NATIONWIDE: An Introduction to International Trade: Customs
This overview is a snapshot of the key legal developments in 2024 concerning United States Customs and International Trade.
General Updates
Customs law is buzzing with activity, especially around issues involving national security, technology, human rights, China, and Russia. Starting in February 2024, Section 321 Type 86 entries for shipments valued under USD800 (ie de minimis entries, which have attracted lawmakers’ interest as potential back doors for goods produced with forced labor) must be filed upon or prior to arrival, rather than within 15 days of arrival. In April, the Department of Commerce expanded its repertoire of trade remedy tools, unlocking for the first time since 1998 its ability to investigate transnational subsidies; broadening its definition of “subsidy” to include uncollected fees, fines, and penalties; adding weak labor, environmental, human rights, and intellectual property protections to the list of actionable price distortions; and aligned its criteria for determining whether a Particular Market Situation exists with the relevant 2022 US Court of Appeals for the Federal Circuit ruling; among other changes. Accordingly, importers should anticipate additional antidumping and countervailing duty (AD/CVD) orders. One such case of significant concern involves aluminium extrusions. The Department of Commerce released its initial findings on May 7, 2024, regarding the antidumping duty (ADD) and countervailing duty (CVD) investigations involving aluminium extrusions from 14 countries. The investigation covers a variety of products using aluminium extrusions, including specific items, parts, assemblies, and finished goods. Given the wide scope and intricate nature of the investigation, it could have significant implications for products utilizing aluminium extrusions. Solar panels are a specific area to watch following last year’s investigation into alleged tariff circumvention by certain Chinese solar manufacturers that exempted four solar components made outside China, the American Alliance for Solar Manufacturing Trade Committee initiated a new AD/CVD petition against solar manufacturers in Cambodia, Malaysia, Thailand, and Vietnam.
China
Section 301 Tariffs on Chinese goods continue to be at the forefront of trade relations between China and the United States. In May 2024, the United States Trade Representative (USTR) released its statutorily mandated report, “Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” which 1) assesses the tariffs’ effectiveness in achieving their objective, 2) measures the tariffs’ overall impact on the US economy, and 3) proposes modifications. Following the report, the Biden administration increased Section 301 rates on a number of goods, including electric vehicles, solar cells, semiconductors, lithium-ion batteries, steel and aluminum products, magnets, graphite, and two previously exempt categories— ship to shore cranes and syringes/needles. The Administration also established an exclusion process for products under Chapters 84 and 85 of the Harmonized Tariff Schedule (HTS), provided exclusions for certain solar equipment, extended some existing exclusions through May 2025, and allowed other exclusions to sunset. Plaintiffs have challenged the Court of International Trade’s (CIT’s) 2023 decision upholding the USTR’s authority to modify Section 301 tariffs in the Court of Appeals for the Federal Circuit (CAFC), but CAFC is unlikely to issue a decision before mid-2025.
The US spearheads enforcement against traded goods that are made using forced labor. The Uyghur Forced Labor Prevention Act (UFLPA) bans the importation of all goods made in the Xinjiang Uyghur Autonomous Region (XUAR) in China. Using the UFLPA presumption and its authority under 19 USC § 1307, US Customs and Border Protection (CBP) can exclude or seize goods it believes were made in XUAR, destroy those goods if they are not exported (absent proof of no forced labor), issue penalties against the importer, and investigate and audit importers that it believes are importing goods from XUAR. The Forced Labor Enforcement Task Force (FLETF) continues to focus on priority sectors including aluminium, steel, auto parts, and PVC, and expanded the UFLPA Entity List, adding 29 Chinese companies in May and June and widening the zone of scrutiny to additional industries, notably seafood. CBP also issued its first Withhold Release Order (WRO) in nearly two years, targeting a work glove manufacturer. CBP has again confirmed that the UFLPA represents a heightened priority in Customs enforcement at the direction of Congress. Third-party technical solution providers offer tools to identify forced labor risk in supply chains, including software for partner screening, supply chain mapping, and DNA/isotopic testing. Importers whose shipments CBP has detained on suspicion of forced labor complain of a lack of uniform treatment between ports of entry and a lack of transparency about what documentation constitutes a complete packet demonstrating absence of forced labor.
Anecdotally, AD/CVD, Section 301, UFLPA, technology-related sanctions and other trade barriers in the bilateral relationship between the US and China appear to play a role in increasing Chinese foreign direct investment (FDI) in Mexico—a phenomenon often described as “nearshoring.” Statistically, although China FDI in Mexico has increased substantially in recent years (with most growth in computer equipment manufacturing and some in the automotive sector), it accounts for a very small portion of Mexico’s total FDI, which is dominated by the US and has largely remained flat since 2015. If China FDI in Mexico continues to expand significantly, especially in strategic sectors, then programs such as Industria Manufacturera, Maquiladora y de Servicios de Exportación (IMMEX) and the US-Mexico-Canada Agreement (USMCA) might serve as “back doors” for importation of illicit Chinese goods, especially technology and goods produced with forced labor, to the US. In this context, importers should carefully consider their duty to map supply chains under UFLPA and how it dovetails with import restrictions and sanctions more broadly.
Russia
As Vladimir Putin’s “special military operation” in Ukraine drags on, so do heavy sanctions on US-Russian relations. Although the initial round of sanctions and tariffs following the February 2022 invasion primarily targeted Russia’s energy and financial sectors, 2023 sanctions and tariffs expanded to raw materials, derivative products, and technology. Those sanctions have persisted and expanded through 2024, and now cover a wide variety of Russian-origin goods, from metals to seafood (see, for example, CBP’s December 2023 guidance on self-certifying that Foreign Trade Zone entries of seafood were not harvested in waters under Russian jurisdiction). In May, CBP issued guidance to help US companies adhere to sanctions on Russian diamonds that went into effect in March, and the Department of State added 280 individuals and entities to an ever-expanding list of sanctions, further increasing transactional difficulty for any US business with networks that touch Russia in any way.
Modifications to US Customs Broker Regulations
CBP continues to implement its “21st Century Customs Framework,” looking to use cloud-based platforms, interagency collaboration, computer system integration, digitization, and automation to aid in inventory tracking and other frontline enforcement activities. Among CBP’s 2022 broker-related modernization efforts—which replaced district permits with universal national permits, heightened broker responsibilities, modified the examination and licensing process, among other changes—were continuing education requirements for licensed brokers. Individual brokers must now earn 36 hours of continuing education every three years, except during the first triennial period (2024-2027) where hours are “reduced by six credits for approximately every six months that elapse between February 1, 2024 and the compliance date on which individual brokers begin completing qualified continuing broker education courses,” according to the June 2023 Federal Register notice. CBP has selected five partners to implement an accreditation process and is collaborating with them to develop a continuing education program. Brokers should monitor Cargo Systems Messaging Service (CSMS) message to catch the program start date, after which time they can begin accumulating accredited continuing education hours.
Other Updates
The USTR announced in April that the US gained Observer status to the Partnership Council of the Indigenous Peoples Economic and Trade Cooperation Arrangement (IPETCA), a framework for economically empowering indigenous communities located within participating countries (currently Australia, Canada, New Zealand, and Taiwan) by removing barriers to their sovereign participation in international trade. In line with the USTR’s novel approach to trade—which explicitly prioritizes international collaboration around labor, environmental, and human rights issues rather than lowering tariff rates—the US adopted the Foreign Extortion Prevention Act (FEPA) in 2023, a companion regulation to Foreign Corrupt Practices Act (FCPA, which criminalizes US persons’ or entities’ offering or giving of bribes to foreign officials) that criminalizes foreign officials’ solicitation or acceptance of bribes from US persons or entities. Measures such as these require heightened diligence in business dealings on the part of multinational companies.
Conclusion
Between longstanding tariff barriers such as AD/CVD and newer requirements related to forced labor and national security (particular concerning China and Russia), supply chain awareness appears to be the name of the game in the current trade environment. Importers should pay close attention to duty rates, as always, including AD/CVD and Section 301 tariffs—but also to clearly understanding and documenting who they do business with, how imported goods are made, and whether there are opportunities to more closely align global sourcing strategies with ongoing business risks and regulatory requirements.