CBP Cracking Down on Undervaluation for Cannabis Industry Imports

Cannabis industry companies should take stock of their import supply chains and CBP clearance procedures in the wake of actions against shippers for undervaluing merchandise, law firm Neville Peterson said in a Jan. 2 blog post. While undervaluation for cannabis-related goods "may have gone undetected due to CBP's unfamiliarity with" the products, CBP is "moving up a learning curve," allowing for easier detection and greater due diligence for importers, the post said.

Neville Peterson noted that foreign shippers have been designating "straw man" companies used to act as the U.S. Importer of Record to avoid having their names linked with the importation of cannabis-related articles. CBP will sometimes reject these entries on the ground that the Importer of Record "lacks the right to make entry" since the importer must be the "owner" or "purchaser" of the merchandise.

Where the goods are imported by these "straw man" companies, the U.S. buyer then must come forward and prove its interest in the shipment. The post said that in various "recent cases," some shippers have been found to have falsely undervalued merchandise. The buyer can reclaim the goods but needs to file a new entry and pay more duties.

CBP's growing familiarity with cannabis-related goods has led to growing enforcement action against these shipments. A Neville Peterson attorney confirmed in an email that the firm is involved with at least three industry members with potential duty liabilities ranging from $1 million to $25 million. The undervaluation issues stem from cannabis industry firms leaving shipping and customs issues to their suppliers, the lawyer noted.