US Customs Intensifies Inspections on Chinese E-commerce Shipments

The recent surge in scrutiny of e-commerce shipments from China by US Customs and Border Protection (CBP) has led to significant airport congestion, delays, and the suspension of several flights, particularly affecting major e-commerce players like Shein and Temu.

The crackdown has led to significant operational disruptions. “All freighters coming into LAX from mainland China, many carrying shipments from Shein and Temu, are being sent directly to Customs warehouses for full inspection,” said a source at LAX. These inspections have revealed numerous illegal items, including fentanyl, drug-making equipment, and misdeclared values to meet the de minimis threshold.

The resulting backlog has caused congestion at customs warehouses and delays in processing e-commerce shipments. With an estimated 100 freighters a day carrying around 100 tons of e-commerce cargo each, the inspection process is considerable. As a result, some planned high-frequency flights into Chicago and New York have been suspended.

A large forwarder confirmed that CBP is scrutinizing documentation and cargo descriptions “very closely,” signaling an effort to tighten controls. Sources indicate that while shipments from Hong Kong are not being checked, the US focus remains on flights from mainland China.

The Complexity Behind the Crackdown

Contrary to assumptions of a sudden protectionist move by the US government against Chinese e-commerce giants, the reality is rooted in the enforcement of existing trade regulations. Specifically, Section 321 of the Tariff Act of 1930 (Smoot-Hawley) exempts shipments valued at or below a certain threshold from duties and formal entry requirements. This threshold was raised from $200 to $800 by the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), signed into law by President Obama in 2016, aiming to facilitate trade and simplify customs procedures.

However, other countries have moved in the opposite direction, reducing de minimis values to subject more low-value shipments to duties and taxes, leveling the playing field with domestic retail channels.

Entry Type 86 and Its Implications

The introduction of Entry Type 86 in the Automated Commercial Environment (ACE) in September 2019 allowed for the filing of Section 321 datasets within 15 days of arrival. Earlier this year, CBP highlighted enforcement challenges with low-value shipments under this entry type, including the importation of illicit substances like fentanyl, counterfeits, intellectual property rights violations, and goods made with forced labor. Violations uncovered included entry by unauthorized parties, incorrect cargo manifesting, misclassification, misdelivery, undervaluation, and improperly executed powers of attorney.

To address these challenges, CBP announced that starting February 15, customs brokers must file complete, accurate, and timely data sets, including full product descriptions and HS codes, at or before the arrival of goods.

Industry Response and Future Outlook

The intensified inspections have created nervousness within the air cargo industry. “Temu has a lot of capacity booked until the end of the year, and they’re starting to get very nervous about that,” commented a charter broker. The uncertainty has led some mainland Chinese carriers to temporarily halt freighters to ensure shipments are fully checked before departing for the US.

Carriers such as CMA CGM Air Cargo, which planned to begin flights from China to the US, may have to delay their launches. Sources suggest that the US is unlikely to cease these thorough inspections soon, especially after discovering fentanyl and drug-making equipment.

US Air Forwarders Association executive director Brandon Fried warned that the government’s focus on preventing the import of illegal drugs or their components could lead to 100% screening of all inbound shipments, effectively causing further delays and congestion. He urged the government to find alternative methods to address these issues.

The broader question for US air logistics remains whether these illegal shipments will lead to additional screening measures for all inbound cargo. With fentanyl causing the deaths of 200 Americans daily in 2022 and over a quarter of a million fatalities since 2018, the urgency for effective enforcement is high.

As the situation evolves, the industry anticipates potential adjustments to compliance procedures to mitigate delays while ensuring security. The outcome will significantly impact e-commerce platforms, logistics providers, and customs brokers handling low-value shipments into the US.

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