Divisions Emerge on COAC Section 321 Entry Recommendations

Multiple recommendations submitted by the Commercial Customs Operations Advisory Committee (COAC) for Section 321 entries proved to be contentious, eliciting disagreement among members during the Aug. 23 COAC meeting in San Diego. The presentation of the recommendations at the meeting included the unusual step of votes and discussions on each individual recommendation. While some of the recommendations faced opposition, all were ultimately approved by the COAC. "There's a lot of uncertainty in this area because it's a new and different model that was not necessarily envisioned or anticipated by the market, by those that are participating in it or by our government partners," said Cindy Allen, the co-chair of the Trade Modernization Subcommittee.

Some of the divide seemed to be between the express industry and other customs brokers. There were some small deviations from the draft recommendations that were released ahead of the meeting (see 1708210023), including separate mentions of automated abilities through the Automated Broker Interface and the Automated Manifest System, which were previously mentioned in the same recommendation. COAC member Amy Magnus of A.N. Deringer opposed the inclusion of AMS filing abilities as a recommendation. "I think it's premature," she said. While clearing Section 321s from manifests has been available for many years, the lack of information on the buyers and sellers is a significant obstacle to risk assessment, she said.

More "exploration needs to go into what exactly does CBP really need to adequately target and screen for the health and safety of the American public, in addition to IPR, forced labor and other concerns," Magnus said. Allen, who is vice president-regulatory affairs and compliance for FedEx Trade Networks, responded that the express industry maintains a strong partnership with CBP toward ensuring that the American public is protected. It's important to recognize that "this model is out there and it's very successful in its targeting efforts, as evidenced by the fact that we do have findings and exams and seizures in the express environment," Allen said.

Another area of dispute is whether to require classification numbers and at what level of detail. The Pacific Coast Council of Customs Brokers and Freight Forwarders Association "strongly advocates" for the 10-digit Harmonized Tariff Schedule (HTS) to be part of any automated Section 321 data set, a group representative said during a public comments period. The current process is "not sustainable" as e-commerce grows and there's a "data integrity issue," which a 10-digit HTS could help resolve, she said. John Van Wallaghen of UPS said it's too soon to talk about adding HTS number requirements. "We're way ahead of ourselves in talking about solutions before we identify the problem," he said during another public comments portion of the meeting. While HTS numbers are good for assessing duty rates, accurate descriptions are better for government risk targeting needs, said Michael Mullen, executive director of the Express Association of America.

There are often language barriers involved in figuring out what a product is, something an HTS number can help with, COAC member Brenda Barnes of Geo. S. Bush & Co. said. For example, while a description may mention "bags," it would still be unclear if they are "plastic bags or colostomy bags," she said. The need for an HTS number is unclear, "specifically when they don't have to pay duty on the goods," Allen said. "I wonder if that would be a chilling effect on the commerce." Questions on forced labor or IP violations also may not be answered by classification information, she said.

The recommendations for Section 321 automation are a "first step of the process to address an urgent need that was brought to us by our government partners" and "trade stakeholders," Allen said. "The subcommittee will next turn its attention to the bigger questions on e-commerce to address the larger policy questions and concerns that exist out there," she said. John Leonard, CBP executive director, Trade Policy and Programs, said the government is "still considering all our options" for regulating and facilitating e-commerce.

The discussions of how to handle low-value shipments will have a far-ranging effects, said Christa Brzozowski, Department of Homeland Security deputy assistant secretary-trade policy. The growth in e-commerce is "driving a new type of entry process that we in DHS and others are still trying to get our heads around how to best take advantage of that but also ensure that some of the new threats that we might be seeing are mitigated," she said. "We are thinking of this not only in the context of customs processes but in the larger strategic context of our discussions with Canada and Mexico on trade issues as well as national efforts to combat the opioid crisis."

The involvement of other agencies will be "critical," as will international engagement, Brzozowski said. "This is something that is being looked at by the World Customs Organization and beyond, in the context of broader free trade agreements and how collectively nations should deal with this new type of trade occasioned by e-commerce."