Finding Safe Harbor in a Stepped-up Trade Enforcement Environment

Risky Business

United States Customs and Border Protection (CBP) has begun the process of reporting trade statistics for FY 2021. And, as we have written in this space, the trend towards stepped-up administrative investigation, enforcement and assessment activity is clearer than ever. This dynamic has even, not surprisingly, spilled over into the judicial realm insofar as it is the primary driver of a perceptible uptick in litigation at the U.S. Court of International Trade.

Notwithstanding the pandemic-related dip in trade volume in 2020, a number of factors have combined over the past five years to produce substantial percentage change increases across almost every reported investigation, enforcement, and assessment metric. These factors include:

  • The overarching and record-breaking expansion of U.S. imports (which have, in turn, played a leading role in the 2021 trade deficit reaching an all-time high of $859B).
  • The broad scope of CBP’s enforcement responsibilities (CBP now enforces over 500 laws and regulations on behalf of approximately 50 partner government agencies (PGAs)).
  • The ongoing improvement of CBP’s big data-powered interagency information sharing, risk identification, and targeting capabilities.
  • The continuation of certain Trump-era policies and measures, coupled, as they have been, with the lapsing of previously available exclusions.
  • The implementation of new policies based on long-established laws (for example, those involving forced labor).
  • The sharpening of techniques associated with newly deployed enforcement tools (for example, those made available under the TFTEA’s Enforce and Protect Act).
  • The pressure Congress has, in a sustained way, placed on CBP to strengthen its revenue protection record.

The impact of these factors on CBP’s current trade investigation, enforcement, and assessment activities can, on an issue-by-issue basis, be observed in the following table:

Finding Safe Harbor in a Stepped-up Trade Enforcement Environment

Sources: U.S. Customs and Border Protection, U.S. International Trade Commission, and the Administrative Office of U.S. Courts

The implication of these statistics for U.S. importers is as clear as the enforcement story they tell. Simply put, U.S. importers need to be more vigilant than ever with respect to their import policies, procedures, and practices, lest they run the risk of becoming the subject of an investigation, enforcement action, or assessment measure.

The Import Compliance Triad

There are three basic considerations that inform the extent to which an importer is able to maximize its compliance with U.S. import laws and regulations. The key elements of the first two considerations – i.e., establishing a robust transactional framework (premised on direct and substantiated knowledge of upstream suppliers and sources) and demonstrating supply chain security – have been discussed in prior blog posts. The third consideration – something that should a part of be every U.S. importer’s compliance triad – involves the development and maintenance of a strong regime of internal compliance controls. The main internal actions and measures that come within such a regime include:

  • Articulating and posting written import compliance policies and procedures;
  • Offering import compliance training for relevant employees;
  • Retaining the services of a customs expert in connection with the realization of core reasonable care (classification, valuation, and country of origin/marking) and priority trade issue (IPR, forced labor, quota, trade remedies, economic sanctions, PGA requirements, etc.) screens; and
  • Monitoring and assessing important compliance on an ongoing basis.

In conclusion, today’s customs and trade environment is characterized by increased levels of enforcement risk. And, judging from both the actions of the current administration and the zeitgeist on Capitol Hill, there is little on the horizon to suggest that this basic characterization will change in the near future. That does not mean, however, U.S. importers are powerless to chart a course to circumnavigate this trend. In fact, the investigation, enforcement, and assessment risks that have come to define the contemporary trade environment can – in the tradition of “sometimes the best offense is a good defense” – be effectively managed by embracing the triad of import compliance strategies laid out above.