CBP Already Looking to Revise In-Bond Regulations

CBP is already considering revisions to its in-bond regulations following the changes made in a final rule on the same regulations issued in September (see 1709270027), Jim Swanson, CBP director-cargo and conveyance security and controls, said during the Feb. 13 National Association of Foreign-Trade Zones legislative summit. "Even though we just published new in-bond regulations, for example, we really just papered over a lot of the cracks in that and listed it as an automated process," he said. CBP would like to "go back" and change the "artifacts of much older in-bond rules" to better spell out the rules and associated penalties, he said. "I've got the regulatory folks agreeing that we can begin that process."

Swanson said he wasn't pleased with the final rule on in-bond. "The requirement for six-digit [Harmonized Tariff Schedule], for example, that was not the original intent behind that and somehow got warped as we were going through and answering comments and we all kind of missed it," he said. "Because, if you read our response to that one, in the comments section, we said it's" the HTS number or the "description if you don't have" that number, he said. That wasn't reflected in the actual regulatory text "so that's why we're not moving forward with that piece right away," he said of the lack of an enforcement date (see 1801050018).

CBP doesn't really need a lot of the information and steps required for in-bond movements anymore, Swanson said. "I just don't think we need all of those control steps anymore" and "that's why you pay the bond," he said. Some requirements, such as warning stickers for in-bond freight, don't "really provide any value," he said. A new in-bond working group within the Commercial Customs Operations Advisory Committee (COAC) is actively looking for any necessary technical changes, he said.

CBP will soon announce a regulatory reform group that will work to develop changes to the foreign-trade zones regulations in 19 CFR 146 and other regulations Swanson, said. "We're looking to charter specific working groups or working teams" and one of the first teams is "a 146 rewrite team," he said. An agency official said in October that CBP planned to engage with the COAC to update those regulations (see 1710240032). Swanson would like to look at in-bond warehouse regulations at the same time so there's similar oversight by CBP, he said. "We are also looking at our basic entry processes," he said.

The agency is hampered by outdated regulations, not only for FTZs, "but across the board," Swanson said. "We're carrying around a lot of dead weight" in the regulations and "if you look at how we do the work, we do not work that way anymore," he said. "We're basically violating our own regulations on a daily basis" due to the move to automated processing, he said. "My goal, though, is to reduce the scope of the regulations themselves, both text and some of those old requirements that still exist as a regulation that may not be necessary," he said. Swanson used "getting rid of permanent files" as an example of useful change that would also satisfy the executive order requiring the repeal of two regulations for each new one (see 1702070048).

The growth of e-commerce "is overwhelming some of our trade resources" and the increased de minimis level "that seems to be driving even more of that" is spurring major changes, he said. "We're going to start working to get everyone's attention and change that universe," he said. Swanson noted there are some pending internal and external inquiries on whether FTZs can do "direct distribution of goods brought in" that remain unanswered.

There's an evolution on broader questions that are related to e-commerce, such as the definition of "shipment" or "importation," Swanson said. "You look at our regulations and there's a lot of that that's subject to a lot of interpretation," he said. Those interpretations may shift eventually, but for now, "we're stuck with those traditional interpretations," he said.

Many of CBP's efforts are limited by an uncertain funding environment for the trade side of the agency, said Dennis McKenzie, CBP deputy executive director for Cargo and Conveyance Security. Under the Trump administration "the focuses have changed," McKenzie said. "Money and resources are focused elsewhere, not necessarily on the trade side." Swanson agreed, and said "our group is probably one of the more limited probably just because what we do isn't sexy."