DHS to Add Textile Firms to UFLPA, Increase CAFTA, USMCA Textile Oversight

Homeland Security Secretary Alejandro Mayorkas ordered the writing of the plan after being lobbied by the National Council of Textile Organizations, which represents domestic yarn and fabric mills. The release described that visit this way: "NCTO explained the significant harm that the textile industry is suffering at the hands of unscrupulous individuals and entities who create an unfair market by circumventing the operation of our nation’s free trade agreements, violating the UFLPA, and exploiting the de minimis shipment exception that is established in law."

NCTO CEO Kim Glas said that she and her members "greatly appreciate Secretary Mayorkas’ personal engagement in this urgent effort and believe it’s a strong step forward to addressing pervasive customs fraud that is harming the U.S. textile industry."

Some of the items in the plan were already expected -- more isotopic testing of imported textiles, and more verification visits to factories in Mexico and countries covered by the Dominican Republic-Central America Free Trade Agreement. The release said CBP visited 31 facilities in Mexico -- the first since USMCA replaced NAFTA -- and 18 facilities in Honduras, and said the agency is on track to double these sorts of visits compared to last year.

Other initiatives include conducting joint CBP and Homeland Security Investigations, which they said will include physical inspections, verification of country-of origin with in-depth reviews of documentation, and isotopic and composition testing. "CBP will issue civil penalties for violations of U.S. laws and coordinate with HSI to develop and conduct criminal investigations when warranted," the release said.

CBP said it will be "cracking down on small package shipments to prohibit illicit goods from U.S. markets by improving screening of packages claiming the Section 321 de minimis exemption for textile, UFLPA, and other violations, including expanded targeting, laboratory and isotopic testing, and focused enforcement operations."

The release said CBP has already conducted 15 trade special operations that focused on physical inspection of small shipments and cargo, along with post-release reviews on whether the cargo was eligible for duty elimination under free trade agreements. It said CBP did 300 physical inspections of textile imports, and initiated trade audits on more than $10.5 billion worth of textile imports.

“We are pulling out all the stops to stay one step ahead of the bad actors that try to threaten this essential industry,” said Troy Miller, acting CBP commissioner.

The DHS release noted the domestic textile industry's 500,000 jobs. Glas said "the essential and vital domestic textile supply chain has lost 14 plants in recent months," and said the economic pressures contributing to those closures included "customs fraud and predatory trade practices by China and other countries...."

A joint statement from the U.S. Fashion Industry Association, the American Apparel and Footwear Association, the Retail Industry Leaders Association and the National Retail Federation indirectly questioned NCTO's members' economic significance and its rhetoric around customs fraud, noting in the second sentence that "our members support 55 million (more than one in four) American jobs and invest considerable time and resources in their customs compliance programs."

"With the launch of the plan, we urge CBP and DHS to partner with the fashion industry," the statement said. "A successful enforcement plan must include input from all stakeholders, clear communication with the trade, and coordinated activities with importers, especially if the Department finds illicit activity happening in the supply chain." Those findings "must be shared so that our members and other importers can act quickly to address the issue."

The textile enforcement plan includes many of NCTO's requests, but not its hope that textiles would be excluded from de minimis eligibility, or that the broad de minimis program be scaled back significantly.

Glas said: "We also appreciate DHS ramping up inspection of de minimis packages. While this plan is specific to textile and apparel enforcement, it’s important to note that we are aware that the administration is also exploring other avenues, including regulatory changes, to address concerns regarding de minimis shipments. This was a critical request made by our industry and many other stakeholders. We commend the administration’s expeditious review and urge them to close de minimis to the maximum extent possible under their current authorities."

The regulatory package has not entered interagency review yet (see 2403270071). It's expected to require advance data for these duty-free entries.

The agency also is going to require "special instructions bonds" for container freight station operators, because CBP has so often found that service providers are not presenting merchandise for inspection if there was an early pre-clearance under Type 86, but that does not have to wait for the formal regulations. Currently, CBP has no way to verify if a shipment is below the $800 per day per person threshold -- in other words, the invoice could be accurate and be below $800, but the consignee could be receiving so many shipments that day that, in aggregate, they exceed $800. It is working on an update to the ACE system, so those excess shipments would be flagged.

House Ways and Means Trade Subcommittee ranking member Earl Blumenauer, D-Ore., the most prominent advocate for restricting de minimis, responded to the announcement saying that enhancing enforcement in the de minimis space "is a small but important step that will benefit workers, business, and consumers alike. But it does not negate the imperative for Congress to act and close the de minimis loophole for good."

He also said: "The textile industry in particular has been decimated by a de minimis loophole that allows goods made with slave labor to illegally enter into the United States. Americans don’t want to buy these products but a gusher of more than three million packages a day has left Customs and Border Protection overmatched."

Although de minimis has been the hottest topic on the Hill, Sandler Travis's Nicole Bivens Collinson said the part of the enforcement plan that would make the biggest difference to apparel importers is the promise of more textile production verification visits and comprehensive audits to confirm the imports meet the rule of origin.

"That means that US importers can anticipate more requests for documentation and verification of origin under these agreements. We are aware that CBP has already stepped up this enforcement and that no longer is providing a copy of an origin affidavit sufficient, but verification or evidence of verification of that affidavit is now being sought. We suggest that importers entering goods under the USMCA or CAFTA-DR conduct an internal review of their yarn, fabric and apparel affidavits verifying authenticity and eligibility for preferences in preparation for CBP’s knock on the door. That knock will come sooner than you think given the limited number of producers in some countries," Bivens Collinson wrote to International Trade Today.

The AAFA, USFIA and other trade associations' joint statement addressed import rules for the region. "As our members look to diversify their supply chains, especially back to the Western Hemisphere, we must make sure efforts are included to incentivize and not deter new investments."