CBP Talking With Hill, Industry on How to Allow FTZs to Participate in E-Commerce Distribution, Swanson Says

ATLANTA -- An initiative to allow foreign-trade zones to take part in e-commerce distribution is in the early stages after CBP ruled that the role of FTZs is limited, said Jim Swanson, CBP director-cargo and conveyance security and controls, during a panel discussion at the CBP 2018 Trade Symposium on Aug. 14. "We have had discussions with key folks out there at both the Hill and from the various associations where there's a lot of discussion going on about what that really means and what the path forward is for potentially" allowing FTZs to "participate in this." CBP recently ruled that the Section 321 entry exemptions do not apply to bulk shipments sent to FTZs that are broken up for individual consumption entries below the $800 de minimis level prior to a consumer order (see 1807180022).

Swanson said there's some recognition that FTZs were "cut out of this" and it's an "unintended consequence" that FTZ business is being impacted by the use of foreign distribution centers instead of a U.S. distribution center. "The ruling really hinged around the statute, unfortunately. The statute has some very clear language that identified what was available and what wasn't and the key word in the statute was time of importation versus time of entry." While FTZs are outside the U.S. for commerce and duty purposes, an FTZ is not outside the U.S. for importation purposes, Swanson said. "There are people looking at it. I can't really comment on it because it is a statutory issue beyond that," he said.

CBP is still grappling with some of the specifics of its planned entry type 86 for Section 321 goods (see 1805230061), Swanson said. For example, it's yet to be decided whether integrated carriers would be required to file 321 entries or clear them off the manifest, he said. "We are still looking at what the path forward is for this process, in terms of how do we make it legal," he said. "Do we do it in a final rule? Make it mandatory? At this point we don't intend to shut anybody out of the process. So, the idea being, those with simple clearances, where the goods are clearly identified, for example, and there is no [partner government agency (PGA)] interest in those goods that we can identify, we would allow that submission," he said.

One issue that remains is what CBP would do if it determines later there is interest from other agencies in the goods, he said. CBP can require a formal entry on those goods in order to collect the PGA data, but "that has costs for everyone" for "almost no revenue connected," he said. The question of "what goes into that entry type bucket versus what can be cleared off the manifest" is "something that we're going to have to shake down in the additional phases," Swanson said.

E-commerce has had much smaller effects on the export side at CBP, Swanson said. The de minimis on the export side, at $2,500, "has always been a lot higher" and most e-commerce goods are below that level, he said. "One of things we have begun to see in the export universe, though, is as things evolve and we begin to see a more international market for some of the products in the U.S., not all of those products are as clearly defined as we would want." For example, some products that could be legal in other countries may not be legal to ship from the U.S., he said. "We are trying to work to clarify that and create some clarity," Swanson said.