Most international trade moves by ocean, but when it comes to counterfeit goods, airfreight is king. And that means more regulatory steps to follow for legitimate shippers and logistics providers.
More than 90% of merchandise seizures for intellectual property rights violations for the fiscal year ending September 2018 were in the express consignment and international mail environment, according to the latest statistics released this month by U.S. Customs and Border Protection.
Air express facilities accounted for $549.2 million of the $1.4 billion in fake goods confiscated, while another $197.3 million worth of copycat goods were intercepted at the nation’s five international mail centers, the agency reported.
According to CBP’s IPR report, the most common fake items by value continued to be watches and jewelry, with wearing apparel the most seized item by quantity. China and Hong Kong were the top origin for 87% of the total IPR seizures, which represented an estimated street value of $840.3 million. Malaysia ($4.7 million) and Pakistan ($2.8 million) replaced Thailand and Singapore in the top 10 list of source countries by value.
Daunting Task
The numbers illustrate the challenge customs and mail authorities have policing the air cargo market in the midst of the e-commerce explosion. The government is only capturing a small percentage of fraudulent shipments, according to Customs and industry officials.
Online and mobile sales have caused a spike in the shipment of small packages, which are much more difficult for authorities to track and inspect. In fiscal year 2018, 161 million express shipments and 475 million packages moved through the international mail system into the U.S.
Many criminal organizations are shipping illicit goods in small packages because they perceive there is a lower risk of interdiction and less severe consequences if a shipment is detained. One reason is that a majority of express and mail shipments fall under the de minimis threshold of $800, which was increased from $200 by Congress in 2016.
De minimis refers to low-value shipments listed on a freight carrier’s manifest that are admitted without taxes, tariffs or formal customs procedures. With the de minimis level raised to $800 — one of the highest in the world — more stuff can be put in a single package without incurring duty. There is also less paperwork filed with lower-value small shipments, which means Customs receives less actionable data for risk assessment and targeted inspections than containerized freight.
Meanwhile, air parcel too has become the preferred conduit for synthetic opioids from China and other foreign sources. Last week the U.S. Department of Treasury listed three Chinese nationals for running international drug trafficking operations that import deadly narcotics, such as fentanyl, into the U.S. One of the enterprises, the Zheng drug-trafficking organization, “touted its ability to create custom-ordered drugs and avoid detection from customs and law enforcement officials when shipping the drugs through express mail and the U.S. Postal Service,” the department said in a statement.
International online drug dealers are using the USPS because the government doesn’t have the same technology and processes to track individual small shipments as couriers FedEx, UPS and DHL, The Washington Post reported Aug. 23.
CBP is trying to implement an e-commerce strategy it rolled out 18 months ago to address the vulnerability from e-commerce shipments. Under the plan, the agency intends to expand its risk management and enforcement capabilities. Its wish list includes:
- Acquiring sophisticated software for data analytics and soliciting more advance information from supply chain parties to identify suspicious packages;
- Developing industry partnerships and providing trade incentives to companies with proven internal security processes, similar to what is done in the Customs-Trade Partnership Against Terrorism;
- Improving interagency and international cooperation on targeting violators, information sharing and developing commerce standards;
- Modernizing inspection procedures, including new training methods for offices and realigning staff allocation;
- And ramping up enforcement and penalties to compel compliance.
An upcoming regulation, for example, will require customs brokers who handle e-commerce shipments to gather much more information, including pictures, about the importer of record to verify they are legitimate companies.
On top of security and safety, CBP has the task of making sure customs entries don’t falsify the value of the listed goods to avoid tariffs. It’s all a tall order for CBP because of the sheer volume of parcels and its limited resources
A lot of CBP’s budget and personnel have been directed by the Trump administration to the southern border to deal with immigration.
“It’s a massive task and I’m not sure that with the current strategy and the resources available Customs is up to the task right now,” said Bob Ibriani, executive vice president of international at Winnsboro, Texas-based Team Worldwide and a CBP advisory panel participant.