Acting Commissioner McAleenan spells out impact of de minimis and online sales on CBP resources
If you need a window into the challenge facing U.S. Customs and Border Protection (CBP) as it adjusts to new dynamics, CBP Acting Commissioner Kevin McAleenan spelled it out clearly Wednesday.
During a keynote speech at the American Association of Exporters and Importers annual conference in Austin, Texas, McAleenan described the outcome of a five-day interagency operation at JFK Airport in New York.
CBP and its partner government agencies (PGAs) found that 43 percent of shipments they inspected were non-compliant, more than 1,300 shipments in all.
The non-compliance caused murmurs in the crowd of seasoned trade compliance practitioners, advisors, attorneys, and software providers. This was not an easily surprised audience, but the news from CBP acting chief underscored the fact that shippers are purposely or unwittingly not complying with regulations from CBP or its partner agencies, like the U.S. Department of Agriculture or the Consumer Product Safety Administration.
According to trade experts that spoke with the Adam Smith Project at the conference, a major cause of non-compliance is likely smaller shippers new to international trade that don’t have the know-how or resources to effectively comply with the raft of trade laws with which they are supposed to comply.
McAleenan said e-commerce is putting new pressures on CBP resources and the agency will have to adapt accordingly, adding that certain ports of entry are having a difficult time keeping up with the volume of small packages that qualify for de minimis, which allows shipments valued at less than $800 to be imported duty-free and with fewer associated data elements.
McAleenan said certain ports of entry are having a difficult time keeping up with the volume of small packages that qualify for de minimis.
“The problem with de minimis is enforcement resources,” he said. “Ninety percent of of (intellectual property rights) seizures are in express mail environments. As consumers shop online, counterfeiters are exploiting those vulnerabilities. It’s challenging our resources in smaller ports. And we’re seeing air cargo landing at non-traditional ports and that’s overwhelming resources. This is compounded by a lack of automation and info sharing among PGAs.”
In his wide-ranging speech, McAleenan, whose nomination for the role of permanent commissioner is still awaiting Senate committee approval, also said CBP will be releasing a new e-commerce strategy in the coming weeks.
“We’re aware of lot of the challenges to businesses benefiting from e-commerce that don’t know about international trade laws,” McAleenan said. “They might lack in-house resources to manage compliance. The stat that sticks with me in terms of the scope of e-commerce is that there will be an estimated $4 trillion of e-commerce sales by 2020. That’s equivalent to all imports and exports in the U.S. last year. That’s amazing percentage of global GDP that’s going to be in e-commerce channels in the coming years.”
McAleenan, who’s served as deputy commissioner at CBP since 2014, has received broad political and industry support. AAEI President and Chief Executive Officer Marianne Rowden said the trade industry heaved a sigh of relief when President Donald Trump nominated McAleenan, whose grasp of trade issues, calm demeanor and pragmatic approach is appreciated by importers and exporters and others in the industry.
The acting commissioner in turn thanked AAEI and other industry groups for their engagement and knowledge sharing as CBP shapes its policy and enforcement going forward.
He also noted an emphasis on duty drawback updates after meeting with AAEI members to hash out their concerns.
“Drawback, I would argue, this may be the most complex commercial program we administer, and that’s saying something,” he said. “We need to support the drawback simplification called for under the [Trade Facilitation and Enforcement Act] and we’re planning to by the February 2018 deadline. We’ve heard your concerns and we’re going to follow that.”