De Minimis Enforcement Increasing, but Catching Excess Shipments Tricky

Brandon Lord, executive director of the trade policy and programs directorate, said that when his team asked: "what made you decide to classify" a package with a certain tariff code, they didn't even give a rationale. He said when representatives from a suspended firm were asked: "Where's your power of attorney," they said, "Well, I don't have one."

"These are brokers that arguably aren't even fulfilling the most basic responsibilities," he said Sept. 23.

Lord said business is starting to return to brokers who used to bring de minimis packages in through the Type 86 pilot but lost the business when others offered to do that service for 5 cents, 10 cents or 25 cents a package.

About 60% of de minimis packages -- already more than 1.3 billion in the not-quite-finished fiscal year -- enter through Type 86, which requires 10-digit Harmonized Tariff Schedule codes. Exporters also can send goods duty-free with a description of what's inside, for slower manifest clearance. After CBP told the trade community what manifest descriptions it found unacceptably vague, there has been a 90% reduction in the use of those terms. That improvement in descriptions "has really helped us, not just from a trade compliance side, but frankly, also from the security side," Lord said.

Although it has been the law that de minimis is limited to $800 per day worth of shipments per recipient for eight years, CBP has had no way to see that the limit was always being honored. The agency delayed an update to the ACE system that would have alerted importers when the shipments exceeded $800 in a day to a single recipient.

Earlier in the session, a lawyer had told an audience that trade professionals' arguments resulted in the delay, and there was applause.

"I ... heard that there was clapping or cheering around our delay of the aggregated reject message," Lord teasingly told the group. He warned that the update would be made, nonetheless. "We have to do that. We have to get to a point where the system is smartly, automatically enforcing that $800 per person."

He said CBP will work with trade stakeholders to design the solution, as the agency realized that there are so many permutations in the de minimis environment, and although CBP officials thought they had solved the problem, "if you start asking some very basic questions," officials start to think, "maybe we haven't thought through every single permutation."

Lord said the rulemaking process that the White House recently announced on de minimis data collection is the same one the agency has been working on for several years, and that CBP is working with other agencies and OMB, and that they hope the proposed rule "is published as quickly as possible."

He told the audience that other ideas on restricting de minimis -- targeting the country the package was shipped from, barring goods with a certain country of origin -- have been eclipsed by the approach of restricting certain products. The White House also announced there would be a rulemaking to bar goods subject to Section 301 tariffs and other trade remedies from de minimis, and said it wants Congress to pass a law that would bar apparel, footwear and other "import sensitive" goods from de minimis.

"It's hard to enforce excluded products without a Harmonized Tariff Schedule" number, Lord noted.

Lord also mentioned a final rule that he said would come out by the end of 2024, on continuing education for customs brokers. He said the number of hours required during the current triennial will be fewer than the number of months left in that triennial at the time the rule is published. "I'm more interested in ... doing this right, and doing this fairly, than I am about how many credit hours I can squeeze out of folks for the first time," he said. After the first, partial triennial, brokers will be responsible for 36 credit hours every three years.

Lord said the agency is moving toward collecting more data, deeper in the supply chain, and its Global Business Identifier and the technology demonstration projects related to GBIs and supply chain tracing are ongoing.

Although CBP received no funding for ACE modernization in the current fiscal year, and doesn't expect to get any funding for the project in the fiscal year that begins Oct. 1, it continues to work on those demonstration projects to test the viability of technology the agency hopes to incorporate in ACE 2.0.

"We need to get out of this situation where the only time we have a conversation with the private sector ... about their supply chain is during a detention. That is just not sustainable. It's not sustainable for you, and frankly, it's not sustainable for us," he said. He added that if CBP is still only asking for supply chain tracing in cases where goods are detained in 10 years, "we will have failed our commitment to be an innovative agency."

He said everything is moving in the direction of more supply chain disclosure -- labor standards, environmental standards, such as the EU's Carbon Border Adjustment Mechanism -- and that's only going to increase.

"Let's have that conversation as early as possible and then when goods are arriving, and we see the right identifiers to know those goods, or map to supply chains that we're comfortable with, we can now segment risk and move up," he said.

Lord acknowledged that for firms to spend the money to deeply document their supply chains, they have to believe there will be a valuable benefit, and said his team is working really hard on identifying what the benefits would be.

Customs brokers will need to know more about clients' production processes to comply with U.S. laws and regulations, he said.

"I realize this might be scary for some, but this is literally fair trade in action," he said. "The days of free trade agreements, barriers to trade going down, a rising tide lifting all boats, those days are gone."