De Minimis Dominates International Trade Commission Hearing on Free Zones – International Trade & Investment

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On May 17, 2022, the United States International Trade Commission (“USITC”) held a public hearing as part of an investigation into the effect of free zone (“FTZ”) policies and practices on businesses. Americans operating in American free zones and under similar conditions. programs in Canada and Mexico. Free Zones are secure areas located at or near United States Customs and Border Protection (“CBP” or “Customs”) ports of entry, but goods in a Free Zone are generally considered to be outside US customs territory. In a free zone, the operator may conduct certain domestic activities (supervised by CBP) involving foreign items, including storage, display, assembly, manufacturing, and processing, prior to formal customs entry . The public hearing on free zones featured testimony from eight representatives of various stakeholders, including business and industry groups, consulting firms, logistics companies and manufacturers.

In addition to responding to inquiries about the effects of, for example, Section 232 steel tariffs or Section 301 tariffs, much of the testimony expressed concerns about duty-free importation. of goods below the “de minimis” threshold of Section 321. Section 321, codified at 19 USC § 1321, allows importers to admit goods into the United States duty-free and without deposit a formal customs declaration, when the goods are valued at less than $800 (the de minimis threshold) for one person a day. Indeed, Section 321 allows high volumes of low value shipments to enter the United States. This type of de minimis entry is particularly useful for e-commerce businesses and other businesses importing large quantities of consumer goods.

However, goods imported into the United States from free zones cannot use this Section 321 entry, creating a disparity between importers from overseas and companies operating in free zones. Additionally, high-volume importers often establish distribution centers overseas, including just across the border in Mexico or Canada. This tension showed in the public hearing, with many speakers urging the USITC to address the disparity. There have been calls to lower the threshold or incorporate free zones into the current Section 321 de minimis regime.

Currently, Section 321 is under consideration with respect to imports from China, as the House of Representatives and Senate struggle to reconcile the COMPETES Act and the US Competition and Innovation Act (” USICA”), respectively. The COMPETES Act contains language that would eliminate the informal import process under Section 321 for shipments from China.

Footnotes

1. 19 U.S.C. 1321(a)(2)(C).

2. This is because of the distinction between “import” into the United States under Section 321 and “entry” or “removal” into the United States from free zones, and because products imported into a free zone are not shipped directly to the end purchaser. See HQ H275567 (May 8, 2018) and HQ H282601 (September 18, 2018).

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