Trade court won't reinstate tariff exemption on low-value 'de minimis' shipments, for now

CNBC

2 days ago

A federal trade court on Monday declined, for now, to block President Donald Trump's decision to end a longstanding tariff exemption for low-value packages shipped to the United States, known as de minimis imports.
A three-judge panel on the U.S. Court of International Trade ruled that the scope of the lawsuit, brought by auto parts retailer Detroit Axle, is already covered by another ongoing case challenging many of Trump's tariffs.
In that case, known as V.O.S. Selections v. Trump, the panel ruled against the Trump administration in late May, striking down Trump's sweeping "reciprocal" tariffs and other duties he had imposed.
But the decision was quickly paused by the U.S. Court of Appeals for the Federal Circuit, keeping Trump's tariffs in place while the legal battle plays out.
As a result, "This court has already granted, and the Federal Circuit subsequently stayed, all relief Axle requests," the lower-court panel wrote in Monday's ruling.
"We will not grant redundant, contingent relief through a preliminary injunction here," they wrote.
The court denied Detroit Axle's bid for a preliminary injunction and stayed its case, pending the outcome of the broader challenge to Trump's tariffs in V.O.S.
Oral arguments in that case before a federal appeals court are set for Thursday morning.
Detroit Axle sued the Trump administration in mid-May, challenging Trump's executive orders rescinding de minimis exemptions, which allow shipments valued below $800 to enter the U.S. duty free.
The loophole has been a boon for Chinese budget retailers like Shein and Temu.
But Detroit Axle's lawsuit argued that Trump's sudden scrapping of the tariff exemption, and his other "drastic and unlawful" trade policies, could wipe out its business in "a matter of months."
The retailer said that its contracts with Chinese manufacturers have helped it broaden its U.S. customer base with lower prices, while growing its business. But between 2018 and 2020, the company said tariffs imposed on Chinese goods during Trump's first presidential term threatened its business model.
That's when Detroit Axle sought to take advantage of the de minimis exemption, it said.
It opened a distribution facility in Juarez, Mexico, that imports auto parts from China and only fulfilled orders for less than $800, which were spared tariffs under the longstanding de minimis exemption.
But that model is now under "existential threat" from Trump's new tariff policies — especially his April 3 executive order that ended the de minimis exemption for Chinese imports by May 2.
That order said that Trump was "targeting deceptive shipping practices by Chinese-based shippers" who hide "illicit substances, including synthetic opioids, in low-value packages."
Nonetheless, "the impact on Detroit Axle has been swift and catastrophic," the company said in its lawsuit.
"Under the now-applicable Chinese tariffs, which have reached 72.5%, it is cost-prohibitive for Detroit Axle to import parts from its suppliers in China to its Detroit factory."
"Its frugal buyers will not bear the increased prices, and Detroit Axle cannot absorb them," the retailer wrote.
The company said it would exhaust its inventory by the end of June, forcing it to shutter its Michigan facilities and layoff hundreds of employees.
In a Michigan state filing in late June, the company said it would be closing its Ferndale warehouse and laying off 102 employees around Aug. 25.
"The decision to close this facility is due to unforeseen circumstance, specifically the sudden imposition of government tariffs, which have significantly disrupted our supply chain and sharply increased the costs of goods," Detroit Axle said in that filing.