What’s the fuss with de minimis?

In the world of international shipping and e-commerce, the term “Section 321” has gained significance, especially among those importing goods into the United States. Under this provision of the Trade Facilitation and Trade Enforcement Act of 2015, shipments valued at $800 or less can enter the country duty-free and without formal entry requirements. However, the process isn’t always straightforward, and occasionally, shipments get targeted by Customs and Border Protection (CBP) for further inspection. So why has there been a recent fuss about the de minimis shipments? Here’s what you need to know:

Section 321 Background:

De minimis or low value import shipments are provided for under Section 321 of the U.S. Tariff Act of 1930. This allows for informal entry of shipments under a certain retail value be entered into the U.S. duty and tax free and have an expedited clearance process. If you have been in this business for any length of time, you might remember that this value used to be capped at $200. In 2016, U.S. Customs increased the value of these shipments to $800 (which is the highest of any country).  An important caveat to note on these types of shipments is that de minimis shipments are based on the aggregate fair market value of all the shipments that are imported by one person each day.

In 2019, CBP initiated a test of a voluntary Entry Type 86 procedure for self-filers and customs brokers to electronically transmit shipment data through the Automated Commercial Environment (ACE). The change was implemented to help speed up the process for imports and for the increase of e-commerce sellers. This testing also extended to shipments that required additional data for Partner Government Agencies (PGA), such as the FDA. In exchange for faster processing, the filers must submit more data, including the 10-digit harmonized tariff code.

Why is CBP targeting Section 321 (de minimis) shipments?

The U.S. Customs and Border Protection (CBP) is currently conducting tests that are targeting Section 321 shipments. This testing stems from a report that was conducted back in November 2023 from the International Trade Commission. In the report it was found that Section 321 entries account for a substantial portion of all U.S. e-commerce imports and China is the leading source of these de minimis imports.

Historically, Section 321 was somewhat under-enforced due to the sheer volume of small packages arriving daily, making comprehensive inspections impractical. However, CBP has begun to focus more attention on these shipments, citing concerns over security, intellectual property rights, and compliance with trade regulations.

• Security Concerns: In an era of heightened security awareness, CBP is keen to prevent illicit or dangerous items from entering the country under the guise of legitimate shipments. With a lot of “bad actors’ in the world, utilizing the de minimis shipment is one way that they would try to smuggle in illicit drugs, such as fentanyl, cash or even other illegal items that could potentially harm the American people.
• Intellectual Property: Protecting intellectual property rights (IPR) has become a priority, as counterfeit goods often enter the US market through small, informal shipments. These shipments can range from fake wearing apparel, watches and purses to fake sports jerseys and fake sports championship rings.
• Compliance and Trade Regulations: The explosive growth of e-commerce has led to a surge in Section 321 shipments, increasing the need for CBP to ensure compliance and security without unduly disrupting trade flows. Most of these shipments are coming in from China and with the increased enforcement of forced labor, many Chinese companies could potentially try to circumvent this enforcement by utilizing the de minimis entry. Sometimes companies will try to utilize the Section 321 entries to avoid paying duties altogether and will severely undervalue the shipment so it will meet the threshold. I used to see shipments come in from Mexico that were sports uniforms and they would always be undervalued and the exporter would also have “gift” listed on the invoice as well. Well, it is pretty suspicious if you have 20 soccer uniforms coming in as a “gift”.

 How is CBP targeting these shipments?

CBP uses sophisticated algorithms and risk assessment techniques to target shipments that may pose a risk to the United States. Reasons for targeting can include discrepancies in declared value, inconsistencies in documentation, or concerns over the nature of the goods being imported. If your shipment is targeted, CBP may require additional information or physical inspection before releasing it for delivery.

In addition, CBP moved up the filing deadline for Entry Type 86 shipments from within 15 days of arrival to “upon or prior to arrival”. If a low value shipment isn’t filed within this time frame, then the shipment cannot be entered as Entry Type 86.

What steps should you take if your shipment is targeted?

• Provide Accurate Information: Ensure that all information provided to CBP is accurate and matches the documentation accompanying your shipment. Inaccurate information can lead to delays or even seizure of your goods.
• Stay Informed: Keep track of your shipment using the tracking number provided by your carrier. Often, CBP will notify the carrier if additional information or action is required.
• Respond Promptly: If notified by CBP or your carrier that your shipment has been targeted, respond promptly and provide any requested information. This could include invoices, proof of payment, or clarification about the goods being imported.
• Work with Your Broker: If you used a customs broker to facilitate the importation, they can be a valuable resource in navigating CBP requirements. They can assist in preparing the necessary documentation and communicating with CBP on your behalf.
• Be Patient: Dealing with CBP targeting can be frustrating, but patience is key. CBP processes a large volume of shipments daily, and targeting does not necessarily mean there is a problem with your shipment.
• Seek Legal Advice if Necessary: In complex cases or if you believe your shipment has been unfairly targeted, seeking legal advice from a customs attorney or trade compliance expert may be beneficial. They can provide guidance on your rights and options.

How can you prevent future issues?

• Accurate Declaration: Always provide accurate information about the value, quantity, and nature of the goods being imported.
• Compliant Packaging: Ensure goods are packaged according to CBP regulations to prevent damage or discrepancies during inspection.
• Stay Updated: Regularly review CBP guidelines and regulations to stay informed about changes that may affect your shipments.
• Import Compliance Program: Having an Import Compliance Program can be beneficial to navigating the complexity of import shipments.

Conclusion

While CBP targeting of your Section 321 shipment can be unnerving, it’s important to approach it with patience and a proactive mindset. By understanding the process, providing accurate information, and working closely with your carrier or customs broker, you can often resolve issues swiftly. Remember, CBP’s goal is to ensure compliance with regulations and facilitate legitimate trade while protecting the borders. By following these steps, you can navigate the complexities of CBP targeting with greater confidence and efficiency.

Navigating CBP targeting can be a learning experience that ultimately strengthens your understanding of international shipping regulations and procedures. Stay informed, stay proactive, and ensure your shipments comply with all relevant laws to minimize disruptions and maximize efficiency in your business operations. If you need help with getting started with an Import Compliance Program or any other assistance with your import shipments, Schedule a no-charge consultation today.