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.
  - fkyoureadthedoc 1y ago
    > 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?
    - infecto 1y ago

hshdhdhj4444 1y ago

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.

ip26 1y ago

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.

daft_pink 1y ago

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.