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E-Commerce Facilitation, Regulation High on Priority List for Customs and Trade

Monday, September 04, 2017
Sandler, Travis & Rosenberg Trade Report

Facilitating and regulating electronic commerce, particularly in the wake of a 2016 change in U.S. law that effectively allows more products bought online to enter the U.S. duty-free, was a major topic of conversation at a recent meeting of U.S. Customs and Border Protection’s Commercial Customs Operations Advisory Committee. CBP officials said e-commerce has required developing understanding and tools that the agency had not necessarily anticipated and that they welcome input from the trade community as they continue to develop a way forward.

E-Commerce Challenges. Under section 321 of the Trade Facilitation and Trade Enforcement Act, the maximum value of goods that can be imported free of duty and tax by one person on one day (the so-called de minimis value) was increased from $200 to $800 as of February 2016. The effect of this change has been compounded by the substantial increase in businesses and consumers purchasing goods online in recent years. Many of these shipments qualify for the de minimis exemption and are not subject to formal entry, which means CBP is not collecting information on an increasing volume of imported goods that would ordinarily be used for targeting and enforcement purposes (e.g., antidumping/countervailing duty liability, intellectual property rights infringement, or compliance with product safety standards), either for itself or for any of the dozens of other government agencies that regulate imports in some manner.

CBP Response. To help address this issue CBP’s Office of Trade created an E-Commerce and Small Business Branch within its IPR and E-Commerce Division in September 2016. This branch drafted an e-commerce strategic plan that outlines education, engagement, and enforcement steps CBP plans to take to coordinate and collaborate with international colleagues, partner government agencies, the trade community, and the public. CBP is working to finalize this plan and make a version available to the public.

CBP is also leading an active U.S. participation in e-commerce-focused working groups at the World Customs Organization. With assistance from the U.S. and other customs administrations, these groups have reviewed member countries’ current practices and developed interim recommendations, with final recommendations and guidelines anticipated by June 2018.

Trade Response. In February 2017 COAC formed an E-Commerce Working Group under its Trade Modernization Subcommittee that aims to identify and find workable solutions to the operational challenges associated with the increasing volume of e-commerce shipments, including current and future supply chains, changing business models, complexities for small businesses, and evolving enforcement issues. Customs brokers, carriers, express couriers, importers, suppliers, and e-commerce platforms are among those represented in this group.

At their Aug. 23 meeting COAC members considered a number of recommendations intended to improve the import process for section 321-eligible shipments across all modes of transportation with respect to both facilitation and enforcement. COAC members ultimately approved all of the recommendations, though in some cases only by a small margin after substantial discussion.

Some of the recommendations are short-term and focus on automating systems and processes and maintaining data integrity. For example, COAC recommended that CBP not limit section 321 filings to a certain class or group of service providers and ensure that such filings can be made electronically through the Automated Commercial Environment or other systems.

Other recommendations focused more on exploring long-term opportunities and challenges with respect to collaboration, compliance, and other issues. COAC urged CBP and other government agencies to clarify whether section 321 imports require data sets similar to those required for entry types 01 and 11 for cargo release and whether duties and fees will be required; if so, CBP should work with the trade community to establish filing requirements. COAC also encouraged CBP to avoid identifying specific parties that should be categorically liable for the accuracy of section 321 filings and to instead rely on existing laws and regulations that allow CBP flexibility to consider factors such as knowledge of manufacture or primary benefit from sale in determining responsible parties. In addition, COAC said, CBP should consider benefits such as expedited processing and less targeting for section 321 imports by trusted traders.

The most actively debated topic was whether to require a ten-digit HTSUS number for section 321 filings. COAC recommended that CBP ensure that section 321 shipments subject to review by PGAs have the necessary data elements or data sets for CBP and the PGAs to “release cargo consistent with the risk and targeting standards aligned with the agencies’ missions and to safeguard public health and safety of the American consumer.” However, there was some debate as to whether or not a ten-digit HTSUS number is a necessary data element.

Some COAC members said such a requirement would be premature, characterizing it as a solution in search of a problem. Others pointed out that HTSUS numbers provide limited value in assessing risk and said requiring them for section 321 filings would add complexity and cost for businesses. On the other side, some members said HTSUS numbers are preferable to product descriptions because they can be automated, provide better information to track goods coming into the U.S., and can help overcome language barriers.

For more information, please contact Lenny Feldman at (305) 894-1011.

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