By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP

As reported in the Customs Overview for June, during a National Association of Foreign Trade Zones conference held in May, an official from U.S. Customs & Border Protection (CBP) disclosed that the agency had ruled that distributors may not enter bulk goods into a Foreign Trade Zone (FTZ), break them down into consumer shipments, and take advantage of the de minimis legislation. The ruling, HQ H275567 (May 8, 2018), has surfaced in CROSS. 

As anticipated, the ruling does not turn on the retail sale prohibition but focuses on the point at which goods are determined to have been imported into the United States. 

The de minimis exception is limited to goods valued at $800 or less and “imported by one person on one day.”

HQ H275567 cites multiple previous rulings in the FTZ context holding that goods are deemed imported prior to the date of admittance to an FTZ. Since at the time of importation the bulk shipment is valued at more than $800, the de minimis exception does not apply. The ruling states: “Under Section 321, the $800 per day limit applies to the merchant at the point of the importation and not the individual purchasers determined subsequent to importation.”

Unfortunately, it appears CBP may be on solid ground here and legislation would be necessary to allow a distributor located in an FTZ to take advantage of the de minimis exception. Clearly, the decision will encourage the use of distribution centers in Canada and Mexico that may be used for that purpose.