U.S. Customs and Border Protection (CBP) has conditionally reinstated Seko Logistics into two customs programs days after suspending the company from using the provisions amid a wider crackdown on duty-free shipments into the U.S.
But the logistics services provider is dead set on finding out why, and has taken legal action against the agency to ensure its full reinstatement into both programs.
Seko Logistics was suspended from participating in the Entry Type 86 and Customs-Trade Partnership Against Terrorism (C-TPAT) imports programs, the company confirmed in a Tuesday statement. Seko was one of six reported customs brokers that was suspended from Entry Type 86, which is a voluntary program designed to give the agency more data about e-commerce parcels arriving in the U.S. to expedite the customs process.
The Entry Type 86 program is designed particularly for shipments imported into the U.S. at a value less than the $800 de minimis threshold, which has attracted foreign e-commerce giants like Shein and Temu to transport goods en masse to individual customers without paying import duties. This practice has drawn scrutiny from American lawmakers and retailers who claim these companies get unfair trade advantages from the practice, while also pushing prices lower.
Related Stories
When The Loadstar initially reported the suspension, the supply chain publication indicated that a major seizure had been made related to shipments from Shein. That report has not been confirmed.
In a Saturday complaint filed with the U.S. Court of International Trade, Seko Logistics alleged that the details of the violations have never been provided to the company despite repeated requests to the agency and a threat of legal action.
The third-party logistics (3PL) provider wanted to clarify the alleged deficiencies and understand what proof-of-compliance issues are specific to the firm, calling CBP’s suspension a “draconian measure” in a statement.
The company also said the reinstatements didn’t come until Seko made the legal threat.
Seko seeks injunctive relief to remove any conditions for reinstatement until alleged violations leading to the agency’s suspension decision are identified.
“We are incredibly disappointed by, and strongly disagree with, the original decision by CBP,” said James Gagne, president and CEO of Seko Logistics, in a statement. “We intend to pursue all appropriate actions to protect our company, our clients, and the U.S. consumer while we continue working as an important compliance partner in global supply chains in good standing with U.S. Customs and with C-TPAT.”
Seko said it was originally notified by CBP of the suspension on May 20, along with several other unnamed brokers. By Seko’s account, the agency gave them only seven days before the suspension went into effect.
The company says it has maintained a “99.999 percent” compliance rate, yet has not had an opportunity to address any unverified deficiencies identified by CBP.
A day after Seko received the suspension letter, an online retailer customer notified the 3PL that CBP had publicized an internal memo that said Seko was a customs broker prohibited from filing T86 customs entries. Seko contended in the filing that its reputation as an e-commerce logistics leader was “unlawfully harmed” after the event.
“CBP’s actions have caused irreparable harm to Seko’s business reputation, goodwill and imminent loss of business due to failure to comply with contractual obligations to provide T86 entry services,” said Seko in the complaint.
Seko also said it has evidence that a substantial number of Section 321 shipments—packages that fall under the de minimis trade exemption—have been lost to competing customs brokers who are still eligible to participate in the Entry Type 86 program.
CBP has been vague on what is setting off the crackdowns, but acting commissioner Troy Miller said Friday that the suspensions from Entry Type 86 came “after determining that their entries posed an unacceptable compliance risk.”
Miller noted that the suspensions are enforced to prevent abuse of the de minimis process, protect the integrity of the supply chain and ensure that businesses comply with applicable U.S. legal requirements. In particular, he highlighted that bad actors could exploit de minimis to move illicit drugs like fentanyl into the U.S.
“Any broker that has been suspended will be considered for reinstatement if it demonstrates to CBP that it has developed and implemented a remedial action plan,” said Miller.
The de minimis provision has become big business for domestic and foreign businesses alike. Imports into the U.S. have increased from 636.7 million in 2020 to 1 billion in 2023, and are at an estimated 705.1 million for 2024 “mid-year.”