by M. Sigmund Shapiro
May 1, 2000

The recent Treasury Decision 00-20 issued by Customs, regarding the declaration of freight amounts on Customs entries, points up the futility of over-regulation, as well as the public’s apprehension about Customs’ definition of “reasonable care”.

The directive would seem to compel brokers and importers to submit a written statement on each entry when the freight amount is unknown. So much for paperless documentation! Even more ridiculous is the requirement that a subsequent statement be given to Customs if the information cannot later be obtained. Customs headquarters is pleading with the trade community not submit reams of paper at each port of entry. But importers may have no alternative unless Customs simplifies compliance.

In the meantime, foreign shippers are being innovative. Recently, a shipper created an FOB invoice to his customer. But the terms of the shipment were really DDP. To get around it, the shipper had a freight forwarder arrange a “route code” movement, and instruct the U.S. Customs broker to bill the forwarder for duty and charges. The forwarder then billed the shipper for everything.

Years ago, CIF shipments were simple. Sellers had to show on the Customs or commercial invoice, the charges included in the CIF price. Customs took this information at face value, as they normally did at the time. Absent any suspicion of fraud, the importers simply deducted those non-dutiable charges at time of entry. It was simplicity itself. It could work again.

The problem, of course is the new Ocean Shipping Reform Act which permits confidential agreements. Shippers don’t want to reveal their arrangements. But, with parties other than sellers offering rates, it’s virtually impossible to determine who benefits from the markup. And besides, with duty rates so low, it hardly matters in revenue collection by the government.

It’s to be hoped that this confusion will finally convince importers that FOB purchases are preferable, and cheaper in the long run. But, in the meantime, Customs owes it to itself and to the public to rewrite Treasury Decision 00-20 to make it workable.