CBP Continues to Weigh FTZ Direct Distribution of Section 321 Shipments

CBP is continuing work to resolve questions that have arisen on Section 321 clearance through foreign-trade zones, said Brenda Smith, executive assistant commissioner-trade at CBP, in an April 10 interview. The agency is still considering a ruling request on whether larger shipments can be brought into foreign-trade zones, then broken up into smaller shipments valued under the $800 de minimis so they can be entered exempt from taxes and fees under Section 321 (see 1802140015).

The issue of whether FTZs can engage in direct distribution is a thorny one, involving multiple agencies and fraught with consequences for the business models that have emerged as e-commerce has exploded. One problem for CBP is that, while FTZs have their own requirements, “a port of entry is really where we have the best eyes and ears,” Smith said. CBP has to make sure that it has the right controls in place and that the goods are compliant. The issue is “an open question,” she said. “I don’t know when we will have an answer.”

CBP’s lack of clarity on the subject hasn’t stopped importers from getting “very creative in trying to make sure that they have the most cost-effective and efficient business models that they can use,” Smith said. “Some people are not waiting for us to make a determination. They are just going ahead and doing it.”

A broader decision on how CBP will handle Section 321 entry filing is still under discussion, though CBP thinks it has “a solution that we’ve worked through.” Discussions continue with CBP’s partner government agencies (PGAs), and CBP also awaits the results of ongoing NAFTA renegotiations (see 1712050025), Smith said. “Rather than try to wade into the middle” of NAFTA discussions with an announcement of a new filing system, CBP will “let the dust settle” before making sure its solution is consistent with the renegotiated agreement, Smith said.

Trade executives have said CBP is likely to adopt a hybrid solution, allowing filing in both the Automated Broker Interface (ABI) and Automated Manifest System (AMS) (see 1802130035). A hybrid system has been discussed among CBP leadership since at least September (see 1709120025).