U.S. Customs and Border Protection (CBP) suspension of customs brokers from the ACE Entry Type 86 Test program (ACE Entry Type 86 test) highlights CBP’s latest enforcement effort with regard to low-value, that is, de minimis, shipments. The action is notable for a number of reasons:
- In view of the ever-increasing volume of de minimis entries (topping 1 billion last year) and the challenges CBP faces with regard to enforcement, legislators have introduced a number of bills concerning de minimis; however, Congress has yet to pass any of these bills.
- CBP’s sweeping suspension of multiple customs brokers is unprecedented and illustrates a shift in CBP’s enforcement of de minimis entry in the absence of congressional action.
- Importers that use de minimis should consider engaging with local representatives as legislative discussions regarding de minimis entry continue and prepare for increased scrutiny of de minimis entries by CBP.
Below we review the pertinent history of de minimis entry and the ACE Entry Type 86 test, discuss recent enforcement action by CBP including the broker suspensions, and highlight key takeaways from these developments.
1. Section 321 de minimis entry and the ACE Entry Type 86 test
The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA)1 raised the value threshold in 19 U.S.C. § 1321 (Section 321) from $200 to $800 for merchandise that could be imported by one person on one day free from duty and taxes. Goods that satisfy the “one person on one day” condition, and other requirements,2 “Section 321 entries” or “manifest entries,” are a type of informal entry that may be entered duty free by presenting to CBP a bill of lading or a manifest listing each bill of lading.3 Notably, there are restrictions to using Section 321, other than meeting the statutory criteria, as a result of the release from manifest process. For example, goods subject to partner government agency (PGA) data requirements cannot use the release from manifest process because many agencies’ requirements do not contain exemptions for low-value shipments and may require payment of duties, fees, or taxes.4 Additionally, shipments containing alcohol, cigars or other tobacco products, gifts in excess of a certain value, or goods subject to tariff rate quotas (TRQs) may not use Section 321 because they are not exempt from applicable taxes or duties.5
Nevertheless, raising the value threshold under Section 321 increased the number of shipments that could take advantage of this simplified procedure and corresponded with a large increase in de minimis entries with the growth of e-commerce, which was further energized by the global pandemic. Indeed, before the value threshold in Section 321 was increased in 2016,6 CBP processed 134 million low-value shipments in FY 2015, compared with FY 2023, when CBP processed over 1 billion de minimis entries. That is a 646% increase in the number of low-value shipments entering the United States in eight years.7 CBP currently processes 4 million de minimis shipments per day. The dramatic increase in the number of low-value shipments has created an opportunity for bad actors who take advantage of the unprecedent volume to introduce illicit substances such as fentanyl and other narcotics, counterfeits, and goods made with forced labor.
In August 2019, CBP implemented the Entry Type 86 test to address the growing volume of low-value shipments resulting from the increased value threshold and global shift to e-commerce. Specifically, the Entry Type 86 test is a voluntary program that allows shipments meeting the de minimis criteria in 19 U.S.C. § 1321, including those shipments subject to PGA data requirements that cannot use Section 321’s release from manifest process, to be entered by filing a new type of informal entry electronically in ACE using the Automatic Broker Interface (ABI). In addition to providing a less complex entry and release process for low-value shipments subject to PGA data requirements, which prior to the Entry Type 86 test had to be entered as traddfitional informal entries, the Entry Type 86 test also expedites the clearance of entries through the use of ACE (since the information can be reviewed by CBP, and applicable PGAs, if submitted prior to arrival). While the simplified procedures have benefited companies, in particular e-commerce companies, the introduction of the Entry Type 86 test has further complicated CBP’s enforcement efforts by enabling even more goods to be entered into the U.S. with less import formalities.
2. Recent changes to the ACE Entry Type 86 test
In January 2024, to address some of the enforcement challenges that CBP is facing with regard to de minimis entry, CBP published a Federal Register notice amending the ACE Entry Type 86 test. The January notice emphasized that any regulations not specifically waived by the test were still in force, including those permitting CBP to require formal entry if CBP deems it necessary for, among other purposes, enforcement. Additionally, the notice clarifies the consequences for misconduct under the program, stating that “CBP may suspend or remove a filer from further participation in the ACE Entry Type 86 test based on a determination that that filer's participation in the test poses an unacceptable compliance risk.” 8
In April 2024, CBP issued a guidance document on the Entry Type 86 test, which, in addition to clarifying certain requirements, also emphasized the burden on customs brokers when using this program.9 The guidance instructs that customs brokers must use “responsible supervision and control” when filing a Type 86 entry, which is a standard that applies to all customs business conducted by customs brokers.10 Additionally, CBP reiterated the requirement that a customs broker must act as the importer of record when filing a Type 86 entry on behalf of a consignee and must exercise reasonable care when doing so. Finally, the guidance stresses that a customs broker must have an “articulable basis to support the classification and valuation of the merchandise for which an entry type 86 is filed,” regardless of whether the merchandise is imported pursuant to purchase or intended for sale. To satisfy this requirement, a customs broker must be able to identify a basis, such as an invoice, that supports the merchandise’s classification and valuation. The January 2024 Federal Register notice along with the April 2024 guidance document highlight CBP’s efforts, in the spirit of the Customs Modernization Act’s “shared responsibility,” to educate customs brokers in an attempt to help close the gap on enforcement issues with de minimis entry.
3. Recent suspension of brokers from the ACE Entry Type 86 Test
CBP’s tact with regard to de minimis entry enforcement changed on Friday, May 31, 2024, when the agency announced that it was suspending a number of customs brokers from the Entry Type 86 test “after determining that their entries posed an unacceptable compliance risk.”11 CBP noted that suspended customs brokers could be reinstated if the agency was satisfied with their remedial action plan, but what a remedial action plan must entail remains unclear. The extent of the suspensions is still unknown given that CBP’s enforcement actions are confidential unless challenged at the Court of International Trade (CIT). To date, only one broker has filed a challenge at the CIT,12 which appears to be moving forward despite CBP’s conditional reinstatement in the Entry Type 86 test program.13
4. Key takeaways
Congress’ attention on international trade has been laser focused on what many lawmakers call the “de minimis loophole.” A number of bills have been introduced to try to “solve” de minimis, such as the Ensure Accountability in De Minimis Act of 2024, 14 End China’s De Minimis Abuse Act, 15 Import Security Fairness Act,16 and De Minimis Reciprocity Act, 17 to name a few. The bills are in various stages of the legislative process, indicating that while many lawmakers agree there is a problem, there is no consensus on how to fix it.
In the meantime, CBP is ratcheting up the pressure on customs brokers to assist in ensuring that low-value shipments entering the United States comply with U.S. laws and regulations. This enforcement tactic by CBP is not new — in 2022, CBP amended the broker regulations to require, among other things, that customs brokers execute a power of attorney (POA) directly with an importer of record or drawback claimant, not through a freight forwarder or other third party, to conduct customs business for the client.18 The Entry Type 86 test similarly requires customs brokers to be appointed through a valid POA.19 The direct POA requirement encourages customs brokers to conduct due diligence on importers before acting on their behalf.
What is new is holding customs brokers responsible if the goods are not entered with reasonable care. A customs broker has no way to know the contents of the low-value shipment and therefore must rely on the representations made by its vetted client. Holding the customs broker responsible if the representations made by the customs broker’s client are not accurate forces customs brokers to contort themselves into a role that, arguably, many are not equipped (or never intended) to play. This enforcement mechanism also does not appear to address the underlying problems of de minimis entry.
Moving forward, clients should monitor the Hill to keep apprised of potential changes in de minimis entry. Those that use de minimis entry should consider engaging with local representatives to be sure their interests are represented in ongoing discussions. Lastly, clients should expect, and prepare for, increased scrutiny on de minimis entries, including Type 86 entries.
1 Section 901, Public Law 114-125, 130 Stat. 122 (19 U.S.C. 4301 note).
2 The merchandise must qualify for informal entry under 19 U.S.C. § 1498 and meet the requirements in 19 U.S.C. § 1321(a)(2)(C), and 19 CFR § 10.151.
3 See 19 CFR § 143.23(j)(3).
4 89 FR 2630.
5 19 CFR § 10.153.
6 81 FR 58831.
7 See CBP, “E-Commerce” https://www.cbp.gov/trade/basic-import-export/e-commerce.
8 89 FR 2630.
9 Entry Type 86 Guidance, CBP Publication No. 3564-0224, https://www.cbp.gov/sites/default/files/assets/documents/2024-Apr/Entry%20Type%2086%20Guidance%20Fact%20Sheet_0.pdf
10 19 C.F.R. § 111.28(a).
11 CBP, “Statement from CBP Acting Commissioner Troy Miller on New Efforts to Enhance Enforcement and Prevent Exploitation in the De Minimis Environment” (May 31, 2024), https://www.cbp.gov/newsroom/announcements/statement-cbp-acting-commissioner-troy-miller-new-efforts-enhance.
12 SEKO Customs Brokerage, Inc. v. United States, case no. 1:2024cv00097 (filed June 1, 2024).
13 https://s3.amazonaws.com/warren-news.com/pdf/925845.
14 S 4082, 118th Congress (2023–24).
15 HR 7979, 118th Congress (2023–24).
16 S 2004, 118th Congress (2023–24).
17 S 1969, 118th Congress (2023–24).
18 Modernization of the Customs Broker Regulations (87 FR 63267).
19 89 FR 2630.
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