321 continues to vex brokers

De minimis, know your importer mandate and rising e-commerce burdening brokers unfairly, says an industry veteran

By: Eric Johnson
Photo: g0d4ather / Shutterstock.com
   It’s little secret by now that U.S. customs brokers are nonplussed by the February 2016 law that raised the de minimis level on U.S. imports from $200 to $800.
   The rule, known as section 321 of the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), allows shipments valued at $800 or less to be imported into the United States duty-free and with little customs data requirements.
   Customs brokers have argued that the raised de minimis comes at a perilous time that disadvantages importers whose shipments are valued at more than $800.
   For one, TFTEA calls on those shippers and their brokers to provide more data about the exporter than ever before (a mandate that shippers under the de minimis level don’t have to meet). And for another, the rise of global e-commerce means there is an ever-increasing number of exporters likely to move goods under the de minimis limit, either direct to consumers or through marketplaces that act as the importer of record.
   Brokers have argued for months that these dual dynamics create a huge gap in U.S. Customs and Border Protection’s security net. They argue that while the onus on brokers to dig into the details of foreign entities has never been higher, CBP’s ability to know critical details about foreign entities shipping less valuable goods has diminished due to the higher limit.

Brokers have argued for months that these dual dynamics create a huge gap in U.S. Customs and Border Protection’s security net.

   But there’s more, Amy Magnus, director of customs affairs and compliance at the broker Deringer, argued at the American Association of Exporters and Importers annual conference in Austin in June. Magnus highlighted the technical and administrative burdens section 321 has placed on brokers, especially as it relates to data required by partner government agencies (PGAs) in filing entries in the Automated Commercial Environment (ACE) for shipments over $800.
   “Think of the HTS (harmonized tariff system) numbers,” said Magnus, who is also trade ambassador for CBP’s Trade Support Network. “There are 31 different PGA flags. You have a 10-digit identifier that they may or may not have an interest in an item. If they have an interest, you have to submit a whole lot of additional information (up to 30 data fields) in the item.
    "If they don’t, you have to send a message in ACE that no, this doesn’t have a PGA concern. There are over 8,000 HTS numbers tagged with PGA flags. Imagine the scope of that. Our world has changed for sure. Talk about disruption, try being a broker.”
   Magnus said these are the unintended consequences of progress on ACE mixed with new commercial dynamics.
   “In the old days, we’d submit a form to cover PGA requirements,” she said. “Now that form has been translated into data fields, including fields that never existed on the form in the first place. There used to be paper manifests and commercial invoices attached describing the goods being moved across the border.”
   Pertinent to brokers’ security concerns about the raised de minimis level, Magnus said there is also an information gap between the party listed on the manifest and the party that made the transaction.
   “On the manifest, the entity receiving the good is the one listed but they may not be party to the transaction,” she said. “If I was nefarious, I could have the goods delivered to another address. There’s be no one responsible (on the manifest). Also absent from manifest are the 10-digit HTS numbers. They want all this information if the good is valued in the country of origin for $801.”
   But not if it’s $800 or less, Magnus added.
   “I often sit at my desk and say, this is ridiculous,” she said. “I see the same good going across the border with virtually no data. Who is responsible for unsolicited shipments? Like apparel samples? Brokers will be required to verify identity of the importer. If it’s $801, the broker has to identify the importer, and if its $799, no one even knows who the importer is.

I often sit at my desk and say, this is ridiculous. I see the same good going across the border with virtually no data.

   “We have greatly facilitated, if not fueled this type of activity. The express consignment operators have taken the total opposite view of brokers.”
   Magnus said one answer is getting the PGAs to be clearer about data requirements on shipments regardless of the value of the shipment.
   “We’d like to get the PGAs to say, do you want the data if it’s under $800,” she said. “ACE release is an automated way to handle de minimis. But that doesn’t capture duty-free. Duty-free isn’t risk-free. If it’s under $800, does that mean it’s less risky? I don’t know, because I’m not a PGA.”
   This debate will likely keep raging, especially as the obligations on brokers to know their customers under TFTEA starts going into force. E-commerce isn’t going anywhere but up, and shippers large and small are getting crafty about using the raised de minimis level more strategically.
   “This happened last February (2016) and when that change occurred, it was implemented almost immediately,” Magnus said. “It’s interesting that it was implemented so quickly relative to other parts of TFTEA that have not been implemented.”