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Replacement for Type 86 Revealed; HTS Will Not Be Required for All Entries

CBP proposes to replace the Type 86 process for low-value packages with an "enhanced entry process," requiring a few more data elements than the 10 currently required. Like the Type 86 test, and providing the additional data in exchange for quicker release will continue to be voluntary.

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In a notice of proposed rulemaking on Entry of Low-Value Shipments (ELVS), scheduled for publication Jan. 14, the agency explained that clearing goods off the manifest, which is the way that nearly 40% of de minimis entries are processed, still will be allowed if this rule becomes final.

This is the first of two proposed rules, with the other rule, which is expected to restrict which goods are eligible for duty-free entry, expected in "coming days," according to a news release that accompanied the draft rule. The release said the data mandated in ELVS is necessary for CBP to implement other reforms.

"The Administration ... continues to encourage Congress to move forward with statutory reform to address the surge in de minimis imports that put American consumers, workers, retailers, and manufacturers at risk," the release said.

The Biden administration asked Congress to change the penalties for false submissions, and asked that all de minimis shipments be charged a $2 merchandise processing fee, so that CBP can add staff and technology to manage the screening of approximately 4 million de minimis entries a day. CBP's top official said such a law is "urgently needed."

CBP said more than 90% of shipments imported enter under de minimis, and said 87% of its seizures are in that stream of goods. "CBP faces significant challenges in targeting these low-value shipments, while still maintaining the clearance speeds the private sector has come to expect," the agency said.

“Every day, the men and women of CBP interdict goods that threaten the health and safety of Americans as well as the economic vitality of our country. We see illicit drugs, dangerous toys, fake medicines, and other counterfeit goods shipped direct to American homes impacting the lives of our neighbors, friends, and families. This proposed rule will help to give us some of the tools we need to address more of these threats,” said acting CBP Commissioner Pete Flores.

The notice of proposed rulemaking said many de minimis shipments "are undervalued or incorrectly presented for release from manifest as non-[partner government agency, or PGA] shipments, and thus do not qualify for the administrative exemption."

The NPRM changes the government's interpretation of the 2015 law that increased the de minimis threshold to $800 per person per day in a few ways. CBP has never been able to effectively police the threshold if the same customer was receiving many packages via different companies, and together, they added up to more than $800. Agents sometimes caught the overage, and CBP has been working on a way to flag the collective value through ACE, but has not yet been able to implement that.

CBP had already said that when that ACE deployment is in effect, if an importer exceeds $800 in value in shipments in one day across multiple packages, none of the packages would be eligible for duty-free entry, simplifying the enforcement of that limit (see 2407310052). The rule puts it in writing.

Whether the recipient of shipments is a retailer at a given location, or whether four employees could each receive $500 was not clear (see 2410020063 and 1707310053); the proposed rule makes it clear it's the buyer of the merchandise, not the person it's being shipped to, who will count as that person.

The regulation also would change language allowing the duty exemption from "shall" to "may," with the notice saying: "the administrative exemptions are a privilege and not an absolute right."

For the enhanced entry, CBP will require:

  • Clearance tracing identification number
  • Country of shipment
  • Harmonized Tariff Schedule code (but waivers will be available for "for filers with demonstrated capabilities and histories of segmenting out goods subject to PGA requirements")
  • Either the marketplace's product listing URL, a product picture, a SKU or product code, and/or a foreign security scanning report, such as a shipment X-ray
  • Advertised retail product description
  • Seller name and address
  • Purchaser name and address
  • PGA data, if warranted
  • Marketplace name and website.

The "basic" entry process would be quite similar to current processes for goods cleared off the manifest, except that the "ultimate consignee" would be replaced with the name and address of the final deliver-to party, if that's different from the buyer. It also would require the buyer's or owner's name because that would be who the $800 limit is linked to. The basic entry process doesn't require an HTS code. The 86-page notice doesn't explain how CBP would be able to segregate out goods subject to Section 301 duties -- the policy expected to come in the next rule -- without HTS codes for all de minimis packages.

Mail, which currently cannot qualify for Type 86 electronically cleared entries, would be eligible for the enhanced entry process, though mail shipments have a different advance data filing deadline, no later than the date it leaves the home country.

For other modes of travel, the deadlines for advance data will be the same as for advance electronic filings in current regulations. Those are:

  • For vessel cargo, the filing is due at CBP 24 hours before the cargo is laden in the foreign port
  • For air cargo it is no later than the departure time of the aircraft, though there are special rules for close-by destinations in the Caribbean, Mexico, Central America and such, which is no later than four hours before the arrival of the plane
  • For rail cargo, the filing must be received by CBP no later than two hours prior to the cargo reaching the first port of arrival in the United States
  • For truck cargo, the filing must be received by CBP no later than either 30 minutes or one hour prior to the carrier’s reaching the first port of arrival in the United States, or such lesser time as authorized, based upon the CBP-approved system employed to present the information.

While CBP has ideas about what a product identifier should be, such as the part number, SKU, or product code, it said it would like input from importers on acceptable product identifiers, and whether the security screening report number, used by express carriers, is viable for that purpose.

A mail customs declaration and invoice will continue to be required, no matter which entry process the sender is seeking. "Mail shipments are not eligible to use the basic entry process because the current method of entering qualifying low-value mail shipments free of duty and tax will continue to remain available," the notice said.

While the rule would replace the data element for ultimate consignee with a purchaser's name data element, it still requires the name and address of the final deliver-to party if that is different from the buyer. "The purpose of this data element is to enable CBP to know to whom and where the imported merchandise is destined to be delivered in the United States," the notice said.

The seller's name and address will be required for all shipments, whether enhanced entry or basic entry. "Seller information is critical to CBP’s efforts to identify and interdict shipments of goods that infringe intellectual property rights or are of a substandard quality that renders them otherwise restricted from entry," the notice said.

The proposed rule would allow express consignment operators and carriers (ECOs, in CBP lingo) or others to apply for a waiver of the requirement to report HTS codes for enhanced entry, as long as the goods are not subject to PGA requirements.

The notice asked specifically for comments on this exception, and said it expects it to save ECOs money; however, it also said it considered the more stringent approach of not having a waiver.

"The application process must include information demonstrating that the applicant does not import goods subject to PGA requirements, or it must have in place documented internal controls used in the ordinary course of business to identify PGA goods with certainty. An applicant must demonstrate that the internal controls allow the applicant to properly classify merchandise under the HTSUS at the 10-digit classification, determine whether merchandise is subject to the requirements of other government agencies, and determine whether merchandise is otherwise precluded by law from eligibility for the administrative exemption under 19 U.S.C. 1321(a)(2)(C). Participation in the Customs Trade Partnership Against Terrorism (CTPAT) program does not guarantee approval of an application, but may be considered along with other factors on a case-by-case basis," the notice said.

CBP will respond to waiver applications within 60 days, and will undertake compliance review of these waivers. "CBP may revoke the privilege at any time if it determines that a company’s internal controls fall below the standards set by CBP," the notice said. Businesses may appeal a denial of a waiver application, or a waiver's revocation within 30 days of CBP's action, at the same email address.

"The denial of an application or the revocation of a waiver, does not preclude a party from reapplying for the privilege in the future. Reapplications must specify and address past denials and revocations of the privilege," the notice said.

Enhanced entries have to be handled by a customs broker, who must exercise reasonable care. "CBP notes that customs brokers must be authorized to conduct customs business on behalf of another party through a valid power of attorney and must comply with all other statutory and regulatory requirements applicable to brokers," the notice said.

CBP acknowledged that brokers are reliant on information coming from marketplaces and sellers. "CBP recognizes that these are non-traditional data elements and may not be easily verifiable by the party filing the entry if they are being passed [on to] the filer by third parties," the notice said, so CBP will take that into consideration, and will permit the broker "to transmit the information on the basis of what the party reasonably believes to be true."

However, express carriers will be allowed to use the enhanced entry method, even though they are technically consignees, not brokers, "because they are better able to provide detailed information to CBP about the imported merchandise. ECOs, by regulation, are expected to exercise 'a high degree of control over the shipments, particularly in regard to the reliability of information supplied for Customs purposes.'"

Carriers also will be allowed to enter shipments under the release from manifest process.

CBP estimated that the additional cost of moving from Type 86 data requirements to these enhanced entry requirements would be 1 cent per shipment.

It didn't consider ending the Type 86 test, which it said has been successful, without any replacement. "CBP is not currently equipped to handle the now-sizable low-value shipment volumes manually without any automated clearance process like entry type 86. Reverting to an entirely manual process would be infeasible and contrary to CBP’s mission to facilitate the entry of legitimate goods into the United States," the notice said.

If these rules become final, they wouldn't end the Section 321 Data Pilot. There will be changes to that pilot that will be announced in a later Federal Register notice, the administration said.