The following was taken in part from the NCBFAA’s Customs Counsel and Legislative Advisor of Sandler, Travis & Rosenberg, P.A.:

The President issued an Executive Order (EO) on June 3rd that will impact all importers and entities connected to import transactions. This Executive Order proposes a broad tightening of US customs enforcement, with a strong emphasis on importer accountability and vetting, foreign importer restrictions, disclosure obligations, and higher penalties. The most immediate practical effect for clients is a likely increase in enforcement, bonding, data submissions, and compliance requirements for importers of record (IORs), especially foreign IORs. The EO effectively creates a Customs Modernization bill that will impact significant portions of the Customs Regulations.

While none of the actions below are immediate, the White House issued a fact sheet that stated DHS/CBP will engage with stakeholders, in the standard rule making process which may allow parties time to adjust operations if needed. As a result, we anticipate that CBP will issue Federal Register notices within the timelines specified seeking public comment.

Importer of record changes. Within 180 days, DHS/CBP is directed to revise IOR rules to require:

• Minimum domestic tangible assets or bonds, 
• Higher bond coverage, and 
• Expanded disclosure of ownership and beneficial ownership, business affiliations, domestic assets, and expected import volumes, and any other data CBP deems necessary. 

Foreign IORs no longer to be treated the same as US IORs.

Foreign IORs May Not File Informal Entries. The Order requires DHS/CBP to amend its regulations/policies to prohibit a foreign IOR from filing informal entries. 

Foreign IORs May File Formal Entries if Additional Requirements are Met. The Order states that Foreign IORs may file formal entries if:

• Bonding is sufficient to demonstrate to CBP that the revenue would be fully protected and that compliance with CBP-enforced import laws, regulations, and instructions would be ensured; and
• The foreign IOR is validated in CTPAT, if eligible, or uses a CTPAT validated and licensed customs broker to file entries.

Definitions of US IOR and Foreign IOR

• The order draws a sharper distinction between US importers of record (US IORs) and foreign importers of record (foreign IORs) based on citizenship, legal organization, ownership, location, and US assets.

A US IOR is an entity that: 

• Is organized under US law, located in the United States, and continuously controlled by beneficial owners who are US citizens or lawful permanent residents. 

OR

• An entity that owns a significant amount of US real property, as determined by the Secretary. A US IOR may also be a citizen or lawful permanent resident of the United States.

A foreign IOR is any importer that does not meet the US IOR definition. 

The order also states that DHS/CBP will apply a substance-over-form test to whether an entity is “located in the United States.” Future guidance is intended to prevent use of shell companies, sham transactions, or artificial corporate structures to obtain US IOR status. 

At minimum, an entity must have its principal place of business in the United States, a real physical presence where significant business activity occurs, and sufficient tangible US assets relative to the scale of its operations.

IOR good standing, registry, and vetting. CBP will establish a “good standing” requirement for all IORs, tied to compliance history and payment of customs liabilities, among other factors. IORs not in good standing will be barred from importing and from any activities directly related to importing goods, including designating a customs broker to act as IOR on their behalf. 

CBP will also update the IOR registry by: 

• Removing inactive IORs, (foreign and US), 
• Confirming IORs are compliant with all regulations and disclosures, and 
• Assigning risk-based tiers based on compliance history, enforcement actions, and audit results, among other things. 

Enhanced and recurring vetting will apply not only to IORs, but also to affiliates of IORs, customs brokers, custodians of bonded merchandise, and freight forwarders.

Import disclosure and certification requirements. The order directs heightened import certifications and expanded supply-chain disclosures, including:

• Compliance certifications tied to sanctions and other legal requirements,
• Foreign tax and business identifiers, and 
• More detailed product and production information. 

Within 90 days, CBP will also require export-related documentation or information provided to foreign customs authorities upon exportation.

Increased enforcement and higher broker penalties. CBP is directed to bolster enforcement activities by: 

• Increasing audits, 
• Enforcing bond claims more aggressively, 
• Restricting in-bond use, and 
• Imposing maximum penalties on brokers that fail due diligence, repeatedly represent noncompliant parties, or fail to cooperate in a timely manner with requests for information by CBP. 

Enforcement Priorities. CBP shall prioritize the enforcement of forced labor, undervaluation, misclassification, and transshipment enforcement including AD/CVD duty evasion under the Enforce and Protect Act (EAPA) shall be prioritized. 

Penalty mitigation drastically reduced. Penalty mitigation standards will also tighten within 90 days, including a minimum penalty floor of at least 50 percent of the assessed penalty, minimum liquidated damages floor, and no mitigation for repeat offenders.

Other operational changes. The order also calls for faster seizure and disposal of noncompliant goods, more transparency through annual enforcement reports and periodic review of confidentiality claims, recommendations for additional legislation within 45 days, and a one-year effectiveness report.

TIMELINE OF EVENTS REQUIRED BY EXECUTIVE ORDER

Days from Order and Required Action

45 days

• Submit recommendations for legislation to strengthen customs enforcement.

90 days

• Require submission of documentation or information that the foreign exporter provided to foreign customs authorities before export to the United States.
• Revise mitigation standards to establish a minimum penalty floor of at least 50 percent, a minimum liquidated damages floor, and no mitigation for repeat offenders.
• Take actions to expedite and enhance seizure and disposal of non-compliant imports, including easing voluntary abandonment, increasing bond requirements for high-risk shipments, and authorizing third-party disposal.
• Enhance transparency through periodic review and expiration of confidentiality requests, as appropriate, and publication of annual enforcement transparency reports.

180 days

• Revise importer eligibility regulations, guidance, and policies to require minimum domestic assets, bonding, or both; increased bond coverage; IOR designation for formal and informal entries; and additional IOR data disclosures.
• Require all IORs to maintain good standing with CBP.
• Update the IOR registry by removing inactive IORs, confirming compliance and disclosures for active IORs, and creating risk-based tiers.
• Establish enhanced and recurrent vetting procedures for IORs, affiliates, customs brokers, custodians of bonded merchandise, and freight forwarders.

1 year

• Submit a report to the President on the effectiveness of the matters set forth in the order.

RIM logistics, ltd. will continue to closely monitor this evolving situation and provide updates as necessary. Please reach out to your RIM representative if you have any further questions.