CBP Seeing Big 'Disruptions' in Supply Chains Following de Minimis Increase, Smith Says

SCOTTSDALE, Arizona -- The increase in the de minimis value threshold last year seems already to be driving a shift in international trade patterns, said Brenda Smith, executive assistant commissioner for the CBP Office of Trade, during a May 25 interview at the West Coast Trade Symposium. "What we're seeing is significant changes in supply chains," reflected in the growing number of Section 321 entries, she said. For example, one port in Alabama with few CBP officers "is suddenly getting this flood because it's close to a distribution center," she said. Likely, that's a result of container-loads full of under $800 small packages that qualify for de minimis, she said.

While final regulations for de minimis will eventually be necessary, CBP is still trying to gauge the full impact of the de minimis changes, said Valerie Neuhart, acting director of CBP’s Office of Trade Relations, during the interview. Goods under the de minimis level face less processing and expedited treatment by CBP, but may still be subject to the requirements of other agencies. The agency issued an interim final rule on the de minimis and raised a number of questions on the role of other agencies' requirements for such shipments (see 1608250029). Smith said the agency is now trying to figure out what are the "policy goals," because "I don't think we have a clear vision for that yet."

A slew of open issues must be resolved on Section 321 entries, Smith said. "Can we use our usual framework, advance data, and do we have enough visibility to understand what the risk [is]?," she said. "Do the people playing with that particular trade program, do they understand what the rules are? That's what we are trying to work through. And then, of course, there's the automation." There are also some differing viewpoints between customs brokers (see 1605160030) and express carriers, Smith said.

Final ACE Deployment Expected This Summer

CBP plans to announce in the "very near future" when the final ACE core deployment will happen, Smith said. That announcement will give 30 days' notice of the deployment, which was delayed in January (see 1701110039), she said. "We expect the deployment will happen in the summer." The delay involved an internal process at CBP that "was very connected to the other pieces" and needed further testing before going forward, she said.

CBP will find a way to program the drawback simplification changes in ACE without any new funding, Smith said. Acting Commissioner Kevin McAleenan "has committed to finding the funding from our base and funding the drawback simplification, so we will be proceeding with that," she said. There was some question as to whether the agency would be able to move forward with that programming without additional funding (see 1705160012). "As we get closer to the end of the year and we are unable to hire, unable to complete procurements, there are small pockets of money that are freed up," she said. "If you knit those pockets of money together," it often can then be transferred and "that's what we are looking to do." Those simplification changes were part of the Trade Facilitation and Trade Enforcement Act (TFT).

The exact timing of the drawback simplification programming remains uncertain, but "we will work to ensure that the benefits are given to the trade," she said. "We may need to phase it" or "we may need to leverage some policy flexibilities if we can't get all the automation done," she said. The agency is "committed that in February 2018 they will get the benefits." CBP is also beginning to look at some "Plan Bs" for what to do if the programming isn't ready, she said. Regardless of the ACE programming, a regulation on drawback simplification is expected to be done by February 2018, Alice Kipel, executive director of CBP's Office of Regulations and Rulings, said in a recent interview (see 1705090022).

The future of ACE programming for other features is still unclear, Smith said. "New development, including 321, including the list that the Trade Support Network has come up with, including the other government agency work, will not go forward unless money comes," she said. Still, CBP is keeping an updated list of items considered to be priorities by all parties, she added.

Regulatory Update

CBP isn't quite ready to go ahead with forced labor regulations, Smith said. "We have more both to learn and more to test in terms of how can we get good information," she said. "How can we validate? How can we work with importers who are trying to show us that they don't use forced labor? How much do importers know about their third- and fourth-tier suppliers?" Those are some of the questions that need some answers, she said. The agency needs more practice in dealing with allegations, in part, because there have not been "a lot," she said. Most allegations so far involve prison labor, while child labor and other forced labor seem to pose a bigger challenge to finding solid information that can elicit CBP action, she said.

Allegations of antidumping or countervailing duty evasion under the Enforce and Protect Act are starting to pick up, Smith said. Few allegations came in after the first six to eight months after the EAPA processes went into effect (see 1608190014), she said. Since then, though, one of the companies that filed one of those allegations (see 1612190004) has submitted "a pretty significant number" of additional allegations, "so we're working through those." The agency plans to issue final EAPA regulations once it processes enough allegations to build up some expertise on the issue (see 1705090020).

The agency continues to work with the Department of Homeland Security counsel and the Office of Information and Regulatory Affairs to get a fuller understanding of the deregulatory guidance from the Trump administration, Smith said. Federal agencies, under a January executive order, are required to repeal two regulations for each new regulation seen as "significant" by the Office of Management and Budget (see 1702070048). While CBP works to get some more details on what actually constitutes a regulation for repeal purposes, the agency has reached out to industry for input, Neuhart said. "We have a couple of large associations that are working on a list," she said. Asked about specific regulations mentioned as potentially deserving repeal, Neuhart said the conversation so far "has been focused on the criteria" as to "what counts."

Technological Opportunities

CBP is now taking a closer look at technological solutions, Smith said. Smith, McAleenan and others went to Silicon Valley last year, which led to some wider consideration on where technology can help various challenges the agency faces, she said. Blockchain, for example, is one such technology McAleenan has pointed to as having significant potential (see 1705180027). While blockchain is "in and of itself a technology we are interested in," it is also representative of McAleenan's "intent to not be 'business as usual,'" Smith said. "For him, it's a bit of shorthand for 'let's explore together.'"