CBP Allowing FTZ Storage of Some Goods Stopped Under WROs, Public Guidance Still in Development

CBP field officers were instructed to allow for foreign-trade zone storage of goods stopped under a withhold release order while an admissibility decision is made, said Jim Swanson, CBP director-cargo and conveyance security and controls, speaking at the National Association of Foreign-Trade Zones virtual conference Sept. 21. He said the agency told the “field folks to allow those goods” to be put “in a foreign-trade zone under the very tight conditions that we outline.” While Swanson previously said a public guidance would come soon (see 2104290003), he said at the conference that “we're still working on getting it in writing, because there's a lot of legal stuff and there's some changes going on in the background.”

Among the restrictions on WRO goods within FTZs are that the goods “have to be segregated both on the inventory level and a physical level,” he said. “Obviously, any violation of that or any merchandise that leaves that foreign-trade zone into commerce while under a withhold release order, that will be the last shipment that will go to that particular facility,” he said. Some problems have already come up for things “already in the zone that were suddenly subject to a” WRO or “were caught on reconciliations,” he said.

The ports also have “some discretion” around the use of FTZs for storing WRO goods “because we know in some cases it's not as easy to track, or the goods are moving further away than the ports are comfortable with,” Swanson said. CBP is working to “tweak our instructions so that it matches those kinds of issues and make it risk-based,” he said.

There is some congressional interest in issues around how FTZs can handle low-value shipments, Swanson said. “We have had discussions with the folks on the Hill, the legislative folks,” he said. “They've asked some questions about it, so we know that some of you and groups that you've joined have been able to reach out to the Hill to identify some of the issues you've had with the de minimis and the way e-commerce is processed outside of foreign-trade zones. But there are gaps in the statute, as we've repeatedly stated, and it's going to be up to them to make a determination of whether or not they are going to fill it.” CBP provided data and “we know those efforts are ongoing,” but the agency remains neutral on the subject, he said. The issue was mentioned as a priority for NAFTZ earlier this year (see 2102120041).

The ongoing 21st Century Customs effort is partially a result of the rapid growth in e-commerce, Swanson said. Some 300 million type-86 entries have been filed this year, more than doubling the previous year, and it's becoming the “bigger chunk” of what CBP is seeing, he said. Adding in mail and express entries, it is likely entries will hit the “billion plateau pretty soon and we only hope it plateaus at a billion.” It is now clear that the existing regulations come from a “different era,” and CBP is trying, “through first statute, and then regulation and then automation,” to fix deficiencies, he said.

Likely to be updated within the effort are “how we collect the data up front, how we process the data, what the requirements are, how we collect duty, how we issue penalties and liquidated damages” and “facilitated seizure authority” to “help clear the decks on our side,” Swanson said. FTZs may be involved, though the FTZ regulations are mostly overseen by the Commerce Department, he said. There is some very early new momentum related to the FTZ regulations that CBP does oversee in 19 CFR 146, he said. While the update has been long discussed but slow-going (see 2102110018), Swanson said “we've engaged some internal efforts to begin moving our regulatory packages forward.”

Swanson also highlighted CBP's first centralized examination station dedicated to air cargo that opens Oct. 1 at Los Angeles International Airport. All cargo delivered to LAX that requires examination will be sent to the new CES, rather than one of the 87 examination stations, likely reducing cargo exam delays, he said. CBP is also hoping to complete full automation of the e214 process, but the agency will need some more money to make it happen, he said.