Originally published by the Journal of Commerce in February 2019
Of all the questions asked of trade attorneys, this is likely the most frequent one. The answer is both a study in current events, but also much more complex. Let’s start at the obvious beginning point. Customs and Border Protection (“CBP”) receives advance information about shipments which arrive in the U.S. Whatever is the required data (and it differs a bit by mode of transportation and whether the di minimis rule applies), it is reported to CBP electronically and routed to the targeting center aka the Commercial Targeting and Analysis Center (CTAC). In addition to CBP, 11 partner agencies have staff stationed at the CTAC with the goal of coordinating their targeting through a variety of means, including intelligence sharing. The public list of agencies is:
Alcohol and Tobacco Tax and Trade Bureau (TTB)
Animal Plant Health Inspection Service (APHIS)
Consumer Product Safety Commission (CPSC)
Environmental Protection Agency (EPA)
Fish and Wildlife Service (FWS)
Food and Drug Administration (FDA)
Food Safety and Inspection Service (FSIS)
Immigration and Customs Enforcement (ICE)
National Highway Traffic Safety Administration (NHTSA)
National Marine Fisheries Services (NMFS)
Pipeline and Hazardous Materials Safety Administration (PHMSA)
CBP is also a member of the Border Interagency Executive Committee or BIEC. Whereas CTAC was set up post- 9/11, BIEC was established in 2014 with the twin goals of the completion and government-wide utilization of the International Trade Data System by year end 2016, and establishment of a two-tiered governance structure to manage implementation. The BIEC mission statement now reads: “The BIEC serves as an Executive Advisory Board charged with assisting federal agencies in their efforts to enhance coordination across customs, transport security, health and safety, sanitary, conservation, trade, and phytosanitary agencies with border management authorities and responsibilities to measurably improve supply chain processes and the identification of illicit and non-compliant shipments.”
BIEC participants represent the Departments of Agriculture, Commerce, Health and Human Services, Interior, Treasury, Transportation, EPA, CPSC and the Federal Communications Commission, along with FSIS, AMS and the parts of APHIS dealing with Animal Care, Veterinary Services, Biotech’s Regulatory Services, the Lacey Act and Plant Protection & Quarantine (PPQ).
Bearing in mind the many law enforcement and intelligence agencies which form key parts of the U.S. government, there is no doubt intelligence sharing occurs and what is shared in used to update risk factors, and that includes for purposes of identifying terrorism and other national security threats.
Taking the information at hand, CBP publishes what it calls the Priority Trade Issues. These are the major issues on which CBP focuses year over year. The current list has remained unchanged for quite a while:
Agriculture and Quota
Antidumping and Countervailing Duty
Intellectual Property Rights
Textiles/Wearing Apparel, and
To experienced American importers, none of these topics is a surprise. Every one of them carries some level of complexity that stands out from the many “routine” shipments. It may be due to food or consumer safety concerns, evidence of widespread violations (such as seizure rates or audit results regarding inability to support free trade agreement claims), high rates of duty (textiles, antidumping and countervailing duties) or failing to pay the right duty amount due to misclassification, all of which ratchet up enforcement efforts and so increase inspections.
While perhaps not surprising, given current events, now comes a chilling reminder of how fragile is the supply chain. The 2019 National Intelligence Strategy (NIS) report was issued last month. It specifically calls out the threats posed by “Russian efforts to increase its influence and authority…” and the “Chinese military modernization and continued pursuit of economic and territorial predominance in the Pacific region…” There is also a discussion about the threats related to weapons of mass destruction, including biological, chemical and nuclear weapons. Of course, much of the discussion is about the seriousness of the cybersecurity threat, but the theft of trade secrets is equally concerning. While the U.S. intelligence community does not generally warn industry when a threat is uncovered due to policies which do not permit distinctions between business competitors, there are a couple of public-private partnerships which can be helpful (the FBI’s Infragard and the Secret Service’s Electronic Crimes Task Force). The democratization of space by way of the development of anti-satellite weapons is also described in the NIS report. The growth of non-state actors and individual dictators who wish the U.S. ill is also discussed. Why mention any of this? Because on page 14 of the report is a reference to “supply chain exploitation.” While only the one mention about the supply chain appears, it should remind all of us there are things going on in the world far beyond what we do in our daily lives, that have a very direct impact on our businesses. Frankly, this really is just a reminder. You need look no further for an example than last July when OFAC published guidelines dealing with the bar on the use of North Korean labor and inputs. A more subtle reminder comes for some companies when overseas funds being received for payment of goods which were sold is seized by the U.S. government as proceeds of money laundering. Not run into this one? It happens when the U.S. has evidence the foreign buyer or third party making payment is engaged in money laundering (even though you sold them legitimate goods and had no idea they were crooks) and so, you do not get paid and do not get your goods back!
If you are a C-TPAT (Customs-Trade Partnership Against Terrorism) partner, you presumably have a pretty good idea where are the risks in your supply chain, but things change. Obviously, keeping up with those changes will help manage your supply chain risks, so you presumably can sort out the nature of your risks. If you have a recent violation, you should not be surprised if CBP inspects subsequent shipments. Where one violation is found, others are suspected. CBP has to make sure one way or the other.
While the discussion has focused on imports to this point, CBP targets export shipments as well, usually for export license and intellectual property reasons. To exporters of licensed goods, the inclusion of WMD was totally predictable.
If you start wondering why your goods are inspected, it could be routine, but think first about which CBP priority industry you fall into, where your goods were sourced (did you usually source from China and are now sourcing from Vietnam? did you recently change the classification of your imported goods? are your goods from China and on a 301 list?). Hopefully a bit of thought will lead to an obvious answer as to why the goods are being inspected. If you are still not sure, your trade attorney should be able to give you an educated guess.