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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 2: Last term, agency power took a hit at the Supreme

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Speaker 2: Court as its conservatives overturned a forty year old precedent

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Speaker 2: and put new constraints on regulators. But conservatives are not

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Speaker 2: done with their attack on the so called administrative state,

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Speaker 2: as more issues are coming to the Court that would

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Speaker 2: further gut the authority of federal regulators, and the upcoming

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Speaker 2: issues could be even more consequential if the Court considers

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Speaker 2: two far reaching arguments. One threatens a multitude of laws

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Speaker 2: that let agencies set clean air standards, establish workplace safety rules,

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Speaker 2: and determine on fair trade practices. A second targets the

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Speaker 2: independence of the Securities and Exchange Commission and perhaps even

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Speaker 2: the Federal Reserve. Joining me is Bloomberg New Supreme Court

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Speaker 2: reporter Greg Storr, who has written about this. Greg, for

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Speaker 2: those who don't remember, explain with the Supreme Court's conservative

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Speaker 2: justices did about agency power last term.

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Speaker 3: Well, they did a lot of things. June. The biggest

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Speaker 3: headlines were they overturned a forty year old precedent that

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Speaker 3: it basically said, if there's a statute and it's not

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Speaker 3: clear what it means that the courts will defer to

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Speaker 3: the agency about what that ambiguity means. That was known

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Speaker 3: as the Chevron doctrine. The Court overturned that, and what

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Speaker 3: it means going forward is that judges are going to

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Speaker 3: have a lot more power to strike down agency actions

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Speaker 3: and agencies will have less authority to define the kind

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Speaker 3: of the scope of their missions. There were a couple

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Speaker 3: other big, big decisions the Court issued as well. It's

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Speaker 3: definitely a theme of this court to limit agency power,

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Speaker 3: but that was the biggest case.

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Speaker 2: Address this in not only her the sense, but at

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Speaker 2: a judicial conference this summer.

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Speaker 3: Yeah, so Justice Kagan, who in our previous life was

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Speaker 3: an expert on administrative law professor, she dissented from all

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Speaker 3: the courts of the big pre rulings from this last term,

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Speaker 3: and at the judicial conference in July, she mentioned that,

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Speaker 3: you know, the Court's pretty clear about what his goals

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Speaker 3: are here that the majority of the conservative majority, she said,

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Speaker 3: just thinks there's too much agency regulation going on. And

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Speaker 3: so you know what we're seeing is critics of federal

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Speaker 3: regulation sort of trying to leverage that predisposition that the

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Speaker 3: Court has to limit agency power and they're lodging a

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Speaker 3: whole variety of arguments at the Court.

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Speaker 2: Last term, we learned about the Chevron doctrine. For people

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Speaker 2: who didn't know this term, we're going to learn about

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Speaker 2: the non delegation doctrine.

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Speaker 3: Yeah, we may well. And if we don't learn about

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Speaker 3: it this term, we will learn about it in a

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Speaker 3: term coming to you very soon. The non delegation doctrine,

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Speaker 3: unlike Chevron Chevren, is all about how to interpret statutes.

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Speaker 3: It's not a constitutional question. The delegation question is about

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Speaker 3: constitutional power, and the question is whether when Congress delegates

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Speaker 3: some of its authority to say, a regulatory agency, what

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Speaker 3: sorts of guidance does Congress have to give that agency.

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Speaker 3: And for the past ninety years or so, the Supreme

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Speaker 3: Court has basically said, yeah, it doesn't have to give

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Speaker 3: a whole lot of guidance. It can delegate some really

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Speaker 3: important things to agencies, and as long as there's a

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Speaker 3: so called intelligible principle, that's just fine. And a lot

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Speaker 3: of conservative advocates conservative jurists would like the Court to

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Speaker 3: reinvigorate that doctrine, to put restrictions on Congress so that

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Speaker 3: if it is going to try to delegate some authority.

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Speaker 3: It's got to be a lot more clear about what

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Speaker 3: the agencies actually are supposed to do.

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Speaker 2: That sounds almost like an uphill battle. I don't know

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Speaker 2: if it's a battle that can't be won, considering how

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Speaker 2: little Congress passes nowadays and how difficult it is to

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Speaker 2: get anything through.

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Speaker 3: Yeah, so this doctrine, known as a non delgate doctrine,

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Speaker 3: could really a It could overturn some previously enacted statutes

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Speaker 3: and be, as you said, given the deadlock that is

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Speaker 3: so often a feature of our political process these days,

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Speaker 3: it could you make it virtually impossible or very very

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Speaker 3: difficult for Congress to muster the will and the coalition

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Speaker 3: needed to put in place the kind of law that

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Speaker 3: the Supreme Court would approve of.

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Speaker 2: This non delegation doctrine would apply to all agencies.

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Speaker 3: It would apply to every federal agency. Obviously, every federal

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Speaker 3: agency is different, so exactly how it applies, you know,

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Speaker 3: might depend on the statute. And it will also apply

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Speaker 3: and one case that the Court could decide to take

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Speaker 3: up in the fairly near future, it could apply when

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Speaker 3: an outside entity, a non governmental entity, plays some role

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Speaker 3: in putting regulations in place. So there's also the notion

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Speaker 3: that Congress has even less power to delegate things to

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Speaker 3: private entitudes.

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Speaker 2: Are we talking about environmental rules, workplace rules, things like that.

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Speaker 3: Yeah. So one place we saw it the court turning

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Speaker 3: this case down. But one place we saw it very

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Speaker 3: recently was a very broad challenge to the power of OSHA,

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Speaker 3: the Occupational Safety and Health Administration that sets workplace safety rules.

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Speaker 3: And the challenge which again the Court didn't take this

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Speaker 3: one up, but the challenge was that Congress had given

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Speaker 3: OSHA way too much power to just decide what is

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Speaker 3: an unsafe workplace practice. So that's one example could certainly

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Speaker 3: apply in the context of the EPA. Absolutely, there are,

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Speaker 3: of course a lot of different sorts of attacks on

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Speaker 3: the EPA they could apply, And it's being raised with

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Speaker 3: regard to the Federal Trade Commission's effort to ban noncompete

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Speaker 3: clauses and employment agreements. The question is there is whether

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Speaker 3: Congress has delegated to the FDC the power to decide

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Speaker 3: was an unfair trade practice, and that's the mechanism the

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Speaker 3: PC used to enact this ban, And the question is

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Speaker 3: whether Congress was specific enough there. So it's a pretty

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Speaker 3: wide and potentially very very important legal doctrine.

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Speaker 2: And there's an FCC case.

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Speaker 3: There is an FCC case, and this may be the

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Speaker 3: one that the Court agrees to take up. This has

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Speaker 3: to do with the so called Universal Service Fund. That's

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Speaker 3: the program that is used to subsidize the monthly phone

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Speaker 3: bills in rural areas for poor people, and it's funded

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Speaker 3: by a charge that shows up on everybody else's or

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Speaker 3: every phone bill. And the question goes to how the

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Speaker 3: FCC determines what that charge is going to be from

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Speaker 3: year to year. And this is one of those cases

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Speaker 3: where it relies in part on some assistance of a

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Speaker 3: private entity. That's a case where a federal appeals court,

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Speaker 3: not surprisingly it's the conservative Fifth Circuit, has said that

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Speaker 3: is a violation of the non delegation doctrine. That's the

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Speaker 3: case that sometime in the next few weeks of Supreme

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Speaker 3: Court may well say it's going to hear and greg.

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Speaker 2: It was during Franklin Roosevelt's term that this was used.

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Speaker 3: Yeah, this is I mentioned. The Court has had kind

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Speaker 3: of a low bar for the delegations for the past

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Speaker 3: ninety years, well ninety years ago. It was actually eighty

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Speaker 3: nine years ago. In nineteen thirty five, where only two

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Speaker 3: times the Supreme Court has ever struck anything down on

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Speaker 3: the basis of the non delegation doctrine. There were two

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Speaker 3: cases stemming from the New Deal. I'll spare you the

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Speaker 3: details of the program, but one case is colloquially known

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Speaker 3: as the Kicking case. The other one is colloquially known

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Speaker 3: as the hot Oil case. But since then the Supreme

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Speaker 3: Court has not struck anything down under the non delegation doctrine.

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Speaker 3: But in more recent years, the Court's conservatives have in

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Speaker 3: various forms, strongly suggested that they are interested in reviving

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Speaker 3: the doctrine.

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Speaker 2: And there are some cases that are targeting the independence

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Speaker 2: of federal ages. Tell us about that.

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Speaker 3: Yeah, this is another issue with its roots in the

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Speaker 3: New Deal. There's a nineteen thirty five decision that also

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Speaker 3: went against Franklin Roosevelt. What it did was it said

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Speaker 3: that Roosevelt could not did not have the authority to

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Speaker 3: fire a member of the Federal Trade Commission for any reason.

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Speaker 3: Congress had put in place job protections for the FTC commissioners.

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Speaker 3: Those job protections are still in place, and the question

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Speaker 3: is as to whether those job protections are unconstitutional, violating

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Speaker 3: separation of powers. And if the answer to that is

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Speaker 3: that does violate the separation of powers, then it calls

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Speaker 3: in the question all the administrative agencies, all the independent

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Speaker 3: agencies that are out there. So we're talking about the

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Speaker 3: Securities and Exchange Commission, We're talking about the Federal Trade Commission,

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Speaker 3: the Federal Communications Commission. There's a whole slew of those

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Speaker 3: executive branch agencies, and the argument is basically that they

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Speaker 3: need to be accountable to the president because they are

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Speaker 3: executive branch aig agencies. And the folks who would like

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Speaker 3: to put those agencies more firmly under presidential control are

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Speaker 3: looking at the possibility or arguing for, in some cases,

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Speaker 3: overturning that nineteen thirty five decision known as Humphrey's Executor.

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Speaker 2: The agency that comes to mind that the Supreme Court

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Speaker 2: has had a lot to do with recently is the

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Speaker 2: Consumer Financial Protection Bureau. Tell us how the Court has

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Speaker 2: ruled with respect to that.

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Speaker 3: Yeah, So, a couple of years ago, the Court said

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Speaker 3: it is unconstitutional to give job protections to the director

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Speaker 3: of the CSPB. They struck down those job protections. That

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Speaker 3: means that the director of the CFPP can now be

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Speaker 3: fired by the President, and in that case they distinguished

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Speaker 3: Humph's executor. What they said was he Humph's executor involved

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Speaker 3: a multi member commission. The idea was that you want

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Speaker 3: to have some expertise on this commission, you want to

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Speaker 3: have sort of institutional knowledge. And the court said it

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Speaker 3: different when you have a single person heading an agency.

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Speaker 3: That person, the CFB director, has an enormous amount of

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Speaker 3: power and he or she really ought to be accountable

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Speaker 3: to somebody, namely the President. So the court left open

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Speaker 3: the question of the independent agencies like the ones we

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Speaker 3: were talking about earlier. It said that with regards to

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Speaker 3: agencies that are run by a single person, at least

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Speaker 3: when they have as much executive branch power as the

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Speaker 3: CFPB director has, that is unconstitutional.

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Speaker 2: And our listeners will be concerned about the FED, I think,

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Speaker 2: I mean, with the FED fall if all these agencies do.

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Speaker 3: Yeah, that's a really good question, because exactly how you

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Speaker 3: distinguished the FED from the SEC and the FTC not

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Speaker 3: entirely clear. The people I talked to and I talked

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Speaker 3: to the story I wrote. I talked to a number

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Speaker 3: of people about kind of what the next priorities are

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Speaker 3: in the world of administrative law and without exception, and

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Speaker 3: folks said, I think the Court will be skittish about

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Speaker 3: calling to question the independence of the FED. You know,

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Speaker 3: its independence is really a bedrock of our economic system,

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Speaker 3: so you know, it's a good question. The courts will

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Speaker 3: probably want to tread carefully. You know, there's not a

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Speaker 3: guarantee about how it will come out, but the Court,

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Speaker 3: you can imagine we'll hear a lot about the importance

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Speaker 3: of said independence being a bit apart from the political

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Speaker 3: processes if indeed they do take up this issue of

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Speaker 3: Humphrey's executor.

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Speaker 2: Coming up next on the Bloomberg Lawn Show, I'll continue

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Speaker 2: this conversation with Bloomberg Supreme Court reporter Greg Store will

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Speaker 2: take a peek at the term coming up and see

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Speaker 2: if there are any blockbuster cases. I'm June Grosso and

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Speaker 2: you're listening to Bloomberg. There's a possible challenge to the

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Speaker 2: Consumer Protection Safety Commission.

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Speaker 3: Yeah, this is a case that is on the so

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Speaker 3: called long conference list where the Supreme Court, when this

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Speaker 3: is a come back in early October, will decide whether

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Speaker 3: to take these cases up. And there is a case

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Speaker 3: that challenges the independence of the Consumer Product Safety Commission

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Speaker 3: in that case, the petitioners are saying, hey, you don't

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Speaker 3: need to overturn Humphreys Executor. We can actually make the

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Speaker 3: case that the Consumer Product Safety Commission is different today

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Speaker 3: than the STC was back in nineteen thirty five. But

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Speaker 3: we've seen in other contexts that the Court sometimes goes

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Speaker 3: beyond exactly what the parties are asking for. So it

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Speaker 3: would at least call into question if the Court would

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Speaker 3: agree to take up that case, it would at least

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Speaker 3: call into question the survivability of Hunters Executor, and therefore

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Speaker 3: all these other independent commissions.

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Speaker 2: You know, I foolishly thought that the Court might take

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Speaker 2: a step back, you know, from these groundbreaking decisions, landmark decisions,

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Speaker 2: considering that a lot of their other landmark decisions, like

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Speaker 2: doing right with the Chevron Doctrine, taking away abortion rights,

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Speaker 2: the Second Amendment decision have led to so much litigation

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Speaker 2: in lower courts who are confused about what the rules are,

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Speaker 2: and it seems like this is just going to cause

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Speaker 2: more litigation.

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Speaker 3: It will certainly cause more litigation if the Court goes

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Speaker 3: there on these two areas of law. You know, this

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Speaker 3: is not a guarantee they're going to take these issues

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Speaker 3: up on the very first opportunity. It's possible they will

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Speaker 3: hear people like June Grosso talking about all the confusion

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Speaker 3: in the lower courts, and we'll say, yeah, maybe we should.

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Speaker 3: I'm sure a little bit we will. Al will certainly

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Speaker 3: also get cases coming up that are dealing with that

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Speaker 3: confusion that you were talking about. The decision, the overturning Chevron,

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Speaker 3: the decisions own as Low for Bride, undoubtedly is going

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Speaker 3: to foster some confusion that the Court may feel the

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Speaker 3: need to clear up. There's another big decision the court

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Speaker 3: is whose last term, having to do with the right

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Speaker 3: to a jury trial with the SEC is going after you.

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Speaker 3: That may also spawn some follow up issues, so the

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Speaker 3: Court may feel like it has a handsful with those issues.

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Speaker 3: We're just going to have to see. But what is

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Speaker 3: clear is that folks who think the administrative state has

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Speaker 3: too much power certainly has some other big goals in mind,

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Speaker 3: some other significant things they would like the Court to do,

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Speaker 3: and they're going to be asking for.

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Speaker 2: That last year. About this time, there seem to be

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Speaker 2: a lot of blockbuster cases lined up for the term.

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Speaker 2: Do you see any blockbusters for this term so far?

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Speaker 3: I would say so far, the Court has not agreed

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Speaker 3: to hear any blockbusters. There's plenty of time to add

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Speaker 3: other big cases for the winter and spring. The cases

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Speaker 3: that the Court has agreed to hear in the fall,

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Speaker 3: probably the one that will get the most attention has

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Speaker 3: to do with transgender care and laws in about two

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Speaker 3: dozen states that ban so called gender firming or gender

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Speaker 3: transition care for minors. That's the case the Court will

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Speaker 3: probably hear in December, and of course there's a possibility

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Speaker 3: that we'll have a significant elections fight, so everybody's kind

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Speaker 3: of holding their breath for the power spelthy of that.

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Speaker 2: Are there any abortion related cases coming up? Less term?

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Speaker 2: The Supreme Court took up that Idaho case over whether

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Speaker 2: a federal hospital law guarantees that patients can get abortions

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Speaker 2: to prevent a serious health risk, even in states like

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Speaker 2: Idaho that allow the procedure only when the mother's life

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Speaker 2: is in danger, But the justices didn't resolve the issue.

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Speaker 2: Is that case coming back to the Supreme Court?

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Speaker 3: So the Idaho case, it doesn't seem like that's likely

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Speaker 3: to come back up. There is waiting for the court.

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Speaker 3: We'll see how they deal with it. A similar issue

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Speaker 3: being raised in a Texas case. It's similar but different.

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Speaker 3: In that case, Texas has sued the Biden administration saying

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Speaker 3: a policy that the Department of Health and Human Services,

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Speaker 3: a memorandum they put together, cannot be applied the Texas

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Speaker 3: having to do with whether abortions that need to happen

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Speaker 3: on an emergency basis in an hospital emergency rooms. I'm

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Speaker 3: sure there will be other abortion cases that come along.

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Speaker 3: Right now, there's not a significant one that is a

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Speaker 3: sure beck for the court to take, and not one

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Speaker 3: that they've already agreed to hear.

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Speaker 2: I noticed that in the first week of the term

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Speaker 2: there are oral arguments set in a death penalty case.

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Speaker 3: It's the unusual case where the court agreed to hear

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Speaker 3: an appeal by a death row inmate. It's a case

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Speaker 3: where even the Oklahoma Attorney General says that the guilty

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Speaker 3: verdict against Richard Glossop should not stand. There's evidence that

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Speaker 3: prosecutors suppressed evidence, including some matters regarding the testimony of

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Speaker 3: the key witness. So the court is hearing arguments in

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Speaker 3: that case. And it's the rare case where a death

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Speaker 3: row inmate has at least a fighting chance to win

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Speaker 3: at the Supreme.

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Speaker 2: Court Greg it seemed like it about this time last year.

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Speaker 2: There are a lot more cases that were queued up

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Speaker 2: that seemed interesting. How much slower are they going with

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Speaker 2: granting petitions this year.

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Speaker 3: It's definitely slow. Not so much on numbers, but it's

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Speaker 3: slow in terms of the star power of the cases.

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Speaker 3: This time last year, we had a lot of cases

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Speaker 3: involving some significant cases involving administrative law the Court had

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Speaker 3: already agreed to hear. There were cases that were pretty

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Speaker 3: clearly in the pipeline that the Court was almost certainly

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Speaker 3: going to have to hear, including the myth of pristone,

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Speaker 3: the abortion pill case. We don't really have this term,

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Speaker 3: not a particular reason for it other than those cases

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Speaker 3: don't seem to have come along yet. I would be

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Speaker 3: surprised if we didn't have some pretty significant ones when

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Speaker 3: all of a said and done. The Court certainly has

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Speaker 3: has plenty of time to add some big cases. And

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Speaker 3: there are at least some folks out there watching the Court

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Speaker 3: who speculate that they are intentionally keeping things low key

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Speaker 3: right now with an election coming up, in part because

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Speaker 3: they don't want their docket to get too bogged down

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Speaker 3: with big stuff. Because they may indeed have to take

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Speaker 3: up a significant election case depending on how things go

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Speaker 3: this summer.

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Speaker 2: I think three of the justices when they were talking

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Speaker 2: to groups of lawyers and judges, either complained about or

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Speaker 2: expressed concerns about the amount of work during the summer

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Speaker 2: from the emergency docket, which is better known as the

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Speaker 2: shadow docket. Was there a lot of action on the

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Speaker 2: emergency docket this summer.

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Speaker 3: Yeah, it's been a really big summer for emergency applications.

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Speaker 3: The Court has had cases involving voting laws, a proof

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Speaker 3: of citizenship law. They've had a case involving the rights

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Speaker 3: of transgender students. They've had a significant case involving Joe

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Speaker 3: Biden's latest attempt to reduce student loan bills. A court

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Speaker 3: kept this newest plan on hold, rejecting the Biden administration

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Speaker 3: in that one. And there are a number of pending

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Speaker 3: applications things that have been sitting around for a while

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Speaker 3: involving the EPA, including a rule that would put new

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Speaker 3: limits on missions from power plant to stem climate change.

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Speaker 3: So that's become a pretty regular feature of the court

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Speaker 3: that there are almost always some very significant emergency applications

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Speaker 3: that are in the pipeline and what often happens with these,

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Speaker 3: for example, the student loan case, that may end up

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Speaker 3: being the final word on that effort. It may be

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Speaker 3: because who knows what's going to happen in the presidential race.

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Speaker 3: It may well be that the Biden administration never gets

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Speaker 3: to put those rules in place, even though this is

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Speaker 3: supposed to be only a temporary order from the Supreme Court.

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Speaker 2: And of course the problem with the shadow docket is

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Speaker 2: that these cases are decided sometimes finally, as you mentioned

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Speaker 2: with the student loan case, without full argument or briefing.

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Speaker 2: Thanks so much for that preview, Greg. That's Bloomberg New

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Speaker 2: Supreme Court reporter Greg's store. The Biden administration is moving

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Speaker 2: to narrow a trade loophole that Chinese online retailers like

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Speaker 2: Tamu and Sheen have used to ship an increasing number

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Speaker 2: of packages containing cheap goods into the US every day

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Speaker 2: ti free. The Biden administration announced that it intends to

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Speaker 2: propose rules that would rein in the use of the

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Speaker 2: so called deminimous exemption that allows products worth less than

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Speaker 2: eight hundred dollars to go directly to consumers without customs

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Speaker 2: declarations or duties. Shipments under the Dominimus standard have searched

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Speaker 2: to one billion packages last year, up from one hundred

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Speaker 2: and forty million a decade ago, overwhelming the US agencies

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Speaker 2: responsible for screening packages for unsafe or illegal goods. Joining

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Speaker 2: me is international trade expert David Townsend of Dorsey and

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Speaker 2: Whitney tell us about the dominimous exemption.

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Speaker 1: It's a harve out from the US import entry process

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Speaker 1: where an importer is permitted to make what's called an

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Speaker 1: informal entry as its merchandise comes into the United States,

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Speaker 1: and by statute, that exemption is available only if the

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Speaker 1: package is valued at less than eight hundred dollars and

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Speaker 1: is only entered on one day to the same person,

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Speaker 1: So you can't have one person importing multiple items that

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Speaker 1: are less than eight hundred dollars in claiming them under

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Speaker 1: the informal entry process. What the informal entry process does

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Speaker 1: is it allows a sort of streamlined entry process where

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Speaker 1: limited information and data is reported to US customs and

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Speaker 1: there's a lot of formal data elements that you get

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Speaker 1: to skip if you enter it under the dominamous exemption,

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Speaker 1: and customs waves or doesn't apply. A number of the

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Speaker 1: regulatory requirements that apply to import entry that do not

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Speaker 1: enter under the diminimus exemption.

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Speaker 2: Has the use of the dominimous exemption gone up in

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Speaker 2: recent years?

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Speaker 1: Yeah, So I'll just back up in terms of the

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Speaker 1: history of the dominomous exemption, because it has a pretty

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Speaker 1: long history. It was it's been in effect under US

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Speaker 1: law for decades through most of the nineties and early

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Speaker 1: two thousands. It was at two hundred dollars per person

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Speaker 1: per day. That was changed in twenty fifteen, and in

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Speaker 1: that law, Congress raised the statutory threshold under which importers

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Speaker 1: can use the diminamous exemption. So the exemption went from

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Speaker 1: two hundred dollars a day eight hundred dollars a day

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Speaker 1: in twenty fifteen. When Congress made this change, it was

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Speaker 1: a recognition that e commerce had increased, that there was

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Speaker 1: significant benefit to US consumers, to US importers, to e

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Speaker 1: commerce and retail companies to allowing the use of the

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Speaker 1: informal entry procedure. And so to get to question whether

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Speaker 1: it's increased, Yes, it's increased many times over since twenty fifteen.

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Speaker 1: And it's no secret why that would be the case. First,

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Speaker 1: the amount of customers and US consumers that buy things over.

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Speaker 1: E commerce has significantly increased since twenty fifteen. There was

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Speaker 1: a large increase because of COVID nineteen, also a large

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Speaker 1: increase I think, even aside from COVID, just from people

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Speaker 1: choosing the shop online and through e commerce platforms more

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Speaker 1: than they were as of the date when Congress changed it.

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Speaker 1: So to give you just a few figures about that increase,

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Speaker 1: that's been vast. So in twenty fifteen twenty sixteen when

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Speaker 1: the law changed, there was about one hundred and forty

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Speaker 1: six million parcels per year that we're using the informal

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Speaker 1: entry process, and as of last year and well this

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Speaker 1: year as well, it'll be over one billion, So a

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Speaker 1: very large increase. And the value of imports under the

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Speaker 1: exemption has increased in the commensurate amount as the number

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Speaker 1: of parcels.

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Speaker 2: How much of this is directed at the Chinese retailers

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Speaker 2: Temu and Sheen. The US textile industry has complained that

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Speaker 2: the recent boom in e commerce from those two companies

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Speaker 2: in particular has hamstrung manufacturers.

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Speaker 1: Well, the majority of imports under the Dominomus exemption are

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Speaker 1: from China, and I think you know, a lot of

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Speaker 1: that increase would be to be expected because the profile

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Speaker 1: of imports from China to the United States has been

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Speaker 1: even going all the way back to twenty fifteen and

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Speaker 1: still today, there's a lot of consumer goods and items

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Speaker 1: sold over e commerce that would naturally tend to qualify

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Speaker 1: for the diminimist exemption.

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Speaker 2: Tell us about the executive order and what it aims

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Speaker 2: to do.

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Speaker 1: Yeah, So the White House on Friday announced several changes

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Speaker 1: to the dominimus exemption. First, there are one of the

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Speaker 1: significant benefits of using the dominomous exemption, certain tariffs can

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Speaker 1: be avoided entirely. And the White House aims to, through

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Speaker 1: a notice of rule making, is going to eliminate some

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Speaker 1: of the tariff exemptions that applied for the dominamous exemption.

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Speaker 1: And I'll just give you a few examples of those.

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Speaker 1: There's what's called Section three A one tariffs, which are

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Speaker 1: imposed on Chinese origin goods since twenty eighteen by the

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Speaker 1: Trump administration, and Customs have been very clear from the

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Speaker 1: beginning that if you were importing something under the dominamus exemption,

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Speaker 1: you could avoid the Section three to one tariffs. Also,

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Speaker 1: less important in my view, the White House is proposing

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Speaker 1: to do away with the exemption if what are called

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Speaker 1: Section two a one terraffs that are safeguard tariffs apply

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Speaker 1: to the import or also two thirty two duties, which

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Speaker 1: are national security related duties that are imposed on deal

440
00:25:51,200 --> 00:25:54,240
Speaker 1: and aluminum. Unlike those duties, the Section three to one

441
00:25:54,320 --> 00:25:57,919
Speaker 1: tariffs apply to about two thirds of the goods that

442
00:25:57,960 --> 00:26:01,640
Speaker 1: are imported from China and do cover at least some

443
00:26:01,720 --> 00:26:04,840
Speaker 1: consumer items, the types of things that you would expect

444
00:26:04,880 --> 00:26:07,960
Speaker 1: to be and in packages that are valued at eight

445
00:26:08,040 --> 00:26:11,680
Speaker 1: hundred dollars or less. So the White House is proposing

446
00:26:11,760 --> 00:26:14,840
Speaker 1: to say, if you have anything in a package that

447
00:26:15,160 --> 00:26:18,040
Speaker 1: is subject to Section three to one duties, you're ineligible

448
00:26:18,080 --> 00:26:21,360
Speaker 1: to use the informal entry process, and you must declare

449
00:26:21,400 --> 00:26:24,520
Speaker 1: it as the formal entry and then be required to

450
00:26:24,520 --> 00:26:27,440
Speaker 1: pay the Section three to one duties. I mean, one

451
00:26:27,480 --> 00:26:31,320
Speaker 1: thing you know that's significantly changed since twenty fifteen when

452
00:26:31,359 --> 00:26:34,879
Speaker 1: the DOMINOMAUS exemption was increased was in twenty eighteen, President

453
00:26:34,960 --> 00:26:38,760
Speaker 1: Trump began imposing the Section three oh one tariffs and

454
00:26:38,880 --> 00:26:42,639
Speaker 1: President Biden has continued those tariffs, and so critics have

455
00:26:42,720 --> 00:26:46,080
Speaker 1: been saying, well, this has created a loophole because you

456
00:26:46,119 --> 00:26:49,439
Speaker 1: can import items from China that ought to be subject

457
00:26:49,480 --> 00:26:51,679
Speaker 1: to Section three to one duties, but if you do

458
00:26:51,840 --> 00:26:55,720
Speaker 1: so under the divinmus exemption, you can just avoid it entirely.

459
00:26:55,760 --> 00:26:59,159
Speaker 1: And what the White House proposed on Friday would avoid

460
00:26:59,160 --> 00:27:03,280
Speaker 1: that situation by for closing importers from using the diminimus

461
00:27:03,280 --> 00:27:05,960
Speaker 1: exemptions for any package with anything that's subject to Section

462
00:27:06,040 --> 00:27:06,600
Speaker 1: three oh one.

463
00:27:07,119 --> 00:27:10,200
Speaker 2: What happens right away? These are just suggested.

464
00:27:10,560 --> 00:27:13,879
Speaker 1: The White House said that they're going to initiate a

465
00:27:13,920 --> 00:27:18,199
Speaker 1: proposed rule making that would prevent filers from using the

466
00:27:18,240 --> 00:27:21,040
Speaker 1: diminimus exemption if anything is subject to three oh one.

467
00:27:21,200 --> 00:27:24,360
Speaker 1: At the same time, the White House said that they

468
00:27:24,440 --> 00:27:29,160
Speaker 1: think there should be comprehensive reform of the diminimust exemption,

469
00:27:29,240 --> 00:27:31,800
Speaker 1: which would be done by Congress. As I noted at

470
00:27:31,800 --> 00:27:35,680
Speaker 1: the start, the Diminimus exemption is the creature of statute,

471
00:27:35,720 --> 00:27:39,760
Speaker 1: so it's established under the US Customs law. So although

472
00:27:39,800 --> 00:27:41,960
Speaker 1: the White House is going to engage in a rule

473
00:27:42,000 --> 00:27:45,000
Speaker 1: making on the topic, they've also said that at least

474
00:27:45,040 --> 00:27:47,920
Speaker 1: some of the issues and enforcement problems that people have

475
00:27:48,040 --> 00:27:52,240
Speaker 1: cited with respect to dominimus ought to be resolved through

476
00:27:52,640 --> 00:27:57,560
Speaker 1: congressional lawmaking rather than just through administrative action rulemaking.

477
00:27:57,680 --> 00:27:58,440
Speaker 2: Takes how long?

478
00:27:58,840 --> 00:28:01,160
Speaker 1: Yeah, right, we're going to have to propose a rule.

479
00:28:01,440 --> 00:28:04,200
Speaker 1: They'll have to open it up for comment, the public

480
00:28:04,240 --> 00:28:07,080
Speaker 1: will get to comment on that, and they'll have to

481
00:28:07,320 --> 00:28:12,000
Speaker 1: engage in a process of addressing those comments and finalizing

482
00:28:12,040 --> 00:28:15,080
Speaker 1: a rule. So presumably it's going to be months before

483
00:28:15,560 --> 00:28:19,000
Speaker 1: something is final And the White House noted that they said, look,

484
00:28:19,000 --> 00:28:21,960
Speaker 1: this all could be done more quickly if Congress acts

485
00:28:22,000 --> 00:28:25,840
Speaker 1: than if the administration does. But they obviously feel like

486
00:28:25,920 --> 00:28:28,680
Speaker 1: they have the authority to move forward with these changes

487
00:28:28,920 --> 00:28:33,159
Speaker 1: without Congress acting, And given the political pressure that's been

488
00:28:33,200 --> 00:28:35,680
Speaker 1: building on this topic, I think they thought they would

489
00:28:35,680 --> 00:28:37,640
Speaker 1: stay in front of it by saying, look, we're going

490
00:28:37,680 --> 00:28:39,840
Speaker 1: to do a rule making to close the three h

491
00:28:39,920 --> 00:28:43,120
Speaker 1: one loophole, as it's been called. At the same time,

492
00:28:43,160 --> 00:28:45,560
Speaker 1: if this is going to be done in a comprehensive manner,

493
00:28:45,760 --> 00:28:47,120
Speaker 1: it ought to be done by Congress.

494
00:28:47,880 --> 00:28:51,120
Speaker 2: Is there a suspicion that a lot is coming in

495
00:28:51,760 --> 00:28:56,360
Speaker 2: that doesn't really fit the deminimous exemption that's slipping in.

496
00:28:57,120 --> 00:29:00,280
Speaker 1: Yeah, So there's sort of two different buckets of issue here.

497
00:29:00,320 --> 00:29:03,280
Speaker 1: One would be the lawful avoidance of Section three to

498
00:29:03,400 --> 00:29:06,640
Speaker 1: one duties that I've described, but then the second is

499
00:29:07,360 --> 00:29:12,200
Speaker 1: that because the import process is informal, it requires less data.

500
00:29:12,680 --> 00:29:16,280
Speaker 1: That there's a lot of merchandise entered under the informal

501
00:29:16,360 --> 00:29:21,120
Speaker 1: process that is not lawfully eligible to be entered under

502
00:29:21,160 --> 00:29:24,240
Speaker 1: the dominimous entry process, and that isn't eligible to be

503
00:29:24,720 --> 00:29:27,160
Speaker 1: imported into the United States at all. So I'll just

504
00:29:27,200 --> 00:29:29,520
Speaker 1: give you a couple of examples of this sort of

505
00:29:29,720 --> 00:29:34,800
Speaker 1: unlawful evasion of US Customs police authority that people are

506
00:29:34,840 --> 00:29:40,320
Speaker 1: concerned about. One is that items that may have illegitimate

507
00:29:40,480 --> 00:29:44,240
Speaker 1: intellectual property or trademarks on them are able to be

508
00:29:44,400 --> 00:29:48,640
Speaker 1: imported under the dominomous exemption without Customs fully enforcing US

509
00:29:48,720 --> 00:29:52,880
Speaker 1: law related to it. And then another is narcotics. So

510
00:29:53,000 --> 00:29:56,680
Speaker 1: that's another example where people have said illicit substances are

511
00:29:56,720 --> 00:29:59,800
Speaker 1: able to be imported into the United States under customs.

512
00:29:59,840 --> 00:30:03,400
Speaker 1: No is because they're not getting full visibility into certain

513
00:30:03,440 --> 00:30:07,320
Speaker 1: import entries that might contain drugs or precursors to drugs

514
00:30:07,360 --> 00:30:11,959
Speaker 1: that people can use to make into illicit substances, and

515
00:30:12,840 --> 00:30:17,160
Speaker 1: Customs has acknowledged that these are blind spots for them

516
00:30:17,640 --> 00:30:22,200
Speaker 1: as one of the things US Customs did earlier this year,

517
00:30:22,960 --> 00:30:28,280
Speaker 1: they issued a rule making related to the type what's

518
00:30:28,320 --> 00:30:32,440
Speaker 1: called Type eighty six entry, which is an entry where

519
00:30:32,440 --> 00:30:34,880
Speaker 1: you take advantage of the deminimus exemption.

520
00:30:35,320 --> 00:30:37,480
Speaker 3: But you still report certain.

521
00:30:37,280 --> 00:30:41,080
Speaker 1: Limited data to US Customs through their electronic system. And

522
00:30:41,120 --> 00:30:44,360
Speaker 1: they said when they were altering this type eighty sixth

523
00:30:44,480 --> 00:30:48,200
Speaker 1: entry process, they said, look, we have enforcement concerns. Given

524
00:30:48,280 --> 00:30:51,440
Speaker 1: the rise in imports under the Demnamus exemption. We just

525
00:30:51,480 --> 00:30:56,560
Speaker 1: cannot meaningfully police everything that's coming in under this and

526
00:30:56,640 --> 00:30:59,640
Speaker 1: so their solution was to broaden at least a bit

527
00:31:00,160 --> 00:31:02,880
Speaker 1: the amount of data elements that importers have to have

528
00:31:03,000 --> 00:31:07,240
Speaker 1: to report to customs as they're using the dominimous entry process,

529
00:31:07,320 --> 00:31:10,520
Speaker 1: and that was done back in January. I think it

530
00:31:10,560 --> 00:31:13,560
Speaker 1: was made effective in the first quarter of twenty twenty four.

531
00:31:14,000 --> 00:31:17,880
Speaker 1: You know, the concerns about enforcement have not abated at

532
00:31:17,920 --> 00:31:20,600
Speaker 1: all since then. In fact, they've grown even stronger. And

533
00:31:20,640 --> 00:31:23,720
Speaker 1: so you see Customs in this position where they're acknowledging that,

534
00:31:24,120 --> 00:31:28,200
Speaker 1: you know, we cannot fully enforce US law under the

535
00:31:28,280 --> 00:31:31,800
Speaker 1: volume of shipments we're seeing under the dominimous exemption. And

536
00:31:31,840 --> 00:31:34,080
Speaker 1: that brings you to the White House action that was

537
00:31:34,120 --> 00:31:38,080
Speaker 1: taken on Friday that narrow the circumstances under which importers

538
00:31:38,120 --> 00:31:42,480
Speaker 1: are allowed to use the diminimus exemption. Although one of

539
00:31:42,520 --> 00:31:45,920
Speaker 1: the elements is that anything subject to second three to

540
00:31:46,000 --> 00:31:49,800
Speaker 1: one tiff would be ineligible to use the dominomous exemption.

541
00:31:50,480 --> 00:31:53,760
Speaker 1: They're also as part of the White House proposal, is

542
00:31:53,840 --> 00:31:57,760
Speaker 1: going to be a rulemaking relating to how importers declare

543
00:31:58,120 --> 00:32:01,520
Speaker 1: the dominimus exemption and the elements that they have to

544
00:32:01,560 --> 00:32:04,800
Speaker 1: share with customs. So you see both the duty avoidance

545
00:32:04,840 --> 00:32:07,320
Speaker 1: issue related to three to one that we talked about earlier,

546
00:32:07,320 --> 00:32:11,840
Speaker 1: but also these other larger enforcement issues relating to IP

547
00:32:12,240 --> 00:32:17,120
Speaker 1: relating to narcotics and other items entering the United States

548
00:32:17,200 --> 00:32:19,160
Speaker 1: that shouldn't be lawfully entered.

549
00:32:19,640 --> 00:32:24,400
Speaker 2: And lawmakers have worn that products illegally made with forced

550
00:32:24,640 --> 00:32:29,240
Speaker 2: labor can avoid detection with this deminimous exemption.

551
00:32:29,680 --> 00:32:33,480
Speaker 1: It's also a significant concern here is as part of

552
00:32:33,520 --> 00:32:37,440
Speaker 1: the Trade Enforcement and Trade Facilitation Act of twenty fifteen,

553
00:32:38,560 --> 00:32:43,240
Speaker 1: Congress addressed and narrowed an exclusion for imports relating to

554
00:32:43,280 --> 00:32:46,880
Speaker 1: forced labor. And that is another issue that since twenty

555
00:32:47,000 --> 00:32:50,560
Speaker 1: fifteen has become a significant flashpoint. And so when you

556
00:32:50,600 --> 00:32:53,000
Speaker 1: look back to those legal changes that were made in

557
00:32:53,040 --> 00:32:55,960
Speaker 1: twenty fifteen by Congress. You have Congress, you know, expanding

558
00:32:55,960 --> 00:32:58,840
Speaker 1: the deminimous exemption up to eight hundred dollars and at

559
00:32:58,880 --> 00:33:02,320
Speaker 1: the same time tightening US import law. Related to an

560
00:33:02,400 --> 00:33:06,080
Speaker 1: enforcement issue, it's just forced labor. And the importance of

561
00:33:06,120 --> 00:33:09,480
Speaker 1: forced labor for Congress and other policymakers in the United

562
00:33:09,480 --> 00:33:13,120
Speaker 1: States has really grown significantly since then, and so that

563
00:33:13,240 --> 00:33:15,920
Speaker 1: is another sort of flashpoint and reason I think you're

564
00:33:15,920 --> 00:33:19,520
Speaker 1: seeing a lot of discussion about reforming the deminamus exemption

565
00:33:19,920 --> 00:33:22,400
Speaker 1: under US law. Whether it's by executive action like the

566
00:33:22,400 --> 00:33:25,400
Speaker 1: White House is doing, or through a potential statory change

567
00:33:25,440 --> 00:33:26,080
Speaker 1: by Congress.

568
00:33:26,120 --> 00:33:29,520
Speaker 2: It's certainly a critical issue. Thanks so much, David. That's

569
00:33:29,600 --> 00:33:32,960
Speaker 2: David Townshend of Dorsey and Whitney. And that's it for

570
00:33:33,000 --> 00:33:36,040
Speaker 2: this edition of the Bloomberg Law Podcast. Remember you can

571
00:33:36,080 --> 00:33:39,000
Speaker 2: always get the latest legal news by subscribing and listening

572
00:33:39,040 --> 00:33:42,760
Speaker 2: to the show on Apple Podcasts, Spotify, and at Bloomberg

573
00:33:42,800 --> 00:33:46,920
Speaker 2: dot com, Slash podcast, Slash Law. I'm June Grosso and

574
00:33:46,960 --> 00:33:48,240
Speaker 2: this is Bloomberg