Cracking Down or Smart Compliance? Navigating the Tightening Grip of Entry Type 86 Regulations

Stricter Enforcement of the ACE Entry Type 86 program

In response to findings of counterfeit goods, illegal substances and misclassified shipments, U.S. Customs and Border Protection (CBP) is intensifying enforcement of the ACE Entry Type 86 program, which exempts U.S.-bound shipments valued under $800 from duties and taxes.

Now, Entry Type 86 needs to be filed prior to or upon cargo arrival, rather than within 15 days. It's also emphasized that only certain regulations are waived under this test, and noncompliance may result in civil and criminal penalties, administrative sanctions, or liquidated damages. As a result, several customs brokers have had their licenses suspended.

Technology: The Enabler of Fast and Precise Entry Type 86 Filings

Every customs broker should strive for regulatory compliance, speed and accuracy. Advanced technology facilitates the development of robust software architectures, expediting parcel clearance through the rapid processing of large shipment volumes.

Automated tools powered by artificial intelligence can significantly expedite the customs declaration process while ensuring high levels of accuracy. These systems can provide brokers with instant, relevant Harmonized Tariff Schedule (HTS) code recommendations, eliminating the need for time-consuming manual searches. AI tools can also automatically correct invalid codes and identify Partner Government Agency (PGA) flags that can be disclaimed, flag potential errors, and validate high-risk or suspicious shipments before submission to CBP and PGAs. This proactive approach not only enhances compliance but also streamlines the entire customs clearance process, resulting in significant time and costs saved for customs brokers and their customers.

Growth of E-Commerce, Diverse Products and Counterfeit Goods Add to Enforcement Challenges

Enforcing Entry Type 86 regulations is a complex task. Declaration details can contain inaccurate or incomplete information. Given the exponential growth of e-commerce, it's very tedious and time consuming for CBP to inspect each of the many parcels and verify the accompanying documentation. Not only that, Entry Type 86 also covers a wide range of products, from electronics to pharmaceuticals and food. Each product category may have specific regulatory requirements, necessitating significant time to ensure compliance for each filing.

Adding to CBP’s challenges is the proliferation of counterfeit products in legitimate sales channels, driven by technology. Shipments can easily bypass regulatory checks due to the sheer volume of e-commerce parcels, posing serious safety and efficacy risks to consumers. New types of products constantly emerge in the market and may not fit neatly into existing regulatory frameworks. Reviews would have to be conducted on a case-by-case basis, which would be time consuming. As of now, CBP shared its expectation for filers to “exercise reasonable care and fulfill their responsibility of complying with the statutory limitation for de minimis.” However, this leaves room for interpretation, making consistent enforcement challenging.

Effectively enforcing Entry Type 86 requires substantial time, manpower and financial resources. It may not be very feasible for full enforcement, particularly with e-commerce parcels that require rapid delivery. Longer deliveries not only reduce the competitiveness of U.S. imports, but also impede global supply chains, leading to unhappy businesses and consumers.

Effectiveness of Stricter Entry Type 86 Guidelines

The effectiveness of tightened Entry Type 86 regulations may be limited by the proliferation of e-commerce parcels and budget constraints. While customs filing documentation may appear to be in order, only labor-intensive physical inspections can reveal discrepancies between the declared contents and actual items in a shipment. Effective enforcement would require additional budget for increased manpower to conduct more checks.

In conclusion, CBP’s stricter enforcement offers a compelling incentive for businesses and brokers to adhere to regulations. The risk of unnecessary fines, extended waiting times and potential reputational damage could ultimately outweigh the costs of ensuring proper filing procedures from the start. Regulatory compliance becomes not just a legal obligation but a strategic necessity for maintaining competitiveness and avoiding costly setbacks.

Siddharth Priyesh is vice president and head of Americas and Caribbean at CrimsonLogic, part of the PSA Group, is a global technology company driven by innovation to digitalize and simplify global trade.