On March 23, 2016, United States Customs and Border Protection (CBP) activated the next phase for the Centers of Excellence and Expertise (CEEs) in six industries. The industries are: Automotive and Aerospace, Agriculture and Prepared Products, Base Metals, Consumer Products and Mass Merchandising, Industrial and Manufacturing Materials and Machinery. This comes on the heels of the recently signed Trade Facilitation and Trade Enforcement Act which directed the CBP commissioner to formally establish new CEEs.
These CEEs join the Apparel, Footwear and Textiles, Electronics, Pharmaceuticals, Health and Chemicals, and Petroleum, Natural Gas and Minerals CEEs in managing entry and post-release processing for their entire industries, respectively, regardless of the original port of entry. Previously, these CEEs had only been managing entries and post-release processing for importers who had volunteered to be members of their industry-specific CEE.
Each CEE is now responsible for all importations of items that fall within the suggested tariff classifications for which they are responsible, as originally set forth in the Federal Register notices announcing their formation. The first four CEEs were announced in the Federal Register on August 28, 2012 while the remaining six were announced on April 4, 2013. All CEE directors now have authority over the following functions and activities:
- Entry and entry summary processing;
- Decisions and activities regarding packing, stamping, country of origin marking, rules of origin, trademarks, copyrights, bonds, classification, appraisements, and the sampling of merchandise; and
- Processing of liquidations, protests, petitions, recordkeeping and financial and accounting matters.
Local Ports and Port Directors will continue to retain authority over matters pertaining to the control of cargo, including the movement, examination, release, drawback, and fines, penalties and forfeitures.
Benefits and Pitfalls
Now that the CEEs are transitioning to post-release processing for their entire industries, and not just for those import partners who initially volunteered to work with the CEEs, CBP has admitted that importers may see different faces of the CEEs. Partners who initially volunteered to work with the CEEs can expect to retain the support and coordination they have received during the past several years. However, CBP believes that all companies will soon see the benefits of the CEEs’ industry focus which, presumably, will allow the agency to better service the trade as it becomes increasingly accustomed with the import issues and concerns of the targeted industries, reducing the need to coordinate with multiple ports to essentially just one.
There are certainly potential benefits to nationwide processing and coordination. For example, the trade community should expect to see more consistent tariff classification treatment, increased familiarity with unique import issues for a particular industry, and more focused response times.
However, with such increased focus and familiarity on a specific industry and the CEEs’ management of consistent import paradigms, there are potential pitfalls. For example, the CEEs seem to be more willing to informally contact importers with questions on importations, in lieu of issuing more formal Requests for Information (CBP Form 28s). While this informal contact may be seen as an initial benefit, it has the effect of short-circuiting defined time lines and administrative procedures, and has not been addressed in rulings or CBP regulations. Any communication with CBP, including those that appear to be informal or casual emails, should be carefully reviewed and evaluated prior to response. Moreover, informal instructions issued by the CEEs should be treated as formal advice and followed by importers until reversed or revoked in writing.
While the CEEs have the potential for enhancing communication with the trade community, they will also increase visibility to national trends in a particular industry or commodity which may spark CBP’s interest or lead to increased enforcement activity. For example, where the majority of an industry is classifying a product a certain way, the CEEs will be better able to identify outliers or anomalies. Similarly, inconsistent valuation trends by importers as compared to others in their industry will be increasingly visible to the agency.
In fact, CBP has publicly noted an anticipated increase in enforcement in the areas of duty preference programs and free trade agreements; antidumping and countervailing duties; misclassification and undervaluation; and intellectual property protections. CEEs have already begun to mine their increased industry knowledge and trade intelligence to target those importers and suppliers they believe to be “high risk.” While there is merit to increased enforcement to ensure compliance with the trade laws and a level playing field, it is inevitable that the increased enforcement will impact all importers.
Although importers will undoubtedly find it helpful to work with CEE officials across ports and realize benefits from the industry partnerships, a healthy bit of caution is warranted as the CEEs consolidate their industry knowledge which will come from increased visibility into targeted industries and supply chains. Importers should remain cautious and ever mindful of the oft-quoted “nine most terrifying words in the English language” – “I’m from the Government and I’m here to help.”