Role for FTZs in Direct Distribution Remains Under Debate, CBP's Smith Says

The internal debate on the role of foreign-trade zones in e-commerce is ongoing within the government, said Brenda Smith, executive assistant commissioner-trade at CBP, while speaking at an American Apparel and Footwear Association event on April 25. "I recognize that, from a business perspective, people are very interested in reducing their duty costs," she said. "It presents an interesting policy question, really, for the Department of Commerce, about 'what are FTZs for, why do we want them?'" CBP is considering a ruling on whether larger shipments can be brought to FTZs and then broken up into smaller shipments valued under the $800 de minimis threshold (see 1804130042).

The open question is what will the government achieve by allowing FTZs to do direct distribution. "Our reading of the rules is not entirely clear, yet," she said. There's a lot of work to do still around de minimis and Section 321 automation and CBP wants to support e-commerce, she said. "Congress gave us pretty clear marching orders" in support of e-commerce by raising the de minimis level to $800, she said. "But we also believe" that "CBP is expected to protect U.S. consumers from risky items coming in under that de minimis threshold," she said.

Asked by an attendee whether letting foreign warehouses fulfill the low value orders rather than FTZs, as is happening, increases the risk potential, Smith said "yes, to some degree." One thing that makes the question more complex, though, is that CBP's resources are largely located near its ports of entry, she said. The "way we do targeting is much more geographically focused at the ports," she said.

CBP also is continuing to work on a request for new legal authorities that would help in overseeing e-commerce issues, she said. The agency recently sought industry input on the subject following Smith's congressional testimony (see 1804050001), with plans to provide an outline for such a request to lawmakers by May 4. Smith, who noted she visited the White House earlier in the day to discuss tariffs on steel and aluminum, said keeping up with the tariff changes and implementation is "what keeps me up at night." Recent hires and more resources have helped, "but I'm always pushing for more." Smith also said the agency remains involved in NAFTA discussions, though largely from the sidelines.