On May 17, 2022, the U.S International Trade Commission (“USITC”) held a public hearing in connection with an investigation into the effect of Foreign Trade Zone (“FTZ”) policies and practices on U.S. firms operating in U.S. FTZs and under similar programs in Canada and Mexico. FTZs are secured areas located in or near U.S. Customs and Border Protection (“CBP” or “Customs”) ports of entry, but merchandise in an FTZ is generally considered to be outside of U.S. Customs territory. Within an FTZ, the operator may conduct certain (CBP supervised) domestic activity involving foreign items, including storage, exhibition, assembly, manufacturing, and processing, prior to formal Customs entry. The public hearing investigating FTZs featured testimony from eight representatives of various stakeholders, including trade and industry groups, consulting firms, logistics companies, and manufacturers.

Aside from responding to probes into the effects of, for example, Section 232 steel tariffs or Section 301 tariffs, much of the testimony voiced concern over the duty-free import of merchandise valued below the Section 321 “de minimis” threshold. Section 321, codified at 19 U.S.C. § 1321, allows for importers to admit goods into the United States free of duty, and without filing a formal customs entry, when the goods are valued at less than $800 (the de minimis threshold) to one person on one day.¹ Effectively, Section 321 permits high volumes of low value shipments to enter into the United States. These kind of de minimis entries are particularly useful to ecommerce companies and other businesses importing large amounts of consumer goods.

However, goods imported into the United States from FTZs cannot utilize this Section 321 entry,² creating a disparity between importers from abroad and companies operating in FTZs. Further, high-volume importers often establish distribution centers abroad, including just across the border in Mexico or Canada. This tension showed during the public hearing, with many of the speakers urging USITC to address the disparity. There were calls to either lower the threshold or incorporate FTZs into the current Section 321 de minimis scheme.

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

We are monitoring the reconciliation process of these two pieces of proposed legislation, as well USITC’s forthcoming report regarding Foreign Trade Zones. If you have any questions regarding de minimis imports or FTZs, please contact the attorneys at Torres Trade Law, PLLC.