COMMENTARY: Does low-value equal low risk?

Getting to the heart of the security debate over the raised de minimis level

By: Megan Montgomery
Photo: Castleski/Shutterstock
   As a part of last year’s passage of the Trade Facilitation and Trade Enforcement Act (TFTEA), the de minimis value under the U.S. Code 19 19 USC section 1321 (321) was raised from $200 to $800.
   There has been much discussion, planning and speculation about the implementation of this change, but the main point that “duty free” does not mean “data free” has remained at the center of the issue. The broader question is, does low value equal low risk?
   We often see in our structure of government that regulations tend to lag behind business trends. Our founding fathers set up our government to be staid, careful, well thought-out. I doubt very much that they could have foreseen how something like the rise of e-commerce would so fundamentally alter the landscape of both business and government regulations in so short a period of time.
   I would speculate that even a few decades ago it would have been hard to fathom how quickly the world is moving today. But having a legislative and regulatory process that is usually left to play catch-up with the changing business world around it leaves us as a country vulnerable in ways we often don’t see at the outset.
   The change in the de minmis amount has caused, and will continue to cause, great movement in supply chains, as business respond to these new rules in a way that maximizes their productivity. And that’s exactly what any successful business should and must do to remain competitive in today’s consumer-driven marketplace.
   But what exactly are the new rules surrounding “low value” shipments?
   Participating government agencies (PGA’s) use U.S. Customs and Border Protection’s (CBP) Automated Commerce Environment (ACE) system to partner with CBP to manage their regulatory requirements and data collection on imports and, increasingly, exports. Many of these agencies do not address de minimis, instead requiring data and screening for every shipment, regardless of size and/or value.
   The American trading population and taxpayers have spent almost $4 billion developing ACE, which is a security and targeting system for our nation’s trade that would collect data, separate the good shipments from the suspicious ones, and keep our homefront as safe and secure as possible.
   Allowing a substantial and growing percentage of shipments to avoid processing through this advanced targeting system seems short-sighted at best and downright foolhardy at worst. Section 321 clearly provides only an exemption from duty for qualified merchandise, not an exemption for import and/or export requirements.
   So, if the $4 billion targeting system created by the government, and paid for by U.S. businesses and taxpayers, is not assisting admissibility decisions for “low-value” shipments, who is? Under current CBP regulations, a licensed customs broker is required to be a party in any business deal that includes the “transaction of customs business.”
   Customs brokers are licensed by CBP, and trained and regulated to help their clients comply with government regulations, including myriad documents, admissibility criteria, and valuation decisions that must be made in conjunction with shipping goods across the U.S. border. With the expansion of 321 for value and the total discarding of all the other criteria that are currently in play, we may very well see a world where admissibility decisions are being made by unlicensed, unbonded, untrained, unregulated carriers.
   Those entities include truck drivers and the like eager to get their loads across the border with no information other than the manifest and no knowledge of the import process to fall back on. This will, quite literally, be a loophole you can drive a truck through in our national primary trade security system.
   In addition to the issues raised above, this change to the regulations has major implications for both the Department of Commerce, the U.S. budget, and the balance of trade. There are estimates that within a few short years as many as 30 percent of shipments will fall under the newly expanded 321 de minimis exemption.
   In order to continue to keep our borders safe and secure, we as a trading community and a nation must stand together and insist that the policies and procedures that were put in place after 9/11 to keep us safe are allowed to do their job. That the parties involved in the clearance of goods (the private sector and government alike) be given all of the information they need to make real fact-based decisions on admissibility. And we must be sure that all of the goods that come into our country though avenues of trade enter through legitimate channels.

Editor's note: This week, the Adam Smith Project received a rebuttal to this column from the Express Association of America.

The express industry was disappointed to see the fallacious argument presented in the Feb. 6 article “Does Low Value Equal Low Risk?” posted on the Adam Smith Project website. As we believe [the NCBFAA] knows very well, all shipments entering the United States, regardless of value, are subjected to a security screening through the Automated Targeting System, using data provided via the Automated Commercial Environment (ACE) system. This security screening is based on the manifest information, which is the same set of data requirements for so-called Section 321 shipments as for all other shipments. So the statement in the article that the Section 321 process allows “a substantial and growing percentage of shipments to avoid processing through this advanced targeting system” is patently false. Further, the statement that “admissibility decisions are being made by … carriers” is totally wrong. Only U.S. Customs and Border Protection officers make admissibility decisions for all shipments, again, regardless of value. To support CBP’s admissibility decision, carriers provide manifest information under regulations promulgated by CBP, which have been in place for several decades and are working well to provide solid security for the United States, while also facilitating trade and preventing massive backups on the border.
The de minimis level in the United States was increased from $200 to $800 last year by Congressional action to bring the value for cargo shipments up to the level a U.S. citizen can bring back with them on a passenger plane. This level had not been changed in over 20 years, and the increase was long overdue.

Michael Mullen
Executive Director
Express Association of America

Megan Montgomery  Megan Montgomery is executive vice president of the National Customs Brokers & Forwarders Association of America.