CBP Proposes to Modify the De Minimis Exemption

U.S. Customs and Border Protection (CBP), under the U.S. Department of Homeland Security, published a Notice of Proposed Rulemaking on Jan. 21, 2025 (Jan. 21 NPRM), narrowing the scope of the administrative exemption under Section 321(a)(2)(C) of the Tariff Act of 1930 (de minimis exemption). The Jan. 21 NPRM proposes that shipments valued at $800 or less and covered by Section 201, Section 232 or Section 301 tariffs be ineligible for the de minimis exemption. Importers of such goods will be required to pay both the standard duties and fees and any additional duties imposed pursuant to trade and national security actions.

Additionally, the Jan. 21 NPRM proposes requiring a 10-digit Harmonized Tariff Schedule of the United States (HTSUS) classification for shipments claiming the de minimis exemption and entering under the release from manifest process (being renamed as the "basic entry process").

The Jan. 21 NPRM is part of a broader effort to address the perception of abuse of the de minimis exemption, in particular, by China-founded e-commerce platforms and ensure compliance with the U.S. trade laws. (See Holland & Knight's previous alerts, "U.S. Government Plans to Restrict Low-Value Imports Under De Minimis Exemption," Sept. 18, 2024, and "A Look at How De Minimis Import Rules May Soon Change," Sept. 27, 2024.)

On Jan. 14, 2025, CBP published another notice (Jan. 14 NPRM) introducing a new optional "enhanced entry process" for low-value shipments that codifies the successful elements of the Entry Type 86 Test: the expedited clearance of shipments in exchange for the submission of advance electronic data, including the 10-digit HTSUS classification.

The Jan. 14 NPRM requires the 10-digit HTSUS classification only for the "experimental" enhanced entry process. However, the Jan. 21 NPRM mandates the provision of the HTSUS classification for the basic entry process as well. Thus, all de minimis merchandise will be required to provide the 10-digit HTSUS classification regardless of the entry process chosen.

Jan. 21 NPRM Proposed Changes

Under the proposed rule, merchandise subject to Section 201, Section 232 or Section 301 tariffs would no longer qualify for the de minimis exemption. Shipments claiming this exemption will be required to provide the 10-digit HTSUS classification.

Exclusion of Certain Low-Value Imports from the De Minimis Exemption

The de minimis exemption, as outlined in Section 321(a)(2)(C) of the Tariff Act of 1930, allows CBP to admit shipments free from duty and tax if their aggregate fair retail value does not exceed $800, with exception for bona fide gifts and certain personal and household goods, which are regulated separately. The de minimis exemption applies to merchandise imported by one person on one day.

According to CBP, some companies exploit the de minimis exemption to conceal shipments of illegal and dangerous products or circumvent the payment of duties and taxes. As of July 30, 2024, 89 percent of all cargo seizures since Oct. 1, 2023, were de minimis shipments, including 97 percent of narcotics and 72 percent of health and safety seizures.

To address national security risks, CBP proposes to exclude merchandise valued at $800 or less subject to an ad valorem tariff imposed under Sections 201, 232 or 301 from eligibility for the exemption under Section 321(a)(2)(C). Importers of such goods would have to pay the standard duties and fees, as well as any additional duties imposed pursuant to trade and national security actions.

CBP notes that "The proposed exclusion from the de minimis exemption will apply 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."

Products covered by antidumping or countervailing duty orders and quota, as well as alcoholic beverages and some cigars, cigarettes and tobacco that are subject to taxes imposed under the Internal Revenue Code that are collected by other agencies, are already excluded from the de minimis exemption eligibility.

Imports Qualifying for De Minimis Exemption Are Required to Provide HTSUS Code

Shipments claiming the de minimis exemption enter the U.S. with less information than is required of other imports. CBP proposes that such imports be required to provide the 10-digit HTSUS classification as they enter through the basic entry process to ensure that no merchandise subject to additional tariffs or otherwise ineligible for the de minimis exemption is accorded a duty-free entry under Section 321(a)(2)(C).

This supplements the Jan. 14 NPRM proposed requirement to provide the 10-digit HTSUS classification for merchandise entering under the enhanced entry process. As a result of these proposed amendments, the 10-digit HTSUS classification would be required under both the proposed basic and enhanced entry processes.

Considerations for Applicability to International Mail Shipments

While CBP has included international mail in the scope of Jan. 21 NPRM, CBP seeks public comments that address the operational feasibility in the international mail environment.

Jan. 14 NPRM Proposed Changes

This notice proposes amendments to the CBP regulations for the entry of low-value shipments through the de minimis exemption. Traditionally, these shipments have been handled manually, which is now impractical due to the need for faster processing and more detailed information.

In 2019, CBP launched two pilot programs, the Section 321 Data Pilot and the Entry Type 86 Test, to test CBP's capabilities to collect – and the trade community's ability to provide – certain enhanced data through CBP-approved electronic systems.

Based on the results of such pilot programs, CBP now proposes to introduce a new "enhanced entry process" and revise the existing "basic entry process," formerly known as the release from manifest process, to modernize and streamline the entry of low-value shipments. CBP also proposes to clarify some definitions and correct typographical errors.

Basic Entry Process

Under the release from manifest process, shipments can be entered by presenting a bill of lading or a manifest listing bills of lading, which serve as a main source of information for release from CBP custody.

The proposed basic entry process retains the general procedures of the current release from manifest process, with minor changes. CBP suggests requiring the name and address of the person claiming the administrative exemption and the final deliver-to party, if different. Additionally, CBP proposes amendments to several existing data elements.

The entry data may either be transmitted electronically through a CBP-authorized electronic data interchange system or be submitted in paper format. Low-value shipments subject to partner government agency (PGA) reporting requirements are ineligible for entry under the basic entry process.

Enhanced Entry Process

CBP proposes to create a new optional enhanced entry process that would require the submission of advance data, within specified time frames, about the contents, origin and destination of the shipments. In particular, the required data will include the clearance tracing identification number, country of shipment of the merchandise, 10-digit HTSUS classification (unless waived) and other additional data elements.

Furthermore, the new process would allow CBP to maintain key benefits of the Entry Type 86 Test, including the expedited clearance of certain shipments and the availability of duty- and tax-free entry for qualifying low-value shipments, including those that are subject to PGA requirements.

The enhanced entry process would require data to be transmitted to CBP in advance of arrival of the shipment to allow for CBP to timely conduct targeting and offer expedited release

Implications for Importers

The proposed changes will likely lead to a greater CBP scrutiny of low-value shipments. The volume of de minimis shipments is expected to decrease as products subject to U.S. trade enforcement actions will no longer qualify for the exemption.

If the notices become a final rule, importers utilizing the de minimis exemption should ensure their merchandise remains covered by the exemption, especially if imported from China. Additionally, they must comply with the updated entry requirements and are advised to consider the newly introduced enhanced entry process as an alternative method of import entry. Importers should also assess the financial and operational impacts of these changes and consider engaging outside counsel for assistance.

The proposed provisions may undergo significant changes as public comments are reviewed and the notices evolve into a final rule.

Public Participation

CBP invites public comments on the proposed rulemakings. Interested parties can submit their comments via the Federal eRulemaking Portal by March 17, 2025, for the Jan. 14 NPRM and by March 24, 2025, for the Jan. 21 NPRM.

CBP will take into account all public comments on the Jan. 14 NPRM and adjust the Jan. 21 NPRM language as appropriate.

For the Jan. 21 NPRM, in addition to comments on the provisions discussed above, CBP is also requesting comments on whether these provisions should be extended to bona fide gifts valued at $100 or less sent from persons in foreign countries to persons in the U.S. and/or certain personal or household articles valued at $200 or less accompanying persons arriving in the U.S.

Conclusion

The proposed changes by CBP aim to tighten the de minimis exemption by excluding certain low-value imports and introducing new entry requirements. These changes are part of a broader effort to address the perception of abuse of the de minimis exemption, particularly by Chinese e-commerce platforms, and ensure compliance with U.S. trade laws. Importers should prepare for increased scrutiny and ensure their shipments meet the updated requirements. Public comments on the proposed rulemakings are invited and will be considered before the rule is finalized.

The Biden Administration, in the Sept. 13, 2024, announcement of its intent to proceed with rulemaking to curb abuses of the de minimis exemption and protect Americans from unsafe or illegal products, also said legislation would be necessary to fully address this issue. Legislation targeting the de minimis exemption was introduced in the 119th Congress, and more attention is expected to be paid to this issue.

For more information on the reformation of the entry process under the de minimis exemption or assistance with complying with the CBP regulations, please contact the authors or another member of Holland & Knight's International Trade Group.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.