Industry Official: Things Moving So Fast That Brokers Face Client Rebellion, CBP Limbo

Sandy Langford-Coty, a broker at A.N. Deringer, said with energy categories for Canadian goods under the International Emergency Economic Powers Act (IEEPA) tariffs, the tariff classifications weren't always clear at the time the action went into effect. "So they said, 'Pick your tariffs.' Well, you picked a couple, that maybe [Customs] didn't pick, and now we're getting rejects, but I haven't paid my entry yet. It's not due for another whatever, 10 days. They can't accept my check for the difference, but it's due now."

She added: "What do I do? Does anyone know? If you do, let me know. But we're getting different direction from the center and for the folks we're sending the check to. So where does this limbo end?"

Langford-Coty said an ongoing hassle is the problem of new aluminum and steel derivative products outside the core chapters for those metals. For those products, importers are supposed to report two values: one for the product as a whole, and one for the metal content in the product. Except some of the products don't actually have any metal content -- or the metal content is domestic, and therefore, not taxable.

"The derivative split value is hell. Honestly, they just threw a solution out there, because the system can't handle it, and now we have these dual lines processing causing all kinds of issues," she said.

She added, "You, as an auditor, have no idea whether that line without the 99 number was really supposed to be a line that's part of a split, or is it really just a derivative that has no [metal content]? So then you've got to look at documents."

Adding another complication is the fact that some of these derivatives may have only triggered tariff liability at the date of export, if they were leaving a foreign-trade zone or bonded warehouse. But the date of export isn't one of the data lines that's on the entry form. Langford-Coty said some regions aren't accepting export dates that preceded the beginning of the duty collection. "I think Customs has to help us by giving us actual dates on our entry," she said.

Ralph De La Rosa, an NCBFAA board member and president of Imperial Freight Brokers, said one aspect of the aluminum derivative enforcement has been softened. In CBP's FAQ on the aluminum derivatives, it originally said "that you have an aluminum derivative product, and you did not know the country of smelting, smelt and cast, that you would need to report Russia. And so you would have to pay 200% duty."

"We pushed back. And for now -- big asterisk -- they're saying, 'Okay, no, until we figure out what we're doing, you don't need to report for Russia. You can report, you know, any country other than the U.S. as country of smelt and cast again.'"

He said brokers should ask their clients, in writing, to tell them where the aluminum was smelted and cast for the product they're bringing in. He said they might answer: "I don't know. I don't care."

They should keep pushing, he said: "Tell me where it came from, or where you reasonably believe it came from, and that's what I'm going to report."

While tariffs on Chinese goods will have the biggest change in duties in a short period of time, most importers haven't had to face that yet, because goods that were loaded on ships before April 9 haven't arrived here yet -- goods on the water before then will not owe the triple-digit duties -- and neither have those that left since that date.

But the next biggest sudden change was the decision to allow most products that meet USMCA rules of origin (other than cars, light trucks, and steel and aluminum) to avoid a 25% IEEPA duty on Canadian and Mexican goods.

There were a few days when that carve-out didn't apply.

"There is really no indication that it will be retroactive, but we have a lot of clients say, 'Well, I'm not paying it,'" Langford-Coty said, but if the broker were to decide they wouldn't pay, they'd be in trouble. "So you gotta pay."

De La Rosa said brokers have asked Customs if, as has been the practice, free-trade-agreement claims could be corrected post-importation up to a year after entry, or if reconciliation can be used for a post-entry claim. "Didn't get an answer to either question," he said.

The session also covered legal liability for brokers. NCBFAA customs counsel Lenny Feldman said "our terms and conditions are tight. They're good. They've been tested in court. You have the $50 limitations in place, you have those disclaimers, but you're going to be asked for some advice that is going to be gray. You are going to need to indicate to your clients business decisions you need to make. If it's gray, get it in writing. They tell you to do it a certain way. Get it in writing. Be very, very careful with your advice."

Similarly, De La Rosa said, "This is a time where we really need to double down on our responsible supervision control in our own houses and our own employees to make sure that they're not giving advice. It's a very big issue."

Feldman talked about ways to reduce duty exposure, but noted that some are red flags for CBP, like creating a sale price between related entities.

On legal classification, he said classifying an item to avoid Chapter 73 or Chapter 76 derivatives is unlikely to be kosher. Generally, on classification, he advised, "Be creative, but be careful. There are opportunities which I like, but there's some which are a little shaky."

"How about rebates? How about discounts? Maybe. Are there legitimate ways that you could reduce the value due to first sale? Yes. Is that equal to the cost of goods sold? No. Could it be a computed value? Maybe. We're hearing some increased interest in related parties using a computed value. Perhaps. Could be an opportunity."

On the operational side, Langford-Coty said brokers need to be careful about how to treat goods that were on CBP holds for examination since before the hike in duties, but are now ready to be cleared.

"Be so careful that somebody doesn't retransmit that [entry] summary" on the day CBP is going to release the import. "And if you have an exam, talk to the center," to get the time of arrival of the item.

"This is really important. We've seen people get burned because they resent their summary on something released, from something that was detained three months ago, and they're now in trouble, right? There's no recourse. You didn't ask for time of arrival."