DHS Announces Plans to Hold e-Commerce Marketplaces Accountable for Counterfeit and Pirated Goods

In 2015, the Trade Enforcement and Trade Facilitation Act (TFTEA) passed Congress and signed into law. While the name of the act rightly gives the impression that it focused on strengthening trade enforcement processes, it also raised the de minimis, or minimum, amount for entry without an entry submitted to CBP for release.

Initially enshrined under what brokers affectionately call Section 321 (short for ‘Section 321 of the Tariff Act of 1930, as amended), the amount a US entity – either corporation or individual – could import once daily without being subject to duty has slowly increased over time from $5.00 to now $800.00.

That $800 ceiling has spurred several cargo owners, integrators, e-commerce platforms, and marketplaces to ship directly to US buyers overseas, bypassing costly import duties, especially for apparel items. The savings on ad valorem duties were significant, but then came Section 301 duties at both higher duty rates and more things overtime during the previous administration. Thus, leading to an explosion of companies discovering substantial landed cost savings by shipping directly to US buyers.

This direct shipping wave made it easier for lawbreakers to bypass targeting systems by Customs to identify people bringing in counterfeit, grey market and pirated articles. Coupled with the use of foreign importers of record outside the reach of CBP’s jurisdiction, the flea markets of yesterday moved online to nondescript and shadowy operators out of the reach of US authorities.

President Trump issued an Executive Order requiring the DHS to analyze the problem and report their findings and begin proposing changes that would take steps to reduce trafficking in counterfeit and pirated items.

At the end of 2020, DHS produced its report. You can read it here, but they identified several key areas to make regulatory changes and step up enforcement. Some of their key findings and options are listed below.

  1. Ensure entities with financial interests in imports bear responsibility. This targets the platforms which facilitate the buying and selling of violative merchandise.
  2. Increase scrutiny of the Section 321 environment. CBP’s successes come when they have data for targeting, and greater use of data elements, including potentially submitting Section 321 data for review, could be utilized.
  3. Suspend and debar repeat offenders. CBP could seek to prohibit individuals or corporate entities found to contribute to this trafficking to be restricted privileges of importation.
  4. Leverage advance electronic data for mail mode. Collectively, we know the state of the US Postal Service. Every piece of foreign mail coming to the US screened at a select number of points of entry. Advanced data targeted select packages could reduce CBP’s need to inspect every parcel and envelope.
  5. Create a modernized e-commerce enforcement environment. CBP’s not-so-new Automated Commercial Environment already targets air and sea cargo based on pre-departure filings. ACE – and other resources – could be brought to bear for both interdiction and pursuit of large-scale violators.

At Sobel Network Shipping Co., Inc. we are familiar with the regulations surrounding the proper use of Section 321 and Type 86 entries for importers seeking to change how their supply chains operate. Coupled with our global network of agent partners, Sobel can work to find creative, legal, and money-saving changes to import supply chains at a time when attention to cost in the wake of sky-high freight rates is essential. Contact Sobel today to learn how we can help you!