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Will the crackdown by U.S. Customs and Border Protection on certain low-value import shipments curb abuse of a rule that affords them duty-free treatment, or disrupt the flow of e-commerce?
E-commerce sellers have been taking full advantage of CBP’s “de minimis” allowance for small packages valued at less than $800, imported by one person on a single day, exempting them from payment of duties and taxes, along with the filing requirements generally imposed on larger import shipments. Such treatment falls under the agency’s Type 86 entry classification, spelled out in the Tariff Act of 1930.
The upshot is that e-commerce shippers benefit by avoiding costs and bureaucratic delays of cross-border goods moving directly to buyers. The privilege became even more attractive in 2016, when the ceiling on package value was raised from $200 to $800. Since that time, however, the rule has been heavily exploited by big online merchandisers like China’s Shein and Temu to flood the American market with huge volumes of imported product, giving rise to calls in Congress for a reduction in the de minimis allowance. And the Biden Administration recently announced new actions to crack down on “unsafe, unfairly traded products” entering the country through that provision. It said it would ban the exemption for imported products that are subject to tariffs or other trade-enforcement actions taken by the U.S., and it urged Congress to pass legislation to reform the de minimis rule.
For its part, Customs has attempted to intensify its oversight of international e-commerce, to ensure that the value of incoming packages isn’t being misrepresented by shippers, and that the shipments don’t contain illicit or counterfeit goods. Early efforts at upholding the rule appear somewhat haphazard, however. In May, the agency suspended Seko Logistics from a voluntary Entry Type 86 reporting program and the Customs-Trade Partnership Against Terrorism (C-TPAT) for 90 days. Seko subsequently sued Customs, only to be conditionally reinstated to the program in June, without a clear explanation of why the suspension was imposed in the first place.
“While the majority of brokers, carriers, and supply chain businesses that participate in CBP’s Entry Type 86 Test are compliant with applicable laws, we are enhancing our enforcement efforts to ensure that all participants are held accountable when they are not,” CBP acting commissioner Troy Miller said in a statement in May. “To date, CBP has suspended multiple customs brokers from participating in the Entry Type 86 Test after determining that their entries posed an unacceptable compliance risk.”
Siddharth Priyesh, vice president and head for the Americas, Europe, Middle East, Africa and South Asia with CrimsonLogic, calls the de minimis allowance “a win-win for both sides,” in that it allows both seller and buyer greater access to markets and products moving across borders. Still, given the volume of commerce moving under the rule — Customs processes nearly 4 million de minimis packages per day — “it’s almost impossible to inspect everything going in.”
Not all de minimis shipments are legitimately generated by e-commerce. Some companies have sought to take advantage of the program by splitting up large business-to-business import shipments moving to a warehouse or production facility. They might put different employee names on each package to keep individual declarations below $800. To counter that practice, Customs looks for entries where the exporter name, shipment data and delivery address are the same. “When that is the case,” Priyesh says, “the shipment is typically flagged and inspected even if the consignees are different at the U.S. side.”
That said, large customs brokers tend to be careful about the shippers they work with, Priyesh claims. “It’s not in their interest to partake in this funny business. It’s usually small importers trying to sneak in things that they should not have tried to export.”
Customs has further tightened up on its filing schedule. Previously, brokers could file Entry Type 86 up to 15 days after products arrived in the U.S. Now, the filing must take place either on the day of arrival, or a day before. “There’s a lot more emphasis on non-compliance that results in penalties,” Priyesh says.
The extra scrutiny of Entry Type 86 shipments could have the effect of slowing the clearance of all cross-border e-commerce packages. With physical inspections on the rise, Priyesh says, customs brokers are taking greater care to ensure that entries meet the requirements of the law. “Now, brokers’ reputation and licenses are on the line,” he adds. But processing costs and time are likely to rise in any case.
Regardless of whether Congress succeeds in lowering the de minimis threshold, don’t expect Customs to relax its newly aggressive enforcement of the Entry Type 86 program. “CBP remains dedicated to protecting American consumers, industries, and the integrity of our trade system,” Miller said in the agency’s May statement. “We will work closely with all businesses and stakeholders to ensure such protection continues by continuing to take enforcement action against those who abuse the Entry Type 86 Test or otherwise abdicate their Customs compliance responsibilities.”
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