Customs and Border Protection Getting Stricter with De Minimis Shipments
In this video from The Franklin Partnership, contributing author Omar Nashashibi discusses recent action from U.S. Customs and Border Protection (CBP) on de minimis shipments.
CBP issued a statement in late May announcing it was suspending multiple customs brokers for posing “an unacceptable compliance risk” for de minimis shipments entering the U.S. The action is important to companies importing products valued at $800 or less brought into the U.S. under the Entry Type 86 Test, a CBP pilot program allowing for the electronic processing of certain products under the de minimis threshold.
CBP’s action addressing some de minimis shipments is part of an increasing trend as lawmakers seek to lower the threshold possibly to $200 to address abuse in the system. Policymakers are concerned over reports of an increase in use of de minimis by Chinese companies to avoid paying the tariffs of 25% and 7.5% on their imports by breaking up the shipments to enter the U.S. with a valuation of $800 or lower.
U.S. Customs and Border Protection also cracking down on illicit imports
In addition to tariff evasion, there are allegations of imports under de minimis of fentanyl, products manufactured using forced labor, and other illicit goods entering the U.S. through the program, which receive less scrutiny than higher valued imports. Under the Entry Type 86 Test, importers use an electronic method to bring products into the U.S. without paying duty or tariff if the goods don’t exceed $800 on a given day.
“CBP’s evaluation and suspension of non-compliant Entry Type 86 Test participants is part of a multi-layered enforcement approach to prevent abuse of the de minimis process, protect the integrity of the supply chain, and ensure that businesses comply with applicable U.S. legal requirements,” the agency said in its recent statement.
CBP added any broker that has been suspended will be considered for reinstatement if it demonstrates it has developed and implemented a remedial action plan.
Congressional reaction to CBP’s action on de minimis imports
The issue of importance here is not the suspension of the customs brokers, but that CBP is responding for calls to action. However, some outside groups say suspension is not enough, calling on the Biden administration to use executive action to end the Entry Type 86 Test under de minimis. This follows legislation clearing U.S. House of Representatives Committee on Ways and Means in April that would bar most products from China from being eligible for entry under de minimis, citing 60% of imports under that program originating from China.
What CBP’s actions mean for companies
Clearly based on this action, CBP is increasing its scrutiny of imports entering the U.S. under the de minimis threshold and companies using the Entry Type 86 process should remain vigilant and speak with their customs broker to be sure the company is in full compliance. Sources in our Washington, D.C. trade circles believe the latest steps taken by CBP are just a precursor of further tightening of the de minimis entry process if the agency believes importers are continuing to abuse the system.
Companies and their customs broker should always conduct due diligence on suppliers for goods entering under the $800 or less de minimis threshold. We last provided an update on de minimis last December, and we may again later this year if Congress moves on a trade bill lowering the exemption through hold in the post-election lame duck session.
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Jennifer Clement is an executive sales and marketing leader specializing in value creation for the C-suite. In her current role at CLA, Jennifer collaborates on strategy with executives of global manufacturing and distribution companies to accelerate results. Previously Jennifer served as a Global Business Acceleration Leader for Complete Manufacturing and Distribution (CMD). During her time with CMD, Jennifer lived and worked in Asia from 2015-2019. Prior to CMD, she spent 10 years in senior care technology. Jennifer started her career at Johnson Controls (JCI) and spent nine years in leadership roles; followed by five years at Rockwell Automation (ROK) leading c-suite strategy and marketing operations.