Executive Order Signals Major Escalation in Customs Enforcement: What All Importers of Record Should Do to Meet the Added Mandatory Requirements

Enforcement Enhancements

The Executive Order provides the Secretary with a mandate to substantially increase customs enforcement at the administrative level, which follows and expands on prior trade enforcement directives. The Secretary is directed to take any action necessary to bolster the enforcement of customs laws and regulations. At a minimum, the Secretary must:

• Enforce liquidated damages claims against bonds for noncompliance
• Restrict in-bond utilization
• Increase audits
• Impose maximum penalties for brokers who
  • fail to conduct due diligence
  • repeatedly represent noncompliant clients, or
  • fail to cooperate in a timely manner with requests for information by U.S. Customs and Border Protection (CBP)

Along with these specific actions, the Secretary must prioritize the enforcement of federal law relating to:

• Forced labor
• Misclassification
• Undervaluation
• Illegal transshipment

The EO specifically identified investigations conducted pursuant to the Enforce and Protect Act (Public Law 114-125) as a mechanism the Secretary should use.

The Secretary must also revise penalty mitigation standards related to import violations. At a minimum, the Secretary must:

• Establish a minimum penalty floor of not less than 50 percent of the assessed penalty, absent exceptional circumstances that materially impact national security
• Establish a minimum liquidated damages floor
• Eliminate mitigation for repeat offenders

In all, these actions demonstrate the Trump administration's clear intent to strictly enforce its trade policy through existing and revised administrative enforcement mechanisms.

For example, following the Executive Order, CBP quickly issued updated guidance titled Forced Labor Enforcement Operational Guidance for Importers. This latest guidance discusses how CBP prevents the importation of goods produced with forced labor into the United States through:

• 19 U.S.C. § 1307
• the Uyghur Forced Labor Prevention Act (UFLPA)
• the Countering America's Adversaries Through Sanctions Act (CAATSA)

The guidance describes the actions importers must take to comply, enforcement procedures, and penalty exposure. Importers can expect further enforcement-oriented guidance regarding additional trade topics in the future.

New Requirements for Importers of Record

The new Executive Order directs the Secretary of Homeland Security to overhaul Importer of Record (IOR) regulations within 180 days. All IORs will face:

• Increased minimum bond requirements
• Mandatory designation and bonding for both formal and informal entries
• Expanded disclosure obligations covering beneficial ownership, business affiliations, and domestic assets

Foreign IORs face the most significant impact. They are:

• Prohibited from filing informal entries entirely
• Generally barred from using continuous bonds for formal entries unless CBP determines revenue is fully protected
• Required to obtain Customs Trade Partnership Against Terrorism (CTPAT) validation or use a CTPAT validated customs broker

All IORs must maintain "good standing" with CBP based on compliance history and payment of customs liabilities. IORs linked to illegal importation of fentanyl or other illicit substances will lose good standing and be barred from importing. CBP will also:

• Create risk-based tiers for IORs
• Establish enhanced vetting procedures for all import-related actors, including customs brokers, freight forwarders, and bonded custodians

Updated Import Disclosure and Certification Requirements

The Secretary must also establish heightened import disclosure and certification requirements. Importers will be required to:

• Certify compliance with critical supply chain laws, including the Countering America's Adversaries through Sanctions Act and 18 U.S.C. § 545, among others determined by CBP
• Disclose certain foreign tax and global business identifiers
• Provide detailed supply chain and production information, such as the manufacturer's product identifier (e.g., model or style number) or key specifications (e.g., composition, grade, or size)

Noncompliance will be met with all applicable criminal fines and civil penalties.

Within 90 days, the Secretary must also establish a requirement that importers submit any documentation or information the foreign exporter was required to provide to the foreign customs administration prior to exporting to the United States.

Other Provisions

• The Secretary must enact procedures to expedite and enhance the seizure and disposal of non-compliant imports.
• CBP will increase transparency through periodic reviews of confidentiality requests and annual reports.
• The Secretary, along with the Director of the Office of Management and Budget and the heads of any other relevant agencies, shall submit to the President, through the Senior Counselor for Trade and Manufacturing, recommendations for legislation to strengthen customs enforcement.

What Companies Should Do

This Executive Order calls for a wholesale examination of trade compliance to ensure preparedness for any outreach from CBP. Importers engaging in any tariff mitigation strategies should ensure compliance with all requirements and review and assess:

• IOR status
• Bonding levels
• Disclosure readiness
• Compliance history in anticipation of these changes
• Current import documentation practices 
• Supply chain visibility to ensure readiness for these expanded disclosure obligations

Our International Trade and National Security Team will continue to monitor developments and provide updates as warranted. If you have any questions or would like to discuss, please contact P. Lee Smith, Matthew McGee, or any member of Baker Donelson's International Trade and National Security Team.