Question – would you buy a product delivered to your front door by your favorite e-commerce retailer if you knew it was made with forced labor in China? Hopefully, you would be outraged — and even more so if you knew that these illegal goods were entering the United States duty free, largely without detection from U.S. officials.
That potential scenario would seem far-fetched if it were not for a provision of U.S. trade law known as Section 321 that allows e-commerce retailers to send up to $800 worth of goods manufactured overseas to individual U.S. customers each day — without having to pay duties. While such tariff exemptions may have been logical when this mechanism was established by the U.S. government in the 1930s, that was a time when virtually no international purchases were sent through the mail — and long before the advent of mass product distribution through e-commerce.
Today, by pressing a computer button, millions of e-commerce purchases are made every day and shipped from numerous countries directly to our doorsteps. U.S. Customs and Border Protection reports that nearly 2 million individual shipments cross the U.S. border each day under the mechanism’s threshold of $800 per shipment. This explosion in e-commerce shipments using the Section 321 tariff waivers has spawned new companies like Shein, a Chinese e-commerce conglomerate that built its multibillion-dollar business, in large part, on exploiting this loophole.
In addition, CBP officials acknowledge that they do not have the manpower to track and inspect even a small percentage of these countless shipments and are unable to adequately identify and block Section 321 shipments that contain illegal drugs and other controlled substances, hazardous materials and adulterated products, posing health and safety risks to U.S. consumers, as well as counterfeit products that violate intellectual property laws.
Moreover, the volume of these shipments has increased import price pressure on American manufacturers of consumer items that routinely sell for less than $800 — such as apparel, footwear, home furnishings, toys, consumer electronics, flatware and auto parts. And this mechanism severely undermines U.S. free-trade partners like Mexico and Canada, whose duty-free access to the United States is tied to strict origin rules and environmental and labor requirements.
Further exacerbating this problem is the fact that China is the largest exporter of consumer goods to the United States, and as such is undoubtedly a major beneficiary of this generous mechanism.
This is especially devastating for the U.S. textile manufacturers who have endured China’s meteoric export growth into the U.S. market in recent decades, leading to shuttered manufacturers and job losses. China’s dominance of global textile and apparel markets has been aided by substantial state ownership of manufacturing, state-sponsored production, export subsidies and rampant violations of intellectual property rights.
Which brings us back to the ugly issue of products made with the use of forced labor arriving at your door. The overwhelming majority of China’s cotton, 84 percent, is produced in a region in China known as the Xinjiang Uyghur Autonomous Region. China has come under fire by global human rights groups, governments and consumers for forced detentions of over 1 million Uyghur minorities and other ethnic groups in internment camps in this region, subjecting them to abuses ranging from relocation, re-education, sexual violence and forced labor to genocide. The U.S. State Department recently said in a report: “Genocide and crimes against humanity occurred during the year against the predominantly Muslim Uyghurs and other ethnic and religious minority groups in Xinjiang.”
Perhaps just as troubling are countless news reports that have identified several well-known global brands and retailers suspected of using suppliers that use forced labor to produce their apparel and footwear in this region in China.
Given that virtually all Chinese cotton is grown and processed with forced labor in this region, and CBP does not have the ability to police the millions of shipments entering the United States every day, it is easy to see how apparel delivered to your door could be made under abhorrent labor practices. And that’s the problem: This loophole is so large and pervasive that no one can say with certainty where the goods originate and who is making it.
If the U.S. government is intent on banning Chinese imports made with forced labor, it needs to close this loophole, which is unwittingly letting millions of dollars of uninspected and potentially tainted goods into the United States duty-free every day.
We must undertake an exhaustive and immediate review of this problem to develop the policy changes needed to mitigate the damaging impact of Section 321 duty waivers on U.S. workers and manufacturers and our free-trade agreement partners. We must ensure this loophole is addressed immediately to combat the use of forced labor in China and in other areas of the world.
Failure to address the loophole will continue an “open door” policy that invites China to ship duty free to the United States illegal and unsafe products that undermine American businesses and jobs, while also diluting any efforts to rein in its abhorrent human rights abuses.
Kimberly Glas is president & CEO of the National Council of Textile Organizations.
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