An administrative ruling issued recently by U.S. Customs and Border Protection aims to clarify the duty-free exemption status of certain low-value shipments sent to U.S. fulfillment centers and domestic warehouses.
Under the new ruling, some shippers in the U.S. who want to import shipments under the $800 ”low value” threshold will be required to provide information about the foreign vendor before the goods can enter the U.S. and continue to a warehouse to await a U.S. buyer.
CBP says the changes made will better position the agency to identify duty evasions and other abuses and help to create a more predictable enforcement environment for trade. It also provides CBP with foreign seller information with which to target and interdict counterfeit products, consumer safety violations, and other threats before they enter the U.S.
“The exponential growth of e-commerce has provided illicit sellers with an extraordinary opportunity to evade duties and sell unsafe and unregulated products to U.S. consumers, particularly through fulfillment centers,” said CBP Acting Commissioner Mark A. Morgan. “As the nation’s largest law enforcement agency, CBP will not sit idly by and allow these bad actors to evade duties, report false values, and harm American businesses and consumers.
Current Duty Exemptions Lack Accountability
19 USC 1321, commonly referred to as Section 321, enables CBP to admit qualifying goods duty- and tax-free provided they are imported by one person on one day and have a total fair market value of $800 or less.
That law, which eased the flow of global e-commerce for retailers and consumers, however, also restricted the degree of information shippers provided to Customs agents monitoring incoming goods for trademark infringement, consumer-safety violations, and other illegal activities.
Direct-to-consumer shipments from China under the $800 threshold have become even more pronounced since the Trump administration hit most Chinese imports with punitive tariffs as part of its ongoing trade war with Beijing. As a result, Chinese vendors, who ship directly to consumers in the U.S. have been able to avoid the tariffs while also bypassing U.S. retailers who are forced to pass on the cost of the tariffs to the consumer.
Foreign Vendors & Risk Management
The new administrative ruling recognizes fulfillment centers and domestic warehouses as the “one person” for any goods that have not been sold to a specific consumer at the time of importation into the United States, making them potentially eligible for Section 321 provisions.
Under this ruling, foreign vendors also qualify as the “one person” and can have their information submitted to receive low-value duty exemption and to benefit from streamlined administrative processes.
Information about foreign vendors is critical to CBP’s efforts to identify and interdict shipments of counterfeit and unapproved goods that undercut the competitiveness of U.S. businesses through trademark violations, consumer-safety violations, etc., that can harm consumers.
For example, since the beginning of the COVID-19 pandemic, CBP has used this information and other data to seize more than 10 million counterfeit masks, more than 120,000 unapproved COVID-19 test kits, and thousands of other goods that threaten the health and safety of Americans.
Changes & Enforcement Now in Effect
The administrative ruling took effect on July 28th 2020 and is enforceable as of that date.
CBP says that it intends to take near-term enforcement action against egregious violators it believes are structuring their shipments to evade duty and entry requirements. Longer-term, egregious, and/or repeat violators may lose their Section 321 privileges and may be required to file formal entry on subsequent shipments.
Need More Information?
Should you have any questions about this change in CBP policy and how your imports may be affected by it, or should you have any other concerns about the Section 321 program, don’t hesitate to contact one of our knowledgeable trade experts to discuss this issue in greater detail.