E-Commerce is one of the fastest-growing segments of the American economy and it is not showing any signs of slowing down in the near-term. According to US Customs &Border Protection (CBP), e-commerce refers to low-value (<$800) cleared under section 321 or otherwise known as Type 86. eCommerce is defined as high volume, low-value shipments that are imported into the United States.
The increase in volume has increased the risk that dangerous and illicit products may cross into the United States, which places the safety and health of Americans at risk while compromising the economic security of the US.
CBP needs to adapt to the changing circumstances and ways of doing business given that e-commerce is driving an increasing volume of low-value <$800 section 321 consignments. Large containerized shipments were once the norm but in recent times, low-value <$800 section 321 shipments, small packages are becoming even more common. This shift presents a challenge to US Customs & Border Protection (CBP) that is charged with safeguarding the safety of American citizens’ health and the security of the US economy. With an increase in small package volume and the resultant actionable data challenges, they present, CBP and other Partner Government Agencies (PGAs) need new resources to be able to enforce trade laws and facilitate trade.
Challenges in E-Commerce
- Increasing Trade Volume
Since the year 2000, the number of Americans engaging in e-commerce has gone from a low of 22 percent to a high of 79 percent. With such a huge increase in participation in e-commerce, there has been a corresponding increase in low-value consignment packages with a value of less than $800 that comes into the US through the land, rail, and seaports of entry. For instance, in 2017 an express hub reported an increase of more than 1000 percent over two decades, with much of the increase attributed to eCommerce shipments.
- Dangerous and Non-Compliant Shipments
In 2017, CBP while conducting its routine special operations conducted a raid on an international mail facility in New York. Among the non-compliant items found included five pounds of fentanyl alongside more than 1000 non-compliant shipments. The non-compliance rate at the facility was very high at 43 percent. As such, Customs & Border Protection needs to get qualitative data on all low-value shipments so that it can be better able to identify any risks posed to the security and safety of the United States.
- Consumer Awareness
Many new importers may not be conversant with the regulations and requirements of CBP. Importers that have been importing for less time than their peers may have to deal with possible penalties and import restrictions in addition to unexpected transaction expenses. Failure in compliance may thus hamper the success of small businesses that have just gotten into e-commerce.
The E-Commerce Strategy
To adapt to the rise in international trade in low-value small packages as a result of the growth of e-commerce, Customs & Border Protection (CBP) is restructuring its policies and processes to ensure that informal entries are compliant. In this regard, CBP set up the E-Commerce and Small Business Branch domiciled in the Office of Trade. The eCommerce strategy is one of the first policies set in place by the eCommerce branch that seeks to enhance compliance when it comes to e-commerce transactions. The strategy is intended to transform the agency’s capacity to adapt to the rapidly changing nature of the business environment. It also comes up with a policy of shared responsibility when it comes to enforcement to promote economic prosperity and minimize critical threats.
The e-commerce strategy developed by CBP has four primary goals:
- Enhance regulatory and legal authorities to make CBP and PGAs better able to detect and deal with emergent threats. Some of the objectives include:
- Reviewing current regulatory and legal authorities and come up with risk segmentation processes to realign resources and improve targeting.
- Develop plans for incentives and penalties that will encourage all stakeholders to comply with policies set out to minimize risks and foster trade throughout the supply chain
- CBP will continue to partner with international and domestic stakeholders to enhance capacities for the sharing of data on small parcel shipments.
- Improve and adapt all processes of CBP to make them responsive to new supply chain dynamics that have resulted from the fast growth of e-commerce. Some of the objectives include:
- Increase operational efficiency through putting in place risk-based enforcement
- Use counter network approaches that include state of the art technologies and techniques to determine which e-commerce shipments pose the highest risk.
- Optimize workforce procedures and policies to make CBP better able to adapt to the fast-changing e-commerce environment.
- Enhance Compliance in the private sector via enforcement incentives and resources. Some of the objectives include:
- Use criminal and civil enforcement mechanisms to deter potential violators and penalize violators.
- Partner with businesses and the trade community to strengthen e-commerce where participants get exclusive benefits through participation in voluntary known shipper programs such as C-TPAT
- Make use of the Partner Government Agency (PGA) networks to standardize policy and provide field guidance on enforcement procedures for e-commerce consignments
- Facilitate the development of global trade standards for e-commerce which are critical in fostering economic growth: Some of the objectives include:
- Take a leadership role and partner with global and interagency communities such as the B5 countries (Australia, Canada, New Zealand, the United Kingdom, and the United States) and the World Customs Organization (WCO) to develop best practices and standards.
- Take into account and use technology solutions that make e-commerce information easily accessible to all stakeholders.
- Offer education to both consumers and importers of applicable cross border responsibilities and rights to be compliant with the rules and regulations of the CBP.
Benefits of the CBP’s E-Commerce Strategy
- It strengthens the ability of the agency to protect the American economy
- Strengthens the long-term partnership the agency has with the business community
- Improves trade risk management
- Makes international mail enforcement more robust
- Deters customs and trade law violations
- Maximizes collection of taxes and custom duties
How to Measure the Success of the Program
As the agency puts in place the policies set out in the e-commerce strategy, success will be measured through internal performance evaluations. Through set key measurement targets, reports, and baseline data, CBP will determine how successful it is in meeting the key objective and goals set out. Once the determination is made on what measures best showcase the progress that is made using the strategy, CBP will either update, add to, or replace the public-facing Results Modernization Act and Government Performance measures.
The new eCommerce strategy enhances its capacity to safeguard the American economy, enhances the agency’s long-term partnerships with business communities, enhances trade risk management, strengthens enforcement of international mail consignment procedures, maximizes the collection of duties and taxes and deters the violation of custom and trade laws. Once it is implemented in full, the US will have a stronger trade position in the international market place.