Russell Fry Questions Experts On Closing Import 'Loopholes' For Counterfeit Goods From China

5/12/2024

During a House Judiciary Committee hearing on Tuesday, Rep. Russell Fry (R-SC) spoke about Chinese counterfeit goods flooding the US market.

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Transcript

00:00 Mack, gentleman from South Carolina is recognized.

00:05 Thank you, Mr. Chairman, for having this hearing today.

00:08 For generations, the textile industry has been a pillar of the economy in both South Carolina

00:13 and the United States. Darling Fibers, in the district I represent, is one of the largest

00:18 domestic producers of high-quality fibers for fabric, garment, and fashion industries. Milliken,

00:24 also in South Carolina, is located in Spartanburg and has been in the business since the 1800s.

00:30 I've heard from many of my constituents concerning their concerns regarding De Minimis. So most of my

00:36 questions are going to be centered around that. De Minimis imports from places like China count

00:41 for, have exceeded a billion total packages just last year, according to the CBP reports.

00:47 E-commerce giants are flooding the U.S. market with low-cost products. Many of them, as we know

00:53 from the hearing today, are counterfeit, and yet they avoid inspection and taxes. Unfortunately,

00:59 this number, I think, is expected to grow in the coming years.

01:03 Deputy Director Lord, you oversee CBP policy and enforcement priorities,

01:07 and I've heard from many constituent companies about the problems they are facing due to the

01:13 influx of De Minimis packages entering the U.S. We've heard that 85 percent of all IP seizures

01:19 occur in the De Minimis environment, and it's become a highway for other illicit goods,

01:24 such as fentanyl, which has been talked about here. The sheer volume of these duty-free packages,

01:30 though, is crippling our own economy and our own companies and our own American workers,

01:34 especially in textiles, which is a crucial industry not only for my district, but my state,

01:41 and indeed the country. So, Mr. Lord, how do we close these loopholes?

01:48 What policy recommendations would be helpful to you in closing these loopholes?

01:53 Well, thank you very much for the question, Congressman. I want to acknowledge first that

02:00 Customs and Border Protection is very much aware of the challenges that the textile industry is

02:04 facing in this moment. We've been working closely with the domestic textile producers in the United

02:10 States since, we'll say, September or October of last year. I've had the privilege of going down

02:17 to some of the production facilities in South Carolina that you've mentioned during my career.

02:21 It's an impressive operation, and I don't wake up every day, and my staff does not wake up every day

02:26 not thinking about how to protect U.S. jobs. When it comes to the specific challenges in De Minimis,

02:32 we are ramping up our inspections of textile products in the De Minimis environment.

02:37 As an agency, we've made investments at some of our laboratory and scientific services centers

02:43 around the country in Savannah, New York, and Los Angeles. They will have very cutting-edge

02:48 technology to begin testing textiles for compliance with the Uyghur Forced Labor

02:53 Protection Act. We do intend and are deploying that technology in the De Minimis environment.

03:00 There's a perception that we're not testing for that in the De Minimis environment. That is not

03:05 true. Mr. Lord, let me ask you something real quick, and I don't mean to cut you off, but I've

03:08 got two minutes. I just want to kind of vet this thing through a little bit. Do you think that

03:12 maybe labeling China as a country of concern would be a prudent step for us to take in Congress?

03:21 Because we know that most of these issues are coming from the PRC, at least they're a big actor

03:25 in this, but would that be helpful to you in your efforts to do your job? That is an excellent

03:34 question, sir. It's difficult for me to answer without understanding what that label might

03:39 trigger in terms of additional legal authorities or presumption of guilt or anything along those

03:44 lines. At Customs, we're focused on the China threat, sir. More than happy to explore those

03:50 ideas with you and your staff. We're committed to finding workable solutions in the De Minimis

03:56 space. Mr. Lord, as part of your portfolio, you oversee the De Minimis Data Pilot Program.

04:01 What insights can you provide about the results so far?

04:06 Absolutely. I appreciate you asking that question, sir. Our two pilot programs in the De Minimis

04:11 environment have been running since the summer of 2019. Those two pilot programs look at a couple

04:19 different things, but what I'll just highlight is what we're discovering is there is better

04:22 data out there that will help us better segment risk and identify compliant or non-compliant

04:27 shipments, particularly from what I'll call non-traditional actors in the supply chain

04:32 to include online marketplaces. We have successfully been able to pair a web address of a

04:39 product listing with a small package coming through. That data from that website helps us make

04:45 better risk management decisions. Last fiscal year, when there was a billion small packages

04:52 entering the United States, over half of them had additional information from one of those two tests,

04:56 which to us signals an interest in the private sector in getting this additional data for us.

05:01 And as a result, we're in the process now of updating our regulations

05:04 to codify the lessons learned from those tests.

05:08 Thank you for that. And I'll just conclude by saying, look, there are so many concerns. You

05:13 know, I didn't know a lot about IP when I got onto this subcommittee, but there are so many

05:17 concerns from the fees and tariffs that the United States is missing out on within the De Minimis

05:25 space. There's no adherence by foreign actors or entities on the Uyghur Act that you mentioned,

05:33 labor standards. The IP concerns are very self-evident when you look at kind of what

05:38 we're talking about here. And of course, at the end of the day, the real impact, and this isn't

05:43 a fault at you, I'm just kind of sharing the concern that I have, which I think you share too,

05:47 is that American workers and American companies are put at a disadvantage because we basically

05:52 have created a free trade agreement with China because of this, because they're shipping these

05:57 things in with substandard labor standards. And American companies are forced to compete with that

06:04 on an international stage at a very big disadvantage to them. And so however we can

06:10 partner with you, I'm happy to do that and listen to your insights, because I think this is a very

06:15 big issue for our country to tackle. Thank you so much.

06:18 Chairman, if I may.

06:20 Mr. Lorden.

06:22 Thank you, sir. Thank you for that, Congressman. I would just like to say and offer my staff to

06:27 reach out to your staff. We have an initiative that I mentioned in my opening remarks, the 21st

06:31 Century Customs Framework Initiative, that proposes statutory changes to help us better manage this

06:38 environment. We are concerned, just to be very direct, and we do need help and are eager to

06:43 partner with Congress. So thank you. Well, and thank you, by the way, for being, and all three

06:48 of you, quite frankly, but thank you for being a witness that actually answers questions. We have

06:53 that very rarely in Congress sometimes. So thank you for that. Mr. Chairman, I yield back.

06:57 The gentleman yields back. I'm going to...

Russell Fry Questions Experts On Closing Import 'Loopholes' For Counterfeit Goods From China

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