There Is $60 Billion
Sitting on the Table.
Foreign sellers hide behind a 1987 treaty. But the law already exists to override it — and recover up to $60 billion in annual U.S. tax revenue they've never paid.
The Supreme Court established the legal principle in South Dakota v. Wayfair (2018). The law already exists. IRC §864, the TCJA, and established withholding mechanisms give the IRS the authority to act today.
A free marketplace must be a fair marketplace.Open competition only works when every participant plays by the same rules. Right now, they don't.
Foreign seller share of U.S. marketplace sellers
Up from 18% in 2017. At million-dollar sellers: 57% Chinese, 39% American. Marketplace Pulse, 2025
When the tax treaty took effect
The U.S.–China Income Tax Treaty predates the commercial internet, Amazon, and e-commerce by decades.
E-commerce was supposed to be America's entrepreneurship engine. Now it's being systematically taken over by China.
Fifteen years ago, e-commerce gave American entrepreneurs an unprecedented advantage: no big city required, no physical storefront needed, just an idea and an internet connection. Small businesses could reach millions of customers. But foreign sellers—overwhelmingly Chinese—exploited a legal loophole to enter U.S. marketplaces with zero accountability, zero taxes, and zero liability. They don't answer to any American court. They don't carry insurance. They don't register as U.S. businesses. And the law that enabled this loophole is older than Amazon itself.
No Liability Insurance
Foreign sellers carry zero liability coverage while American competitors must insure against product harm.
Answer No American Court
When their products cause harm, victims have no one to sue. The seller vanishes and cannot be reached.
No U.S. Company Registered
They operate as 'undocumented businesses' inside the American economy with no legal entity to hold accountable.
Pay Zero U.S. Income Tax
Despite $220B in annual sales to Americans, they register no U.S. presence and owe nothing.
Foreign sellers on major U.S. marketplaces
Up from 7% a decade ago. Overwhelmingly Chinese.
Annual sales by foreign sellers to Americans
On Amazon, Walmart, Temu, Shein, TikTok Shop.
Built-in competitive advantage
Americans pay up to 50% tax. Foreign sellers pay 0%.
How They Hide
These sellers operate as "undocumented businesses" inside the American economy. They:
- Store inventory in American warehouses
- Ship from American soil to American customers
- Register no U.S. company and pay no U.S. income tax
- Carry no liability insurance and answer to no American court
- Shelter under a 1987 U.S.-China tax treaty written before e-commerce existed
Real Harm
This isn't abstract. American businesses are being destroyed by the tens of thousands. When a foreign seller's product causes harm — like a Chinese seller's hoverboard that burned a Tennessee family's home, with two children trapped upstairs — the seller vanishes and cannot be reached. There is no one to sue.
American businesses that follow every rule are losing to competitors who follow none.
Two major victories. One critical gap remains.
De Minimis Closure
Eliminated the loophole that let Temu and Shein flood the country with untaxed, untraced packages directly to consumers.
Impact: Sealed the border to anonymous goods.
Customs Enforcement Order
Required a real, accountable Importer of Record with genuine U.S. assets behind every shipment crossing the border.
Impact: Made foreign companies accountable for what they import.
But One Door Remains Open
The marketplace seller loophole. While we've sealed the border to direct imports and required accountability for goods coming in, foreign companies still operate inside American marketplaces — Amazon, Walmart, Temu, Shein, TikTok Shop — with zero accountability and zero U.S. income tax.
They store inventory in American warehouses, ship from American soil, set U.S. pricing, and run advertising and customer service from America. But they register no U.S. company and pay no U.S. income tax. This is the work that remains.
Close the marketplace seller loophole.
The Remaining Problem
- •Foreign sellers dominate U.S. marketplaces (50%+ of third-party sellers)
- •$220 billion in annual sales flowing tax-free to China
- •Hidden behind outdated 1987 tax treaty designed before e-commerce
- •Zero U.S. income tax despite operating entire business from America
- •No accountability, no liability, no registration required
- •Destroying American small businesses by the tens of thousands
Why This Matters for America
For American workers: When foreign brands dominate the American market, they source from foreign factories. The more market share they take, the fewer American factories have customers.
For American businesses: A 30%+ competitive advantage (0% tax vs. 50% tax for Americans) isn't fair competition. It's market capture by government favor.
The Path Forward Is Clear
The authority already exists. We don't need new law. We need the IRS to enforce existing law:
- ✓IRC §864 establishes that substantial, continuous U.S. business activity = U.S. taxable presence
- ✓The TCJA (2017) strengthened this authority over foreign sellers
- ✓Wayfair (2018) confirmed economic presence alone creates tax nexus
Why Taxation Is The Answer
Taxation isn't just about revenue. It's about accountability. When you tax foreign sellers, you force registration. When they register, they become accountable. And accountability cascades into everything else.
Taxation
Tax obligation forces a legal presence in the U.S.
IRC §864, TCJA (2017), Wayfair (2018) all provide authority.
Registration
A legal presence requires a registered entity.
No more hiding behind marketplaces or subsidiaries.
Responsibility
A registered entity has legal obligations.
Tax filing, withholding, reporting requirements.
Liability
A legal entity can be held accountable.
For product defects, consumer harm, damages.
Compliance
Real enforcement becomes possible.
Safety standards, labor laws, tariff compliance.
Why SAFE Act, PAIL Act, and Customs Enforcement Matter
Once taxation forces registration and accountability, other policies become enforceable:
The Revenue Impact: $9–60 Billion Annually
Foreign sellers generate over $220 billion in annual U.S. marketplace sales. Under existing law (IRC §864, TCJA, Wayfair), the IRS can recover between $9–60 billion annually by enforcing tax obligations. No new legislation required.
Three legal principles already give the IRS everything it needs.
Foreign sellers generating $220 billion in U.S. marketplace sales aren't hiding in some legal gray area. They're directly subject to three established doctrines the Supreme Court, Congress, and courts have already recognized.
The Three-Step Enforcement Sequence
Step 1: Establish Nexus (Wayfair)
Foreign sellers with $100K+ annual sales or 200+ transactions on U.S. marketplaces have economic nexus. This is not debatable—Wayfair settled it. $220 billion in foreign seller sales automatically triggers nexus.
Step 2: Apply Tax Obligation (IRC §864)
Once nexus exists, IRC §864(b) applies. These sellers are engaged in a "U.S. Trade or Business." The 1987 U.S.-China tax treaty doesn't override this—§7852(d) makes clear that newer domestic law prevails. Congress can override the treaty, and the IRS can enforce §864.
Step 3: Implement Withholding (TCJA)
The IRS enforces through marketplaces. Withhold 15-30% from foreign seller payouts (using FIRPTA, §3406, or §1441 precedent), require U.S. entity registration and EIN, mandate tax filing. No new law needed—these are established frameworks.
Result: Foreign sellers either register as U.S. businesses and pay U.S. tax, or they exit U.S. marketplaces. Accountability cascades. No new legislation required.
The Full Reform Package
Three immediate actions. Thirteen structural reforms. All of it doable now.
IRS Applies Existing Domestic Law
Declare that $100,000+ in annual U.S. marketplace sales or 200 transactions — the safe-harbor threshold the Supreme Court found permissible in Wayfair — is sufficient to establish a U.S. Trade or Business under IRC §864(b). The TCJA strengthened this authority. Implement withholding under FIRPTA (§1445), backup withholding (§3406), or §1441/§1442. No new law required.
Administrative action only. Effective upon issuance.
Mandatory Withholding at the Platform Level
Marketplaces withhold a percentage (15–30%, per existing precedent under FIRPTA, §3406, and §1441) of disbursements to foreign sellers and remit to the IRS — exactly how sales tax collection already works. Evasion-proof by design.
Precedent: FIRPTA 15% (§1445), backup 24% (§3406), foreign persons 30% (§1441). Rate at IRS discretion.
Mandatory U.S. Entity + EIN
Every seller on a U.S. marketplace must hold a U.S. legal entity and EIN. No entity, no marketplace access. Pairs with withholding to close the evasion loop.
Addresses the Hong Kong re-registration surge documented in 2025.
Complete 16-point framework below — addressing tax, enforcement, consumer protection, trade fairness, and platform accountability.
Apply IRC §864 & the TCJA — Override the Treaty Shield
Foreign sellers hide behind the 1987 treaty to avoid U.S. income tax. But IRC §864(b), interpreted by long-settled case law, already reaches these sellers, and the TCJA strengthened U.S. taxing jurisdiction over foreign business activity. Under §7852(d), Congress retains the authority to apply later-enacted domestic law where it conflicts with earlier treaty provisions. The IRS should apply existing law and implement mandatory marketplace withholding.
Mandatory U.S. Entity, EIN and Tax Compliance
All sellers—foreign and domestic—must maintain a U.S. legal entity, a U.S. Employer Identification Number, and pay U.S. income and corporate tax rates on U.S.-source income.
Mandatory Marketplace Tax Withholding
Marketplaces must withhold a percentage of disbursements to foreign sellers and remit directly to the IRS. Established precedent ranges from 15% (FIRPTA, §1445) to 24% (backup withholding, §3406) to 30% (§1441/§1442). The IRS should determine the appropriate rate using these existing frameworks.
180-Day Fund Hold Period
Foreign seller funds must be held for 180 days to allow resolution of consumer protection claims, IP disputes, and fraud investigations—preventing fund flight to foreign accounts before legal remedies can be pursued.
U.S. Responsible Persons and Liability Bonds
Foreign companies must appoint a U.S.-based responsible person and maintain liability bonds of $1M+ in a U.S. bank account. Creates enforceable domestic legal recourse for injured consumers.
Tariffs Based on True Country of Origin
Tariffs based on the entity and entity owner's true country of origin, closing transshipment loopholes via Vietnam, Mexico, and Canada. Clearly defined exemptions for genuinely U.S.-owned and operated companies.
Federal Incentives for Domestic Manufacturing
Direct federal incentives for small businesses to invest in and manufacture within the United States—rebuilding American industrial capacity at the small-business level.
90-Day Product Pre-Registration
Foreign sellers must pre-register all products 90 days before sale. IP owners may review and block infringing products before they go live. Platforms and ad-tech companies must build this into their infrastructure.
Open All Import Records to the Public
All HTS/HS/Import records must be publicly accessible—enabling self-policing by American businesses, journalists, researchers, and law enforcement tracking foreign seller activity.
Mandatory Seller and Product Origin Disclosure
Marketplaces must visibly display the seller's country of origin, HS/HTS codes, and all tariff information for every listed product—giving consumers and sellers full visibility to self-police.
Mandatory U.S. Insurance Coverage
All foreign and Chinese sellers must be insured by licensed U.S. insurance providers—creating a domestic claims mechanism for consumers injured by defective or counterfeit products.
Marketplace Liability for Policy Enforcement
Platforms must be held liable for enforcing their own marketplace policies—including review manipulation, search ranking abuse, counterfeit listings, and other forms of commercial fraud.
Equal Fee Structures for All Sellers
Marketplaces cannot offer preferential incentives, lower fees, or special promotional terms to foreign sellers. All seller treatment must be equal regardless of country of origin.
No USPTO Registrations Without a U.S. Entity
Trademark and patent registrations at the USPTO must require a valid U.S. legal entity—closing the loophole enabling mass weaponized filings from foreign entities (48,000 Chinese USPTO filings in 2020 alone).
All Compliance Testing Must Be U.S.-Based
Product compliance and safety testing for any good sold on U.S. marketplaces must be conducted by accredited U.S. testing facilities—not foreign labs with no accountability to U.S. standards.
Close the De Minimis Loophole
The $800 duty-free threshold was exploited to avoid tariffs, smuggle fentanyl, and circumvent customs inspection. The 2025 closure was the right call. This must be made permanent and airtight.
Expected Outcomes
$9–60B in Recovered Tax Revenue
Annually — recovered without new taxes, new laws, or new tariffs
A Level Playing Field
All marketplace participants held to identical standards, regardless of where they are incorporated
Enhanced Consumer Protection
Real accountability for product safety, counterfeits, and fraud—with enforceable domestic remedies
Increased Industrial Capacity
Federal incentives rebuild American manufacturing at the small-business level across rural and urban areas
Reduced Supply Chain Risk
Less dependence on overseas supply chains vulnerable to geopolitical disruption or manipulation
Balanced Trade Relations
Reciprocity enforced consistently—the same rules we apply to American companies, applied to everyone
In the News
The e-commerce fairness crisis is well-documented. These are the stories from journalists, researchers, and analysts covering it.
The SAFE Act: Senate Bill Targets Foreign Seller Fraud on U.S. Marketplaces
Senator Bill Cassidy (R-LA) introduced the Securing Accountability in Foreign Entries (SAFE) Act — legislation that directly advances AEBA's core mission by requiring verifiable, accountable parties to serve as importers of record. Foreign entities without meaningful U.S. presence can no longer hide behind the system.
“American markets should be safe from foreign fraudsters. We’re making it easier to do business with the partners we trust, and harder for those we don’t.”
— Sen. Bill Cassidy (R-LA)
How the SAFE Act Advances AEBA's Mission
Importer Accountability
Requires verifiable U.S. presence — aligns with AEBA Priority 03: Mandatory U.S. Entity + EIN.
Levels the Playing Field
Ends the decades-long practice letting foreign sellers bypass the rules American businesses follow.
Customs Integrity
Strengthens bonding requirements and trade enforcement — closing gaps that enable fraud.
Bipartisan Momentum
Backed by Flexport, Coalition for a Prosperous America, and trade enforcement organizations.
Executive Order on Strengthening Customs Enforcement Advances Foreign-Seller Accountability
The June 3, 2026 Executive Order requires importers to hold real domestic assets and bonding, bars foreign actors from informal entries, mandates beneficial-ownership disclosure, and sets a 50% penalty floor — directly advancing six AEBA reforms. Read AEBA's statement of support.
De Minimis Loophole Shut Down: SHEIN and Temu Face New Tariffs
Trump's executive order ended the de minimis exemption for Chinese goods. Over 1.36 billion duty-free de minimis packages entered the U.S. in 2024 (the majority from China). New tariffs: 90% of value or $75—rising to $150.
China Reaches Global Majority on Amazon
For the first time, Chinese sellers hold the majority position on Amazon globally. Their share of new seller registrations reached 62.3%, while American sellers fell to 26.8%.
Trump Tariffs Mean Higher Prices, Big Losses for Amazon Sellers That Source from China
As tariffs rise, the reliance of American sellers on Chinese manufacturing becomes a vulnerability. Over 70% of Amazon sellers source from China—a supply chain risk amplified by recent trade policy shifts.
How China's State-Backed E-Commerce Platforms Threaten American Consumers and U.S. Technology Leadership
ITIF analysis shows China uses unfair industrial policy—subsidies, regulatory support, state-backed logistics—to boost domestic platforms' global expansion at the expense of American competitors.
How to Close Loopholes on Chinese E-Commerce and Boost U.S. Retailers
In 2018, China exported $5.3B in low-value single packages globally. By 2023, that number ballooned to $66B—with nearly $20B imported to the U.S. alone. This must stop.
Are Chinese Sellers Taking Over Amazon? It Depends on the Category
SmartScout analysis finds that 57% of Amazon sellers earning over $1M in revenue are Chinese. In cities with the most Amazon sellers, more than half are in China—Shenzhen alone hosts 102,000+.
Free markets only work when they are fair markets.
Join the American E-Commerce Business Alliance
The AEBA represents American businesses of all sizes who believe in one principle: everyone who profits from American consumers should play by American rules. A free and fair marketplace is not a political position—it is the foundation of commerce. Add your company's name to the growing coalition demanding it.
Coalition Members
By signing, your company pledges to:
- Support and advocate for the AEBA 16-Point Reform Package
- Educate your network about the e-commerce fairness crisis
- Engage with elected representatives to advance these reforms
- Stand for a fair, free, and competitive online marketplace for all
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