On March 6th U.S. Customs and Border Protection (CBP) published its E-Commerce Strategy. While the synopsis provided by CBP was immediately posted on various websites, an even closer look at the strategy is warranted.
Since 2000, the number of Americans shopping online has increased nearly fourfold, up from 22 percent to 79 percent. This rapidly accelerating increase in volume is largely comprised of shipments valued under $2,500. According to the “CrossBorder Merchant Research 2016” report from market research firm Ipsos, 36 percent of U.S. online merchants are selling across borders.
Fifty-three percent of cross-border sellers use online marketplaces — with eBay and Amazon being the most common. Many of these companies have robust compliance programs in place which is not the case with individuals who are buying direct from overseas suppliers.
However, the volume of e-commerce shipments has increased exponentially, taxing existing CBP resources. At the end of Fiscal Year 2017, one port that has an express consignment hub received an estimated 25 million predominantly informal and de-minimis value shipments. In comparison, this same facility averaged 2.4 million shipments between 1997 and 1999.This is an increase of over 1000 percent in 20 years.
Similarly, the U.S. Postal Service (USPS) has experienced a significant increase in the number of international mail packages arriving in the United States. The growing volume of small shipments is also impacting operations at sea, rail, and land ports of entry. Industry projections strongly suggest that air freight traffic will only increase as the volume in online sales continues to rise over the course of the next decade.
For purposes of this strategy, CBP defines e-commerce as high-volume, low-value shipments entering the port limits of the United States. According to the agency, “this growth has increased the opportunity for illicit and dangerous products to cross our borders, placing Americans’ health and safety at risk and compromising U.S. economic security.”
The growth in e-commerce is “creating inspection challenges.”
What are these challenges?
- E-commerce shipments pose the same health, safety, and economic security risks as containerized shipments, but the volume is higher and growing.
- Transnational criminal organizations are shipping illicit goods to the United States via small packages due to a perceived lower interdiction risk and less severe consequences if the package is interdicted.
- New or infrequent importers often possess less familiarity with U.S. customs laws and regulations, which can lead to the importation of non-compliant goods.
The level of information required for entry of these packages that will undoubtedly be declared under Section 321 will be minimal. CBP has recently talked about “intelligent enforcement.” This concept is based on the use of data and information. Absent the level of data for these individual e-commerce shipments CBP will be confronted with a daunting enforcement task. To correct this vulnerability, CBP must put into place new protocols that allow for effective identification, enforcement, and deterrence of trade violations in the e-commerce environment.
CBP will need to improve data collection for its targeting systems and field personnel. Without key pieces of data, CBP will most likely use more time-consuming techniques to try to uncover violations. This will require use of physical inspections along with x-ray scanning technologies, and leveraging postal, other government agency, and foreign government assets to plug information gaps.
CBP is stressing that it remains committed to facilitating legitimate trade while ensuring consumer safety and economic vitality as the volume of e-commerce shipments continues to increase. This e-commerce strategy positions CBP to properly enforce violations and address the various complexities and threats resulting from this global shift in trade. This is the crux of the e-commerce dynamic. CBP is faced with an increased workload plus increased pressure to enforce and protect while at the same time needing to facilitate trade.
It is interesting to note that CBP is seeking to enhance current wide ranging legal and regulatory authorities in order to better posture the agency and other government partners to address emerging threats. According to CBP these new authorities will “enable the agency to more easily adapt to evolving business practices and develop risk segmentation processes, improve targeting, and realign resources.”
Enhancing and adapting all affected CBP operations to respond to emerging supply chain dynamics created by the rapid growth of e-commerce is anticipated. In order to implement the necessary changes, CBP will seek additional resources, develop and utilize state-of-the-art techniques and technologies, and amend relevant staffing.
This strategy strengthens CBP’s ability to protect the health and safety of American citizens and the U.S. economy from non-compliant goods. By transforming CBP operations, driving compliance, and promoting cooperation domestically and internationally, the United States will build a strong trade posture in e-commerce, ensuring a shared economic prosperity.
The bottom line is CBP is restructuring its framework for ensuring compliance of informal entries. How this will affect the future of small package shipments and the use of Section 321 remains to be seen.
Please contact Vandegrift to discuss your e-commerce framework.