On December 8, Senate Finance Committee members Bill Cassidy (R-LA) and Sheldon Whitehouse (D-RI) introduced the “Customs Modernization Act of 2023.” The act, which would amend the Tariff Act of 1930 “to strengthen the authorities of U.S. Customs and Border Protection (“CBP”) to enforce the customs and trade laws of the United States,” enhances CBP’s mandate, increases the costs of disclosure and compliance on the part of importers, and expands legal uses of trade data beyond cargo safety and security in a shift toward removing “roadblocks for the clearance process, enforcement actions, and even national security determinations,” among other purposes. The act also expands liability for violations of reporting requirements, clarifies procedures for a variety of reports and challenges, and expands the operating scope of CBP information-gathering and investigation activities.

Title I: Improved Collection and Use of Information.

In an attempt to overcome data collection constraints currently facing the agency, CBP would receive expanded authority to collect U.S. import data from importers and other parties.

• The requirements for filing of entry documentation, with which the importer of record or its customs broker must comply, will include furnishing CBP with advance information about the merchandise (instead of collecting this information post-importation). First-time violations will incur a $5,000 penalty and subsequent violations each will incur a $10,000 penalty.

• Record keeping and production requirements will extend to e-commerce platforms or marketplaces and other entities that facilitate cross-border transactions.

• CBP will be authorized to apply adverse inferences to importers and other parties that fail to make reasonable efforts to comply with demands for records – which can impact CB’s ascertainment of an entry’s correctness and determining liability for fines, penalties, duties, etc.

• Mandatory advance electronic information collected for cargo may be collected for the purpose of enforcing all trade and customs laws (not only to ensure cargo safety and security).

The proposed changes would allow Customs to more easily collect data to achieve greater supply change transparency and facilitate enforcement in connection with forced labor prevention, unfair trade practices, and other import prohibitions.

Title II: Strengthened Enforcement of Import and Export Prohibitions.

The Act strengthens CBP’s authority to examine and test merchandise that infringes intellectual property (“IP”) rights. To lower the cost of seizing and forfeiting counterfeit and illicit goods, the Act will permit alternatives, e.g., export of infringing goods, and further permits summary forfeiture of certain infringing goods. Additionally, to raise the cost of importing merchandise “bearing a counterfeit mark or infringing a copyright,” those involved in IP infringement will be subject to civil penalties.

Title III: Liability for Violations of Customs and Trade Laws.

The Act expands liability and clarifies standards for violating U.S. customs and trade laws in several ways with the aim of leading to more consistent, uniform enforcement, lower costs of compliance for good-faith actors, and deterrence of noncompliance. For example, the proposed legislation:

• Expands civil liability for (i) certain violations of arrival, reporting, entry and clearance requirements, and (ii) aiding unlawful importation and exportation, to any person who knowingly provides incorrect information in connection with the reporting requirements;

• Removes standard and maximum penalty of gross negligence;

• Clarifies standards for negligence and fraud by aligning the definition of “fraud” with other civil fraud statutes (e.g., the False Claims Act) and case law;

• Permits CBP to (i) disclose the importer name in Enforce and Protect Act (“EAPA”) investigations where the allegation does not identify the importer and CBP has reasonable suspicion that evasion occurred, and (ii) expand EAPA investigations to include additional importers, if CBP reasonably suspects similar conduct;

• Grants CBP authority to levy penalties on those who obstruct investigations.

Title IV: Administrative Exemption from Duties.

The proposed changes in Title IV are perhaps the most significant. With the aim of preventing more unsafe and illegal imports, the Act would allow CBP to collect more information on Section 321 shipments (i.e., shipments that fall under the $800 de minimis threshold and enter the United States duty-free). Such documentation or information may relate, e.g., to the sale or purchase, transportation, importation or warehousing of the article. The Act calls for implementing regulations, the violation of which would result in civil penalties.

These proposed changes are aimed are tackling concerns that Section 321 may be used in order to import illicit substances, such as fentanyl, into the United States without detection.

Notably, Senator Cassidy and Senator Tammy Baldwin (D-WI) previously introduced a bill in June to lower the U.S. de minimisthreshold to match trading partners’ respective thresholds.

Title V: Other Matters.

Finally, Title V provides for clarification of procedures for challenging exclusion order enforcement at the International Trade Commission (“ITC”); reducing administrative burdens by allowing electronic transmission of requests for accelerated disposition of protests and modifying requirements for filing official documents before the Court of International Trade; and allowing CBP to conduct communications electronically. Also included under this title is a provision which clarifies that aircraft and vehicle (truck and rail) manifest be disclosed, as currently only ocean vessel manifest are required to be disclosed.

Taken together, the provisions contained in the Customs Modernization Act of 2023 represent a significant effort to adapt the U.S. customs system to the modern era characterized by e-commerce, forced labor, and drug trafficking. As Senator Whitehouse remarked: “It’s been thirty years since Congress last overhauled our customs laws. Given the explosion of e-commerce and increasingly complex global supply chains, we’re in need of comprehensive customs modernization to better stop kleptocrats, cartels, and international criminals from moving illicit products into the United States. Our bipartisan bill will crack down on bad actors and promote fairer competition for American businesses and workers.”

Read the draft text of the bill here.

Crowell & Moring, LLP continue to monitor this development and the potential impact to businesses and consumers moving forward.