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U.S. Customs and Border Protection is upping its enforcement efforts around low-cost shipments entering the country, a push that has led to the suspension of multiple customs brokers from a key import program.
Details remain sparse regarding which brokers the CBP has taken action against, but Seko Logistics confirmed its suspension from the Entry Type 86 program in a June 1 complaint filed in the U.S. Court of International Trade. The company's global network moves more than 14 million parcels monthly and serves e-commerce brands like Shein.
“We are incredibly disappointed by, and strongly disagree with, the original decision by CBP,” said James Gagne, Seko Logistics president and CEO,in a June 4 news release.
Here's what shippers need to know about the CBP crackdown on Entry Type 86 shipments, Seko's suspension and how to minimize delays from the enforcement ramp up.
What is the Entry Type 86 program?
Entry Type 86 exists because of the "de minimis" exemption, which allows for shipments valued at $800 or less to be admitted into the U.S. tax and duty free. E-commerce shippers lean on this exemption to ship goods into the U.S. at a low cost.Last year, CBP said 85% of all shipments entering the U.S. are small packages below the $800 threshold.
CBP has pushed to identify high-risk shipments under the threshold while expediting the clearance of legitimate packages through the Entry Type 86 program, which was established in 2019. The program aims to streamline the entry process of low-value goods for brokers while also giving CBP greater visibility into these shipments.
Entry Type 86 has developed into a key component of the cross-border ecosystem. Program filings accounted for more than 60% of all de minimis shipments in CBP's 2023 fiscal year.
"Due to improved entry filing efficiency, visibility, and speed, participation in the T86 program has become a de facto industry standard for customs brokers with clients in e-commerce," Seko said in its complaint.
Why was Seko Logistics suspended from the program?
CBP suspended multiple customs brokers from Entry Type 86 Test participation "after determining that their entries posed an unacceptable compliance risk," according to a May 31 statement from Acting Commissioner Troy Miller.
Seko, one of the suspended brokers, said in its June 1 complaint that alleged filing violations led CBP to suspend it from the Entry Type 86 and Customs-Trade Partnership Against Terrorism programs in May. Seko claims the agency hasn't been clear as to which violations specifically occurred and what shipment entries contained the violations.
"Without an audit report or further information as to CBP’s specific findings, CBP withheld facts used to make a determination in the administrative proceeding which led to SEKO’s suspension from the Entry Type 86 and CTPAT programs," the complaint said.
Seko said in the complaint that it wanted full reinstatement into the programs and for CBP to provide it with a detailed audit specifying the alleged violations, among other requests.
CBP said in a June 4 filing that it reinstated Seko into both programs until Aug. 29. Participation beyond that date is dependent on Seko meeting certain conditions, which were redacted in the filing. However, the conditional reinstatement doesn't satisfy Seko's overall goal.
"SEKO remains committed to seeking a full and unconditional reinstatement into these programs based on the agency’s unprecedented move to take enforcement action without identifying specific violations," the company said in its news release.
Why is CBP ramping up its enforcement now?
While Entry Type 86 has become a key program for importers of low-cost goods, it has also created headaches for CBP.
As the agency works to prevent illegal substances, counterfeit goods and products made with forced labor from entering the U.S., its efforts are complicated by often vague and inaccurate data filed for Entry Type 86 shipments, Miller saidat the National Customs Brokers and Forwarders Association of America's annual conference in April.
"We continue to see weight and value ratios that don't make sense, vague cargo descriptions like freight of all kinds or daily necessities," he said. "In fact, a few weeks ago, we seized two shipments that contained Xylazine, a horse tranquilizer. When added to fentanyl it is resistant to Narcan, a medication that helps prevent opioid overdose deaths."
Both shipments entered under Entry Type 86 were misclassified and had vague, one-word descriptions, Miller added.
In response to enforcement challenges, CBP moved up the filing deadline for Entry Type 86 shipments from within 15 days of arrival to "upon or prior to arrival," per a January notice from the agency. The agency is also pushing participants to provide more accurate data when filing and suspending them when necessary for noncompliance.
"We know that there are filers abusing their Entry Type 86 test by filing entries as quickly as possible and providing junk data," Miller said. "These individuals can file entries worth more than several thousand dollars a day without any vetting of the data to ensure accuracy.”
What can shippers do to avoid supply chain disruption?
Shippers need to minimize their exposure to brokers or commodities that are being targeted for more thorough inspections by the U.S. when possible to ensure smooth cross-border shipping, said Jordan Dewart, president of cross-border logistics provider Redwood Mexico.
"The U.S. government can flag shipments coming in by commodity, they can flag them by broker, they'll inspect every single shipment that a particular broker is declaring or that a particular trucking company is moving," Dewart said in an interview with Supply Chain Dive.
For the earlier Entry Type 86 filing deadline specifically, businesses should ensure their data and import documentation are complete and correct to avoid unnecessary delays,UPS said on its website. This is particularly important for small parcel air shipments, which are more likely to meet the de minimis threshold while having shorter transit times than ocean freight.
Shippers should also make sure their current carrier or broker is able to comply with the new requirements, as failure to do so could also create delays or added costs, UPS added.
"Shipments not meeting the clearance requirements can be defaulted to an informal or formal entry, triggering duty and brokerage charges, even on de minimis shipments," UPS said.
For its part, Seko said it has a history of compliance and close cooperation with CBP and maintained "an exceptionally high 99.999+% compliance rate" when the agency first notified it of the suspension in late May.
“SEKO has always sought to be compliant and work in partnership with CBP to address any concerns they have raised,” said Lila Landis, Seko’s global chief compliance officer, in the company's June 4 news release.
