CBP Increasing Detentions, Seizures of Exports to China, Hong Kong, Trade Lawyer Says

CBP and other export enforcement agencies are increasing detentions of shipments to China and Hong Kong due to a series of recently imposed export restrictions announced by the Trump administration, trade lawyer Doug Jacobson said. Jacobson said he has noticed a “dramatic increase” in detentions and seizures, and said he is spending “a lot of time” working with agencies to provide information on clients’ shipments.

“I've had several clients recently that had items detained and seized by U.S. customs going to Hong Kong that were never intended to leave Hong Kong,” Jacobson said during a Sept. 24 webinar hosted by the Association of Certified Sanctions Specialists. “This has become a big problem.”

The Bureau of Industry and Security has been particularly active in increasing export restrictions on shipments to China and Hong Kong, which have included increased license restrictions on certain shipments to Huawei (see 2005150058) and more due diligence requirements on exports to military end-users in China (see 2007090075). BIS also suspended license exceptions for exports to Hong Kong (see 2006300050), and is expected to increase enforcement of China-related exports, particularly as the administration tries to counter China’s civil-military fusion strategy (see 2007020035).

Jacobson said CBP is looking “very closely” at shipments to China, particularly electronic components or items that may require a license. The agency is detaining those items, asking for more information on the shipments from the exporter or the freight forwarder and checking with BIS’s Office of Export Enforcement to make sure the items are not captured by restrictions, Jacobson said. He said that process is leading to more seizures.

“We're spending a lot of time submitting petitions to CBP … to get goods that have been detained and seized [to be] released,” said Jacobson, a lawyer with Jacobson Burton Kelley. “So there's been a major focus on China recently.” A CBP spokesperson declined to comment on the increased detentions and seizures but said exporters “have a responsibility to exercise due diligence and maintain compliance” with export restrictions.

Jacobson also said he has noticed more industry outreach by BIS agents, even during the COVID-19 pandemic. He said some of his clients have been contacted by agents who have asked for meetings. “They are actually still showing up at companies’ offices for discussions,” he said.

Part of the reason for increased detentions by CBP may be a result of BIS’s increased due diligence requirements on shipments to military end-users and for military end-uses. Jacobson said he “strongly” recommends to clients that they obtain “detailed” end-use and end-user statements from customers.

But the process can still be difficult, said Becki LaPorte, director of global risk and compliance at CSI Regulatory Compliance. Speaking during the webinar, LaPorte said there is “a lot of uncertainty and confusion” about which Chinese companies are affiliated with the Chinese government or military or associated with Chinese human rights violations in the Xinjiang region (see 2007010040).

“I know sometimes we think, especially if we're not working directly in China … we think [we’re] not really dealing with China,” LaPorte said. “But just because you're not dealing with a particular country, through layers of beneficial ownership or layers of connections, the ultimate beneficiary of those funds could be in China.”

The Defense Department recently issued two lists with companies it said are affiliated with the Chinese military (see 2006250024 and 2008300001). Although those companies are not yet listed on BIS’s Entity List, Jacobson said, companies should be cautious when dealing with them. “If they are on one of those lists, then they should certainly [lead to] enhanced due diligence,” he said.