An executive order (EO) recently issued by the White House, entitled “Strengthening Customs Enforcement,” addresses what it called long overdue U.S. customs reform.
The EO explained that customs enforcement is viewed as essential to U.S. national security, foreign policy, and economy, adding that effective customs enforcement prevents the importation of unlawful and dangerous goods, ensures importers of record (IORs) are correctly identified and accountable for duties owed; and guarantees compliance with numerous federal laws, including laws that govern forced labor, rules of origin, origin marking, intellectual property, revenue collection, and product safety.
Key mandates and timelines
“Customs reform is long overdue,” the EO stated. “Systemic inefficiencies, loopholes, insufficient enforcement mechanisms, and outdated processes have created opportunities for malign actors to evade Federal law. Examples of noncompliance include undervaluing imports, withholding critical information about IORs and the goods being imported, and avoiding payment of duties through various arrangements and schemes. These actions threaten national security, undermine foreign relations, disadvantage domestic businesses, and harm Americans.”
The United States must strengthen its customs enforcement through comprehensive reform, including through agency action and legislation. Such reform should focus on protecting national security, promoting lawful trade, ensuring the timely collection of duties, modernizing systems and processes, bolstering compliance mechanisms, increasing transparency, and protecting Americans and the domestic economy.
- Within 180 days of the EO being issued, an IOR is required to maintain a minimum level of tangible domestic assets, bonds, or both, as determined by U.S. Customs and Border Protection (CBP) to be necessary to ensure compliance with U.S. Customs and trade laws, and increase the minimum required bond coverage for an IOR;
- Require an IOR to provide CBP with additional data and identification information, including anticipated import volumes, year organized, ownership and beneficial ownership disclosures, business affiliation disclosures, and domestic asset disclosures;
- Creates stricter rules for foreign IORs and companies importing higher volumes of low-value articles and are less familiar with U.S. customs and trade laws and face lower penalty amounts and financial consequences for non-compliance, with foreign IORs no longer able to use the simpler informal entry process for low-value imports, face stricter formal-entry requirements, not rely on continuous customs bonds without the approval of CBP, and IORs may be required to participate in or use brokers that are validated through CBP’s C-TPAT program;
- Require all IORs to maintain “good standing” based on compliance history, payment of required customs liabilities and prior violations;
- Establish heightened import disclosure and certification requirements, including certifying compliance with critical supply chain requirements like the Countering America’s Adversaries through Sanctions Act, disclosing certain foreign tax and global business identifiers and providing detailed information about the imported good’s supply chain and production methods, such as the manufacturer’s product identifier (e.g., model or style number) or key specifications (e.g., composition, grade, or size); and
- Take necessary steps to bolster the enforcement of customs laws, regulations, and other mandates, including conditions necessary for participation in the CTPAT program and also include actions enforcing liquidated damages claims against bonds for noncompliance; restricting in-bond utilization; increasing audits; and imposing maximum penalties for brokers who, for example, fail to conduct due diligence, repeatedly represent noncompliant clients, or fail to cooperate in a timely manner with requests for information by CBP and take all appropriate action to prioritize the enforcement of Federal law relating to importations involving products produced by forced labor, and importations involving misclassification, undervaluation, and illegal transshipment, including investigations conducted pursuant to the Enforce and Protect Act, among others.
Industry reactions
In a LinkedIn post, Pete Mento, Director of Global Trade Management Services, at Baker Tilly, was bullish about the EO, in terms of how it benefits the customs brokerage community, calling it “a beautiful moment.”
“The new Executive Order is being discussed as a trade enforcement measure, but for customs brokers it feels a little different. It feels like the federal government just discovered every concern we’ve been raising for the last twenty years. The entire order is built around a concept customs brokers understand instinctively: At some point, somebody has to be responsible. For the duties. For the records. For the classification. For the valuation. For the origin. And most importantly, for answering the phone when CBP calls.” — Pete Mento, Director of Global Trade Management Services, Baker Tilly
Jackson Wood, Director of Industry Strategy, Global Trade Intelligence, at Descartes, told LM that this EO raises the bar from filing the entry to being able to prove the claim, for things related to increased CBP scrutiny for out-of-origin claims, tariff classifications, customs valuation, and importer documentation.
“Importers should expect more scrutiny across all of these dimensions, as CBP will likely focus on whether supplier records, product data, invoices, broker instructions and shipping documents all tell the same story,” noted Wood. “The EO demonstrates that enforcement is moving from transactional reviews to program-level accountability. CBP is not only looking for incorrect entries; it is also going to evaluate whether companies have the controls, data, documentation and governance to support the claims they make at the border.”
Operational implications
As for what customs brokers, importers, freight forwarders, and logistics services providers need to do to prepare for the EO’s directives, Wood said that the most important thing is a shift from a “filing” mindset to an “evidence” mindset.
“All parties need to know who is responsible for what, specific details of products, country of origin, valuation, and ultimately how all of this is documented and ready to withstand deep scrutiny from CBP,” he said. “Customs compliance is playing an expanded role in economic security architecture. Governments across the globe want to know where goods are made, who controls the supply chain, whether tariffs and other trade controls are being evaded, and whether imports create exposure to forced labor, sanctions or strategic dependency.”
Source: Logistics Management
Compiled from international media by the SCI.AI editorial team.
