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Wednesday, June 19, 2024

US Customs further tighten scrutiny on duty free low value consignments

U.S. Customs and Border security has further tightened the scrutiny of low value consignments in the United States that are released without duty and taxes. This will particularly hurt online textile fashion giants being accused of exploiting labor.

Shein, a Chinese company that operates from Singapore, outsources its apparel from various locations in China. It has been accused of using cotton produced from forced labor as well as exploiting apparel workers. The accusation is denied by the company. Now another Chinese fashion brand Temmu has also made inroads in global markets and is accused of similar unethical practices. Both operate online and dispatch consignments to the United States valued less than $800 to qualify for duty free release.

U.S. Customs and Border Protection recently suspended several companies from participating in an ongoing test designed to expedite the entry of low-value shipments. Section 321 of the Tariff Act of 1930 allows for the informal entry of articles that have a retail value of $800 or less and are imported by one person in one day. These de minimis shipments are free of duty and taxes and are subject to expedited clearance processing. A November 2023 report from the International Trade Commission found that Section 321 shipments account for a substantial share of all U.S. e-commerce imports by quantity and that China is the leading source of de minimis imports by a large margin.

CBP is currently conducting a test in which Section 321 shipments may be entered via informal entry type 86 in the Automated Commercial Environment, resulting in faster clearance. The test is open to all owners, purchasers, consignees, and designated customs brokers of Section 321 shipments, including those subject to partner government agency requirements, imported by all modes of cargo transportation except mail. However, it is not available for goods subject to antidumping or countervailing duties, goods subject to quota, certain tobacco and alcohol products, and goods taxed under the Internal Revenue Code.

Under the new approach CBP made several modifications to the test effective Feb. 15 in response to enforcement challenges related to imports of illicit substances, counterfeits and other goods violating intellectual property rights, and goods made with forced labor. For example, CBP has encountered violations such as entry by parties without the right to make entry, incorrect manifesting of cargo, misclassification, misdelivery (e.g., delivery of goods prior to release from CBP custody), undervaluation, and incorrectly executed powers of attorney.

The CBP has suspended multiple companies from participating in the test after determining that their entries posed an unacceptable compliance risk. The noncompliance can have far-reaching effects on the integrity of the US trade system and the people reliant on the goods that flow through our ports every day.

According to CBP any company suspended from the test will be considered for reinstatement if it demonstrates that it has developed and implemented a remedial action plan.

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