Sidley Says Senate Customs Modernization Is More Enforcement Than Facilitation
The Customs Modernization Act is a bit of a misnomer, a Sidley Austin advisory says, encouraging firms to tell Sen. Bill Cassidy's office that changes are needed to make it beneficial to importers. The discussion draft of the bill was released so that it wouldn't produce unintended consequences for importers or businesses that provide services to importers, the Louisiana Republican's spokesman said (see 2111030035).
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The Sidley trade lawyers said that the bill has a major focus of bringing e-commerce platforms "within the scope of U.S. customs laws (the recordkeeping and penalty provisions, in particular), and the proposed changes could have even farther-reaching effects. For example, the draft bill imposes recordkeeping requirements, and provides CBP with examination and summons authority, on those who own or operate 'a commercial or marketing platform or marketplace through which merchandise imported into the United States is offered for sale or purchase in the United States.' Notably, this language is broad enough to potentially cover any domestic company that sells an imported product, not just e-commerce marketplaces."
Although the lawyers identified one plank of the bill as benefiting intellectual property rights holders -- the one that would give CBP the authority to share more information with those right holders -- they said in general the bill increases CBP enforcement authority more than it focuses on the needs of traders. The IPR section "would provide e-commerce marketplaces with additional tools to combat IPR-violative merchandise on their platforms but would likely also raise the government’s expectations on marketplaces to take action on such information and use the information to better seller due diligence," the lawyers wrote.
On de minimis, where companies will be required to provide documentation related to either sales or purchase offers if CBP says it is "reasonably necessary" to determine whether the good should qualify for tariff-free entry. "In practical terms, these changes would raise the burden on importers, and those that facilitate the importation of merchandise, to provide more information to CBP, while simultaneously expanding their liability," the lawyers wrote.
Sidley also flagged the much higher threshold for pre-penalty notices from CBP, currently set at $1,000; it would rise to $500,000. "This means that unless CBP assesses a penalty of more than $500,000, the person facing the penalty will lose the opportunity to engage with CBP at the pre-penalty stage. That person will have just one bite at the apple to seek cancellation or mitigation of the penalty after the penalty notice is issued. While the regulations provide for a second, supplemental petition, CBP is not always required to grant importers the right to file such absent an agreement to waive the statute of limitations. Therefore, this change will reduce the procedural protections for many against whom CBP attempts to collect penalties unless the party is willing to waive its rights under the statute of limitations," it said. "This may force parties to either pay penalties they believe are too high or unjustified or to engage in costly litigation at the Court of International Trade."