Executive Order on Counterfeits Called 'Ambiguous,' but Trade Community Concerned

The recent executive order to strengthen e-commerce enforcement is ambiguous, and how CBP plans to heed the order's call to restrict access to importer of record numbers based on customs and intellectual property rights violations is unclear, Sandler Travis lawyer Paula Connelly said. That's because, currently, domestic importers use their tax IDs to register with CBP, and only companies that have no offices in the U.S. file for an importer of record number.

Currently, there is no standard for applying for an importer of record number, you just submit for one.Connelly said that while it's clear that there will be a standard in applying, there is no mention of whether domestic companies will have to apply for numbers. “That, to me, would be a little problematic” if domestic companies have to get an importer of record number, she said. The executive order proposes that CBP look at changing the importer of record process, both on the front end and in enforcement (see 2001310062).

The executive order also ties CBP debarment and suspension to an importer's ability to get an importer of record number. Currently, Connelly explained, while CBP has a debarment and suspension list for importers of record, that debarment does not prevent them from importing, it only prevents government agencies from buying from those firms.

And the executive order says that customs brokers and express shippers would be also responsible for determining if a foreign importer is trying to get around a past debarment, for instance, by changing the company's name. National Customs Brokers & Forwarders Association of America President Amy Magnus said that brokers are not investigators, and yet “there’s going to be an expectation that we’re going to be more involved in the vetting and sort of screening of all parties.”

Connelly, who was a customs broker before founding her own law firm, said it's not surprising many brokers do not know where to find the debarment list on CBP's site, since there's no current consequence for continuing to import after losing the number. Connelly said she believes most customs brokers have some sort of process to vet new customers. The industry is awaiting proposed regulations -- unrelated to this order and expected soon -- on how customs brokers should vet companies for power of attorney purposes. She said customs brokers will be expected to check Google Maps to see if the company has a physical location, and check corporate documents to see who the officers are, in hopes of spotting if an officer was in a past company that evaded paying duties.

“It’s a lot of responsibility on a broker. It’s tough,” she said, but she doesn't think customs brokers will be in trouble if a customer evades duties, as long as they can substantiate that they used reasonable care to check the firm out before taking it on as a client. “If they didn’t do anything, you could run into a problem,“ she said.

The executive order also talks about setting a standard for foreign postal services in terms of how well they prevent contraband and counterfeits from being sent to the U.S. The Office of the U.S. Trade Representative, in concert with the Department of Homeland Security, is to suggest what that standard should be within 90 days, though it would be another six months before any postal service would have to increase data sharing, and longer still before that country's packages could be banned. It's unclear whether new legislative authority would be necessary for such a ban, Connelly said. “Honestly, it kind of remains to be seen how they’re going to implement some of this stuff,” she said. “There’s just a lot of ambiguity in the executive order.”

The fact that this followed so closely on the DHS report on counterfeiting and e-commerce surprised her. “It’s concerning to the trade community, and the fact that it seemed to just come out of nowhere....”

Magnus questioned how effective any of the measures could be with an $800 de minimis level, given that even the advanced data on small packages doesn't include who the buyer and seller are, only the shipper and the deliver-to party. However, if there is to be a barred importer of record list, Magnus suggested it should be incorporated into ACE so that customs brokers get a rejection message if they try to prepare an entry for such an importer. Connelly agreed that would be ideal, rather than requiring brokers to search for a list.

Connelly said given the time it takes an agency to promulgate rules, she couldn't predict whether there would be real-world impact from this executive order in six months, or even within the year. And if there's a new administration in 2021, she doesn't know if these proposals would be supported by that president.

Although both Magnus and Connelly questioned the practicality of some aspects of the order, they both agreed counterfeits and duty evasions are a big problem. “I understand where they’re coming from,” Connelly said.