Flexport: Importers Must Have Ability to Provide More Granular Data to Customs
With the White House announcing this week the end of the de minimis exemption for goods made in China starting next month, the U.S. will need to have the customs and trade infrastructure in place to handle significantly higher volumes of formal and informal entries, said Bernie Hart, vice president of customs for logistics provider Flexport.
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This heightened activity comes as importers' import data will need finer levels of granularity to comply with all the recently announced tariffs, according to Hart.
“What you're talking about is you have 4 million additional potential transactions, entries, that are now going to hit the United States," Hart said on an April 3 webinar that discussed the recent flurry of trade activity announced by President Donald Trump, including new reciprocal tariff rates.
"Now, Customs has to plan for this. Our infrastructure has to plan for this, because when I say infrastructure, what if 1%, 2% of those are flagged for exam or intensive exam -- what is that going to do to the overall infrastructure? Do we have enough customs agents? What do our facilities look like to be able to store these goods so that commerce continues to flow through it?” Hart said.
As Hart detailed recent White House activity related to Section 232 tariffs on steel and aluminum derivatives, he said he’s seeing more businesses being asked to provide a lot more detail about their supply chains. While businesses may have been asked about their supply chains in order to prevent forced labor from creeping in, companies are now seeing this inquiry stem more from a business perspective, he said.
For instance, a furniture importer may be asked to provide proof of where a product’s steel and aluminum originated, including how much of that steel or aluminum content originated from Russia.
“What we can anticipate here is that we're going to probably see more and more of that level of granularity,” Hart said. “So, businesses need to be thinking about their product library as an example, which is a great way to store product catalog, a great way to store their information at the part and SKU level. But within that, we're also having them consider really taking it to the next level … . If it happens to be a kit, an assembly, a sub-assembly [or] if it's part of a manufactured product, keep your costed bill of material there, because that costed bill of material might be able to help you to lower your overall entered value on those specific parts that are attracting these higher duty rates.”
He continued: “It gets more and more complex, but it really is up to the importer of record to store all of this data and information, and one of the great ways to do that is capture that in your product library so that you then have that specificity if Customs ever comes back and challenges you.”
This type of tracking also will help importers who have products that have eligibility for USMCA, Hart said, where regional content value and tariff shift come into play.
As for how automotive parts imports are being affected, “if you look up in the [Harmonized Tariff Schedule], the definition for automotive parts is much more narrow to what the sweeping executive order is today, meaning that there’s a lot more components that are falling underneath the automotive parts associated with this,” Hart said.
Furthermore, while there are some exemptions under USMCA for automotive parts, that could change down the road, Hart continued: “None of us have a crystal ball, but we believe what's going to happen is we're going to watch this play out … and see if there's any collateral damage associated with this that was unintended,” Hart said. “I think you're going to continue to see updates being made on a periodic basis by the administration trying to not destroy or put out of business a small company, but at the same time still invoke the spirit of what these reciprocal tariffs are supposed to do, and that's create that level playing field that we've been talking about.”
As importers collect more documentation about their products, Flexport founder and CEO Ryan Petersen said companies can take the data that they’ve put into ACE and analyze it in order to find opportunities where businesses might be able to save money, such as duty drawbacks. This data analysis is something that Flexport offers, he said.
“We don't yet have real certainty about what's going to happen, but we're going to get more clarity over the coming weeks,” Petersen continued. “And then your job, as it always has been, ... is to go find a way to make money and outcompete. Your competitors are probably in the same boat as you are right now, and when there's big opportunity, when there's big changes in the world, like this, [it's a] big moment of opportunity for you to go and win.”