President Trump issued June 3 an executive order that will impact all importers and entities connected to import transactions. This EO directs a broad tightening of U.S. customs enforcement, with a strong emphasis on importer accountability and vetting, foreign importer restrictions, disclosure obligations, and higher penalties. The most immediate practical effect will likely be an increase in enforcement, bonding, data submissions, and compliance requirements for importers of record, especially foreign IORs.
As the nation’s largest independent customs and trade law firm, Sandler, Travis & Rosenberg is prepared to help you understand and respond to these enhanced enforcement measures and their impact on your business operations. Please send a message to tariffs@strtrade.com or contact your STR professional for further information.
Companies should note that none of the actions below are immediate and that the Department of Homeland Security and U.S. Customs and Border Protection are expected to engage with stakeholders to implement these actions through the standard rulemaking process. As a result, we anticipate that CBP will issue Federal Register notices within the timelines specified seeking public comment, which may allow parties time to adjust operations as needed.
Importers of Record
Definitions. The EO draws a sharper distinction between U.S. IORs and foreign IORs based on citizenship, legal organization, ownership, location, and U.S. assets.
A U.S. IOR is defined as an entity that is organized under U.S. law, is located in the U.S., and is either continuously controlled by beneficial owners who are U.S. citizens or lawful permanent residents or owns a significant amount of real property in the U.S. A U.S. IOR may also be a citizen or lawful permanent resident of the U.S.
A foreign IOR is any importer that does not meet the U.S. IOR definition.
The EO states that CBP will apply a substance-over-form test to determine whether an entity is located in the U.S. Future guidance on this issue will prioritize preventing the use of shell companies, sham transactions, or artificial corporate structures to obtain U.S. IOR status. At minimum, an entity must have its principal place of business in the U.S., a physical presence where significant business activity occurs in the U.S., and sufficient tangible U.S. assets relative to the scale of its operations.
IOR requirements. CBP is directed to revise its regulations, guidance, and policies within 180 days to (1) increase bonding requirements, (2) require IORs to maintain minimum domestic tangible assets, bonds, or both, and (3) require expanded disclosure of ownership and beneficial ownership, business affiliations, domestic assets, expected import volumes, and any other data CBP deems necessary.
Foreign IOR restrictions. Under this EO, foreign IORs will no longer be treated the same as U.S. IORs. CBP is directed to amend its regulations, guidance, and policies to prohibit foreign IORs from filing informal entries. However, foreign IORs may file formal entries if (1) bonding is sufficient to demonstrate to CBP that the revenue would be fully protected and that compliance with CBP-enforced import laws, regulations, and instructions would be assured, and (2) they are validated in CTPAT (if eligible) or use a CTPAT-validated and licensed customs broker to file entries.
IOR good standing, registry, and vetting. CBP is directed to establish a “good standing” requirement for all IORs that is tied to their compliance history and payment of customs liabilities, among other factors. IORs not in good standing will be barred from importing into the U.S. as well as any activities directly related to importing goods, including designating a customs broker to act as IOR on their behalf.
CBP is also directed to update the IOR registry by removing inactive IORs (foreign and U.S.), confirming that IORs are compliant with all regulations and disclosures, and creating risk-based tiers based on compliance history, enforcement actions, and audit results, among other things.
Enhanced and recurring vetting will apply not only to IORs but also to affiliates of IORs, customs brokers, custodians of bonded merchandise, and freight forwarders.
These changes are all directed to occur within 180 days.
Import Disclosure and Certification
The EO directs heightened import disclosure and certification requirements and expanded supply chain disclosures, including (1) compliance certifications tied to sanctions and other legal requirements, (2) foreign tax and business identifiers, and (3) more detailed product and production information.
CBP is also directed to take steps within 90 days to require the submission of export-related documentation or information provided to foreign customs authorities prior to export to the U.S.
Enforcement and Penalties
CBP is directed to prioritize the enforcement of laws relating to forced labor, undervaluation, misclassification, and transshipment enforcement, including evasion of antidumping and countervailing duties under the Enforce and Protect Act.
CBP is directed to bolster its enforcement activities by increasing audits, enforcing bond claims more aggressively, restricting in-bond use, and imposing maximum penalties on brokers that fail to conduct due diligence, repeatedly represent noncompliant parties, or fail to cooperate in a timely manner with CBP requests for information.
Penalty mitigation standards are to be tightened within 90 days, including establishing a minimum penalty floor of at least 50 percent of the assessed penalty, minimum liquidated damages, and no mitigation for repeat offenders.
Other
The EO also directs faster seizure and disposal of noncompliant imports, more transparency through annual enforcement reports and periodic review of confidentiality claims, recommendations for additional legislation within 45 days, and a one-year effectiveness report.
TIMELINE OF EVENTS REQUIRED BY EXECUTIVE ORDER
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Days from Order
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Required Action
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45 days
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Submit recommendations for legislation to strengthen customs enforcement
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90 days
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Require submission of documentation or information that the foreign exporter provided to foreign customs authorities before export to the U.S.
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Revise mitigation standards to establish a minimum penalty of at least 50 percent, minimum liquidated damages, and no mitigation for repeat offenders
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Take actions to expedite and enhance seizure and disposal of noncompliant imports, including easing voluntary abandonment, increasing bond requirements for high-risk shipments, and authorizing third-party disposal
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Enhance transparency through periodic review and expiration of confidentiality requests, as appropriate, and publication of annual enforcement transparency reports
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180 days
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Revise importer eligibility regulations, guidance, and policies to require minimum domestic assets, bonding, or both; increased bond coverage; IOR designation for formal and informal entries; and additional IOR data disclosures
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Require all IORs to maintain good standing with CBP
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Update the IOR registry by removing inactive IORs, confirming compliance and disclosures for active IORs, and creating risk-based tiers
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Establish enhanced and recurrent vetting procedures for IORs, affiliates, customs brokers, custodians of bonded merchandise, and freight forwarders
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1 year
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Submit a report on the effectiveness of the matters set forth in the order
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