De Minimis in Crosshairs of Consumer Safety Advocates, Subcommittee Leader

Members at the three-hour hearing, held March 4, heard from major e-commerce companies, major companies that struggle to fight copies of their products sold online, and two consumer advocates. The e-commerce companies emphasized how much they coordinate with the Department of Homeland Security and how seriously they take the problem of counterfeits.

Dharmesh Mehta, who leads Amazon's department tasked with stopping counterfeits, said the company spends a half-billion dollars a year on the effort, and blocked more than 6 billion suspected bad listings last year. Even so, he said, 99.9% of pages have never had a trademark infringement complaint. But David Friedman, vice president of advocacy at Consumer Reports, said, “They’re investing effectively pennies when they should be investing dollars.” He said Congress needs to change the law so that online platforms are “held accountable when they knew or should have known [a product was fraudulent]. Until then, the incentives are upside down.”

Lori Wallach, director of Global Trade Watch, told Congress that the Consumer Product Safety Commission is handcuffed by the fact that they have no data on what's coming in under de minimis. “By moving it from 200 to 800 [dollars], first, products of much higher value can get de minimis treatment,” she said. She said that 1.8 million de minimis shipments are cleared every day, and 1 million are from China. She said electric scooters, hoverboards, medical equipment, major electronics and airbags are all coming in without oversight as a result -- and they're all potentially threats to consumer safety.

Amazon's Mehta said he wants CBP to be able to share information with the company about issues they uncover. “There’s more we can do to partner with Customs,” he said, and noted they have engaged with the pilot on advance data for de minimis shipments. He said the company supports “requiring pre-clearance regardless if under de minimis.”

Apple's senior director for intellectual property, Jeff Myers, said Apple bought replacement batteries and charging equipment that was designed to look like Apple products, but they found it had defective components and could not pass UL testing, as real products of this kind must. Myers said CBP needs to use design rights to fight counterfeits, not just trademarks.

Andrew Love, head of brand security and investigations for Specialized Bicycles, agreed. He showed two helmets, with identical designs, one with his brand name on it, and one with no name on it. Both were counterfeits, he said, but the one with no logo, he can't request a take-down. Love also showed a counterfeit bicycle that looked like his brand. He said he tried riding it gingerly for 15 minutes, and the rear came out twice, and the front fork had the “integrity of a wet sponge.” He said it sold for $650. Of de minimis, he said, “$800 is way too high.”

Wallach said most de minimis shipments have come in by air, traditionally, but now exporters are learning they can send containers to Canada or Mexico, move the cargo in a bonded status to warehouses, and then break up the cargo into consumer packages to be sent into the U.S. “It’s a serious problem,” she said. She said that at the five ports where most of the de minimis packages arrive, CPSC only has one part-time inspector, at JFK.

Frank Pallone, D-N.J., the committee chairman, noted in a memo supporting the subcommittee hearing that CBP found that 16% “of counterfeit products seized in Fiscal Year 2018 posed a direct risk to health, safety, and security.”

In an interview with International Trade Today after the hearing, Wallach said that even universal advance data on packages coming in under de minimis is not enough to help the CPSC inspectors. “Even if there's advance [notice] it's advance of two or three hours, not three or four days,” as is the case for shipments coming on the water, she said, and the data provided by express shippers doesn't easily merge into risk assessment tools.

“Here's the reality. The U.S., at $800, has one of the highest de minimises in the world,” Wallach said. “A lot of the countries are looking at lowering their de minimis in the era of e-commerce. Because they realize absent that, there's going to be an enormous amount of health and safety violations that they can't catch, as well as intellectual property violations.”

When asked about the bipartisan pushback on the Office of the U.S. Trade Representative's proposal to lower de minimis for shipments from Mexico and Canada, Wallach replied, “I think a lot of people haven't thought about the health and safety issues. There are upsides, obviously, to having a higher de minimis, for efficiency purposes, quick flow ... but the problem is now people are becoming aware of the big downsides. And I think it could change the dynamic.”

The subcommittee's top Republican, Cathy McMorris Rodgers of Washington state, said, “it is clear the heavy hand of government will not solve” the problem of online sales of counterfeits, so even if a bill did pass the House to address these issues, it might run into trouble in the Republican-held Senate.