Global e-commerce has drastically increased the number of international shipments sent each day. When consumers and companies buy merchandise online via an e-commerce platform, it may come from anywhere in the world. Entry Type 86, is a new customs entry type intended to help Customs and Border Protection (CBP) manage the flow of goods, creating greater visibility for low-value shipments entering the U.S. while improving border protection, import security, and safety.
Beginning in September 2019, imports to the U.S. with a de minimus value of less than $800 can be classified under the new Entry Type 86. When imported under this designation, importers (shippers, purchasers, or designated customs brokers) are not required to file for formal entry of their goods into the U.S., or to pay taxes and duties. Cargo of these trade goods are considered duty-free as long as the relevant CBP form is completed. Importers can now file for Entry Type 86 and complete the CBP form using the Automated Commercial Environment (ACE) broker portal.
At the same time, Customs Entry Type 86 will improve the time-consuming import process and associated fees for importers bringing low-value products or goods into the U.S. This regulation will make the customs and border process more straightforward for the importer and shipper. The question becomes: is my product eligible under Entry Type 86? This guide explains this new entry type: the process and its benefits.
Formal Vs. Informal Entry
When sellers or customs brokers import goods into the U.S. for commercial sales, there are two options for alerting Customers and Border Control: formal and informal entry. Entry Type 86 expands the number of shipments eligible for informal entry. Manufacturing in Mexico is poised to grow with this new federal register regulation and classification.
To better understand this designation, we’ll take a look at both entry types.
Filing for formal entry is a lengthy and time-consuming process. First, the seller or customs broker must choose a port of entry for their shipment and notify a Commodity Specialist Team member to gather data regarding:
- Harmonized Tariff Schedule for the United States tariff Classifications
- Duty rates
- Any applicable Regulations to the products they are importing
- Acceptable bond types—all goods must be bonded to cover cost, taxes, and duty
Between a week before and 15 days after entry, the importer will file several additional customs forms, along with these data requirements:
- An invoice
- A packing list
- Shipping documents
- A check for estimated duties
After the paperwork meets reporting requirements and is approved, goods are either released and shipped to their final destination, or stamped for further inspection.
In contrast to formal entry, informal entry is a fairly straightforward process. When goods enter the U.S. informally, they do not need to be bonded. In addition, the customs broker does not need to complete and file every form—more of this work is left to the Customs Officers at the Port of Entry.
Informal entry has long applied to goods imported for personal enjoyment rather than commercial sale. However, it has excluded all goods that are subject to Participating Government Agency (PGA) regulation requirements. PGAs that regulate some shipments include:
- The Fish and Wildlife Service (regulates the import of animals and products made from their parts)
- The Food and Drug Administration (regulates food, cosmetics, and drugs)
In the past, all PGA-regulated goods required formal entry and CBP approval for release.
Entry Type 86 expands the number of imports that are eligible for informal entry and further simplifies the import process. In particular, it can be used even for cosmetics, food products, etc., that are usually regulated by PGAs. While Section 321 de minimis is focused on travelers, entry type 86 is focused on businesses.
How it Works
Section 321 is the U.S. Customs and Border Protection that describes de minimis shipments—shipments that are “too trivial” to be subject to formal entry rules. Under Entry Type 86, Section 321, shipments under $800 USD are eligible. An e-commerce platform with previously formal entry products may be able to reclassify their products as informal entry products saving the importer, shipper, and customer money as a result.
Entry Type 86, a voluntary trade filing for shippers, purchasers, and designated custom brokers seeking to avoid formal entry and the payment of duties. As of September 2019, it can be used at any Port of Entry in the U.S., and it can be used one time per person per day to meet reporting requirements. (It is currently in a test-run phase.) Entry Type 86 builds on the benefits of NAFTA for Mexico and a variety of other countries who trade closely with the U.S.
In American Shipper’s analysis of Entry Type 86, Chris Gillis breaks down the information custom brokers must provide for a given shipment:
- Bill of lading or air waybill number
- Entry number
- Planned port of entry
- Shipper name, address, and country
- Consignee name and address
- Country of origin
- “Fair retail value” in the country of shipment
- 10-digit Harmonized Tariff Schedule number
- IOR (importer of record) number of the owner, purchaser, or broker
Importantly, a shipment cannot be broken up into several parts to take advantage of this entry type.
While Entry Type 86 is meant to ease the import process for PGA-regulated goods, not all shipments are eligible for this entry status. If a PGA-regulated commodity requires the collection of fees on import, it is not eligible for this entry type.
In particular, the following trade goods are not eligible:
- Goods subject to antidumping and countervailing duties
- Goods subject to quota
- Certain tobacco and alcohol products
- Goods taxed under the Internal Revenue Code
Shipping Benefits of Entry Type 86
Prior to Entry Type 86, all imports with a value of over $200 had to file for formal entry as well as pay duties. Entry Type 86 exempts shipments from taxes and duties. In addition, as with other informal entries, Entry Type 86 goods do not need to be bonded.
For importers bringing low-value goods into the U.S., this new entry type should ease both the time and monetary costs associated with shipping. The electronic data interchange simplifies the process for importers and the CBP.
At NAPS, we specialize in outsourced administrative and compliance management services that ensure long-term success for companies manufacturing in Mexico. Contact us with any questions you have about your imports classifying under Entry Type 86, so you save money on taxes.