Brokers, Importers Grapple With Uncertainties Over Drawback, ACE Capabilities Post-'Liberation Day'

"It’s crazy for us all trying to understand the new requirements and how to comply," one broker told International Trade Today.

A CBP official said during the April 3 bi-weekly ACE trade support call that the agency is working on CSMS messaging that will provide further technical instructions, as well as guidance related to the executive orders on reciprocal tariffs and low-value imports.

"I just wanted to acknowledge the very prolific trade events that have been happening, and I wanted to reassure everyone that CBP is working closely with our other government agencies to implement recent executive orders, and we're working hard to continue to provide updates as we are able to, including detailed guidance that promotes compliance," the CBP official said on the call.

But one of the potential issues that might arise when multiple trade actions occur on one day is the ability of ACE to absorb and adapt to these actions. Not only did the Trump administration announce reciprocal tariffs (see 2504020072), it also announced plans to end the de minimis exemption for Chinese imports (see 2504020006), and it released additional information on tariffs related to automotive parts and vehicles (see 2504020081) and Section 232 (see 2504020015).

While ACE updates have so far mostly been rolled out correctly, there were several instances where the systems needed to be changed after implementation, said Cindy Allen, CEO and founder of Trade Force Multiplier. This was particularly so with the implementation of the steel and aluminum derivatives tariffs, she said.

"One issue is the difficulty of programming in a very short timeline. While CBP may have had a little bit of a heads-up internally regarding the new [Harmonized Tariff Schedule (HTS)] chapter 99 numbers, having only a few days to make changes is challenging for such a large system," Allen said. "That is true for the brokers as well. The third annex is 22 pages long, and each provision has to be looked at, analyzed, interpreted, then the changes have to be programmed, tested, pushed out to all the broker systems, and then implemented in a very quick fashion."

Another potential issue Allen sees is that of HTS chapter 99 number stacking, as ACE hasn't been calculating the duty correctly when more than one 99 number applies to the product, "and therefore there are no edit checks to ensure that what is transmitted and paid is correct," she said.

"The customs broker’s systems are doing this, but it has been challenging with all of the stacking. And they have to ensure that since there is not an edit check, the calculated duty is accurate. Auditing has become more critical to ensure that these complex tariffs are being applied correctly. That adds costs to the entry processing," Allen said.

Tom Gould, a customs broker who also heads his own consulting firm, echoed Allen's comments about the ability of ACE to verify the amounts.

"I think ACE will be ready to handle the tariffs. [But] I don't think ACE will be ready to validate that the amounts reported are accurate," Gould told International Trade Today. "In some cases they can, but in many cases, they're not going to be able to validate the data, and so they're relying on the broker or the importer to exercise reasonable care, meaning that in today's environment, a broker and an importer has a higher level of responsibility to validate the numbers that are reported to ACE are accurate."

Beyond ACE, another uncertainty is whether importers will have the option to use drawback in response to these reciprocal tariffs. While all the other International Emergency Economic Powers Act-related announcements have excluded drawback, this latest executive order on reciprocal tariffs hasn't.

That omission was noted by multiple people.

"That [omission] begs the question: Why did this executive order exclude that language? We are keeping our eyes open for the Federal Register notices and further communications from CBP to determine if the tariffs will be eligible or not," said Dave Corn, a customs broker and executive vice president at Comstock & Holt.

In an April 3 webinar for customs brokers, Erik Smithweiss, a trade lawyer with Grunfeld Desiderio, also touched on the absence of any restrictions on drawbacks, as well as Chapter 98 exemptions, in the recent executive order.

Regarding drawbacks, Smithweiss said he couldn’t be sure that the absence of drawback restrictions in the language of the new reciprocal tariffs was intentional on the Trump administration’s part, but he thought it was.

“I think that it would be a poor economic and policy decision to prevent it,” Smithweiss said. “But, again, we'll have to see what happens.” He also noted that the executive order didn’t restrict use of Chapter 98 duty exemptions, although clarity on their application under new tariffs has sometimes only appeared in subsequent Federal Register notices.

Gould also noticed the absence of drawback in the executive order on reciprocal tariffs: "I was on a call this morning where there were some discussions about drawback, and the question was, will the president issue an amendment to the executive order that would eliminate drawback from the reciprocal tariffs?"

"There's some that feel that that will happen, because that's what happened to all the others," he said. "But then the other school of thought is that drawback is really designed to promote exports, and so then maybe it was done on purpose to help companies make the decision to export more of their products."

Should drawback be permitted under this reciprocal tariff scheme, "businesses will definitely be looking at drawback as an opportunity to mitigate these new tariffs," Corn said.

While Corn and others are still waiting for CBP to clarify whether there will be any restrictions on drawback, Corn said drawback on these tariffs "gives American companies the chance to remain as competitive as possible while creating thousands of manufacturing and transportation jobs, [while] also providing an additional incentive to manufacture in the U.S. and to export U.S.-made goods."

As importers and brokers await further direction on how to tackle the latest trade actions, Allen stressed that companies need to understand their supply chains.

"Brokers, consultants, lawyers are also fielding questions from their clients to assist in understanding how these reciprocal tariffs will impact their products. Reports are being run to determine possible duty impacts for each level of the supply chain," Allen said. "Understanding and knowing the supply chain all the way down to the raw materials is even more critical, so there is visibility into the layered effects of tariffs. Especially for goods that move in and out of the U.S. multiple times in the manufacturing process. Wall Street and investors are looking at possible impacts to businesses."

Importers should also be aware that not only should they have a customs bond, but that the additional duties mean that the bond requirement is going to be higher, according to Gould.

Companies "also have to verify that the declarations that they're making are accurate, because there are so many moving parts and so many things changing that you've got to make sure that you're making the right declaration on the right date for the right product," Gould said.

However, "the other thing that I'm talking to companies about is, as all these new tariffs are implemented, it does potentially open up questions and potentially open up opportunities," Gould continued. "There are some weird quirks to the rules that we don't have the answers to yet, like, what happens if your ... tariff on aluminum or steel is a lower rate than the reciprocal tariff? Can you choose to pay the aluminum or steel tariff on the full value of a product that only contains some aluminum or steel, versus paying the new reciprocal tariff that might be at a higher rate? So there will be potentially loopholes that companies should be watching out for and should potentially be able to take advantage of."