Congress, CBP Still Need to Address ‘Big Picture’ Issues Related to de Minimis: Expert

As CBP deploys measures to ensure de minimis compliance among importers, there are some big-picture items that the agency and Congress need to consider to enable scalability or prevent loopholes, according to Lenny Feldman, managing partner with Sandler Travis.

For starters, CBP should look at what data elements are required for cargo release, including whether the data elements for de minimis should align with those required for an Entry Type 01 or Entry Type 11, Feldman said. That might help with scalability, he said.

“What CBP seems to be contemplating is a different data set than 01 and 11. I think that is going to put the filer in a difficult position if, in fact, they do have to toggle between the different types of entries and release data that’s needed for those different types of release,” said Feldman, who also serves as general counsel and customs counsel to the National Customs Brokers & Forwarders Association of America.

Feldman acknowledged that this idea might find favor with some groups but not others. Members of the brokerage community who are the predominant filers of de minimis may think that this action might help them, while others, such as carriers, might be less inclined toward such an alignment.

Another issue CBP should consider is whether to require the 10-digit Harmonized Tariff Schedule number for de minimis shipments. The number is currently required for Type 01 and Type 11 entries.

This is something that CBP is considering to implement as part of a broader effort to move President Joe Biden's "Detect and Defeat" legislation forward (see 2407310030). However, there are questions among the trade about whether CBP will allow de minimis filers to apply for waivers so that they don't have to provide the 10-digit number for all imported items (see 2408020057).

Feldman thinks requiring the 10-digit HTS number should apply to all or not be required for any, in order to prevent an uneven playing field, because some companies may have the resources to opt to apply for waivers while other companies may not.

“I think it should be an all or nothing [situation where] either everyone has to provide an HTSUS or no one has to provide it,” Feldman said. “Customs shouldn’t get into the business of picking and choosing which companies are appropriate because I could see that leading to various appeals and potentially lawsuits of companies who feel they’re being placed at an economic disadvantage by not getting that kind of approval.”

Requiring the 10-digit number has its pros and cons. On one hand, the requirement could catch anomalies. When an importer files a formal entry with a 10-digit number, there are various types of parameters in the system. An alert occurs if the value, the quantity or weight falls out of the proper parameters for that 10-digit number. If an importer's description of an item doesn’t match with the values of that 10-digit number, that could trigger an alarm and allow CBP to track anomalies.

However, some individuals may provide descriptions to fit the parameters of the corresponding HTS number, yet the shipment is not actually what the description says it is.

"There are good arguments on both sides as to why an HTS number is needed or not needed, depending on what data and information the government thinks and the trade thinks is going to be most useful to them," Feldman said.

Indeed, that question of purposely providing the wrong description in order to hide what is being sent raises the broader question of the effectiveness of these regulations against bad actors. Bad actors may include foreign entities that provide faulty data, and those foreign entities are outside of U.S. jurisdiction, Feldman said.

Congress and CBP are “not going to require parties to have a bond in order to file de minimis. And at least for the brokerage community, I think that’s difficult because you have parties that are on the other side of the world potentially, or outside of U.S. jurisdiction, who might be providing the false or bad data,” Feldman said. “But the U.S. government does not have the ability to go and go against a Chinese consolidator who’s providing wrong data. They don’t have the ability to go in a Mexican or Canadian trucker who's providing bad data.”

What happens instead is that it’s the U.S. companies or the companies that are importers of record who could be penalized, Feldman continued.

“I think it’s very problematic that you’re setting up a system where these bad actors can simply just provide bad data or inaccurate data, reside outside of the U.S., and they’re not going to be subject to any of these penalties,” Feldman said. “I think it's going to create much more exposure and liability for the U.S. companies that are the filers [and] who generally are good, compliant companies trying to do the right thing, because CBP is going to have no one else to go after.”

“I’m just not clear how the enforcement is going to get to those bad actors. And I think it very well could be setting up a system which would encourage parties who are offshore and out of the United States to actually say, well, I’m a consignee, and as a consignee, I could be a filer. [So] I’m just going to do this outside of the U.S., so you really won't have jurisdiction against me,” Feldman said. “... I don’t see anyone connecting all the dots yet.”

There is legislation in Congress that could address some of these loopholes, though the passage of these bills is not guaranteed.

Senate Finance Committee Chairman Sen. Ron Wyden, D-Ore., formally unveiled a widely anticipated bipartisan bill Aug. 8 that would restrict foreign goods from eligibility for de minimis shipments (see 2408080043).

The bill, the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (Fighting) for America Act, which recently circulated in draft form (see 2408020031), would bar certain categories of products from being imported through de minimis, including goods subject to tariffs under Section 301 of the U.S. Trade Act of 1974, and items deemed "import sensitive" under the Generalized System of Preferences benefits program, such as apparel and textiles, International Trade Today reported Aug. 8.

Meanwhile, Sen. Sherrod Brown, D-Ohio, and others have also sponsored legislation eliminating Chinese shippers' eligibility for de minimis (see 2408050030).