[Federal Register Volume 90, Number 12 (Tuesday, January 21, 2025)]
[Proposed Rules]
[Pages 6852-6873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-01074]
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DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
DEPARTMENT OF THE TREASURY
19 CFR Parts 10, 128, 143
[USCBP-2025-0003]
RIN 1685-AA02
Trade and National Security Actions and Low-Value Shipments
AGENCY: U.S. Customs and Border Protection, Department of Homeland
Security; Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes amendments to the U.S. Customs and
Border Protection (CBP) regulations pertaining to the administrative
exemption for certain low-value shipments not exceeding $800.
Specifically, CBP proposes to make merchandise that is subject to
specified trade or national security actions ineligible for this
administrative exemption and to require that certain shipments claiming
this exemption provide the 10-digit Harmonized Tariff Schedule of the
United States (HTSUS) classification of the merchandise.
DATES: Comments must be received by March 24, 2025.
ADDRESSES: Please submit comments, identified by docket number, by the
following method:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments via docket number
USCBP-2025-0003.
Instructions: All submissions received must include the agency name
and docket number for this rulemaking. All comments received will be
posted without change to https://www.regulations.gov, including any
personal information provided. Comments must be submitted in English,
or an English translation must be provided.
Docket: For access to the docket to read background documents or
comments received, go to https://www.regulations.gov. In accordance
with 5 U.S.C. 553(b)(4), a summary of this rule may also be found at
https://www.regulations.gov.
[[Page 6853]]
FOR FURTHER INFORMATION CONTACT: Christopher Mabelitini, Director,
Intellectual Property Rights & E-Commerce Division, Office of Trade,
U.S. Customs and Border Protection, 202-325-6915,
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Public Participation
II. Background and Purpose
A. Administrative Exemption From Duties and Taxes
B. Specified Trade and National Security Actions
C. Excepting Merchandise Subject to Specified Trade or National
Security Actions From Eligibility for the Administrative Exemption
D. Unique Considerations for Applicability to the International
Mail Shipments
III. Discussion of Proposed Amendments
IV. Statutory and Regulatory Reviews
A. Executive Orders 12866 and 13563
B. Additional Requirements for Regulatory Analysis
C. Regulatory Flexibility Act
D. Initial Regulatory Flexibility Analysis (IRFA)
E. Paperwork Reduction Act
F. National Environmental Policy Act
Signing Authority
List of Subjects
Proposed Amendments to the CBP Regulations
I. Public Participation
Interested persons are invited to participate in this rulemaking by
submitting written data, views, or arguments on all aspects of this
notice of proposed rulemaking (NPRM). U.S. Customs and Border
Protection (CBP) also invites comments that relate to the economic,
environmental, or federalism effects that might result from this
proposed rule. Comments that will provide the most assistance to CBP
will reference a specific portion of the NPRM, explain the reason for
any recommended change, and include data, information, argument, or
authority that supports such recommended change.
Regulatory Alternatives
This rulemaking proposes to make imported merchandise subject to
certain trade or national security actions ineligible for the
administrative exemption found in 19 U.S.C. 1321(a)(2)(C) and to
require that certain shipments claiming this exemption provide the 10-
digit Harmonized Tariff Schedule of the United States (HTSUS)
classification of the merchandise. However, in addition to comments on
the above proposals, CBP is also requesting comments on whether these
proposals should be extended to bona-fide gifts valued at $100 or less
($200, if the gift is from certain island possessions) sent from
persons in foreign countries to persons in the United States and/or
certain personal or household articles valued at $200 or less
accompanying persons arriving in the United States pursuant to 19
U.S.C. 1321(a)(2)(A) and 19 U.S.C. 1321(a)(2)(B).
Moreover, given the unique nature of the international mail
shipments in the postal environment as set forth in Section II.D below,
CBP is specifically seeking public comments as to the effects of this
proposed rulemaking on those shipments into the United States.
II. Background and Purpose
A. Administrative Exemption From Duties and Taxes
Section 321(a)(2) of the Tariff Act of 1930 (19 U.S.C. 1321(a)(2)),
as amended by the Trade Facilitation and Trade Enforcement Act of 2015
(TFTEA), Section 901, Public Law 114-125, 130 Stat. 122 (Section 321),
authorizes administrative exemptions from duty and tax imposed on or by
reason of importation for three categories of imported articles, when
the amount of revenue to be collected is disproportionate to the
expense and inconvenience caused to the government. These categories
include: bona-fide gifts valued at $100 or less ($200, if the gift is
from certain island possessions) sent from persons in foreign countries
to persons in the United States; certain personal or household articles
valued at $200 or less accompanying persons arriving in the United
States; and other imported articles when the value of the article is
$800 or less.\1\ These exemptions are subject to the condition that the
aggregate fair retail value in the country of shipment of articles
imported by one person on one day and exempted from duty cannot exceed
the authorized amounts. Also, these exemptions are not to be granted if
merchandise covered by a single order or contract is forwarded in
separate lots to obtain the benefit of duty- and tax-free entry.
Finally, these exemptions are also not to be granted in circumstances
where regulations prescribe exceptions or limitations on eligibility
for these exemptions. Pursuant to Section 321(b), such regulations may
be prescribed whenever such action is consistent with the purpose of
Section 321(a), or, when ``necessary for any reason to protect the
revenue or to prevent unlawful importations.'' All further references
to ``the administrative exemption'' in this document will be to the
administrative exemption found in 19 U.S.C. 1321(a)(2)(C), unless
specified otherwise.
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\1\ 19 U.S.C. 1321(a)(2). Shipments entered under this exemption
are also commonly referred to as ``de minimis'' shipments.
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All merchandise imported into the customs territory of the United
States is subject to entry and clearance procedures, unless
specifically excepted. These procedures ensure the proper appraisement,
valuation, and tariff classification of the merchandise for the purpose
of collecting the lawful amount of duties owed, as well as compliance
with all other laws and regulations administered and enforced by CBP.
Different procedures are provided for the entry and clearance of
merchandise depending upon the value of the merchandise. Shipments of
merchandise valued at $2,500 or less and entered pursuant to 19 U.S.C.
1498(a)(1)(A) are referred to as ``informal entries.'' Specifically, 19
U.S.C. 1498(a)(1)(A) authorizes the Secretary of the Treasury \2\ to
``prescribe rules and regulations for the declaration and entry of
merchandise when the aggregate value of the shipment does not exceed an
amount specified . . . by regulation, but not more than $2,500.''
Shipments that are eligible for the administrative exemptions at 19
U.S.C. 1321(a)(2) are a subset of the informal entries covered by 19
U.S.C. 1498(a)(1)(A). The statutory framework of 19 U.S.C. 1498
authorizes, in effect, a less formal entry process than under 19 U.S.C.
1484 (referred to as ``formal entries''). As a result, informal entry
procedures are less burdensome and complex than the formal entry
procedures. These simplified procedures reduce the overall
administrative burden on informal entry filers. The regulations
pertaining to entry of merchandise claiming the exemptions in 19 U.S.C.
1321(a)(2) are found throughout various parts of title 19 of the Code
of Federal Regulations (CFR). The informal entry procedures for low-
value shipments claiming the administrative exemption under 19 U.S.C.
1321(a)(2)(C) are specifically found in Part 143, subpart C, which
cross-reference other regulations establishing eligibility
requirements. Pursuant to the current text of 19 CFR 143.23(j), such
eligible merchandise must be entered by providing certain information
on a bill of lading or a manifest listing each bill. However, the
requirements for shipments imported by
[[Page 6854]]
mail are found in 19 CFR part 145, and the requirements for shipments
imported by express consignment operators and carriers are covered by
19 CFR part 128.\3\
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\2\ In accordance with Treasury Order 100-20, the Secretary of
the Treasury delegated to the Secretary of Homeland Security the
authority related to the customs revenue functions vested in the
Secretary of the Treasury as set forth in 6 U.S.C. 212 and 215,
subject to certain exceptions.
\3\ The procedures for low-value shipments imported by mail are
not implicated in this proposed rulemaking.
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Over the last 10 years, the number of shipments entering the United
States claiming the administrative exemption has increased
significantly, from approximately 139 million a year to over one
billion a year. This exponential increase in shipments claiming the
administrative exemption creates challenges to CBP's effective
enforcement of U.S. trade laws, health and safety requirements,
intellectual property rights, and consumer protection rules. Low-value
e-commerce shipments pose the same health, safety, and security risks
as higher-value shipments. Transnational criminal organizations and
other bad actors perceive low-value shipments as less likely to be
interdicted because these types of shipments are not subject to the
more extensive formal entry procedures. This has resulted in attempts
to enter illicit goods, such as illicit fentanyl, into the country
through these types of shipments. Of particular concern are the large
volume of daily importations and the more limited data regarding low-
value shipments which make it increasingly difficult for CBP to target
and block illicit synthetic drugs such as fentanyl and synthetic drug
raw materials and related manufacturing equipment from entering the
country. These developments have also created challenges with respect
to the enforcement of trade actions designed to address threats to
national security, unreasonable or discriminatory trade practices, and
injury to domestic industry caused by import surges. In response to the
significant changes in the trade environment and supply chains,
substantial increases in the volume of shipments, and advancements to
CBP's technological capabilities, CBP is proposing two regulatory
actions to modify the regulations governing the administrative
exemption.\4\
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\4\ For a more detailed discussion of these challenges, please
see the ELVS NPRM. 90 FR 3048.
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First, on [DATE], CBP published an NPRM regarding the entry of
certain low-value shipments eligible for the administrative exemption
under Section 321(a)(2)(C). See 90 FR 3048 The NPRM, titled ``Entry of
Low-Value Shipments'' (ELVS NPRM) proposed various amendments to the
CBP regulations pertaining to the entry of low-value shipments.
The existing informal entry requirements for low-value shipments
are less rigorous than those required for other entry types, and often
do not provide sufficient information for CBP to accurately identify
the merchandise in the shipment and the parties involved in its sale
and purchase. Furthermore, novel and complex e-commerce business models
have expanded the traditional array of parties involved in the import
transaction. New or infrequent importers often possess less familiarity
with U.S. customs laws and regulations, which can lead to the attempted
importation of non-compliant goods.
The ELVS NPRM proposed the creation of a new entry process for
entering low-value shipments, referred to as the ``enhanced entry
process,'' which would allow CBP to target high-risk shipments more
effectively. The enhanced entry process is set forth in the ELVS NPRM
as proposed Sec. 143.23(l) and would require the provision of the 10-
digit HTSUS classification of the merchandise. The ELVS NPRM also
proposed revisions to the current process for entering low-value
shipments, referred to as the ``basic entry process,'' to require
additional data elements that would assist CBP in verifying eligibility
for duty- and tax-free entry. The basic entry process is set forth in
the ELVS NPRM as proposed Sec. 143.23(k).
Second, this rulemaking proposes to prescribe exceptions to
eligibility for the administrative exemption under Section
321(a)(2)(C). These exceptions, described in more detail below, are
consistent with the purpose of Section 321(a), and necessary to protect
the revenue and prevent unlawful importations. In addition, this
rulemaking proposes to require a 10-digit HTSUS classification for
shipments entered using the basic entry process claiming the
administrative exemption under Section 321(a)(2)(C).
B. Specified Trade and National Security Actions
The President has statutory authority to impose tariffs and
establish quotas (among other actions) to address threats to national
security, and serious injury or threat thereof to domestic industry,
while the U.S. Trade Representative has statutory authority to take
action to address unreasonable or discriminatory acts, policies, or
practices, subject to any direction by the President. This rulemaking
focuses on actions taken under Section 232,\5\ Section 201,\6\ and
Section 301 \7\ and will refer to these actions collectively as
``specified trade or national security actions.'' Currently,
merchandise provided for in any absolute or tariff-rate quota, whether
the quota is open or closed, and merchandise subject to antidumping and
countervailing duties are not eligible for the administrative exemption
under Section 321(a)(2)(C).\8\ However, merchandise subject to
specified trade or national security actions imposing an ad valorem
tariff is currently eligible to claim this administrative exemption.
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\5\ Section 232 of the Trade Expansion Act of 1962, as amended
(Section 232); 19 U.S.C. 1862, Public Law 87-794, 76 Stat. 872.
\6\ Section 201 of the Trade Act of 1974 (Section 201); 19
U.S.C. 2251 et seq., Public Law 93-618, 88 Stat.1978.
\7\ Title III of the Trade Act of 1974 (Section 301); 19 U.S.C.
2411-2420, Public Law 93-618, 88 Stat.1978 (as amended).
\8\ See 19 CFR 10.153(g) and 19 U.S.C. 1671h and 1673g.
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Section 232 authorizes the President to adjust the imports of an
article and its derivatives, if the Secretary of Commerce finds that
the article is being imported into the United States in such quantities
or under such circumstances as to threaten to impair the national
security.\9\ For example, beginning in 2018, the President imposed ad
valorem tariffs, absolute quotas, and tariff-rate quotas on steel mill
articles and on aluminum articles from almost all countries, pursuant
to this authority.\10\
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\9\ 19 U.S.C. 1862.
\10\ See 83 FR 11625 (March 15, 2018) and 83 FR 11619 (March 15,
2018), as amended. Effective February 8, 2022, the United States
also imposed ad valorem tariffs on imports of aluminum derivative
articles and steel derivative articles into the United States under
section 232 of the Trade Expansion Act of 1962. See 85 FR 5281
(January 24, 2020), as amended.
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Section 201 provides that, if the U.S. International Trade
Commission determines that a good is being imported into the United
States in such increased quantities as to be a substantial cause of
serious injury, or the threat thereof, to the domestic industry
producing a good like or directly competitive with the imported good,
then the President is authorized to take all appropriate and feasible
action within his power which the President determines will facilitate
efforts by the domestic industry to make a positive adjustment to
import competition (i.e., safeguards).\11\ These actions include
imposing temporary duties and other trade measures. For example, in
2018, the United States imposed an ad valorem tariff and tariff-rate
quota on certain crystalline silicon photovoltaic
[[Page 6855]]
cells, whether partially or fully assembled into other products,
pursuant to this authority.\12\
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\11\ 19 U.S.C. 2251, et seq.
\12\ See, e.g., 83 FR 3541 (January 23, 2018). For additional
information on actions taken under Section 201, please refer to
https://ustr.gov/issue-areas/enforcement/section-201-investigations
(last visited November 7, 2024).
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Section 301 allows USTR to address, among others, unreasonable or
discriminatory acts, policies, or practices that burden or restrict
U.S. commerce. Actions may include suspending trade agreement
concessions or imposing import restrictions, subject to the specific
direction of the President, if USTR determines that a trading partner
of the United States is violating trade agreement commitments or
engaging in discriminatory or unreasonable practices that burden or
restrict U.S. commerce.\13\ For example, the United States has imposed
an additional ad valorem tariff on many products from China because
China employs a series of technology transfer-related acts, policies,
and practices that are unreasonable or discriminatory and burden or
restrict U.S. commerce pursuant to this authority.\14\
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\13\ 19 U.S.C. 2411-2420.
\14\ See, e.g., 83 FR 28710 (June 20, 2018). For additional
information on actions taken under Section 301, please refer to:
https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions (last visited November 7, 2024).
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Collectively, these trade or national security statutes empower the
President, or USTR, in consultation with designated agencies, to
enforce U.S. trade or national security objectives with respect to
certain imported merchandise by, among other actions, imposing an ad
valorem tariff in addition to the standard applicable duty rate.
C. Excepting Merchandise Subject to Specified Trade or National
Security Actions From Eligibility for the Administrative Exemption
To uphold the objectives of the specified trade or national
security actions discussed above, and consistent with the purpose of
Section 321(a), to protect the revenue, and prevent unlawful
importations, this rulemaking proposes to except merchandise subject to
an ad valorem tariff imposed under Section 232, 201, or 301 from
eligibility for the exemption under Section 321(a)(2)(C). The Secretary
of the Treasury is authorized by 19 U.S.C. 1321(b) to prescribe such
exceptions to any administrative exemption.
These specified trade or national security actions are meant to
prevent specific harms such as the threat of certain imports to
national security or domestic industries or to respond to
discriminatory or unreasonable practices that restrict or burden U.S.
commerce. Thus, any Government expense involved in the collection of
these additional duties is outweighed by the fact that continuing to
exempt these goods would undermine the statutory scheme for trade or
national security actions generally and the effectiveness of specific
actions that are currently in force. Further, creating this exception
would ensure that administrative exemption eligibility for products
covered by the specified trade or national security actions is
consistent with treatment under other U.S. trade laws. For instance,
products covered by antidumping or countervailing duty orders are
already excepted from eligibility for the administrative exemption
under 19 U.S.C. 1321(a)(2)(C).\15\
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\15\ See 19 U.S.C. 1671h; 19 U.S.C. 1673g (requiring CBP to
collect antidumping and countervailing duty deposits for ``all
entries, or withdrawals from warehouse, for consumption of
merchandise subject to [an antidumping or countervailing duty]
order'') (emphasis added).
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Merchandise that would be ineligible to claim the administrative
exemption under this rulemaking may continue to be entered under an
appropriate formal or informal entry process to ensure collection of
any applicable tariff. For purposes of ensuring merchandise subject to
additional tariffs imposed pursuant to a specified trade or national
security action is not accorded duty-free entry under Section
321(a)(2)(C), this rulemaking additionally proposes to require a 10-
digit HTSUS classification for merchandise entered under the proposed
``basic entry process'' claiming an exemption under Section
321(a)(2)(C), in addition to the proposed requirement to provide the
10-digit HTSUS classification for merchandise entered under the
``enhanced entry process'' that was proposed in the ELVS NRPM.
Provision of the 10-digit HTSUS classification at entry enables CBP to
determine whether the merchandise is subject to ad valorem tariffs as a
result of a specified trade or national security action, and therefore
whether the merchandise is eligible for the administrative exemption.
The proposed exception applies to all merchandise identified in a
specified trade or national security action imposing an ad valorem
tariff, even if the merchandise is accorded an exclusion from the ad
valorem tariff imposed by a specific action.\16\ CBP's proposal does
not affect exclusions for purposes of determining whether an ad valorem
trade or national security action tariff is applicable at entry.
Merchandise accorded an exclusion may continue to be entered under an
appropriate formal or informal entry process without being subject to
the ad valorem tariff, that would otherwise apply had the exclusion not
been accorded, consistent with all applicable requirements. Products
that are not subject to the ad valorem tariff imposed by a specified
trade or national security action, as detailed in each action, remain
eligible for the exemption under Section 321(a)(2)(C). For example, in
recently issued Presidential Proclamation 10782, imports of aluminum
from Mexico are not subject to the ad valorem tariff imposed pursuant
to Section 232 if the article meets specified criteria.\17\
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\16\ CBP notes that merchandise subject to either an absolute or
tariff-rate quota is already ineligible for the administrative
exemption pursuant to 19 CFR 10.153(g). As a result, CBP is not
discussing these quotas further in this NPRM.
\17\ See 89 FR 57339 (July 10, 2024).
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The proposal to make merchandise subject to specified trade or
national security actions ineligible for the administrative exemption
under Section 321(a)(2)(C) is consistent with the purpose of Section
321(a) and is necessary to protect the revenue. The rate of duty for
merchandise subject to additional Section 232, 201 and 301 duties is
higher than the rate applicable to merchandise subject to regular rates
of duty (that is, most-favored-nation rates or rates under trade
agreements or preference programs). Currently, the standard duty rate
assessed on imported merchandise, on average, is less than 2 percent
for goods subject to regular rates of duty. In comparison, the
additional Section 301 ad valorem tariff rate assessed on certain goods
from China currently ranges from 7.5 percent to 100 percent, the
Section 201 tariff rate on certain solar cells is an additional 14.25
percent, and the Section 232 tariff rate is an additional 10 percent
for aluminum and an additional 25 percent for steel mill articles.
As described in the Regulatory Flexibility Act section, when the
standard duty rate is combined with the tariff rate applied to the
aggregate value of imported merchandise subject to an ad valorem tariff
under Section 232, 201 and 301, the total amount of additional revenue
to be collected on merchandise subject to these trade or national
security actions is projected to range between $5.9 billion and $7.8
billion in 2025. Considering the rates of duties and the aggregate
trade volume of affected imports, CBP anticipates that the amount of
additional revenue to be collected under the proposed exception would
substantially outweigh the expense and inconvenience to the U.S.
Government of collecting the duties.
[[Page 6856]]
Thus, making goods subject to ad valorem tariffs pursuant to these
trade or national security actions ineligible for the administrative
exemption is consistent with the purpose of Section 321(a), because the
amount of revenue to be collected on goods subject to ad valorem
tariffs pursuant to these trade or national security actions is
substantial enough to outweigh the expense and inconvenience to the
government of processing the low-value shipments. Moreover, creating an
exception for goods subject to ad valorem tariffs pursuant to these
trade or national security actions protects the revenue because failing
to collect these duties represents a substantial loss of revenue to the
U.S. Government.
The above proposal also serves to prevent unlawful importations. As
noted above, over the last 10 years, the number of shipments entering
the United States claiming the administrative exemption has increased
significantly, from approximately 139 million a year in 2015 to over
one billion a year in 2024. Even though these shipments have a low
value, this significant increase in volume makes it more challenging
for CBP to conduct targeting for purposes of, among other things,
identifying violations of U.S. trade laws, health and safety
requirements, intellectual property rights, and consumer protection
rules, and to block illicit synthetic drugs such as fentanyl and
synthetic drug raw materials and related manufacturing equipment from
entering the country. Such enforcement challenges put American
consumers at risk. CBP anticipates that excepting merchandise subject
to ad valorem tariffs pursuant to specified trade or national security
actions from eligibility for the administrative exemption will result
in a decrease in the overall volume of shipments claiming this
exemption. CBP expects that shipments of ineligible merchandise will be
consolidated into larger shipments and entered under an appropriate
formal or informal entry process, resulting in decreased overall volume
of shipments.
D. Unique Considerations for Applicability to the International Mail
Shipments
While CBP has included international mail in the scope of this
proposed rulemaking, CBP seeks public comments that address the
operational feasibility in the international mail environment. The U.S.
Postal Service (USPS) has committed to provide comments as part of the
rulemaking record. This approach seeks to determine whether there are
sufficient reasons why postal shipments can and should be treated
differently, and those differences are best addressed as the rulemaking
moves forward with input from the USPS and the public.
The reasons postal shipments may require a different approach in
the proposed rulemaking include the following: (1) the USPS is subject
to universal service obligations to deliver international mail and
other constraints under both international agreements and domestic law,
which create unique challenges to the application of the proposed rule
to international mail; (2) international mail operates differently from
other modes of global commerce, including that international postal
shipments do not benefit from an end-to-end process as do commercial
shipments; (3) the overwhelming majority of international mail consists
of low-value shipments and the USPS typically cannot collect duties
directly from the foreign mailers with whom it has no relationship; and
(4) as a result of these operational considerations, the application of
this proposed rulemaking may create substantial unrecoverable financial
costs for the USPS, which would be inconsistent with the legal
obligation of the USPS to operate in a financially self-sufficient
manner.
Further, if CBP decides to exclude international mail from the
scope of a final rule, the agency would intend to address the trade
remedies and national security loophole for de minimis goods through
additional rulemaking tailored to the unique operational and legal
characteristics of the international mail environment.
III. Discussion of Proposed Amendments
This rulemaking proposes amendments to provisions found in 19 CFR
parts 10, 128, and 143. Because CBP has also proposed amendments to the
same provisions in the ELVS NPRM, the regulatory amendments proposed in
this section are amendments of the regulations as proposed in the ELVS
NPRM. See 90 FR 3048.\18\
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\18\ CBP will take into account all public comments on the ELVS
NPRM and will adjust this rulemaking's language as appropriate.
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CBP proposes an amendment to 19 CFR part 10 that would make
merchandise subject to an ad valorem tariff under Sections 232, 201 and
301 ineligible for the exemption under Section 321(a)(2)(C). Part 10,
among other things, implements in CBP regulations the statutorily
authorized administrative exemption for low-value shipments, and lists
the conditions that must be met to qualify for the exemption. Section
10.153 identifies exceptions to the administrative exemption. The ELVS
NPRM proposes to amend Sec. 10.153 by adding a new paragraph (i),
which tracks the existing statutory exception to eligibility for
merchandise subject to antidumping and countervailing duties. In this
present notice of proposed rulemaking, CBP proposes to further amend
this section to add an additional new paragraph (j), providing that
imported merchandise subject to actions imposing additional duties
pursuant to Section 232, Section 201, or Section 301 are also
ineligible for the administrative exemption.
CBP additionally proposes amendments to 19 CFR parts 128 and 143,
to require a 10-digit HTSUS classification for all merchandise entered
under the proposed basic entry process as described in the ELVS NPRM.
As a result of these proposed amendments, a 10-digit HTSUS
classification would be required under both the proposed basic and
enhanced entry process described in the ELVS NPRM. By requiring a 10-
digit HTSUS classification for entries using either the proposed basic
or enhanced process, CBP will have additional data needed to
corroborate the product description that would also be required for all
basic and enhanced entries. This HTSUS classification assists CBP in
determining eligibility for the administrative exemption, including
whether merchandise is subject to specified trade or national security
actions, as well as assisting with administration and enforcement more
generally. Therefore, CBP is proposing to amend 19 CFR part 128, by
adding this classification requirement to Sec. 128.21(a)(4)(ii), as
proposed in the ELVS NPRM, and part 143, by adding this requirement to
Sec. 143.23(k), as proposed in the ELVS NPRM.
Part 128, subpart C, sets forth requirements and procedures for the
clearance of imported merchandise carried by express consignment
operators and carriers, including couriers, under special procedures.
Current Sec. 128.21(a) lists the manifest information required in
advance of the arrival of all express consignment cargo. The ELVS NPRM
proposed to amend Sec. 128.21(a)(4)(ii) to explain that the HTSUS
subheading number would not be required for low-value shipments entered
under the basic entry process in Sec. 143.23(k). However, given that
this notice of proposed rulemaking now proposes to extend this HTSUS
subheading number reporting requirement to the basic entry process, CBP
now proposes to amend Sec. 128.21(a)(4)(ii) to make clear that the
[[Page 6857]]
HTSUS subheading number is required for shipments claiming the
administrative exemption entered under either the basic entry process,
as proposed in Sec. 143.23(k) of the ELVS NPRM, or the enhanced entry
process, as proposed in Sec. 143.23(l) of the ELVS NPRM.
Part 143, subpart C, sets forth the requirements for the clearance
of imported merchandise under informal entry procedures. In the ELVS
NPRM, CBP proposed to amend the current release from manifest process
described in current Sec. 143.23(j) and (k). The ELVS NPRM
consolidates the general requirements for the basic entry process in
proposed Sec. 143.23(k). CBP is proposing to further amend paragraph
(k) by adding the 10-digit HTSUS classification as a required data
element that must be provided for all shipments entered using the basic
or enhanced entry processes proposed in the ELVS NPRM.
IV. Statutory and Regulatory Reviews
A. Executive Orders 12866 and 13563
Executive Orders 12866 (Regulatory Planning and Review), as amended
by Executive Order 14094 (Modernizing Regulatory Review), and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
This rule is a ``significant regulatory action'' that is
economically significant under section 3(f)(1) of Executive Order
12866, as amended by Executive Order 14094, because the rule would have
an annual effect of $200 million or more during at least one year of
the analysis. A regulatory impact analysis (RIA), entitled Trade and
National Security Actions and Low-Value Shipments (TraNSALS) Regulatory
Analysis and Regulatory Flexibility Analysis, has been included in the
docket of this rulemaking USCBP-2025-0003. The following presents a
summary of the aforementioned regulatory impact analysis. Although this
analysis attempts to mirror the terms and wording of the rule, no
attempt is made to precisely replicate the regulatory language and
readers are cautioned that the actual finalized regulatory text, not
the text of this assessment, is binding.
1. Purpose of the Rule
This proposed rule makes merchandise subject to an ad valorem
tariff pursuant to a trade or national security action under Section
232, 201, or 301 ineligible for the administrative exemption in 19
U.S.C. 1321(a)(2)(C). The administrative exemption allows shipments of
merchandise to be imported by one person on one day to pass free of
duty and tax imposed on or by reason of importation if the aggregate
fair retail value in the country of shipment does not exceed $800, and
the shipment is not covered by a single order or contract but sent in a
separate lot to secure duty-free treatment. Throughout this analysis,
we refer to low-value shipments that qualify for the administrative
exemption in 19 U.S.C. 1321(a)(2)(C) as ``qualifying low-value
shipments.'' For fiscal year 2023, CBP estimates that hundreds of
thousands of qualifying low-value shipments would have been assessed
additional tariffs owed under Section 232, 201, or 301, had they not
claimed the administrative exemption. By allowing these low-value
shipments to be imported without assessment of the additional duties
owed pursuant to an applicable trade or national security action, the
administrative exemption is undermining the United States' trade and
national security actions. Additionally, low-value shipment volumes
have grown rapidly in recent years, rising from approximately 139
million to over 1 billion shipments per year between fiscal years 2015
and 2023.\19\ This overwhelming volume has created operational
inefficiencies for CBP's inspection of low-value shipments for
compliance with U.S. laws and regulations. CBP anticipates that this
rulemaking would increase tariff revenue, reduce the volume of
qualifying low-value shipments, improve effectiveness of specified
trade and national security actions, and thereby increase the
efficiency with which CBP targets imports for security risks.
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\19\ Data pulled from CBP's Automated Targeting System (ATS)
database.
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2. Need for the Proposed Rule
The Trade Expansion Act of 1962 and the Trade Act of 1974 authorize
the President and USTR to impose tariffs in certain circumstances.
Specifically, as relevant to this proposed rulemaking, Section 232 of
the Trade Expansion Act of 1962 authorizes the President to adjust
imports of an article and its derivatives if the Secretary of Commerce
finds that the article is being imported into the United States in such
quantities or under such circumstances as to threaten to impair the
national security. Section 201 of the Trade Act of 1974 authorizes the
President to impose temporary trade measures if the International Trade
Commission finds that an article is being imported in such increased
quantities as to be a ``substantial cause of serious injury or the
threat thereof'' to U.S. industries. Lastly, Section 301 of the Trade
Act of 1974 authorizes USTR, subject to the direction of the President,
if any, to impose import restrictions to address, among other things,
unreasonable or discriminatory acts, policies, or practices that burden
or restrict U.S. commerce. This proposed rulemaking refers to tariffs
imposed under Section 232, 201, or 301 as ``specified trade or national
security actions.''
These specified trade or national security actions are designed to
protect domestic industries, and to address the harm to domestic
industry and the American public from substantial cause of serious
injury or threat thereof from surges of injurious imports and
unreasonable or discriminatory trade practices, and may in turn
encourage foreign governments to eliminate policies that gave rise to
the action, or to address the threatened impairment of U.S. national
security caused by certain imports. However, some merchandise subject
to specified trade or national security actions may also be eligible
for the administrative exemption pursuant to Section 321 of the Trade
Act of 1930, as amended (19 U.S.C. 1321(a)(2)). Section 321 provides
administrative exemptions from duty and taxes that are imposed upon or
by reason of importation for three categories of imported articles:
Certain bona-fide gifts valued at $100 or less ($200, if
the gift was from certain island possessions) sent from persons in
foreign countries to persons in the United States;
Certain personal or household articles valued at $200 or
less accompanying persons arriving in the United States; and
All other imported articles when the aggregate fair retail
value of the articles in the country of shipment is $800 or less.
This proposed rulemaking only concerns shipments in the third
category, which is covered by the administrative exemption in 19 U.S.C.
1321(a)(2)(C). To avoid confusion with the other two administrative
exemptions, we will refer to this exemption alone as the
``administrative
[[Page 6858]]
exemption.'' Specifically, the administrative exemption allows a
shipment to be imported duty-free when the aggregate fair retail value
in the country of shipment of all articles imported by one person on
the same day and exempted from the payment of duty is less than or
equal to $800. This administrative exemption was originally set at $1
in the Customs Administrative Act of 1938 to limit the ``expense and
inconvenience'' of collecting duty when it was a disproportionate
amount of work by the U.S. Government compared to the amount of revenue
that would be collected. Since its inception, Congress has increased
the daily aggregate value cap to $5 in 1978, $200 in 1993, and $800 in
2016. In recent years, the volume of imports subject to ad valorem
tariffs as a result of specified trade or national security actions
under Sections 232, 201, and 301 has increased, but low-value shipments
qualifying for the administrative exemption are permitted to enter
duty-free, even when subject to additional duties pursuant to these
actions. Thus, the administrative exemption dampens the impact of
specified trade or national security actions by allowing low-value
imports that claim the exemption to legally avoid all duties and taxes
imposed upon or by reason of importation that would otherwise be
collected, including the additional duties collected under specified
trade and national security actions. In fiscal year 2023, an estimated
77 percent of shipments claiming the administrative exemption would
have been assessed additional duties under Section 232, 201, or 301 had
they not claimed the administrative exemption.\20\
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\20\ Our estimate is based on a random sample of 6,238,513 ET86
entries from fiscal year 2023, pulled from CBP's ACE database. We
assume that qualifying low-value shipments cleared off the manifest
are as likely as type 86 entries (a test which created a new
electronic informal entry process for filing qualifying low-value
shipments in ACE (84 FR 40079)) to be covered by additional Section
232, 201, or 301 tariffs.
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Additionally, low-value shipments create operational inefficiencies
for CBP's ability to inspect these goods due to their high volumes and
more limited data requirements. The volume of shipments claiming the
administrative exemption has risen sharply from approximately 139
million in fiscal year 2015 (prior to the increase in the daily
aggregate exempted value cap) to 1 billion shipments per year in fiscal
year 2023.\21\ In 2019, CBP implemented the Entry Type 86 Test (84 FR
40079; subsequently amended in 89 FR 2630), which created a new
electronic process for filing entries of qualifying low-value shipments
in the Automated Commercial Environment (ACE), as a voluntary
alternative to the current regulatory ``release from manifest'' process
under parts 128 and 143 of the CBP regulations. Under this test, an
owner, purchaser, or customs broker appointed by an owner, purchaser,
or consignee may file an entry type 86 through ACE for shipments
claiming the administrative exemption. Ten data elements are required
to be transmitted to CBP as part of the entry, including the 10-digit
HTSUS classification for the imported merchandise. The Entry Type 86
Test facilitates the clearance of compliant low-value shipments into
the United States through the filing of an electronic entry in ACE, to
include the submission of partner government agency (PGA) data, which
expedites release. While Entry Type 86 has sped up processing for many
shipments claiming the administrative exemption, the remaining
shipments entered under the current regulatory ``release from
manifest'' process \22\ may require manual clearance and provide CBP
with more limited data. CBP anticipates that this rulemaking would
reduce the volume of shipments claiming the administrative exemption
and thereby increase the efficiency with which CBP targets imports for
security risks, including curbing the smuggling of illegal opioids such
as heroin and fentanyl, by shifting some shipments to other entry types
that require more data and the use of an authorized broker.
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\21\ Data pulled from CBP's Automated Targeting System (ATS)
database.
\22\ The ``release from manifest'' process describes shipments
claiming an exemption under 19 U.S.C. 1321(a)(2)(C) which are
released from CBP custody based on the information provided on the
manifest or bill of lading, 19 CFR 128.24(e) and 143.23(j)(3)-(k).
See 84 FR 40079, 40080 (Aug. 13, 2019); 89 FR 2630, 2631 (Jan. 16,
2024).
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3. Summary of Proposed Rule
In this proposed rule, CBP proposes to make all goods subject to
trade or national security actions under Sections 232, 201, and 301
ineligible for the administrative exemption. As a result, importers of
such goods would have to pay both the standard duties and any
additional duties imposed pursuant to trade and national security
actions under Sections 232, 201, and 301, even when the entry value is
under $800; shipments containing such goods would instead need to be
entered through an alternative entry type. CBP assumes that filers will
use entry type 11 (another informal entry type) or entry type 01 (a
formal entry type), depending on the value of the merchandise.\23\ To
enable CBP to determine whether merchandise is eligible for the
administrative exemption, CBP proposes to collect the 10-digit HTSUS
classification as part of the basic as well as the enhanced processes,
as described in the ELVS NPRM. This is a proposed modification of the
ELVS NPRM, which did not propose to require the 10-digit HTSUS
classification as part of the data required for entry under the basic
entry process.\24\ In the ELVS NPRM, CBP proposed to only require the
10-digit HTSUS classification of the merchandise to be provided as part
of the enhanced entry process (subject to waiver in certain
circumstances subject to specified conditions).\25\ This Trade and
National Security Actions and Low-Value Shipments NPRM would expand
that HTSUS classification reporting requirement to include shipments
claiming the administrative exemption under the basic entry process.
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\23\ While other entry types are available, they comprise a
minor portion of total entries. Because type 01 and 11 entries are
most common, we assume these are the most likely types that will be
employed for shipments that no longer qualify for the administrative
exemption.
\24\ The ``basic entry process,'' as described in the ELVS NPRM
is largely the same as what is known as the ``release from
manifest'' process currently in use but with minor changes to
certain data elements. Detailed information about those proposed
data element changes can be found in the Entry of Low-Value Shipment
NPRM.
\25\ The proposed ELVS rule would allow entry filers to apply
for a waiver privilege (i.e., a ``waiver'') from the requirement to
transmit the HTSUS as part of an enhanced entry for non-PGA related
goods. To obtain a waiver, the filers meet several criteria
generally demonstrating their ability to properly classify
merchandise, determine whether the merchandise is subject to the
requirements of partner government agencies (PGAs), or otherwise
precluded by law from eligibility for the administrative exemption.
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The proposed rule would strengthen the United States' specified
trade and national security actions, especially for Section 301
tariffs. For example, the goal of the current Section 301 action is to
discourage China's acts, policies, and practices related to technology
transfer, intellectual property, and innovation that burden or restrict
U.S. commerce. Additionally, the specified trade or national security
actions can be used to protect domestic industries from serious injury,
or the threat thereof, by import surges or adjust imports that threaten
to impair the national security. Moreover, enforcement of U.S. trade
laws and US trading rights protects domestic industries and workers
from unfairly traded imports. An industry that is particularly
vulnerable to circumvention by qualifying low-value shipments from
China is the U.S. textile and apparel manufacturing industry. A large
volume of Chinese textile and apparel imports claim the administrative
exemption, thereby avoiding tariffs. Further, approximately
[[Page 6859]]
50 percent of the value of current qualifying low-value shipments is
attributed to textiles and apparel that would otherwise be subject to
additional duties under Section 301. Broadly speaking, an estimated
15.9 percent of total imports covered by Section 232, 201, and 301
tariffs are exempt from the tariffs as a result of claiming the
administrative exemption.\26\ By excepting imported goods that are
subject to additional duties imposed under Section 232, 201, and 301
actions from the administrative exemption under 19 U.S.C.
1321(a)(2)(C), CBP would increase the effectiveness of these specified
trade or national security actions. This proposed rule would further
help protect domestic industries and discourage unreasonable or
discriminatory practices, among other things, by other countries.
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\26\ See Chapter 5 of standalone RIA for sources and estimation
method.
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This rule would also increase CBP's inspection efficiency by
shifting a large volume of shipments that would become ineligible to
claim the administrative exemption into alternative entry types, such
as formal type 01 and informal type 11 entries. Low-value shipments
claiming the administrative exemption are currently more challenging
for CBP to efficiently inspect than other entry types because they
arrive with more limited data. As a result, CBP officers must do more
work to ensure that a low-value shipment is admissible and to determine
whether the shipment is eligible for the administrative exemption,
which is often impossible without physical inspection of the shipment.
Shipments entered using type 01 or 11 entries, in contrast, arrive with
more detailed information about the contents of the goods included in
the shipment, increasing CBP's inspection efficiencies.
Furthermore, shifting shipments that will become ineligible for the
administrative exemption to an alternative entry type, such as type 01
formal or type 11 informal entry, is likely to result in the
consolidation of multiple, similar items into a single shipment.\27\
Specifically, the $800 daily aggregate value limit for shipments
claiming the administrative exemption incentivizes importers to de-
consolidate goods into numerous low-value shipments to avoid paying
tariffs. Absent the ability to avoid tariffs, importers are likely to
be incentivized to reduce per-unit shipping costs by consolidating
items in bulk shipments.\28\ This consolidation results in fewer,
higher value entries, where multiple identical items can be reviewed by
CBP officers at the same time. Consolidation of non-identical items is
also possible and could result in savings if they are from the same
shipper or origin or have other similar characteristics. However, for
the purposes of this analysis, we focus on the consolidation of similar
or identical goods, because that is where there are the clearest
savings for both trade members and CBP.
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\27\ We acknowledge that consolidation may not be possible for
all qualifying low-value shipments. For a discussion of which
shipments might be consolidated see Exhibit 3-5 of the standalone
RIA.
\28\ For example, imagine a retailer sells 10,000 identical
shirts manufactured in China via an eCommerce platform, and each
shirt has a value of $10. Packaging each shirt individually at a
factory or distribution center in China for direct delivery to the
final consumer in the United States allows filers to claim the
administrative exemption on behalf of the final consignee (i.e., the
consumer). Absent this administrative exemption, the retailer must
pay the tariff based on the value of each shirt as well as a filing
fee for each individual shipment. If the retailer chooses instead to
ship all 10,000 shirts as a single line item in a bulk shipment to
an existing distribution center in the United States, the total
tariff payment is the same, but the filing fee is orders of
magnitude smaller because it is only paid once (rather than 10,000
times). The shirts can then be packaged in the United States for
individual delivery to the final customer. Retailers will make
strategic decisions about how to import goods affected by this rule
based on a variety of factors including filing fees; the relative
costs of using foreign or domestic distribution centers; the costs
in terms of money and time associated with slower, lower-priced
ocean freight (bulk containers) versus faster, higher-priced air
freight (individual packets); inventory management costs; etc.
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Finally, the proposed rule is likely to improve CBP's ability to
accurately identify the contents of a shipment claiming the
administrative exemption even if it does not contain goods subject to
an ad valorem tariff as a result of a trade or national security action
under Section 232, 201, or 301. Many of these goods currently use the
``release from manifest'' entry process, and absent this rule, would
use the basic entry process if the ELVS NPRM is finalized. The
``release from manifest'' process (or its proposed modification into
the ``basic entry process'' as described in the ELVS NPRM) is less
costly for importers, because less information is submitted to CBP, but
the release of shipments by CBP is slower, averaging 3 days.\29\ In
contrast, shipments using type 01 or 11 entries, or the current Entry
Type 86 Test (or its proposed modification into the ``enhanced entry
process'' as described in the ELVS NPRM), are typically released by CBP
within 1 day. This proposed rule would require a 10-digit HTSUS
classification under both the basic and enhanced entry process. As a
result, importers will likely opt for enhanced entry, with its faster
clearance times, given that the difference in administrative costs
between the basic and enhanced entry processes will become negligible.
Having the HTSUS classification along with several additional data
elements required for enhanced entry under the ELVS NPRM will improve
CBP's targeting abilities.\30\
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\29\ See the ELVS Regulatory Analysis supporting the NPRM.
\30\ ELVS proposes to require a CTIN, the country of shipment of
the merchandise, the 10-digit HTSUS for all enhanced entries. ELVS
also proposes to require enhanced entries to include a URL, product
picture, product identifier, and/or a shipment x-ray or other
security screening report number verifying completion of foreign
security scanning of the shipment. The seller name and address,
purchaser name and address, any data or documents required by other
government agencies, advertised retail product description, and
marketplace name and website or phone number are proposed to be
required for enhanced entries as they are applicable.
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4. Proposed Rule Benefits, Costs and Transfers
Analytic Baseline
This analysis estimates the benefits, costs, and transfers
anticipated for a 10-year period beginning in 2025, the expected year
of rule implementation. Estimating these effects requires defining and
modeling a baseline scenario that reflects the world without the
proposed regulation. By comparing the baseline, or ``world without the
regulation,'' to the ``world with the regulation,'' analysts can
characterize the incremental effects of the regulation. The baseline
scenario is forward-looking, in that it projects what the world would
look like, in the future, absent the new regulation. We make three key
assumptions related to the baseline scenario:
Shipment modes and entry types: We assume that in the
future, absent this proposed rule, shipments would continue to be
entered into the United States in the same proportions (by shipment
mode and entry type) as in 2023. These entries are predominantly
commercial non-express type 86 entries (58 percent), followed by
manifest express entries (17 percent), manifest commercial non-express
(16 percent), postal (8 percent), and express type 86 entries (1
percent).
Low-value shipment growth: We assume the total value of
qualifying low-value shipments in 2026 through 2034 grows at the rate
of projected GDP growth over the same period. We note that this
assumption is highly uncertain. Since 2016, when Congress increased the
administrative exemption limit to $800, the volume of qualifying low-
value shipments has increased exponentially, with shipments from
[[Page 6860]]
China the primary contributor to this growth. We assess the sensitivity
of our results to alternative growth assumptions.
Entry of Low-Value Shipments (ELVS) Rule: CBP has
published a Notice of Proposed Rulemaking proposing the ELVS rule,
which would replace the existing Entry Type 86 Test with a new entry
process (``enhanced entry'') providing expedited clearance for
qualifying low-value shipments. For the purposes of this analysis, we
assume that the final ELVS rule will be published and implemented in
advance of the Trade and National Security Action final rule. If it is
not, this analysis will be revised as necessary in the final rule.
Incremental Costs and Transfers
We model costs and transfers from the proposed rule using a partial
equilibrium analysis for industry-level qualifying low-value imports
from 2025 to 2034. The primary costs of the proposed rule are consumer
surplus losses resulting from increased duties and possibly increased
processing fees, resulting in higher prices for imported goods paid by
U.S. consumers on imported goods.31 32 Under the proposed
rule, importers are required to pay tariffs on all goods subject to an
ad valorem tariff pursuant to Section 232, 201, or 301, and some
shipments are subject to additional fees. Our analysis focuses only on
goods that would be subject to Section 301 tariffs absent the
administrative exemption. Data shows that 0.1 percent of goods (by
value) that entered using ET86 in FY 2023 had HTSUS codes subject to
Section 232 or 201 tariffs. The resulting price increases lead to
higher equilibrium duty-inclusive prices and reduced imported
quantities, leading to a decline in consumer surplus, a measure of
welfare that reflects the difference between what a consumer is willing
to pay and what the consumer paid for a product.
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\31\ Consumer surplus is an economic measure of welfare that
reflects the difference between what a consumer is willing to pay
and what the consumer paid for a product.
\32\ In this analysis, we assume the prices experienced by
consumers include tariffs and processing fees paid by manufacturers
or retailers selling the goods and arranging for their importation
and delivery.
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An important component of consumer surplus loss is the transfer of
tariff revenue to the government. Although consumers face higher prices
for imported goods, the U.S. government generates tariff revenue on
goods that were previously avoiding tariffs by claiming the
administrative exemption. The net effect of consumer surplus losses and
gain in government tariff revenues is the resulting welfare change
under the proposed rule.\33\
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\33\ We note that this analysis focuses primarily on the overall
societal effect of the proposed rule. It does not quantify the
potential distributional effects associated with the incidence of
the increased prices for affected goods and the incidence of revenue
gains associated with the collection of tariff revenue; however, it
describes the potential distributional effects of increased prices
qualitatively in Section 3.4 and Appendix A. Forecasting how the
tariff revenue may be returned to the U.S. population (e.g., through
tax cuts or other policy options) is beyond the scope of this
effort. If tax cuts are selected, additional distributional
distortions are possible.
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Cost Shocks
To model the impact of the proposed rule, we introduce cost shocks
comprised of two components: (1) a tariff that will apply to certain
goods currently claiming the administrative exemption; and (2)
additional fees associated with services provided by licensed customs
brokers and CBP staff to process low-value shipments, regardless of
whether the shipments remain in the 19 U.S.C. 1321(a)(2)(C) exemption
environment or shift to formal type 01 or informal type 11 entry. The
tariffs apply on an ad valorem basis to affected goods, regardless of
whether these goods are shipped individually or as part of larger,
consolidated shipments. The weighted average tariff rate for affected
low-value shipments across all industries included in the analysis is
21.2 percent. Table 1 presents the weighted average tariff rate by
industry for affected low-value shipments.
Table 1--Weighted Average Section 301 and MFN Tariff Rates by 3-Digit NAICS Code
----------------------------------------------------------------------------------------------------------------
Weighted average
NAICS code NAICS description tariff rate (%)
----------------------------------------------------------------------------------------------------------------
11........................................... Agriculture, Forestry, Fishing and Hunting.... 21.8
211.......................................... Oil and Gas Extraction........................ 25.0
212.......................................... Mining (except Oil and Gas)................... 25.0
311-312...................................... Food, Beverage and Tobacco Product 12.2
Manufacturing.
313.......................................... Textile Mills................................. 31.2
314.......................................... Textile Product Mills......................... 31.0
315.......................................... Apparel Manufacturing......................... 21.0
316.......................................... Leather and Allied Product Manufacturing...... 28.3
321-323...................................... Wood, Paper, Printing......................... 21.2
324.......................................... Petroleum and Coal Products Manufacturing..... 26.8
325-326...................................... Chemical, Plastics, Rubber Products 17.8
Manufacturing.
327.......................................... Nonmetallic Mineral Product Manufacturing..... 23.9
331.......................................... Primary Metal Manufacturing................... 23.1
332.......................................... Fabricated Metal Product Manufacturing........ 25.5
333.......................................... Machinery Manufacturing....................... 24.9
334.......................................... Computer and Electronic Product Manufacturing. 21.0
335.......................................... Electrical Equipment, Appliance, and Component 26.4
Manufacturing.
336.......................................... Transportation Equipment Manufacturing........ 22.8
337-339...................................... Furniture and Miscellaneous Manufacturing..... 14.1
All Industries............................... .............................................. 21.2
----------------------------------------------------------------------------------------------------------------
Source: Data provided by the International Trade Administration (ITA) via email on October 11, 2024.
In contrast to tariff payments, fees are assessed on a per-shipment
basis, and thus vary significantly depending on assumptions about the
degree to which items are bundled together in larger, consolidated
shipments. These fees include: (1) payments to brokers to file and
process entries; and (2) the merchandise processing fee (MPF) paid
[[Page 6861]]
to CBP on all type 01 and 11 entries.\34\ Table 2 presents the fees
charged by brokers (working with carriers) to file and process entries.
Our estimate for the cost of processing an international shipment in
the postal environment is $8.55. We do not include the $7.20 dutiable
mail fee charged by CBP, which is required when CBP personnel must
complete the paperwork for postal shipments themselves, as it is not
clear how often CBP personnel would be the ones completing the
paperwork. CBP is requesting public comment on the expected costs of
processing a shipment in the postal environment, including how often
the dutiable mail fee is expected to apply.
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\34\ Conversations with brokers suggest the MPF for higher-value
bulk shipments will be negligible. Therefore, we do not consider the
MPF fees explicitly in the analysis.
Table 2--Per Shipment Fees
------------------------------------------------------------------------
Fee ($/
Type shipment)
------------------------------------------------------------------------
Broker fee: \1\
Non-express commercial carrier \2\.................. $1.00
Express commercial carrier \3\...................... 30.00
Postal carrier \3\.................................. 8.55
Merchandise Processing Fee (MPF): \4\
All................................................. 2.53
------------------------------------------------------------------------
Sources and assumptions:
\1\ A licensed broker is not currently required for the ``release from
manifest'' entry process, nor would the ELVS NPRM require one for the
basic entry process if the ELVS NPRM is finalizes as proposed. We
assume for purposes of this analysis that a broker fee is charged for
any entry requiring an HTSUS code and is similar regardless of whether
the filer uses enhanced entry, entry type 86, 01, or 11. (Source:
Personal communication with representatives of a major broker
association on 9/26/2024.)
\2\ Email from CBP dated 10/11/2024.
\3\ Fajgelbaum and Khandelwal (2024).
\4\ Minimum merchandise processing fee for informal entries as of
October 1, 2023. (As viewed on 10/11/2024 on https://www.federalregister.gov/documents/2023/07/28/2023-16197/cobra-fees-to-be-adjusted-for-inflation-in-fiscal-year-2024-cbp-dec-23-08.)
We highlight that these fees are a significant additional cost for
many qualifying low-value shipments relative to the overall value of
these goods. For example, roughly one-fifth (18.5 percent) of
qualifying low-value shipments have a declared value of $5 or less and
the majority of these shipments (61.5 percent) have a declared value of
$25 or less. Examination of the magnitude of fees relative to the value
of shipments currently claiming the administrative exemption, coupled
with discussions with representatives of the customs broker and
logistics community, suggest that shipment consolidation is a likely
outcome of the proposed rule (see chapter 3 in the RIA available in the
docket of this rulemaking for additional detail). We evaluate the
uncertainty associated with an assumption about the likelihood of
consolidation by modeling two separate scenarios, summarized below:
Low impact scenario. We assume that in order to mitigate
additional fees, similar or identical Section 301 goods are
consolidated into larger, bulk shipments, which would be entered using
either entry type 01 or entry type 11 and would be comprised of
multiple pieces of identical items.\35\ As a result, the only increase
in price experienced by consumers of goods subject to Section 301
duties is the duty because all fees are assumed to be fully
mitigated.\36\ Certain shipments without Section 301 goods are also
affected because they must provide an HTSUS code where none was
required previously. Non-Section-301 shipments in the express
environment using the basic entry process are consolidated to mitigate
the fees paid to the broker for filing the entry with the HTSUS (i.e.,
similar to Section 301 goods, fees are assumed to be negligible, or
$0). For express shipments that would use enhanced entry, and therefore
already provide HTSUS codes, no change in entry mode occurs. Similarly,
because this rule does not require an HTSUS code for postal shipments,
postal shipments without Section 301 goods are also unaffected.
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\35\ As noted earlier, we acknowledge that consolidation may not
be possible for all qualifying low-value shipments. Thus, this
scenario more likely represents a lower-bound estimate of the
impacts of the proposed rule.
\36\ As discussed in detail in Section 3.3.2 of the standalone
RIA, given the high cost of broker fees and MPF relative to the
value of items included in qualifying low-value shipments, it is
likely that retailers will strategically consolidate shipments in
order to negate the impact of these fees. Thus, this low impact
scenario considers only the impact of newly applicable tariffs. The
impact of additional broker fees and MPF is considered in the high
impact scenario.
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High impact scenario. In this scenario, we assume less
consolidation occurs. Shipments without Section 301 goods remain
qualifying low-value shipments and pay a fee to a customs broker to
file the entry with the HTSUS code. The fee ranges from $1 to $30 per
shipment, depending on the carrier. Because the affected parties are
hiring a broker to file the entry and assign an HTSUS code, they file
an enhanced entry, rather than a basic entry.\37\ For shipments with
Section 301 goods, we assume that the typical business relationship
between non-express carriers and their clients supports consolidation
of like items as a means of mitigating fees, which would result in
these shipments being entered either using entry type 01 or entry type
11 (i.e., net fees, when combined with the potential savings in
shipping costs associated with consolidation, are assumed to be
negligible, or close to $0). However, we assume Section 301 shipments
transported by express carriers and the postal service remain
unconsolidated and apply associated per shipment fees (i.e., broker/
filing fees range from $8.55 to $30 per shipment, depending on the
carrier, plus a MPF of $2.53 per shipment).
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\37\ In this high impact scenario, some shipments are likely to
remain as low value shipments and should therefore see faster
clearance times resulting from the use of a different filing
process. However, as discussed earlier and in Chapter 3 of the
standalone RIA, in both the low and high impact scenarios, we
anticipate substantial consolidation of individual items in larger,
bulk shipments, where they will be sent to U.S. facilities for
storage, packaging, and distribution. These items will likely travel
by ship, rather than plane, so while they will be cleared through
customs more quickly, they will take longer to travel from the
foreign port to their U.S. destination (this time cost is offset by
substantially lower freight costs associated with ocean freight). On
balance, considering all affected shipments, it is difficult to say
whether net time savings will occur. For this reason, we do not
explicitly quantify potential time-savings or time costs in this
analysis.
---------------------------------------------------------------------------
[[Page 6862]]
Results
Results from the partial equilibrium analysis are as follows:
1. Consumer surplus losses in 2025 range from $10.0 billion (low
scenario) to $18.2 billion (high scenario). These losses are largely
explained by higher import prices faced by consumers. In both
scenarios, tariffs raise the price of low-value shipments for the
consumer. In the high scenario, these price increases are heightened
due to broker fees and MPF applicable to many shipments. In addition,
consumers experience a welfare loss associated with a reduction in
import quantities resulting from these price increases.
2. Tariff revenues increase in all years relative to the baseline.
In 2025, $7.8 billion in tariff revenues are generated in the low
scenario, compared with $5.9 billion in the high scenario. Because
tariff revenues depend on the value of imported goods, the high
scenario generates less revenue as consumer demand falls in response to
the additional fees on many shipments.
3. The proposed rule results in net decreases in welfare in the low
scenario (-$2.2 billion in 2025) and high scenario ($-12.3 billion in
2025).\38\ For the 10 years following rule implementation, the present
value of these welfare effects is a loss of $21.9 billion in the low
scenario and $121.9 billion in the high scenario (assuming a 2 percent
real discount rate).\39\ The greater impacts in the high scenario
result from the additional costs imposed on imported goods in the form
of broker fees and merchandise processing fees.\40\
---------------------------------------------------------------------------
\38\ As discussed in Point #7, these losses are likely to be
regressive in nature, disproportionately affecting low-income and
minority consumers.
\39\ OMB Circular No. A-4 (2023) requires agencies to estimate
the present value and annualized impacts of a proposed rule by
applying a 2 percent real discount rate.
\40\ We note that our estimate of the net effect of changes in
consumer surplus and tariff revenue does not explicitly measure
potential changes in producer surplus. The direction and magnitude
of bias introduced to the net welfare estimate is uncertain. Please
see Section 3.1 for additional discussion.
---------------------------------------------------------------------------
4. Tariff pass-through--the rate at which increased tariffs are
passed on to consumers through higher prices--is a key parameter that
influences all three partial equilibrium outputs presented in this
report: consumer surplus, tariff revenues, and net welfare effects.
Consistent with recent economic evidence on tariff pass-through, we
assume full tariff pass-through to U.S. consumers in our main
estimates.\41\ That is, consumers bear the full cost of increased
tariffs as foreign suppliers do not adjust their supply prices. Given
uncertainty in the rate of tariff pass-through, we calculated the
``break-even'' points where the net welfare effects are $0.\42\ In the
low scenario, pass-through rates greater than 79 percent (including the
100 percent pass-through assumed in our main estimates) result in net
welfare losses; lower pass-through rates would result in net welfare
gains. In the high scenario, this break-even point is roughly 35
percent. In other words, if foreign producers reduce their prices by an
amount equal to 21 percent of the tariff increase in the low scenario,
or 65 percent of the tariff increase in the high scenario, consumer
surplus losses are offset by increased tariff revenue.43 44
---------------------------------------------------------------------------
\41\ The historical evidence on tariff pass-through (and the
related phenomenon of exchange rate pass-through) has suggested that
the benefits from reduced tariffs are only partially passed through
to consumers (i.e., foreign suppliers increase their prices in
response to the tariff cut). More recent evidence focuses on the
effect of the sharp increases in tariffs, primarily hitting Chinese
imports, in 2018 to 2019. In this episode, the estimated effects are
very different. Fajgelbaum et al. (2020) finds complete pass-through
of tariffs to import prices using product-level monthly import and
export data from the U.S. Census Bureau, i.e., foreign supplier did
not reduce their prices in response to the tariffs. These results
are supported by more recent analyses by Chang et al. (2021) and Ma
et al. (2021) (as cited in Fajgelbaum and Khandelwal 2021) and Amiti
et al. (2020). These studies focus on the price of imported goods at
the entry port. Cavallo et al. (2019) employs data from product-
level data for several large U.S. retailers and finds tariffs were
passed through almost fully to U.S. import prices at the entry port.
However, the effects on resulting retail prices were muted,
suggesting tariff incidence was largely born by U.S. retailers.
Importantly, these studies evaluated the effects of the tariff on
all imports, not just qualifying low-value shipments, which comprise
a small percentage of imports in each product category. If a
comprehensive tariff did not lower supply prices, a tariff affecting
only a small percentage of the total is even less likely to lower
supply prices. In this analysis, we assume that higher U.S. import
prices at the entry port are passed on entirely to U.S. consumers,
similar to the assumptions in Fajgelbaum and Khandelwal (2024).
\42\ We highlight three reasons why evidence of full pass-
through is accompanied by uncertainty. First, analysis of the recent
tariff episode is drawn from a relatively short time window before
the effects of the global pandemic and supply chain disruptions
thoroughly confounded the ability to measure longer run effects
carefully. This episode includes elements of what Fajgelbaum and
Khandelwal term the ``trade war'' that are important because firms
on both sides of the market were experiencing shocks to both supply
(via traded inputs) and demand, making identification of the demand
effects complicated. Further, a potential reason for complete pass-
through of tariffs is that markets are slow to adjust to shocks:
prices are locked in by previously negotiated contracts; and
consumers of imported goods are slow to find alternative sources of
supply. Second, while the recent episodes tend to find complete
pass-through for most goods they examine, there is some
heterogeneity in the response across firms and product sectors. This
no doubt results from differences in market structure, response
horizons, and substitution options in both supply and demand. As an
example, Fajgelbaum and Khandelwal (2021) emphasizes that this work
does not address how tariffs might change the selection of products
to be imported, or the possibility that foreign suppliers might
downgrade the quality of imported products while holding prices
fixed. Finally, it should be said that while the evidence of
complete tariff pass-through in the recent episode is very strong,
it is also regarded as significantly puzzling and a subject for
active research to uncover precisely why foreign supply prices were
not more responsive.
\43\ It is possible that there will also be an increase in
producer surplus. See Section 3.1.
\44\ As noted earlier, our analysis focuses primarily on the
overall societal effect of the proposed rule. It does not quantify
the potential distributional effects associated with the incidence
of the increased prices for affected goods and the incidence of
revenue gains associated with the collection of tariff revenue;
however, it describes the potential distributional effects of
increased prices qualitatively in Section 3.4 and Appendix A. If
more of the tariff is borne by foreign producers, price increases
will be smaller, reducing the disproportionate impact on lower-
income consumers. The potential for disproportionate impacts
associated with tax policies designed to return tariffs to consumers
also exists in such a scenario.
---------------------------------------------------------------------------
5. Impacts are largely concentrated among qualifying low-value
shipments containing Section 301 goods, which are subject to tariffs
under the proposed rule. In the high scenario, we estimate additional
costs for a subset of qualifying low-value shipments not containing
Section 301 goods, which may be subject to additional broker fees to
comply with the rule's requirements to provide HTSUS codes.
6. Apparel manufacturing comprises the majority (51.4 percent) of
the value of qualifying low-value shipments. While the effects of the
rule on each industry are not exactly proportional to its share of
imports (due to differing demand elasticities and tariffs in each
sector), the effects are concentrated among few industries comprising
most affected imports.
7. Distributional considerations: While data limitations hindered
our ability to examine how the proposed rule may disproportionately
impact some consumers, Fajgelbaum and Khandelwal (2024) \45\ provide
evidence that eliminating the administrative exemption entirely would
disproportionately affect lower-income and minority consumers. In their
paper, the authors explain that direct-to-consumer imports comprise a
higher share of household spending for zip codes with lower incomes and
lower shares of white households. Their analysis finds that consumers
in the poorest zip codes lose 24.8 percent more consumer surplus than
the representative consumer. In Appendix A in the standalone RIA, we
provide additional detail on this study and its
[[Page 6863]]
applicability to our analysis of the proposed rule.
---------------------------------------------------------------------------
\45\ Fajgelbaum, P.D. and A. Khandelwal. (2024). ``The Value of
De Minimis Imports.'' National Bureau of Economic Research Working
Paper No. 32607.
---------------------------------------------------------------------------
8. Baseline growth in qualifying low-value imports is highly
uncertain. In our main estimates, we assume that post-2025 growth in
qualifying low-value import values follows growth in real GDP. In
essence, this implies that the value of qualifying low-value shipments
would comprise the same share of overall GDP in each year from 2025 to
2034. Growth in the low-value import sector, however, has considerably
outpaced GDP in recent years. As a sensitivity analysis, we present a
high-growth scenario assuming 18.4 percent annual increases in
qualifying low-value shipment value and associated welfare effects.
This percentage corresponds with the growth in total low-value shipment
values between 2023 and 2024 and is generally reflective of growth
since 2016. The resulting present value of welfare losses over the 10-
year analysis period is approximately doubled relative to our main
estimates: using a discount rate of 2 percent, we estimate $47.2
billion in net welfare losses in the low scenario and $262.5 billion in
net welfare losses in the high scenario. We note, however, that
sustaining 18 percent growth in the value of qualifying low-value
shipments may be implausible.
Our primary estimates are presented in Table 3. Programming costs
to the U.S. government associated with rule implementation are also
considered. Over the 10-year period of our analysis, the present value
cost of these software changes is approximately $460,000, assuming a
discount rate of 2 percent.
Table 3--Partial Equilibrium Analysis Results: 2025-2034 Main Results
[$Billions, 2024 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low impact scenario High impact scenario
Year ------------------------------------------------------------------------------------------------
Consumer Tariff Welfare Consumer Tariff Welfare
--------------------------------------------------------------------------------------------------------------------------------------------------------
2025................................................... -$10.0 $7.8 -$2.2 -$18.2 $5.9 -$12.3
2026................................................... -10.3 8.0 -2.2 -18.6 6.0 -12.5
2027................................................... -10.5 8.2 -2.3 -18.9 6.2 -12.8
2028................................................... -10.7 8.3 -2.3 -19.3 6.3 -13.0
2029................................................... -10.9 8.5 -2.4 -19.6 6.4 -13.2
2030................................................... -11.0 8.6 -2.4 -19.9 6.5 -13.4
2031................................................... -11.2 8.7 -2.5 -20.3 6.6 -13.7
2032................................................... -11.4 8.9 -2.5 -20.6 6.7 -13.9
2033................................................... -11.6 9.1 -2.5 -21.0 6.8 -14.2
2034................................................... -11.8 9.2 -2.6 -21.4 7.0 -14.4
------------------------------------------------------------------------------------------------
Total, undiscounted................................ -109.4 85.4 -24.0 -197.9 64.5 -133.4
Present value, 2% d.r.............................. -99.9 78.0 -21.9 -180.8 58.9 -121.9
Annualized, 2% d.r................................. -10.9 8.5 -2.4 -19.7 6.4 -13.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Growth in the value of qualifying low-value shipments is assumed to match growth in real GDP from 2025 to 2034. When growth is assumed to match
year-over-year growth in low-value shipments since 2016, net welfare losses in the low scenario are estimated at $47.2 billion and $262.5 billion in
the high impact scenario.
Incremental Benefits
The proposed rule would preclude goods subject to specified trade
or national security actions from claiming the administrative
exemption, which would strengthen the effectiveness of the United
States' trade and national security actions. Moreover, the change in
eligibility for the administrative exemption would significantly reduce
the volume of qualifying low-value shipments, and to enforce this
change in eligibility for the administrative exemption, CBP would
require all low-value shipments entered through basic entry to provide
an additional data element. Both the reduction in qualifying low-value
shipments and the additional data would improve CBP's ability to
identify violative goods and prevent inadmissible merchandise from
entering the United States. These benefits are described qualitatively
below.
Trade and National Security Actions
First, the proposed rule would strengthen the effectiveness of
United States' trade and national security actions. Section 301 tariffs
are meant to incentivize changes in foreign governments' acts,
policies, or practices. Additionally, specified trade and national
security actions can be used to protect U.S. industries from injurious
serious injury, or the threat thereof, caused by import surges,
unreasonable or discriminatory practices, or adjust imports that
threaten to impair national security. Allowing these goods to be
imported without assessing the Section 301 tariff that would otherwise
be applicable undermines this effort. Excluding these goods from the
administrative exemption and requiring additional data will allow CBP
officers to assess additional duties, specified in an applicable trade
or national security action.
By increasing tariff revenue, this rule would help accomplish the
goals of the tariff actions. The largest effect would be on goods
subject to Section 301 tariffs. Based on a random sample of 6,238,717
type 86 entries in fiscal year 2023, we estimate that 77 percent of the
total value of all ET86 entries covered goods subject to tariffs
imposed under Section 301. According to CBP statistics, the total value
of all imports claiming the administrative exemption in FY 2023 was
$54.6 billion. We assume that the share of the total value of
qualifying low-value shipments containing goods subject to Section 301
tariffs was the same for entries entered under the ``release from
manifest'' process as compared to type 86 entries. With this
assumption, we estimate that the total value of all qualifying low-
value shipments that would have been subject to Section 301 tariffs in
fiscal year 2023 was $41.1 billion. The total value of type 01 and 11
entries covered by Section 301 tariffs that same year was $215.9
billion. Hence, we estimate that qualifying low-value shipments made up
16.0 percent of the total value of goods covered by Section 301
tariffs. This rule would therefore strengthen the incentive for China
to eliminate its acts, policies, and practices related to technology
transfer, intellectual property, and innovation that are unreasonable
or discriminatory and burden or restrict U.S. commerce.
[[Page 6864]]
Targeting of Violative Shipments
In addition to the primary benefit of this regulation,
strengthening U.S. trade and national security actions, the proposed
rule will also support CBP's efforts to identify and intercept items
violating import laws and regulations. The proposed rule would require
all shipments claiming the administrative exemption under 19 U.S.C.
1321(a)(2)(C), entered under either the proposed new basic or the
proposed new enhanced entry process, to provide a 10-digit HTSUS
classification for the merchandise within the shipment. In the absence
of the proposed modification to the rule as proposed in the ELVS NPRM,
basic entries would not be required to provide 10-digit HTSUS
classifications. This additional data element would allow CBP to more
effectively target and screen basic entries in order to identify
violative shipments (e.g., prohibited items that are not allowed to
enter the United States and other items ineligible for entry under the
administrative exemption). CBP seizure statistics show that low-value
shipments pose a security concern when compared to type 01 and 11
entries. In particular, CBP finds that goods claiming the
administrative exemption have higher seizure rates for narcotics, IPR
violations, and prohibited items than goods entered through entry type
01 and 11. See Section 5 of the standalone RIA for more details on the
security concerns posed by low-value shipments. Imports claiming the
administrative exemption made up 87 percent of total seizures in fiscal
year 2023.
Macroeconomic and Distributional Effects
We estimate the macro-economic and distributional effects of the
proposed rule using USAGE-TERM, a computable general equilibrium (CGE)
model of the United States. At its most disaggregate level USAGE-TERM
tracks variables like inputs, output, employment, investment, trade,
and prices for 513 sectors in 70 regions across the U.S. A summary of
the results of the CGE analysis follows:
In the low impact scenario, we estimate that the average
price of imported goods would be 0.29% higher. We estimate that
consumer prices would be 0.10% higher in year 1 and 0.12% higher in
year 10.
We estimate consumer welfare losses of $9.5 billion in
year 1, shrinking to $6.7 billion in year 10.
We estimate a decrease in GDP, compared to the baseline,
of 0.03% in both year 1 and year 10.
Sectors that benefit from the proposed rule, like apparel,
textiles, and leather, would see job growth. These sectors would employ
5,900 more people in year 1, and 3,900 more people in year 10 compared
to the baseline.
We did not explicitly model the impacts on the logistics
and express sectors. To the extent that consumers use more logistics
and express services we would expect these sectors to benefit from the
proposed rule.
These job gains, which could be a result of new jobs being
created or fewer job separations, would be offset by a net reduction of
jobs in other sectors. On net, the U.S. economy would have 97,000 fewer
jobs in year 1, due to an increase in job separations and a reduction
in new hires. By year 10 the economy would return to full
employment.\46\
---------------------------------------------------------------------------
\46\ For context, in 2023, 68.1 million U.S. workers separated
from their job, either voluntarily or involuntarily. But in 2023,
70.8 million workers were hired at new jobs, leading to the economy
adding about 2.7 million jobs on net. These estimates suggest that
if the proposed rule had been first active in 2023, the economy
would have added about 2.6 million jobs on net instead.
---------------------------------------------------------------------------
In the high impact scenario, we estimate that the average
price of imported goods would be 0.51% higher. We estimate consumer
prices would be 0.17% higher in year 1 and 0.21% higher in year 10.
In the high impact scenario, we estimate consumer welfare
losses of $16.5 billion in year 1, shrinking to $11.6 billion in year
10.
We estimate a decrease in GDP, compared to the baseline
growth of GDP, compared to the baseline, of 0.06% in year 1 and 0.05%
in year 10.
Sectors that benefit from the proposed rule, like apparel,
textiles, and leather, would see job growth. These sectors would employ
9,700 more people in year 1, and 6,400 more people in year 10 compared
to the baseline.
These job gains would be offset by fewer jobs in other
sectors. On net, the U.S. economy would have 136,000 fewer jobs in year
1, due to an increase in job separations and a reduction in new hires.
By year 10 the economy would return to full employment.
B. Additional Requirements for Regulatory Analysis
Table 4 provides a cost accounting statement for the proposed rule.
Estimates correspond to the low-impact scenario based on our
understanding that many low-value shipments are likely to be
consolidated under the proposed rule to lessen costs associated with
fees. Therefore, CBP considers the low-impact scenario as the primary
estimate of the impact of this proposed rule.
Table 4--A-4 Accounting Statement for the Proposed Rule
----------------------------------------------------------------------------------------------------------------
Category Annualized estimate (in 2024 dollars) Source citation
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Monetized benefits................... None................................... RIA, Chapter 5.
Quantified, non-monetized benefits... None...................................
Qualitative (unquantified) benefits.. Greater enforcement/effectiveness by
requiring goods with 232, 201, and 301
duties to utilize entry types subject
to duty payment. Improved targeting of
violative shipments by requiring
certain qualifying low-value shipments
to provide HTSUS codes that describe
the contents of the entry. In certain
cases, CBP estimates that
consolidation of shipments would lead
to faster merchandise release,
enhanced national security and
improved health and safety.
----------------------------------------------------------------------------------------------------------------
Costs
----------------------------------------------------------------------------------------------------------------
Monetized costs...................... $10.9 billion (low scenario) or $19.7 RIA, Chapter 3.
billion (high scenario) in consumer
surplus loss.
Quantified, non-monetized costs...... None...................................
[[Page 6865]]
Qualitative (unquantified) costs..... None...................................
Cost Savings Monetized costs......... None...................................
Quantified, non-monetized cost None...................................
savings.
Qualitative (unquantified) cost None...................................
savings.
----------------------------------------------------------------------------------------------------------------
Transfers
----------------------------------------------------------------------------------------------------------------
Monetized budgetary transfers........ None................................... RIA, Chapter 3.
Other monetized transfers............ $8.5 billion (low scenario) or $6.4
billion (high scenario) in additional
duty revenue, paid for by U.S.
consumers assuming full pass-through
by foreign producers and returned to
consumers to offset consumer surplus
loss.
----------------------------------------------------------------------------------------------------------------
Distributional Effects
----------------------------------------------------------------------------------------------------------------
Effects on State, local, and/or The proposed rule affects consumers, RIA, Chapter 6.
tribal governments. which could include anyone in the
Effects on small businesses.......... United States, including businesses,
not-for-profit organizations,
government jurisdictions, as well as
individuals. As a result, a
substantial number of small entities
are likely to be affected. Prices for
an individual affected low-value
shipment could increase by 12.2 to
31.2 percent, depending on whether
only tariffs or tariffs plus broker
fees are incurred, the type of carrier
transporting the shipment into the
United States, and the underlying
value of the shipment. Lacking readily-
available information describing the
number of qualifying low- value
shipments and their value imported
annually by small entities, CBP cannot
certify this rule under the Regulatory
Flexibility Act at this time. Instead,
it conducts an Initial Regulatory
Flexibility Analysis (IRFA).
Effects on inflation................. Inflation increases by between 0.1% and RIA, Chapter 4.
0.17% in year 1.
Effects on growth.................... GDP growth is 0.03% lower in year 1.... RIA, Chapter 4.
----------------------------------------------------------------------------------------------------------------
Note: Present value calculations use 2025 as the base year. Costs are annualized over 10 years from 2025 to 2034
and reflect a 2 percent discount rate.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et. seq.)
(RFA), as amended by the Small Business Regulatory Enforcement Fairness
Act of 1996 (SBREFA), requires agencies to assess the impact of
regulations on small entities. A small entity may be a small business
(defined as any independently owned and operated business not dominant
in its field that qualifies as a small business per the Small Business
Act); a small not-for-profit organization; or a small governmental
jurisdiction (locality with fewer than 50,000 people).
Under the requirements of the RFA, as amended by SBREFA and
Executive Order 13272 entitled ``Proper Consideration of Small Entities
in Agency Rulemaking,'' agencies must consider the potential impact of
proposed regulations on small businesses, small governmental
jurisdictions, and small organizations during the development of their
rules.
Specifically, CBP is required to prepare an RFA analysis and take
other steps to assist small entities, unless it certifies that the rule
will not have a ``significant economic impact on a substantial number
of small entities.'' The Small Business Administration (SBA) provides
guidelines on the analytical process used to assess the impact of a
particular rulemaking on small entities. Generally, an agency first
conducts a threshold analysis to determine whether it can certify the
proposed rule. The threshold analysis provides the factual basis for
such a determination. If the results of the threshold analysis indicate
that a rule may have a significant impact on a substantial number of
small entities, or if the agency is uncertain, it is required to
prepare an Initial Regulatory Flexibility Analysis (IRFA) and publish
the IRFA for public comment with the proposed rule. The analytic
components of an IRFA are:
1. A description of the reasons why action by the agency is being
considered;
2. A succinct statement of the objectives of, and legal basis for,
the proposed rule;
3. A description of, and, where feasible, an estimate of the number
of small entities to which the proposed rule will apply;
4. A description of the projected reporting, record-keeping and
other compliance requirements of the proposed rule, including an
estimate of the classes of small entities that will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record;
5. An identification, to the extent practicable, of all relevant
Federal rules which may duplicate, overlap or conflict with the
proposed rule;
6. A description of any significant alternatives to the proposed
rule that accomplish the stated objectives of applicable statutes and
that minimize any significant economic impact of the proposed rule on
small entities, such as,
the establishment of differing compliance or
reporting requirements or timetables that take into account the
resources available to small entities;
the clarification, consolidation, or
simplification of compliance and reporting requirements under the rule
for such small entities;
the use of performance rather than design
standards; and,
an exemption from coverage of the rule, or any
part thereof, for such small entities.
This section presents data and analysis in support of these
requirements. First, we provide an overview of the proposed rule, and
then we conduct the threshold analysis in Section 6.2 of the RIA.
Because the significance of impacts of the proposed rule on small
entities is uncertain, we also prepare an IRFA in Section 6.3 of the
RIA.
Overview of the Proposed Rule
This proposed rule makes merchandise subject to an ad valorem
tariff pursuant to a trade or national
[[Page 6866]]
security action under Section 232, 201, or 301 ineligible for the
administrative exemption in 19 U.S.C. 1321(a)(2)(C).
Such shipments would instead need to be entered through an
alternate entry type, such as entry type 01 (formal) or entry type 11
(informal). Importers of such goods would then have to pay both the
additional duties owed under a specified trade or national security
action and regular customs duties, if applicable, when the value is
below $800. To enable CBP to determine which entries are ineligible,
CBP would require a 10-digit Harmonized Tariff Schedule of the United
States (HTSUS) classification for all shipments of merchandise entered
using the basic or enhanced entry processes proposed in the ELVS NPRM
and claiming the administrative exemption. In the ELVS NPRM, CBP
proposed to require that HTSUS codes be collected for qualifying low-
value shipments entered through an enhanced entry process. Modifying
these changes proposed in ELVS, this Trade and National Security
Actions and Low-Value Shipments NPRM would expand that requirement to
low-value shipments entered through the basic entry process proposed in
ELVS, by requiring the provision of a 10-digit HTSUS code(s) on the
bill of lading or other entry document.
This proposed rule would strengthen the United States' trade and
national security actions, especially for Section 301 tariffs. For
example, the goal of the current Section 301 tariffs is to discourage
China's acts, policies, and practices related to technology transfer,
intellectual property, and innovation that are unreasonable or
discriminatory and burden or restrict U.S. commerce. Additionally,
trade and national security actions can be used to protect domestic
industries from substantial threat of serious injury, or the threat
thereof by import surges or adjust imports that threaten to impair
national security. An industry that is particularly vulnerable to
circumvention by qualifying low-value shipments is the U.S. textile and
apparel manufacturing industry. A large volume of textile and apparel
imports claim the administrative exemption thereby avoiding tariffs.
Specifically, approximately 50 percent of the value of current
qualifying low-value shipments is attributed to textiles and apparel
that would otherwise be subject to additional duties under Section
301.\47\ Broadly speaking, an estimated 15.9 percent of imports covered
by Section 232, 201, and 301 tariffs are exempt from the additional
tariffs under the administrative exemption.\48\ By including imports
that would have been eligible for the administrative exemption without
this rule, CBP would increase the effectiveness of these specified
trade and national security actions. These actions would help protect
national security and discourage unreasonable or discriminatory
practices.
---------------------------------------------------------------------------
\47\ Proportion of qualifying low-value shipments containing
Section 301 textile and apparel items is calculated using data on
type 86 entries provided by CBP via email on August 14, 2024. We
assume that qualifying low-value shipments cleared off the manifest
are similar in nature to goods using type 86 entry.
\48\ See Chapter 5 of the RIA available in the docket of this
rulemaking for sources and estimation method.
---------------------------------------------------------------------------
This rule would also increase CBP's inspection efficiency by
shifting a large share of low-value shipments into alternative entry
types. Qualifying low-value entries are more challenging for CBP to
efficiently inspect than other entry types because they arrive with
more limited data. As a result, CBP officers must do more work to
ensure a low-value shipment is admissible and otherwise complies with
applicable U.S. trade laws and regulations. Shipments entered using
entry type 01 or entry type 11, in contrast, arrive with more detailed
information about the contents of the goods included in the shipment.
Furthermore, shifting low-value shipments to an alternative entry
type is likely to result in consolidation of multiple items into a
single shipment. Specifically, the $800 limit for qualifying low-value
shipments incentivizes importers to de-consolidate goods into numerous
low-value shipments to avoid paying tariffs. Absent the ability to
avoid tariffs, importers are likely to be incentivized to reduce per-
unit shipping costs by consolidating items in bulk shipments. This
consolidation results in fewer, higher value entries, where multiple
items can be reviewed by CBP officers at the same time.
Finally, the proposed rule is likely to improve CBP's ability to
accurately identify the contents of a shipment claiming the
administrative exemption even if it does not contain goods subject to a
trade or national security action under Section 232, 201, or 301. Many
of these goods currently use manifest clearance to enter the United
States. The ``release from manifest'' entry process (or the proposed
new basic entry) is (or would be) less costly for importers, because
less information is submitted to CBP, but the release of shipments by
CBP is slower, averaging 3 days.\49\ In contrast, shipments using entry
types 01 or 11, or the current entry type 86 (or the proposed new
enhanced entry), are (or would be) typically released by CBP within 1
day. This proposed rule would require a 10-digit HTSUS classification
for all basic entry shipments. As a result, importers will likely opt
for enhanced entry, with its faster clearance times, given that the
difference in administrative costs between basic and enhanced will
become negligible. Having the HTSUS classification, along with several
additional data elements required for enhanced entry, will improve
CBP's ability to identify violative shipments. Furthermore, because
enhanced entry is an automated process with required data elements
being submitted in advance of the shipment's arrival in the United
States, additional efficiency gains for CBP officers and importers are
likely.
---------------------------------------------------------------------------
\49\ See the ELVS Regulatory Analysis supporting the NPRM.
---------------------------------------------------------------------------
Threshold Analysis
A threshold analysis conducted pursuant to RFA/SBREFA involves
determining whether the proposed regulatory changes will significantly
impact a substantial number of small entities subject to the
regulation. Responding to this question requires understanding both:
(1) the number of affected entities that are small; and (2) the
economic impact on these small entities in the context of the proposed
regulatory action.
Should the proposed rule go into effect, entities could be affected
in two ways:
1. Imports subject to a trade or national security action under
Section 232, 201, or 301 would no longer qualify for the administrative
exemption in 19 U.S.C. 1321(a)(2)(C), which allows a shipment to be
imported duty-free when the aggregate fair retail value in the country
of shipment for articles imported into the United States on the same
day and exempted from the payment of duty does not exceed the
administrative exemption limit of $800 per person per day. Consignees
(i.e., consumers) of these imports will pay higher prices for the goods
resulting from tariffs and, possibly, additional processing fees.
2. Paperwork for other imported goods using the administrative
exemption will need to include HTSUS codes to facilitate CBP's ability
to confirm that the goods are not covered by Section 232, 201, or 301
tariffs. Consignees of these imports will pay higher prices for the
goods resulting from additional processing fees assessed by CBP and by
licensed customs brokers.
[[Page 6867]]
Judicial review of agency compliance with the RFA requirements
limits the scope of regulatory flexibility analyses to directly
regulated entities (SBA 2017). In the case of the proposed rule, the
entities that would have claimed the administrative exemption absent
the proposed rule are considered directly regulated and therefore the
subject of the threshold analysis. Here, consignees (i.e., consumers)
are the entities or individuals potentially eligible for the
administrative exemption. As described in detail in Section 3.4 of the
RIA, we assume that all duties and fees are incurred directly by
consignees.
Consistent with the scenarios evaluated in the above sections, this
section conducts the threshold analysis under two scenarios meant to
act as upper and lower bounds of the effects of this proposed rule.
These scenarios highlight the uncertainty regarding how importers will
respond to the rule requirements:
Low Impact Scenario: All importers respond to avoid fees.
Importers of Section 232, 201, and 301 goods consolidate while
importers of goods not subject to specified trade or national security
actions either consolidate or move to postal. In this scenario, price
increases are limited to required tariffs, because all other fees are
assumed to be fully mitigated.
High Impact Scenario: In this scenario, less consolidation
of shipments occurs. As a result, in addition to tariffs, prices are
also affected by higher fees. See Sections 3.3.1 and 3.3.2 of the RIA
for detailed descriptions of the price shocks under each scenario.
Substantial Test
This section explores whether a substantial number of affected
entities are small. The RFA does not provide a definition of a
``substantial number.'' In its guide to government describing how to
comply with the RFA, the SBA states:
``Substantial number'' depends on the number of regulated entities
and the size of the regulated industry. The interpretation of the term
``substantial number'' is not likely to be five small firms in an
industry with more than 1,000 small firms. On the other hand, it is
important to recognize that five small firms in an industry with only
20 firms would be a substantial number. Depending on the rule, the
substantiality of the number of small businesses affected should be
determined on an industry-specific basis and/or on the number of small
businesses overall. (SBA 2017, p. 21.)
This analysis evaluates the extent to which a substantial number of
consignees that would become ineligible for the administrative
exemption due to the proposed rule are small entities. Affected
consignees could be anyone in the United States--including businesses,
not-for-profit organizations, and government jurisdictions as well as
individuals--that purchases a good valued at $800 or less from a
retailer that manufactures products outside of the United States.
Individuals are not ``entities'' as defined by the RFA, and thus are
excluded from this analysis.
All small entities in the United States have the potential to be
affected by the proposed rule. As described in Chapter 3 of the
standalone RIA document, the proposed rule affects products produced by
19 industries defined at the 3-digit North American Industry
Classification System (NAICS) sector, with more than half of the
affected goods coming from the apparel industry. Ideally, this analysis
would rely on all historical low-value shipment transactions to
characterize the entities most likely to be affected by the proposed
rule. In the absence of that information, we characterize which
industries are most likely to be affected, and which portion of
consignees may be small entities, using data on consignees who imported
goods using type 86 entries over the course of an example day in fiscal
year 2023. This analysis relied on the following steps:
1. Identify a sample of businesses that are consignees. As noted
above, we rely on a sample of shipments using type 86 entry for one day
in fiscal year 2023 as a representative sample of consignees importing
qualifying low-value shipments absent this rule. On this date, CBP
identified nearly 1.2 million consignees associated with approximately
1.6 million type 86 entries. Within this list, CBP detected 786 likely
businesses based on the names provided in the ``header party'' field
and randomly selected 394 of these businesses for
analysis.50 51
---------------------------------------------------------------------------
\50\ To detect businesses, CBP looked for entities that used the
following key terms in their names: Inc., Co., LLC. Individuals with
these letter combinations in their names were later manually
screened out of the sample. CBP did not attempt to identify not-for-
profit organizations or governmental jurisdictions in its consignee
data. (Personal communication between IEc and CBP on July 6, 2023.)
\51\ Data pulled from ACE Reports on June 13, 2023 representing
all consignees of type 86 entries on January 1, 2023. CBP provided
the cleaned data to IEc via email on June 23, 2023.
---------------------------------------------------------------------------
2. Obtain the business profiles of the consignees. We uploaded the
names and location information for the 394 businesses to D&B Hoovers'
website and relied on D&B Hoovers' proprietary algorithm to match
entities with the information stored in its database.\52\ For the 394
businesses in our sample, D&B Hoovers' search functionality was able to
match profiles for 182 entities (46 percent). The 212 unmatched
consignees either do not have business profiles in D&B Hoovers or the
owner's name and location information provided by CBP do not match the
business records on the site. For the 182 matched entities, we collect
primary NAICS code, number of employees,\53\ and annual revenue
information as presented in D&B.\54\
---------------------------------------------------------------------------
\52\ This process relies on D&B Hoovers' automated search
functions to identify the business profiles associated with a list
of businesses, not manual business-by-business searching. This
search functionality is described in more detail in D&B Hoovers
(2019, p. 25). This resource is available at https://app.dnbhoovers.com/product/wp-content/uploads/2020/10/DB-Hoovers-User-Guide-920.pdf.
\53\ D&B Hoovers contains data fields for both ``employees at
single site'' and ``employees at all sites.'' When both numbers are
provided, we default to using the ``employees at all sites'' entry
in order to capture the size of the larger parent company. When only
the ``employees at single site'' information is available, we use
that entry instead.
\54\ The matched data was downloaded from D&B Hoovers on July
27, 2023, accessed via: app.dnbhoovers.com/login. We assume all data
to be in 2023 dollars, consistent with the download date.
---------------------------------------------------------------------------
3. Determine which businesses in the sample are small businesses.
We compare number of employees and annual revenues with the SBA's
definitions of small business associated with each six-digit NAICS code
(SBA 2023).\55\
---------------------------------------------------------------------------
\55\ In some cases, SBA provides a size standard for the NAICS
code as well as an ``exception'' for a sub-set of businesses with
specific activity types. This analysis does not consider the
``exceptions'' when classifying businesses as small.
---------------------------------------------------------------------------
The 182 businesses in the sample are associated with 117 NAICS
codes (6-digit) spanning many sectors. Table 5 provides a sample of
NAICS codes represented by the consignee businesses to demonstrate the
breadth of industries associated with type 86 entries on a given day.
As shown in Table 6, the consignees organize into nearly every 2-digit
sector NAICS code. Using the 6-digit NAICS codes for classification
purposes, 92 percent of businesses in the sample qualify as small
businesses.
Data from CBP does not identify the type of good associated with
the consignees, therefore we are unable to differentiate between
entities that would be affected by Section 301 tariffs (in both the low
scenario and high scenario) and all other entities that would be
affected by fees in the high scenario only.
Taken together, this analysis finds that a substantial number of
small entities may be affected by the proposed rule.
[[Page 6868]]
Table 5--Example NAICS Codes Among Sampled Consignees
------------------------------------------------------------------------
NAICS code Industry
------------------------------------------------------------------------
111998....................... All Other Miscellaneous Crop Farming.
221118....................... Other Electric Power Generation.
236115....................... New Single-family Housing Construction.
238340....................... Tile and Terrazzo Contractors.
238910....................... Site Preparation Contractors.
238990....................... All Other Specialty Trade Contractors.
311615....................... Poultry Processing.
325199....................... All Other Basic Organic Chemical
Manufacturing.
325412....................... Pharmaceutical Preparation Manufacturing.
325510....................... Paint and Coating Manufacturing.
325910....................... Printing Ink Manufacturing.
332312....................... Fabricated Structural Metal
Manufacturing.
332322....................... Sheet Metal Work Manufacturing.
332710....................... Machine Shops.
333310....................... Commercial and Service Industry Machinery
Manufacturing.
335313....................... Switchgear and Switchboard Apparatus
Manufacturing.
339940....................... Office Supplies (except Paper)
Manufacturing.
423110....................... Automobile and Other Motor Vehicle
Merchant Wholesalers.
423120....................... Motor Vehicle Supplies and New Parts
Merchant Wholesalers.
423110....................... Automobile and Other Motor Vehicle
Merchant Wholesalers.
423120....................... Motor Vehicle Supplies and New Parts
Merchant Wholesalers.
423110....................... Automobile and Other Motor Vehicle
Merchant Wholesalers.
445110....................... Supermarkets and Other Grocery Retailers.
449110....................... Furniture Retailers.
449210....................... Electronics and Appliance Retailers.
531311....................... Residential Property Managers.
532111....................... Passenger Car Rental.
541618....................... Other Management Consulting Services.
561730....................... Landscaping Services.
611110....................... Elementary and Secondary Schools.
811111....................... General Automotive Repair.
811192....................... Car Washes.
812112....................... Beauty Salons.
812910....................... Pet Care (except Veterinary) Services.
------------------------------------------------------------------------
Note: The NAICS codes presented in this table represent a sample of
industries associated with entry type 86 consignees on a typical
recent date, not a comprehensive list of all affected industries. See
the main text for details.
Table 6--Number of Small Businesses in Sample of Consignees
----------------------------------------------------------------------------------------------------------------
Total Small
Two-digit NAICS code \a\ Sector businesses in businesses in Percent small
sample sample
----------------------------------------------------------------------------------------------------------------
11................................. Agriculture, Forestry, 1 1 100
Fishing and Hunting.
22................................. Utilities.................. 2 2 100
23................................. Construction............... 11 11 100
31................................. Manufacturing.............. 2 1 50
32................................. Manufacturing.............. 7 6 86
33................................. Manufacturing.............. 17 16 94
42................................. Wholesale Trade............ 14 12 86
44................................. Retail Trade............... 23 22 96
45................................. Retail Trade............... 8 8 100
48................................. Transportation and 5 5 100
Warehousing.
49................................. Transportation and 1 1 100
Warehousing.
51................................. Information................ 5 5 100
52................................. Finance and Insurance...... 1 1 100
53................................. Real Estate and Rental and 5 5 100
Leasing.
54................................. Professional, Scientific, 21 20 95
and Technical Services.
55................................. Management of Companies and 2 1 50
Enterprises.
56................................. Administrative and Support 9 7 78
and Waste Management and
Remediation Services.
61................................. Educational Services....... 2 1 50
62................................. Health Care and Social 5 4 80
Assistance.
72................................. Accommodation and Food 6 5 83
Services.
81................................. Other Services (except 18 17 94
Public Administration).
99................................. Unclassified \b\........... 17 17 100
-----------------------------------------------
Total.......................... ........................... 182 168 92
----------------------------------------------------------------------------------------------------------------
Sources: IEc analysis of 182 businesses named as consignees of type 86 entries for one day in 2023 (provided by
CBP), business profiles from D&B Hoovers, and SBA small business size standards (SBA 2023). See text for
details.
Notes:
[[Page 6869]]
1. While 2-digit NAICS codes are used for presentation purposes, the 6-digit NAICS codes were used to determine
which businesses are small.
2. All businesses identified with NAICS code 999990 in D&B Hoovers are presumed small.
Significance Test
This section tests whether the effects of the rule would be
significant for the small entities identified above. The RFA does not
define a ``significant effect'' in quantitative terms. In its guidance
to agencies on how to comply with the RFA, SBA states,
[i]n the absence of statutory specificity, what is `significant'
will vary depending on the economics of the industry or sector to be
regulated. The agency is in the best position to gauge the small entity
impacts of its regulation. (SBA 2017, p. 18.)
DHS component agencies typically assume that an annual per entity
cost exceeding 1 percent of the annual gross revenues for that entity
is significant (Houser 2012). Therefore, this analysis considers the 1
percent threshold when analyzing these potential impacts.
To accurately assess whether small entity consignees are likely to
be significantly affected by the rule requires data on the total volume
of affected shipments each entity is likely to purchase. Data
describing total historical qualifying low-value shipment volume for
the 168 small businesses in the sample of consignees provided by CBP is
not readily available. Instead, we compare the value of the shipments
with the percent increase in cost considering Section 301 tariffs (for
the low and high scenarios) as well as the increased fees associated
with entry (for the high scenario only). While the value of a shipment
is not a measure of revenue, it provides a proxy for the capacity of
entities to absorb the potential increases in shipment costs.
Low Impact Scenario
In the low impact scenario, qualifying low-value shipments formerly
claiming the administrative exemption incur tariffs averaging 21.25
percent on an ad valorem basis (see Chapter 3 in the standalone RIA
available in the docket of this rulemaking). As described in Chapter 3,
we assume consignees incur 100 percent of the tariff. Table 7 presents
the distribution of affected shipments by shipment value, using entry
type 86 shipments imported in fiscal year 2023 as a representative
sample (i.e., the exact distribution may differ for shipments cleared
off the manifest that would have entered with an administrative
exemption in the baseline).
Table 7--Distribution of Qualifying Low-Value Shipments by Shipment Value
----------------------------------------------------------------------------------------------------------------
Mid-point of shipment % of total entry type 86
Shipment value bin value shipments
----------------------------------------------------------------------------------------------------------------
$0-$5..................................................... $2.50 18.5
$6-$25.................................................... 15.50 43.0
$26-$50................................................... 38.00 20.0
$51-$75................................................... 63.00 8.4
$76-$100.................................................. 88.00 4.7
$101-$200................................................. 150.50 4.7
Over $200................................................. 500.50 0.8
----------------------------------------------------------------------------------------------------------------
Source: IEc analysis of data provided by email from CBP on September 9, 2024.
Using the mid-point of shipment value for each bin, the weighted
average value per shipment is approximately $32. Applying the tariff
rate likely to be incurred by consignees, we find that the increased
cost per shipment is approximately $6.80 (21.25 percent of $32). We do
not have readily available data on the number of affected shipments
imported annually per entity. Therefore, it is uncertain whether tariff
rates of this magnitude impose a significant impact on small entities
importing these affected shipments under the low scenario. However, a
21.25 percent increase in the cost of importing affected goods
represents a significant impact relative to the value of the shipment.
High Impact Scenario
In the high impact scenario, consignees of affected low-value
shipments experience price increases resulting from the tariffs
described above in the low impact scenario. Additionally, some
consignees incur additional price increases resulting from fees
required to file and process shipments (for a detailed description see
Chapter 3 in the standalone RIA available in the docket of this
rulemaking). Table 8 summarizes the additional per shipment fees that
might be incurred, depending on the carrier providing shipping
services. None or some combination of these fees apply, depending on
whether the shipment includes a good subject to additional Section 232,
201, or 301 duties, and whether a broker is already involved in the
shipping process in the baseline.
Table 8--Per Shipment Fees
------------------------------------------------------------------------
Fee ($/
Type shipment)
------------------------------------------------------------------------
Broker fee: \1\
Commercial non-express carrier \2\.................. $1.00
Express commercial carrier \3\...................... 30.00
Postal carrier \3\.................................. 8.55
Merchandise Processing Fee: \4\
All................................................. 2.53
------------------------------------------------------------------------
Sources and assumptions:
[[Page 6870]]
\1\ A licensed broker is not currently required for the ``release from
manifest'' entry process, nor would the ELVS NPRM require one for the
basic entry process if the ELVS NPRM is finalized as proposed. We
assume for the purposes of this analysis that a broker fee is charged
for any entry requiring an HTSUS code and is similar regardless of
whether the filer uses enhanced entry, entry type 86, 01, or 11.
(Source: Personal communication with representatives of a major broker
association on 9/26/2024.)
\2\ Email from CBP dated 10/11/2024.
\3\ Fajgelbaum and Khandelwal (2024).
\4\ Minimum merchandise processing fee for informal entries as of
October 1, 2023. (As viewed on 10/11/2024 on https://www.federalregister.gov/documents/2023/07/28/2023-16197/cobra-fees-to-be-adjusted-for-inflation-in-fiscal-year-2024-cbp-dec-23-08.) Informal
entries apply to shipments that do not exceed $2,500 and is the entry
option most likely to be used for shipments currently exercising the
administrative exemption (i.e., shipments that do not exceed $800).
Relying on the detailed information characterizing shipment/fee
combinations provided in Chapter 3 in the standalone RIA (available in
the docket of this rulemaking) we find:
Approximately 73 percent of qualifying low-value shipments
do not experience increases in fees; only additional tariffs will
apply.
Among the commercial non-express carriers, only the
consignees with shipments moving from manifest clearance to enhanced
are expected to incur increased fees. This bin represents approximately
4 percent of total qualifying low-value shipment volume. Increased fees
range from 1 percent to 40 percent of the value of the shipment.
Among express commercial carriers, nearly all shipments
will incur additional fees, ranging from 1 percent to 1,301 percent of
the value of the shipment. These fees are in addition to the tariffs
described above. The affected shipments represent 18 percent of total
qualifying low-value shipments.
For postal, only shipments containing Section 232, 201,
and 301 goods experience additional fees. These shipments represent
approximately 6 percent of total low-value shipment volume. Increased
fees range from 2 percent to 443 percent of the shipment value, and are
in addition to tariffs.
As described in the low impact scenario, data describing the
number, value, and entry mode of qualifying low-value shipments by
consignee is not readily available. Therefore, we are uncertain whether
tariffs and fees of this magnitude impose a significant impact on the
annual revenues of small entities importing these affected shipments.
However, the value of fees and tariffs relative to the value of
individual shipments suggests the potential for a significant increase
in the price of affected goods. Given that options exist for reducing
fees, such as consolidation, and are likely to be available for many
shipments, we believe the low impact scenario is more likely.
D. Initial Regulatory Flexibility Analysis (IRFA)
Due to uncertainty regarding whether impacts to various small
entities are significant, CBP does not certify that this rule has a
significant economic impact on a substantial number of small entities
and we instead provide information in this section for an IRFA.
1. A description of the reasons why action by the agency is being
considered.
U.S. trade law authorizes the President or USTR to assess
additional tariffs under certain acts of Congress, including the Trade
Expansion Act of 1962 and the Trade Act of 1974. Section 232 of the
Trade Expansion Act of 1962 authorizes the President to adjust imports
of an article and its derivatives if there is a determination that the
article is being imported in such quantities or under such
circumstances as to threaten to impair the national security. Section
201 of the Trade Act of 1974 authorizes the President to impose
temporary trade measures if there is substantial cause of serious
injury or threat thereof to U.S. industries because of increased
imports. Lastly, Section 301 of the Trade Act of 1974 allows USTR to
impose import restrictions to address, among others, unreasonable or
discriminatory acts, policies, or practices that burden or restrict
U.S. commerce. This proposed rulemaking will refer to Section 232, 201,
or 301 as ``specified trade or national security actions.''
Trade or national security actions are designed to protect domestic
industries and the American public from serious injury, or the threat
thereof, caused by import surges and unfair trade practices or to
adjust imports that threaten to impair national security, or to
encourage foreign governments to eliminate policies that are
unreasonable or discriminatory and burden or restrict U.S. commerce.
However, some merchandise subject to specified trade or national
security actions may also be eligible for the administrative exemption
pursuant to Section 321 of the Trade Act of 1930, as amended (19 U.S.C.
1321(a)(2)). Section 321 provides administrative exemptions from duty
and taxes that are imposed by reason of importation for three
categories of imported articles:
Certain bona-fide gifts valued at $100 or less ($200, if
the gift was from certain island possessions) sent from persons in
foreign countries to persons in the United States;
Certain personal or household articles valued at $200 or
less accompanying persons arriving in the United States; and
All other imported articles when the aggregate fair retail
value of the articles in the country of shipment is $800 or less.
This proposed rulemaking concerns shipments in the third category,
which are covered by the administrative exemption in 19 U.S.C.
1321(a)(2)(C). To avoid confusion with the other two administrative
exemptions, we will refer to this exemption alone as the
``administrative exemption.'' Specifically, the administrative
exemption allows a shipment to be imported free of duties and taxes
imposed upon or by reason of importation when the aggregate fair retail
value in the country of shipment of articles imported by the same
person on the same day and exempted from the payment of duty is less
than or equal to $800. The administrative exemption limit was
originally set at $1 in the Customs Administrative Act of 1938 to limit
the ``expense and inconvenience'' of collecting duty when it was a
disproportionate amount of work by the U.S. government compared to the
amount of revenue that would be collected. Since its inception,
Congress has increased this daily aggregate value cap to $5 in 1978,
$200 in 1993, and $800 in 2016. In recent years, the volume of imports
subject to specified trade or national security actions has increased,
but the tariffs imposed as a result of these actions do not apply to
imports that enter as qualifying low-value shipments. Thus, the
administrative exemption dampens the impact of specified trade or
national security actions by allowing imports that claim the exemption
to legally avoid all duties and taxes that would otherwise be
collected, including the additional duties collected under specified
trade and national security actions. In fiscal year 2023, hundreds of
thousands of shipments would have been assessed additional tariffs
under Section 232, 201, or 301 had they entered through formal or other
type of informal entry.
Additionally, low-value shipments create operational inefficiencies
for
[[Page 6871]]
CBP's ability to conduct an inspection of these goods. The volume of
qualifying low-value shipments has risen sharply from approximately 139
million in fiscal year 2015 (prior to the increase in the exemption
value) to 1 billion shipments per year in fiscal year 2023.\56\ While
entry type 86 has sped up processing for many of the qualifying low-
value shipments, the remaining shipments are processed manually and
with more limited data than other types of entries. CBP anticipates
that this rulemaking would reduce the volume of qualifying low-value
shipments and thereby increase the efficiency with which CBP identifies
imports presenting security risks, including curbing the smuggling of
illegal opioids such as heroin and fentanyl, by shifting some shipments
to other entry types that require more data and the use of an
authorized broker.
---------------------------------------------------------------------------
\56\ Data pulled from CBP's Automated Targeting System (ATS)
database.
---------------------------------------------------------------------------
2. A succinct statement of the objectives of, and legal basis for,
the proposed rule.
The proposed rulemaking aims to uphold the objectives of U.S. trade
and national security actions, protect the revenue, and prevent
unlawful importations. Trade or national security actions, such as
additional tariffs under Section 232, Section 201, and Section 301, are
meant to prevent specific harms such as the threat posed by certain
imports to national security or domestic industries or to respond to
discriminatory or unreasonable practices that restrict or burden U.S.
commerce. The rule would prevent low-value shipments from circumventing
these trade or national security actions by claiming the administrative
exemption. Moreover, considering the rate of duties and the aggregate
trade volume of affected imports, the amount of additional revenue to
be collected under the proposed rule would substantially outweigh any
added expense or inconvenience to the U.S. Government. Finally, CBP
expects that the affected goods would be consolidated into larger
shipments and entered under an appropriate formal or informal entry
process, resulting in decreased overall volume of shipments. This
consolidation would help CBP officers inspect entries for inadmissible
merchandise more efficiently.
The authority to except merchandise subject to specified trade or
national security actions from the administrative exemption comes from
19 U.S.C. 1321(b). This statutory provision authorizes regulations that
except certain merchandise from eligibility for the administrative
exemptions in 19 U.S.C. 1321(a) when such exceptions are consistent
with the purpose of 19 U.S.C. 1321(a), or necessary to protect the
revenue or to prevent unlawful importations. The authority to require
HTSUS classification as part of the proposed basic entry process (in
addition to the proposed enhanced entry process) as described in the
ELVS NPRM comes from 19 U.S.C. 498(a)(1)(A), which authorizes the
prescription of special rules for the declaration and entry of low-
value shipments.
3. A description of, and, where feasible, an estimate of the number
of small entities to which the proposed rule will apply.
As described in Section 6.2.1 of the standalone RIA, the proposed
rule does not directly regulate any one industry. Instead, it 1)
imposes additional requirements on shipments that seek to use the
administrative exemption, and 2) makes goods subject to ad valorem
tariffs under Section 232, 201, and 301 ineligible for the
administrative exemption. Therefore, any individual or entity that
would have claimed the administrative exception in the baseline is
affected by the proposed rule. Those individuals and entities importing
goods that previously met the requirements for the administrative
exemption are likely to be affected by higher prices for these goods.
Any small entity in the United States has the potential to be
affected by the rule as a consignee. Analysis of a sample of consignees
of shipments using type 86 entry for one day in 2023 demonstrates that
92 percent of businesses in the sample qualify as small.
4. A description of the projected reporting, record-keeping and
other compliance requirements of the proposed rule, including an
estimate of the classes of small entities that will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record.
The proposed rule would add a reporting requirement to the basic
entry process beyond the proposed requirements described in the ELVS
NPRM. Under this rule, the 10-digit HTSUS classification would need to
be reported with the entry filing for each product in a basic entry.
The 10-digit HTSUS classification reporting requirement is already
proposed for enhanced entry in the ELVS NPRM. Any small entity that
would import a low-value shipment subject to specified trade or
national security actions through basic entry in the absence of this
rule would be affected by this new requirement. This would include both
small businesses and individual consumers. Reporting the HTSUS codes
requires the ability to determine the merchandise's HTSUS codes. We
expect most importers to hire a licensed customs broker to determine
the HTSUS codes and file the entry.
5. An identification, to the extent practicable, of all relevant
Federal rules which may duplicate, overlap or conflict with the
proposed rule.
This proposed rule would not conflict with any relevant Federal
rules. This NPRM does, however, propose amendments to another NPRM's
proposed amendments. The ELVS NPRM proposes the creation of a new entry
process for entering low-value shipments, referred to as the ``enhanced
entry process,'' which would allow CBP to target high-risk shipments
more effectively. The ELVS NPRM also proposes revisions to the current
process for entering low-value shipments cleared off the manifest,
referred to as the ``basic entry process,'' to require additional data
elements that would assist CBP in verifying eligibility for duty- and
tax-free entry. For more information about the ELVS NPRM and its
effects, please see regulations.gov for the rule and the accompanying
regulatory analysis.
6. A description of any significant alternatives to the proposed
rule that accomplish the stated objectives of applicable statutes and
that minimize any significant economic impact of the proposed rule on
small entities.
In addition to the preferred regulatory alternative (the proposed
rule), CBP also considered two other alternatives.
First, CBP considered a more stringent alternative where
all shipments except for bona fide gifts under 19 U.S.C. 1321(a)(2)(A)
would be prohibited from claiming the administrative exemption.
Although this alternative is not modeled in this analysis, CBP
anticipates the incremental welfare loss and gain in tariff revenue
under this alternative would be greater than those under the proposed
rule because more shipments would be affected. Therefore, this
alternative has the potential to increase impacts on small entities.
Second, CBP considered an alternative identical to the
proposed rule but with an additional requirement that HTSUS codes be
required for postal shipments entered by USPS. This alternative is not
feasible because the collection of HTSUS codes in the postal
environment is currently restricted by U.S. obligations under the
Universal Postal Union. Therefore, this alternative would not meet the
stated objectives of the proposed rule.
[[Page 6872]]
E. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507), an agency may not conduct, and a person is not required to
respond to, a collection of information unless the collection of
information displays a valid control number assigned by the Office of
Management and Budget (OMB). The collection of information contained in
this proposed rule, will be submitted to OMB for review under section
3507(d) of the Paperwork Reduction Act (PRA). The public can direct
comments to the Office of Information and Regulatory Affairs of OMB,
Attention: Desk Officer for Customs and Border Protection. Such
comments can be submitted in the regulatory docket for this proposed
rule.
This rule, if finalized, would make low-value shipments subject to
specified trade or national security actions ineligible for the
administrative exemption, resulting in a change to OMB-approved
collection 1651-0024 beyond the changes proposed in the Entry of Low-
Value Shipments NPRM. Under the changes to the information collection
in that NPRM, basic entries do not have a time burden as they have no
data requirement beyond what is submitted on the bill of lading,
whereas CBP reports separate burden estimates for Form 3461s filed on
paper, Form 3461s and Form 3461ALTs filed electronically, and enhanced
entries filed electronically.
The proposed rule would require all entries using the basic entry
process (as described in the ELVS NPRM) to provide a 10-digit HTSUS
code to facilitate CBP's ability to confirm eligibility for the
administrative exemption. Shipments found ineligible would need to
refile under formal or other type of informal entry to enter the
merchandise (excluding enhanced or basic entry), leading to a decrease
in both basic and enhanced entries. Because the HTSUS code will be
required for all shipments entered using the basic or enhanced entry
process (subject to waiver in certain circumstances, as detailed in the
Entry of Low-Value Shipments NPRM), there is less of a difference in
the filing requirements between basic and enhanced entries, so we
expect some basic entries to shift to enhanced entries. As a result, we
will see a change in the number of responses for Form 3461, 3461ALT;
Excluding Enhanced, and enhanced entries. CBP does not expect a change
in the number of respondents as a result of this rule.
As low-value shipments subject to specified trade or national
security actions are made ineligible for the administrative exemption,
importers will have to file entry under formal or other type of
informal entry (excluding enhanced or basic entry) and fill out Form
3461, 3461ALT (excluding enhanced). As low-value shipments shift away
from basic or enhanced, CBP and brokers expect them to reconsolidate
into larger shipments. CBP does not know the level of consolidation
that will occur, and it is not estimated in the main analysis of this
rulemaking, but subject matter experts in the trade community that CBP
interviewed as part of the economic analysis report that they expect
enough consolidation to occur that this rule will not result in
additional time burden for the public and that it may even result in
time savings. In keeping with that information, CBP is adjusting its
estimates of the filings to reflect a level of consolidation at which
the time burden to the public breaks even as a result of this rule. CBP
will revisit these estimates when it renews this information
collection. Upon finalization of this proposed rule, OMB-approved
collection 1651-0024 will be revised to reflect the increased burden
hours as follows:
Paper Only Entry/Immediate Delivery Form 3461
Estimated Number of Respondents: 1,669.
Estimated Number of Total Annual Responses: 33,923.
Estimated Time per Response: 0.25 hours (15 minutes).
Estimated Total Annual Burden Hours: 8,481.
ACE Cargo Release Electronic Submission
Form 3461 and 3461ALT Excluding Enhanced Entry
Estimated Number of Respondents: 6,580.
Estimated Number of Total Annual Responses: 23,027,005.
Estimated Time per Response: 0.17 hours (10 minutes).
Estimated Total Annual Burden Hours: 3,837,834.
Enhanced Entry
Estimated Number of Respondents: 535.
Estimated Number of Total Annual Responses: 242,230,193.
Estimated Time per Response: 0 hours (0.0007 minutes).
Estimated Total Annual Burden Hours: 2,826.
F. National Environmental Policy Act
DHS and its components analyze actions to determine whether the
National Environmental Policy Act of 1969 (``NEPA''), 42 U.S.C. 4321 et
seq., applies to these actions and, if so, what level of NEPA review is
required. 42 U.S.C. 4336. DHS's Directive 023-01, Revision 01 and
Instruction Manual 023-01-001-01, Revision 01 (``Instruction Manual
023-01-001-01'') establish the procedures that DHS uses to comply with
NEPA and the Council on Environmental Quality (``CEQ'') regulations for
implementing NEPA, 40 CFR parts 1500 through 1508.\57\
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\57\ CBP is aware of the November 12, 2024 decision in Marin
Audubon Society v. Federal Aviation Administration, No. 23-1067
(D.C. Cir. Nov. 12, 2024). To the extent that a court may conclude
that CEQ regulations implementing NEPA are not judicially
enforceable or binding on this agency action, CBP has nonetheless
elected to follow those CEQ regulations, in addition to DHS's
Directive and Instruction Manual, to meet the agency's obligations
under NEPA, 42 U.S.C. 4321 et seq.
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Federal agencies may establish categorical exclusions for
categories of actions they determine normally do not significantly
affect the quality of the human environment and, therefore, do not
require the preparation of an Environmental Assessment or Environmental
Impact Statement. 42 U.S.C. 4336e(1); see also 40 CFR 1501.4,
1507.3(c)(8), 1508.1(e). DHS has established categorical exclusions,
which are listed in Appendix A of its Instruction Manual 023-01-001-01.
Under DHS's NEPA implementing procedures, for an action to be
categorically excluded, it must satisfy each of the following three
conditions: (1) the entire action clearly fits within one or more of
the categorical exclusions; (2) the action is not a piece of a larger
action; and (3) no extraordinary circumstances exist that create the
potential for a significant environmental effect.
DHS has analyzed this action under Directive 023-01 and Instruction
Manual 023-01-001-01. DHS has made a determination that this rulemaking
action is one of a category of actions that do not individually or
cumulatively have a significant effect on the human environment. First,
this proposed rule clearly fits within the Categorical Exclusions A3(a)
and A3(d) of DHS's Instruction Manual 023-01-001-01, Appendix A, for
the promulgation of rules of a ``strictly administrative or procedural
nature'' and rules that ``interpret or amend an existing regulation
without changing its environmental effect,'' respectively. The proposed
rule would create a new
[[Page 6873]]
process for entering low-value shipments, allowing CBP to target high-
risk shipments more effectively. The proposed rule would also revise
the current process for entering low-value shipments to require
additional data elements that would assist CBP in verifying eligibility
for duty- and tax-free entry of low-value shipments and bona-fide gift.
Second, this NPRM is not part of a larger action. Third, this NPRM
presents no extraordinary circumstances creating the potential for
significant environmental effects. Therefore, a more detailed NEPA
review is not necessary. DHS seeks any comments or information that may
lead to the discovery of any significant environmental effects from
this NPRM.
Signing Authority
In accordance with Treasury Order 100-20, the Secretary of the
Treasury delegated to the Secretary of Homeland Security the authority
related to the customs revenue functions vested in the Secretary of the
Treasury as set forth in 6 U.S.C. 212 and 215, subject to certain
exceptions. This regulation is being issued in accordance with DHS
Directive 07010.3, Revision 03.2, which delegates to the Commissioner
of CBP the authority to prescribe and approve/sign regulations related
to customs revenue functions. Pete Flores, Senior Official Performing
the Duties of the Commissioner, having reviewed and approved this
document, has delegated the authority to electronically sign this
document to the Director (or Acting Director, if applicable) of the
Regulations and Disclosure Law Division of CBP, for purposes of
publication in the Federal Register.
List of Subjects
19 CFR Part 10
Bonds, Exports, Imports, Reporting and recordkeeping requirements,
Trade agreements.
19 CFR Part 128
Administrative practice and procedure, Freight, Reporting and
recordkeeping requirements.
19 CFR Part 143
Reporting and recordkeeping requirements.
Proposed Amendments to the CBP Regulations
For the reasons stated above in the preamble, CBP proposes to amend
19 CFR parts 10, 128, and 143 as set forth below.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
0
1. The general authority citation for part 10 continues to read as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484,
1498, 1508, 1623, 1624, 4513.
* * * * *
0
2. Amend Sec. 10.153 by adding paragraph (j);
The addition reads as follows:
Sec. 10.153 Conditions for exemption.
* * * * *
(j) The exemption provided for in Sec. 10.151 is not to be allowed
with respect to imported merchandise covered in an action imposing
additional duties pursuant to either Section 232 of the Trade Expansion
Act of 1962 (19 U.S.C. 1862), Section 201 of the Trade Act of 1974 (19
U.S.C. 2251 et seq.), or Section 301 of the Trade Act of 1974 (19
U.S.C. 2411 et seq.).
* * * * *
PART 128--EXPRESS CONSIGNMENTS
0
3. The general authority citation for part 128 continues to read as
follows:
Authority: 19 U.S.C. 58c, 66, 1202 (General Note 3(i),
Harmonized Tariff Schedule of the United States), 1321, 1484, 1498,
1551, 1555, 1556, 1565, 1624.
0
4. Amend Sec. 128.21 by revising paragraph (a)(4)(ii) to read as
follows:
Sec. 128.21 Manifest requirements.
(a) * * *
(4) * * *
(ii) If the merchandise is eligible for, and is entered under, the
informal entry procedures as provided in Sec. 128.24, except for
merchandise eligible to pass free of duty and tax as provided in Sec.
128.24(f) and entered under Sec. 143.23(k) of this chapter.
* * * * *
PART 143--SPECIAL ENTRY PROCEDURES
0
5. The general authority citation for part 143 continues to read as
follows:
Authority: 19 U.S.C. 66, 1321, 1414, 1481, 1484, 1498, 1624,
1641.
0
6. Amend Sec. 143.23 by adding paragraph (k)(9) to read as follows:
Sec. 143.23 Form of entry.
* * * * *
(k) * * *
(9) The 10-digit classification of the merchandise in Chapters 1-97
(and additionally in Chapter 99, if applicable) of the Harmonized
Tariff Schedule of the United States (HTSUS), if entering merchandise
meeting the requirements of 19 U.S.C. 1321(a)(2)(C) and Sec. 10.151.
* * * * *
Robert F. Altneu,
Director, Regulations & Disclosure Law Division, Regulations & Rulings,
Office of Trade, U.S. Customs and Border Protection.
[FR Doc. 2025-01074 Filed 1-17-25; 8:45 am]
BILLING CODE 9111-14-P