Dossier: E-Commerce

USCBP latest initiatives to strengthen enforcement capacity for e-commerce shipments

By United States Customs and Border Protection

E-commerce is a growing segment of the economy of the United States. It made up 10.7% of the total retail sales in 2019 and 14% in 2020[1]. In 2020 alone, e-commerce sales in the U.S. grew over 40% and reached $791.8 billion U.S. dollars in value[2].

The growth of e-commerce  presents many challenges. Although e-commerce shipments pose the same health, safety, and economic security risks as containerized shipments, United States Customs and Border Protection (CBP) lacks full visibility into the e-commerce supply chain due to the complex and dynamic nature of the industry. The overwhelming volume of small packages also makes it difficult for CBP to identify and interdict packages presenting high risk. Further, vague and inaccurate electronic data provided by certain trade entities poses a significant challenge when CBP is targeting shipments.

In order to address these challenges, CBP’s E-Commerce Branch has been focusing its effort to improve trade risk management by working closely with the trade community. In 2019, CBP convened an E-Commerce Task Force (ETF) of industry participants covering all aspects of e-commerce to identify more accurately the nature and origin of Section 321 shipments.

Title 19 of the United States Code (U.S.C.) §1321(a)(2)(C) enables CBP to admit qualifying merchandise duty- and tax-free, provided that the merchandise is imported by “one person on one day” and has a total fair retail value in the country of shipment of $800 USD or less. Section 321(a)(2)(C) of the Tariff Act of 1930, as amended (Section 321), authorizes Customs and Border Protection (CBP) to provide an administrative exemption to admit, free from duty and tax, shipments of merchandise (other than bona fide gifts and certain personal and household goods) imported by one person on one day having an aggregate fair retail value in the country of shipment of not more than $800 USD. This exemption is known as a de minimis entry.

In coordination with the ETF, CBP mapped business models specific to e-commerce, identified parties responsible for the sale and movement of goods, and established which parties had access to and could provide additional data with which to better assess e-commerce risk. This effort to receive advance electronic data to target risk shipments in a more effective and timely manner served as the foundation for two test programs, namely, the Section 321 Data Pilot and the Entry Type 86 Test, which CBP launched in July and September of 2019, respectively. CBP is now looking to formalize the success of these two pilot programs, with the objective of enabling the agency to monitor and protect against illegitimate trade while providing the public with the benefits of duty-free shipments for qualifying imports.

Section 321 Data Pilot and administrative ruling

On 23 July 2019, CBP published its intent to conduct a voluntary pilot to collect certain advance data related to shipments potentially eligible for release under Section 321. CBP collaborated with carriers, technology firms, logistics providers and non-traditional CBP partners, such as online marketplaces, to invite them to participate. Pursuant to this pilot, participants transmitted electronically certain data elements pertaining to de minimis shipments to CBP in advance of arrival. The pilot allowed CBP to accept shipment-level information directly from online marketplaces and match it with the information received from traditional carriers. CBP is conducting this pilot for two reasons. The first is to determine the feasibility of requiring advance data from different types of parties. The second is to determine the feasibility of requiring additional data that is generally not required under current regulations in order to effectively identify and target high-risk shipments in the e-commerce environment.

On 28 July 2020, CBP issued an administrative ruling that recognized fulfillment centers and domestic warehouses as the “one person” for unsold merchandise imported into the U.S. Under this ruling, foreign owners or sellers of unsold merchandise may also qualify as the “one person” provided their identity is presented to CBP and the total value of the merchandise they import on one day is $800 USD or less. In situations where merchandise has not been sold to a consumer at the time of importation, CBP considers the consignee (likely to be the U.S. fulfilment facility or warehouse taking custody of the merchandise) to be the “person” for Section 321 eligibility purposes. The owner or the purchaser of the merchandise (likely to be the foreign seller) may also qualify as the “person”, provided the owner or purchaser’s identity is presented to CBP and the total value of the merchandise they import on one day is $800 USD or less. When the identity of the owner or purchaser of the merchandise is not presented to CBP, any affiliated shipment may be subject to informal[1] or formal entry procedures when the aggregate value exceeds the $800 USD limit or when CBP determines it is necessary to protect U.S. Customs revenue or the national interest.

The Section 321 administrative ruling better positions CBP to identify duty evasions and other abuses consistent with current statutory authorities, and helps create a more predictable enforcement environment for trade. Owners or purchasers of a shipment wishing to qualify as the “person” under Section 321 are required to provide their first and last name, or the name of the business. This ruling therefore also provides CBP with important foreign seller information with which to target and interdict counterfeit products, consumer safety violations, and other threats before they enter the U.S.

Entry Type 86 Test

In addition to the Section 321 Data Pilot, in September 2019 CBP also conducted a test of a new entry process for Section 321 shipments, including those subject to Partner Government Agency (PGA) data requirements, which currently cannot be cleared through the Section 321 de minimis entry process. Known as the “Entry Type 86 Test”, it allows Customs brokers and self-filers (an owner or purchaser of a Section 321 low-value shipment) to electronically submit de minimis entries with a limited data set through the Automated Broker Interface, including those entries which are subject to PGA data requirements for clearance but exempted from PGA duties, taxes and fees. Merchandise imported by mail and transported by the United States Postal Service was excluded from the Entry Type 86 Test. This new entry type is intended to improve import safety and security by providing greater visibility into low-value shipments for both CBP and PGAs, while ensuring regulatory requirements are met.

Proposed advance electronic data elements

CBP is currently in the process of formalizing the processes established under the Section 321 Data Pilot and Entry Type 86 Test. The new processes which are to be adopted will leverage results and lessons learned from the two pilot programs and sunset both programs.

CBP proposes that the following information must be submitted to CBP by the importer of merchandise or authorized agent of the importer for a shipment to receive clearance:

  1. Data Transmission ID (Unique Identifier)
  2. Marketplace Name and Website or Phone Number
  3. Consumer Purchaser Name and Address
  4. Shipper Name and Address
  5. Advertised Product Description
  6. Value
  7. Country of Origin
  8. One or more of the following must be provided:
    1. Link to Product Listing
    2. Product Picture
    3. Product Identifier
    4. Shipment X-Ray
  9. PGA Data Set (If applicable)
  10. 10-Digit Harmonized Tariff System Number

Documented benefits

As of August 2021, CBP received additional data on 603 million shipments: 206 million Section 321 Data Pilot transactions and 397 million Entry Type 86 transactions[4]. In the fourth quarter of fiscal year 2020, CBP received Section 321 Data Pilot data on nearly 25% of all non-mail de minimis shipments. Similarly, Entry Type 86 filings accounted for almost 50% of all non-mail de minimis shipments. The two pilot programmes have also shown significant operational benefits when pilot participants provided seller information, product pictures, and other transactional details. First, the programmes led to a more predictable and consistent enforcement environment for low-risk shipments and trusted trade partners. Second, obtaining advance data elements significantly reduced CBP workload, with same-day clearance compared to the previous six- to eight-day wait times. Further, advance information led to fewer CBP holds and improved overall security, including mitigating risks associated with the importation of potentially counterfeit test kits, medical devices, and personal protective equipment related to COVID-19.

Pilot participants also experienced fewer holds. One e-commerce platform experienced 97% fewer holds from when they first began transmitting data, and another experienced 90% fewer holds. In addition to such operational benefits, feedback received in a CBP survey revealed that pilot participants saw an estimated $2 billion USD in time and cost savings associated with the Entry Type 86 test.

Informed compliance efforts

While administering the two pilot programs, CBP has made significant efforts to engage with the trade community and to inform stakeholders of the Section 321 administrative ruling and its implications. In addition to engaging with the ETF, CBP’s E-commerce Branch and Office of Trade Relations actively connect with the trade community in various fora. For example, CBP holds quarterly public meetings with the Advisory Committee on Commercial Operations (COAC), a group of private sector stakeholders selected to advise the Secretaries of the Department of Treasury and the Department of Homeland Security on the commercial operations of CBP (minutes and documents related to these meetings can be found online[5]). The Branch also participates in numerous webinars and online training events to inform the public of the latest regulations and available resources[6].

CBP understands the importance of working closely with the trade community to achieve its objectives, especially when implementing new administrative rulings. CBP has been engaged with the trade community throughout this dynamic process and will continue to work not only with the traditional players, but also with foreign stakeholders who will be affected by the Section 321 administrative ruling.

More information
https://www.cbp.gov

[1] “2019 E-Stats Report: Measuring the Electronic Economy”, U.S. Census Bureau, 5 August 2021, https://www.census.gov/newsroom/press-releases/2021/e-estats-report-electronic-economy.html.

[2] “Monthly Retail Trade”, U.S. Census Bureau, https://www.census.gov/retail/index.html.

[3] Informal entries do not require a posting of a Customs bond and are liquidated at the time of release.

[4] The figures represent fiscal year to date data, starting from 1 October 2020.

[5] https://www.cbp.gov/trade/stakeholder-engagement/coac/coac-public-meetings/coac-quarterly-meeting-march-17-2021-washington-dc

[6] https://www.cbp.gov/trade/stakeholder-engagement