CBP’s Automated Commercial Environment Can Make It Easier to Clear Shipments—If It’s Properly Implemented

Importers and exporters have to file up to 200 different forms to clear their shipments with the government. Many of these filings have to be completed on paper and then either hand delivered or faxed to the right department. In addition, shippers find that they often have to submit the same data to the Customs and Border Protection as well as 47 other agencies. But change is coming: The government is building a single electronic window so that shippers will only have to file information once.

The system is called the Automated Commercial Environment (ACE), but it hasn’t quite been implemented as planned. Congress passed a bill to begin work in 1994, with the expectation that it would be wrapped up in a matter of a few years. Over two decades later, government agencies are still not quite prepared to adopt the system, even as the Government Accountability Office has identified it as a project that has suffered serious cost overruns. (GAO estimates that its final cost will exceed $4 billion.)

ACE has been enormously difficult to implement. But once it’s ready, ACE is supposed to make it significantly easier for shippers and brokers to trade goods.

What will ACE do for shippers?

ACE will bring importing and exporting into the digital world. Instead of always relying on paper, fax machines, and original signatures, shippers will be able to use electronic submission processes to clear shipments.

Shippers currently use Automated Commercial System (ACS) to clear shipments with Customs. ACS is slated to be replaced by the ACE. Government agencies are on a staggered schedule to drop ACS and transition to ACE, with the first deadline set as March 31st, 2016; the National Highway Traffic Safety Administration and the Animal and Plant Health Inspection Service are the first two agencies to move to ACE. Most agencies will have to be moved to ACE in the summer of 2016, including the EPA, the DEA, and the CDC.

ACE will radically change the way products flow into the country. When fully implemented, ACE will make it easier to clear shipments. It promises to consolidate, automate, and modernize border processing by bringing all government processes through a single web portal, instead of having to send the same information to different agencies. Shippers will be able to use this portal to share trade data with government agencies, saving time and money for themselves and their brokers.

Shippers will also have greater control over their import and export activities. They can use the ACE web portal to see the work done by their brokers, the duty statements they’ve filed, and access to more reports over their processes.

Jayson Gispan, Director of Customs Brokerage Operations at Flexport, identifies two important benefits he’s already seen from using the new system: “First, ACE is making it much easier to process shipment splits. And second, instead of having to use a manual document submission to correct duty payments, we can now do it electronically.”

ACE implementation delays

March 31st is the first upcoming deadline for the adoption of ACE. Other “mandatory use dates” are May 28th, 2016, Summer 2016, and finally, October 2016. All government agencies are supposed to adopt ACE by the end of 2016; by then, ACS will be completely dropped.

That’s how it’s supposed to work in principle. In practice, the deadlines have been continually pushed back because government agencies have not been ready to adopt it.

We’re long past the initial deadline set by the government for agencies to adopt ACE. Instead of the end of March 2016, as it currently is, it was supposed to be the end of February 2016. And before that, it was supposed to be November 2015. There’s a chance that the March deadline will be pushed back once again.

The problem is that government agencies have not been ready. In spite of billions spent, in spite of the fact that the project was initiated two decades ago, and in spite of the multiple executive orders signed by the President to expedite the process, agencies have not been able to build software to integrate with the system.

The 48 government agencies have been individually tasked to adapt their systems to ACE. Certain agencies have been more ready than others. The Food and Drug Administration was supposed to be one of the first agencies to adopt ACE, but it’s gotten so far derailed that CBP no longer gives it a firm deadline to be integrated into the system.

This is a government project that doesn’t require action from shippers. So why should they care about its progress? The danger is that the system is not ready before ACS is dropped. ACE currently still has significant bugs that prevent shipments from being cleared. Jon Kent, spokesman for the National Customs Brokers and Forwarders Association of America, has already warned in the JOC that a non-functional ACE can cause significant interruptions to the flow of commerce. That would be in no one’s interest.

Given the continuous delays, we might expect the deadline to be moved back once more. But when completely ready, shippers will have an easier time dealing with filing.

Foreign Trade Zone (FTZ) Basics

In today’s global economy, US manufacturers and importers face heavy competition from international companies in manufacturing and selling goods. To even the playing field, the United States enacted the Foreign Trade Zone (FTZ) Act of 1934. These FTZs are geographical areas “in or adjacent to” U.S. Ports of Entry, designed to allow local manufacturers to compete with foreign enterprises by creating special economic zones that are “outside” of U.S. commerce. Merchandise can be held in these zones without being subject to duties and other taxes. In essence, a Foreign Trade Zone (aka Free Trade Zone) is a highly regulated bonded facility that supports US import and export activities.

 

Who benefits from using FTZs?

  1. United States
    1. Job growth
    2. Increased competitiveness in the global economy
  2. Manufacturers
    1. Inverted tariff rule allows for importing raw materials, components, and/or partially finished goods and then manufacturing/assembling into a final, single tariffed good
    2. When selling this final good domestically, manufacturers declare only one product, thereby potentially reducing duty rate
    3. Ability to export goods in-bond without ever having to pay duty to the United States, bypassing duty drawback
  3. Importers with their own distribution centers
    1. Direct delivery in-bond prevents delays at port
    2. Weekly Customs Entry minimizes MPF (Merchandise Processing Fee) payment
    3. Importing goods in-bond into own warehouse delays duty payment until time of order placement (unlimited storage time)
      1. Re-export or destroy goods without ever paying duty
    4. Importers using a forwarder’s FTZ
      1. Import goods into the U.S through an FTZ warehouse in order to gain Weekly Custom’s Entry benefits. Note: this method slows the movement of freight by adding an extra stop before delivery to the final destination.

Weekly Entry:

One of the more financially interesting benefits of having an FTZ is the ability to declare customs on a weekly basis vs. a per shipment basis. This allows shippers to maximize their MPF payment at $485 on all shipments imported during the zone week, instead of on a per shipment basis.

Thinking about converting your facility to an FTZ?

Companies looking to convert their facilities will need to apply with the FTZ Board. After the board has reviewed your application, you can expect a 9-12 month process before your FTZ is up and running. Having an FTZ comes with the responsibility of running a bonded facility, so Customs will require tight security and robust inventory software to provide real-time accountability of any goods moving in and out of the zone. The “Operator” of the FTZ is liable for any goods that leave the zone and are unaccounted for, and customs needs to ensure that duty is paid on any item leaving the zone for consumption into the United States. Heavy fines are issued by CBP for any unaccounted inventory.

Court Ruling Lowers Duties on Mobile Phone Cases

«PhoneCases»

Great news for importers of mobile phone accessories: the United States Court of International Trade has ruled that several models of mobile phone cases will now be classified under a different HTS Code with lower duty rates.

Previously, US Customs and Border Protection had classified such cases as “containers” with a 20% duty (4202.99.9000), but as a result of the ruling they can now be considered “articles of plastic and other materials” at 5.3 % (3926.90.9980). The CIT rejected CBP’s classification as the functionality of mobile phone cases only reflects one of the primary characteristics of that of a container: they protect what is inside, but neither store nor organize anything. Furthermore, while items stored inside of a container are unavailable to use, an encased mobile phone is fully functional.

With over 300 million mobile devices in use in the US, importing mobile phone cases just became a whole lot more exciting. Full text of decision available here.

10 Ways to Minimize Importing Compliance Risk

By Deep Sengupta, DSG Global LLC, President

The importing process is tough to navigate for many entrepreneurs and startups. There are several government agencies overseeing a myriad of regulations, and it is easy to miss a tiny seemingly insignificant detail. In this article, we will focus on the requirements imposed on importers by the U.S. Customs and Border Protection (“CBP” or “Customs” for short).

The burden of Customs compliance was shifted to importers in 1994, when Congress passed the Customs Modernization Act or “Mod Act” as part of the same legislative package as the North American Free Trade Agreement (NAFTA).

Under the Mod Act, the trade community is expected to comply with the tenets of “reasonable care” and “informed compliance” when importing merchandise into the United States. This means that every importer of record has a duty to provide CBP with accurate information regarding the admissibility, tariff classification, value, and origin of the imported goods. The importer is also responsible for a recordkeeping relating to each importation for five years.

Importers who do not adhere to the Mod Act’s requirements are exposed to stiff penalties and potentially unflattering publicity regarding the company’s inability to follow U.S. import requirements.

CBP also conducts audits through its Regulatory Audit division to ensure that importers are in compliance with trade laws and regulations and there is no revenue loss for the government. Customs performs two types of audits, namely Quick Response Audits (QRA) and Focused Assessments (FA).

QRA are single-issue audits with narrow focuses, designed to address a specific objective within a short period of time. Focused assessments on the other hand are more comprehensive (and time-consuming) evaluations of a company’s import activities, using a risk-based approach. For more information on these Customs audits, please see http://www.cbp.gov/trade/audits.

In this article, we will review the top areas of compliance risks that are evaluated in a Customs audit (either a QRA or a FA). Usually when someone gets in trouble with Customs, the issue falls under one of the following categories, so keep these in mind next time you import goods into the U.S.!

Continue reading

Not Based in the U.S.? Importing as a Foreign Importer of Record

How to Import into the U.S. without a U.S. Entity

Many businesses have asked how they can go about importing into the U.S. if they do not have a U.S. entity or presence here.  It’s actually a relatively straightforward process and simply requires a few additional documents from your company to verify your business’s legitimacy.

What you ultimately need to import into the U.S. is to be established as a Foreign Importer of Record.  To do so, you will need a Customs Assigned importer of record number and a Customs bond.

Continue reading

Customs Shipment Holds and Exams: Part I

 Customs Shipment Holds and Exams: Part I

Customs used to be solely focused on preventing smuggling or misvaluation. However, since 9/11, Customs is now additionally responsible for protecting the country and monitoring security risks.

As a result, Customs pulls more shipments for exams than they had in the past and shipment targeting and examination is becoming increasingly sophisticated.  For example, gamma scanning technology has been deployed to most overseas and domestic ports to detect signs of radiation.

It’s all about the data!

Customs cargo inspectors use a targeting system that applies a score to each shipment. If the score is over a certain number, it triggers further review and possibly an exam.

Continue reading

eBonds Will Replace the Existing Customs Bond Process Soon

eBonds, coming soon!

eBond will be in effect 1/3/15! This is great news for the importing community as it is an efficient paperless application.

eBond became a reality thanks to the Department of Homeland Security (DHS) recommendation to centralize U.S. Customs’ bond processing. eBond will become part of ACE (Automated Commercial Environment) which has been in the works for over fifteen years.

Continue reading

Regulatory Compliance for Vehicle Imports

 

Regulatory Compliance for Vehicle Imports

When shipping vehicles into the U.S., you should take heed of the following requirements to ensure that you comply with all the government bodies that oversee vehicle importation.  These include the Environmental Protection Association (EPA), the Department of Transportation (DOT), and even the U.S. Department of Agriculture (USDA) – in addition to U.S. Customs themselves.

Continue reading