Seko Logistics is a massive global freight forwarder, logistics provider and customs brokerage owned by private equity firm Ridgemont Equity Partners. They have 120 offices across 40 countries. They helped Chinese e-commerce giant Shein take the U.S. fast fashion market by storm.
And they have a shocking contempt for CBP, and the legal duties and responsibilities of customs brokers (19 C.F.R. Part 111, Subpart C).
Here’s what we know. Back in September, 2023, CBP officials stated that they’d “recently visited nearly a dozen different brokers who had filed more than one Type 86 entry for a package that CBP discovered contained fentanyl.”
This was crazy, because Type 86 is a voluntary ‘trusted partner’ CBP de minimis pilot program. It’s analogous to ‘Global Entry’, CBP’s faster customs clearance for human beings. Type 86 is Global Entry, for your Temu Order.
With regular de minimis, foreign vendors can ship duty-free, with little chance of inspection, and without filing critical customs paperwork, directly to U.S. households. It’s lawlessness, but the one catch for Temu is that it took longer to reach Americans’ homes.
With Type 86 de minimis, foreign vendors still enjoy duty-free treatment and little chance of inspection. But Type 86 lets them supply the missing customs information, thus earning faster clearance. The catch, for the foreign vendor, is that they must use a licensed U.S. customs broker as their Importer of Record to use Type 86. This is where Seko Logistics comes in.
(A quick aside about what’s actually going on with Type 86: CBP must work with 49 other U.S. agencies who have product oversight responsibilities that touch imports: think the FDA, Consumer Products Safety Commission (CPSC), etc. With regular de minimis, if a package is labeled “Toy”, and a CBP officer happens to notice while doing a sampling of cargo, he or she is obliged to move that ‘toy’ aside and notify the CPSC. That notification is a joke, as CPSC can’t meaningfully be expected to do anything about this single package, but that legally mandated process jams up delivery times. With Type 86, CPSC gets that legally required notification digitally and automatically, so CBP is no longer legally obliged to hold it up. From their perspective, it’s no longer their problem. That’s the Type 86 scam.)
According to court documents, in July, 2023, CBP found “significant non-compliant” de minimis shipments entered by Seko Logistics via Type 86 during audits. This continued to happen. The court documents make reference to “the illicit nature of seized items, the inadequate and erroneous HTSUS descriptions, defects with the Power of Attorney signatures, and instances of exceeding the daily entry limit per ultimate consignee” as among the violations.
On May 20, 2024, CBP gave Seko Logistics a 90-day suspension to the Type 86 program, as well as another CBP trusted trader program known as CTPAT. Seko Logistics came down hard, demanding a reinstatement. CBP, for unknown reasons, caved and granted a conditional 90-day reinstatement to both programs, until August 29, 2024. (Imagine you were caught with fentanyl, more than once, while proceeding through Global Entry. How do you think that would go for you?)
‘Conditional’ reinstatement wasn’t enough for Seko, and so the following day, the company sued CBP in federal court, saying that CBP violated its fifth amendment rights and the Administrative Procedures Act. Seko Logistics demanded unconditional reinstatement by way of injunctive relief against CBP.
Seko Logistics says that CBP officials have stated that the agency does not have authority to hold customs brokers liable for misconduct by their clients, the overseas vendors, despite being the overseas vendors’ official Importer of Record. The company points to comments by Christine Hogue, CBP’s E-commerce and small business branch chief, where she said in a webinar that “the agency won’t hold brokers responsible for contraband inside a box when the exporter lied to the broker about what was inside.”
Seko Logistics is certainly wrong that it has an inalienable right to voluntary ‘trusted trader’ programs like Type 86 and CTPAT, especially as the company is required to act as Importer of Record. Not only should the company be liable, but their aircraft should be seized as would vehicles belonging to any drug trafficker.
But on the bigger picture of de minimis, the company is right. With regular de minimis, back in that disastrous 1995 rulemaking, we said regular carriers could import merchandise without any of the responsibilities of an importer, so long as a dollar-figure below $800 was scrawled somewhere on the package.
All we have left are empty and ineffective indictments against overseas vendors.
Hopefully the President and/or Congressional leadership can find the backbone to stand up against the carriers. They have the United States Supreme Court on their side:
De Minimis Catastrophe Escalates: DOJ Indictments Laughed-Off, Amazon Moving to China, CBP Sued
The de minimis problem is getting worse. Consider this article a “Summer 2024” update of how the de minimis catastrophe continues to escalate.
3 million de minimis shipments per day
U.S. Customs and Border Protection (CBP) has published its Trade Fact Sheet for Fiscal Year 2023, giving us fresh data about the out-of-control ‘de minimis’ loophole dissolving our laws, economy, and morals.
The top level takeaway: de minimis shipments rose 55.6%: from 685.1 million in FY2022 to 1,066,000,000 in FY2023.
How many dogs and x-rays would CBP need to screen 3 million per day?
De minimis is a subsidy worth well-north of $10B/year to China’s exporters
This 55.6% rise in de minimis packages drove a $12.3B decline in tariff revenue for the U.S. Treasury ($104.6B in FY22, down to $92.3B in FY23). And that’s just in the last year! Consider cumulative since imposition of China tariffs in 2018.
With de minimis, 100% of the benefit of this tariff cut goes to overseas (read: mostly China) vendors who use e-commerce platforms to sell directly to Americans despite having zero presence here.
Big picture: why does it make sense to eliminate tariffs, but only for foreign vendors shipping small packages? Shipping small packages has a host of negative externalities, most notably security. And it penalizes businesses who have made brick and mortar establishments, from mom & pop retailers, to big box stores, to traditional importer-wholesalers. (All of whom pay income tax in addition to tariffs, by the way!)
De Minimis Causes Amazon To Abandon Domestic Operations (!!!)
The Wall Street Journal reports:
“Amazon.com plans to launch a service focused on shipping cheap fashion wear, household goods and other products directly from warehouses in China, as it faces growing competition from low-cost e-commerce platforms Temu and Shein.” (Emphasis added.)
This is really bad. From a lobbying perspective, the hope was that Shein and Temu’ fleet of 88 Boeing 777 freighters leaving China daily packed with de minimis shipments would convince Amazon to abandon its support of de minimis. After all, Amazon built its business by developing an extensive domestic warehouse and fulfillment business, which can’t make use of de minimis shipments as those are required to originate outside the United States. A 2023 analysis estimated that Amazon operates 305 large warehouses in the United States, likely more than 1,000 smaller delivery facilities.
But now Amazon is closing its U.S. warehouses and hoping to mimic Shein and Temu. Amazon appears content to be an also-ran, untethered de minimis platform catering to producers in China. How pathetic. This will work about as well as Amazon’s failed attempt to sell in China, dating back to 2004.
Like Shein and Temu, Amazon increasingly appears to tolerate flagrant lawlessness on its platform:
Major Reuters investigation shock: even indicted Chinese vendors continue to sell fentanyl precursors into America using de minimis; laugh-off DOJ
On July 22, 2024, the Department of Justice unsealed an indictment and issued an accompanying press release titled “Chinese National Indicted for Importation of Enough Chemicals to Make Millions of Fatal Doses of Fentanyl”:
The now unsealed charges allege Fang and his associates shipped over 2,000 kilograms of fentanyl precursor chemicals from China into the United States and on to Mexico in approximately 100 separate shipments between August and October 2023. Fang and his co-conspirators were able to avoid law enforcement interdiction of the shipments by declaring them to have a de minimis value, less than $800, and commingling the boxes containing the precursor chemicals with similarly low valued import items, according to the charges.
In this case, DOJ was able to arrest the foreign national shipper in New York. However, three days after this announcement, a team of investigative journalists at Reuters published a damning investigation which put into context the futility of indicting foreign nationals outside our jurisdiction who ship here via de minimis. Their report is titled: We bought everything needed to make $3 million worth of fentanyl. All it took was $3,600 and a web browser.
Essentially, unless the de minimis shipper is dumb enough to physically come here, our indictments do little:
“The U.S. Department of Justice (DOJ) has indicted at least a dozen Chinese chemical suppliers since mid-2023. But at least three of those operators remained in business – and sold precursors to Reuters months after they were charged. One of these was Jenny’s company, which shipped Reuters the kilo of 1-boc-4-piperidone. In chats while arranging the sale, she scoffed at the U.S. crackdown.”
The Reuters investigation goes on to document how the journalists were able to order a kilogram of benzene shipped via FedEx from China to the USA. These Chinese sellers labeled the shipment “Pigment Ink” and declared the value as $10. CBP cleared the package, and FedEx shipped it, despite being told by the journalist that the package was Benzene, had a true value of $150, and declining to sign the necessary affirmation under the Toxic Substances Control Act.
While CBP declined to comment officially to Reuters, a senior CBP official was quoted saying “We can’t seize our way out of the fentanyl threat” and that their investigation “highlighted the need for strengthening U.S. laws and regulations on small packages entering the country”.
This is correct. We now have a solid decade of evidence pointing to the futility of policing high volumes of small packages; a volume entirely driven by de minimis.
Back in CBP’s FY2018, there were 410.5 million de minimis shipments. In January 2018, the New York Times reported: “Nearly $800 million worth of fentanyl pills were illegally sold to online customers in the United States over two years by Chinese distributors who took advantage of internet anonymity and an explosive growth in e-commerce”.
The Congressional response in 2018 was the STOP Act, aimed at getting more data on small shipments. It did nothing, as there is no way to police millions of small daily shipments. More legislative attempts to demand information from foreign vendors will similarly fail.
The CBP FY 2023 fact sheet notes that of the 1,066,000,000 de minimis shipments in FY2023, 785 million – that’s 73% – used one of CBP’s two enhanced data-pilots for de minimis. These are a joke, and even the enhanced data pilots are being used to smuggle fentanyl.
Biden White House Still Peddling “More information needed” Line
The Biden Administration is still refusing to use its blanket de minimis authority to eliminate the loophole or do anything to reduce package volumes. Instead, eight years after our policy makers were bamboozled with the STOP Act’s promises that ‘more package information’ would deter narcotics and contraband trafficking, the Biden Administration is repeating that same 2017-ask to Congress.
The White House proposed that Congress pass a law to “require importers of small packages to provide additional information to Customs and Border Protection officials so that we can keep track of these packages and better detect and identify packages that are carrying illicit fentanyl precursor chemicals and related machinery.”
Claims of “more info will fix this” must be met with maximum pushback. We’ve already done that. China Post provides Advanced Electronic Data for 99% of mail packages. Express Shippers like FedEx and UPS do the same. As do 73% of de minimis packages. Calls for ‘more info’ are a refusal to acknowledge the untenable reality of millions of small package imports.
Even if we had perfect, unlimited, truthful, accurate information for the millions of daily shipments, policing millions of small shipments wouldn’t work. That’s because the manpower resources needed to intercept a single package among 10,000 on an airplane tagged as a t-shirt containing forced-labor cotton are too much.
Major customs brokerage slaps CBP with lawsuit: ‘we’re immune for the contraband we import’
Seko Logistics is a massive global freight forwarder, logistics provider and customs brokerage owned by private equity firm Ridgemont Equity Partners. They have 120 offices across 40 countries. They helped Chinese e-commerce giant Shein take the U.S. fast fashion market by storm.
And they have a shocking contempt for CBP, and the legal duties and responsibilities of customs brokers (19 C.F.R. Part 111, Subpart C).
Here’s what we know. Back in September, 2023, CBP officials stated that they’d “recently visited nearly a dozen different brokers who had filed more than one Type 86 entry for a package that CBP discovered contained fentanyl.”
This was crazy, because Type 86 is a voluntary ‘trusted partner’ CBP de minimis pilot program. It’s analogous to ‘Global Entry’, CBP’s faster customs clearance for human beings. Type 86 is Global Entry, for your Temu Order.
With regular de minimis, foreign vendors can ship duty-free, with little chance of inspection, and without filing critical customs paperwork, directly to U.S. households. It’s lawlessness, but the one catch for Temu is that it took longer to reach Americans’ homes.
With Type 86 de minimis, foreign vendors still enjoy duty-free treatment and little chance of inspection. But Type 86 lets them supply the missing customs information, thus earning faster clearance. The catch, for the foreign vendor, is that they must use a licensed U.S. customs broker as their Importer of Record to use Type 86. This is where Seko Logistics comes in.
(A quick aside about what’s actually going on with Type 86: CBP must work with 49 other U.S. agencies who have product oversight responsibilities that touch imports: think the FDA, Consumer Products Safety Commission (CPSC), etc. With regular de minimis, if a package is labeled “Toy”, and a CBP officer happens to notice while doing a sampling of cargo, he or she is obliged to move that ‘toy’ aside and notify the CPSC. That notification is a joke, as CPSC can’t meaningfully be expected to do anything about this single package, but that legally mandated process jams up delivery times. With Type 86, CPSC gets that legally required notification digitally and automatically, so CBP is no longer legally obliged to hold it up. From their perspective, it’s no longer their problem. That’s the Type 86 scam.)
According to court documents, in July, 2023, CBP found “significant non-compliant” de minimis shipments entered by Seko Logistics via Type 86 during audits. This continued to happen. The court documents make reference to “the illicit nature of seized items, the inadequate and erroneous HTSUS descriptions, defects with the Power of Attorney signatures, and instances of exceeding the daily entry limit per ultimate consignee” as among the violations.
On May 20, 2024, CBP gave Seko Logistics a 90-day suspension to the Type 86 program, as well as another CBP trusted trader program known as CTPAT. Seko Logistics came down hard, demanding a reinstatement. CBP, for unknown reasons, caved and granted a conditional 90-day reinstatement to both programs, until August 29, 2024. (Imagine you were caught with fentanyl, more than once, while proceeding through Global Entry. How do you think that would go for you?)
‘Conditional’ reinstatement wasn’t enough for Seko, and so the following day, the company sued CBP in federal court, saying that CBP violated its fifth amendment rights and the Administrative Procedures Act. Seko Logistics demanded unconditional reinstatement by way of injunctive relief against CBP.
Seko Logistics says that CBP officials have stated that the agency does not have authority to hold customs brokers liable for misconduct by their clients, the overseas vendors, despite being the overseas vendors’ official Importer of Record. The company points to comments by Christine Hogue, CBP’s E-commerce and small business branch chief, where she said in a webinar that “the agency won’t hold brokers responsible for contraband inside a box when the exporter lied to the broker about what was inside.”
Seko Logistics is certainly wrong that it has an inalienable right to voluntary ‘trusted trader’ programs like Type 86 and CTPAT, especially as the company is required to act as Importer of Record. Not only should the company be liable, but their aircraft should be seized as would vehicles belonging to any drug trafficker.
But on the bigger picture of de minimis, the company is right. With regular de minimis, back in that disastrous 1995 rulemaking, we said regular carriers could import merchandise without any of the responsibilities of an importer, so long as a dollar-figure below $800 was scrawled somewhere on the package.
All we have left are empty and ineffective indictments against overseas vendors.
Hopefully the President and/or Congressional leadership can find the backbone to stand up against the carriers. They have the United States Supreme Court on their side:
As a result of the complete power of Congress over foreign commerce, it necessarily follows that no individual has a vested right to trade with foreign nations, which is so broad in character as to limit and restrict the power of Congress to determine what articles of merchandise may be imported into this country and the terms upon which a right to import may be exercised.
Buttfield v. Stranahan, 192 U.S. 470, 493 (1904)
Senator Brown calls for complete De Minimis shutdown
To end on a positive note: on Friday, August 2nd, U.S. Senator Sherrod Brown (D-OH), alongside manufacturers, retailers, law enforcement, and workers at MMI Textiles in Brooklyn, Ohio gathered to issue a public call to President Biden to close the de minimis loophole. Coalition for a Prosperous America CEO was among the guests and thanked Senator Brown for recognizing that this dangerous loophole must be closed.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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