2025-01074. Trade and National Security Actions and Low-Value Shipments

Table 1—Weighted Average Section 301 and MFN Tariff Rates by 3-Digit NAICS Code

NAICS code	NAICS description	Weighted average tariff rate (%)
11	Agriculture, Forestry, Fishing and Hunting	21.8
211	Oil and Gas Extraction	25.0
212	Mining (except Oil and Gas)	25.0
311-312	Food, Beverage and Tobacco Product Manufacturing	12.2
313	Textile Mills	31.2
314	Textile Product Mills	31.0
315	Apparel Manufacturing	21.0
316	Leather and Allied Product Manufacturing	28.3
321-323	Wood, Paper, Printing	21.2
324	Petroleum and Coal Products Manufacturing	26.8
325-326	Chemical, Plastics, Rubber Products Manufacturing	17.8
327	Nonmetallic Mineral Product Manufacturing	23.9
331	Primary Metal Manufacturing	23.1
332	Fabricated Metal Product Manufacturing	25.5
333	Machinery Manufacturing	24.9
334	Computer and Electronic Product Manufacturing	21.0
335	Electrical Equipment, Appliance, and Component Manufacturing	26.4
336	Transportation Equipment Manufacturing	22.8
337-339	Furniture and Miscellaneous Manufacturing	14.1
All Industries		21.2
Source: Data provided by the International Trade Administration (ITA) via email on October 11, 2024.

In contrast to tariff payments, fees are assessed on a per-shipment basis, and thus vary significantly depending on assumptions about the degree to which items are bundled together in larger, consolidated shipments. These fees include: (1) payments to brokers to file and process entries; and (2) the merchandise processing fee (MPF) paid ( print page 6861) to CBP on all type 01 and 11 entries.^[34] Table 2 presents the fees charged by brokers (working with carriers) to file and process entries. Our estimate for the cost of processing an international shipment in the postal environment is $8.55. We do not include the $7.20 dutiable mail fee charged by CBP, which is required when CBP personnel must complete the paperwork for postal shipments themselves, as it is not clear how often CBP personnel would be the ones completing the paperwork. CBP is requesting public comment on the expected costs of processing a shipment in the postal environment, including how often the dutiable mail fee is expected to apply.

Table 2—Per Shipment Fees

Type	Fee ($/shipment)
Broker fee: 1
Non-express commercial carrier 2	$1.00
Express commercial carrier 3	30.00
Postal carrier 3	8.55
Merchandise Processing Fee (MPF): 4
All	2.53
Sources and assumptions:
1  A licensed broker is not currently required for the “release from manifest” entry process, nor would the ELVS NPRM require one for the basic entry process if the ELVS NPRM is finalizes as proposed. We assume for purposes of this analysis that a broker fee is charged for any entry requiring an HTSUS code and is similar regardless of whether the filer uses enhanced entry, entry type 86, 01, or 11. (Source: Personal communication with representatives of a major broker association on 9/26/2024.)
2  Email from CBP dated 10/11/2024.
3  Fajgelbaum and Khandelwal (2024).
4  Minimum merchandise processing fee for informal entries as of October 1, 2023. (As viewed on 10/11/2024 on https://www.federalregister.gov/​documents/​2023/​07/​28/​2023-16197/​cobra-fees-to-be-adjusted-for-inflation-in-fiscal-year-2024-cbp-dec-23-08.)

We highlight that these fees are a significant additional cost for many qualifying low-value shipments relative to the overall value of these goods. For example, roughly one-fifth (18.5 percent) of qualifying low-value shipments have a declared value of $5 or less and the majority of these shipments (61.5 percent) have a declared value of $25 or less. Examination of the magnitude of fees relative to the value of shipments currently claiming the administrative exemption, coupled with discussions with representatives of the customs broker and logistics community, suggest that shipment consolidation is a likely outcome of the proposed rule (see chapter 3 in the RIA available in the docket of this rulemaking for additional detail). We evaluate the uncertainty associated with an assumption about the likelihood of consolidation by modeling two separate scenarios, summarized below:

• Low impact scenario. We assume that in order to mitigate additional fees, similar or identical Section 301 goods are consolidated into larger, bulk shipments, which would be entered using either entry type 01 or entry type 11 and would be comprised of multiple pieces of identical items.^[35] As a result, the only increase in price experienced by consumers of goods subject to Section 301 duties is the duty because all fees are assumed to be fully mitigated.^[36] Certain shipments without Section 301 goods are also affected because they must provide an HTSUS code where none was required previously. Non-Section-301 shipments in the express environment using the basic entry process are consolidated to mitigate the fees paid to the broker for filing the entry with the HTSUS ( i.e., similar to Section 301 goods, fees are assumed to be negligible, or $0). For express shipments that would use enhanced entry, and therefore already provide HTSUS codes, no change in entry mode occurs. Similarly, because this rule does not require an HTSUS code for postal shipments, postal shipments without Section 301 goods are also unaffected.

• High impact scenario. In this scenario, we assume less consolidation occurs. Shipments without Section 301 goods remain qualifying low-value shipments and pay a fee to a customs broker to file the entry with the HTSUS code. The fee ranges from $1 to $30 per shipment, depending on the carrier. Because the affected parties are hiring a broker to file the entry and assign an HTSUS code, they file an enhanced entry, rather than a basic entry.^[37] For shipments with Section 301 goods, we assume that the typical business relationship between non-express carriers and their clients supports consolidation of like items as a means of mitigating fees, which would result in these shipments being entered either using entry type 01 or entry type 11 ( i.e., net fees, when combined with the potential savings in shipping costs associated with consolidation, are assumed to be negligible, or close to $0). However, we assume Section 301 shipments transported by express carriers and the postal service remain unconsolidated and apply associated per shipment fees ( i.e., broker/filing fees range from $8.55 to $30 per shipment, depending on the carrier, plus a MPF of $2.53 per shipment).

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Results

Results from the partial equilibrium analysis are as follows:

1. Consumer surplus losses in 2025 range from $10.0 billion (low scenario) to $18.2 billion (high scenario). These losses are largely explained by higher import prices faced by consumers. In both scenarios, tariffs raise the price of low-value shipments for the consumer. In the high scenario, these price increases are heightened due to broker fees and MPF applicable to many shipments. In addition, consumers experience a welfare loss associated with a reduction in import quantities resulting from these price increases.

2. Tariff revenues increase in all years relative to the baseline. In 2025, $7.8 billion in tariff revenues are generated in the low scenario, compared with $5.9 billion in the high scenario. Because tariff revenues depend on the value of imported goods, the high scenario generates less revenue as consumer demand falls in response to the additional fees on many shipments.

3. The proposed rule results in net decreases in welfare in the low scenario (−$2.2 billion in 2025) and high scenario ($−12.3 billion in 2025).^[38] For the 10 years following rule implementation, the present value of these welfare effects is a loss of $21.9 billion in the low scenario and $121.9 billion in the high scenario (assuming a 2 percent real discount rate).^[39] The greater impacts in the high scenario result from the additional costs imposed on imported goods in the form of broker fees and merchandise processing fees.^[40]

4. Tariff pass-through —the rate at which increased tariffs are passed on to consumers through higher prices—is a key parameter that influences all three partial equilibrium outputs presented in this report: consumer surplus, tariff revenues, and net welfare effects. Consistent with recent economic evidence on tariff pass-through, we assume full tariff pass-through to U.S. consumers in our main estimates.^[41] That is, consumers bear the full cost of increased tariffs as foreign suppliers do not adjust their supply prices. Given uncertainty in the rate of tariff pass-through, we calculated the “break-even” points where the net welfare effects are $0.^[42] In the low scenario, pass-through rates greater than 79 percent (including the 100 percent pass-through assumed in our main estimates) result in net welfare losses; lower pass-through rates would result in net welfare gains. In the high scenario, this break-even point is roughly 35 percent. In other words, if foreign producers reduce their prices by an amount equal to 21 percent of the tariff increase in the low scenario, or 65 percent of the tariff increase in the high scenario, consumer surplus losses are offset by increased tariff revenue.^[43 44]

5. Impacts are largely concentrated among qualifying low-value shipments containing Section 301 goods, which are subject to tariffs under the proposed rule. In the high scenario, we estimate additional costs for a subset of qualifying low-value shipments not containing Section 301 goods, which may be subject to additional broker fees to comply with the rule's requirements to provide HTSUS codes.

6. Apparel manufacturing comprises the majority (51.4 percent) of the value of qualifying low-value shipments. While the effects of the rule on each industry are not exactly proportional to its share of imports (due to differing demand elasticities and tariffs in each sector), the effects are concentrated among few industries comprising most affected imports.

7. Distributional considerations: While data limitations hindered our ability to examine how the proposed rule may disproportionately impact some consumers, Fajgelbaum and Khandelwal (2024) ^[45] provide evidence that eliminating the administrative exemption entirely would disproportionately affect lower-income and minority consumers. In their paper, the authors explain that direct-to-consumer imports comprise a higher share of household spending for zip codes with lower incomes and lower shares of white households. Their analysis finds that consumers in the poorest zip codes lose 24.8 percent more consumer surplus than the representative consumer. In Appendix A in the standalone RIA, we provide additional detail on this study and its ( print page 6863) applicability to our analysis of the proposed rule.

8. Baseline growth in qualifying low-value imports is highly uncertain. In our main estimates, we assume that post-2025 growth in qualifying low-value import values follows growth in real GDP. In essence, this implies that the value of qualifying low-value shipments would comprise the same share of overall GDP in each year from 2025 to 2034. Growth in the low-value import sector, however, has considerably outpaced GDP in recent years. As a sensitivity analysis, we present a high-growth scenario assuming 18.4 percent annual increases in qualifying low-value shipment value and associated welfare effects. This percentage corresponds with the growth in total low-value shipment values between 2023 and 2024 and is generally reflective of growth since 2016. The resulting present value of welfare losses over the 10-year analysis period is approximately doubled relative to our main estimates: using a discount rate of 2 percent, we estimate $47.2 billion in net welfare losses in the low scenario and $262.5 billion in net welfare losses in the high scenario. We note, however, that sustaining 18 percent growth in the value of qualifying low-value shipments may be implausible.

Our primary estimates are presented in Table 3. Programming costs to the U.S. government associated with rule implementation are also considered. Over the 10-year period of our analysis, the present value cost of these software changes is approximately $460,000, assuming a discount rate of 2 percent.

Table 3—Partial Equilibrium Analysis Results: 2025-2034 Main Results

[$Billions, 2024 dollars]

Year	Low impact scenario			High impact scenario
	Consumer	Tariff	Welfare	Consumer	Tariff	Welfare
2025	−$10.0	$7.8	−$2.2	−$18.2	$5.9	−$12.3
2026	−10.3	8.0	−2.2	−18.6	6.0	−12.5
2027	−10.5	8.2	−2.3	−18.9	6.2	−12.8
2028	−10.7	8.3	−2.3	−19.3	6.3	−13.0
2029	−10.9	8.5	−2.4	−19.6	6.4	−13.2
2030	−11.0	8.6	−2.4	−19.9	6.5	−13.4
2031	−11.2	8.7	−2.5	−20.3	6.6	−13.7
2032	−11.4	8.9	−2.5	−20.6	6.7	−13.9
2033	−11.6	9.1	−2.5	−21.0	6.8	−14.2
2034	−11.8	9.2	−2.6	−21.4	7.0	−14.4
Total, undiscounted	−109.4	85.4	−24.0	−197.9	64.5	−133.4
Present value, 2% d.r.	−99.9	78.0	−21.9	−180.8	58.9	−121.9
Annualized, 2% d.r.	−10.9	8.5	−2.4	−19.7	6.4	−13.3
Note: Growth in the value of qualifying low-value shipments is assumed to match growth in real GDP from 2025 to 2034. When growth is assumed to match year-over-year growth in low-value shipments since 2016, net welfare losses in the low scenario are estimated at $47.2 billion and $262.5 billion in the high impact scenario.

Incremental Benefits

The proposed rule would preclude goods subject to specified trade or national security actions from claiming the administrative exemption, which would strengthen the effectiveness of the United States' trade and national security actions. Moreover, the change in eligibility for the administrative exemption would significantly reduce the volume of qualifying low-value shipments, and to enforce this change in eligibility for the administrative exemption, CBP would require all low-value shipments entered through basic entry to provide an additional data element. Both the reduction in qualifying low-value shipments and the additional data would improve CBP's ability to identify violative goods and prevent inadmissible merchandise from entering the United States. These benefits are described qualitatively below.

Trade and National Security Actions

First, the proposed rule would strengthen the effectiveness of United States' trade and national security actions. Section 301 tariffs are meant to incentivize changes in foreign governments' acts, policies, or practices. Additionally, specified trade and national security actions can be used to protect U.S. industries from injurious serious injury, or the threat thereof, caused by import surges, unreasonable or discriminatory practices, or adjust imports that threaten to impair national security. Allowing these goods to be imported without assessing the Section 301 tariff that would otherwise be applicable undermines this effort. Excluding these goods from the administrative exemption and requiring additional data will allow CBP officers to assess additional duties, specified in an applicable trade or national security action.

By increasing tariff revenue, this rule would help accomplish the goals of the tariff actions. The largest effect would be on goods subject to Section 301 tariffs. Based on a random sample of 6,238,717 type 86 entries in fiscal year 2023, we estimate that 77 percent of the total value of all ET86 entries covered goods subject to tariffs imposed under Section 301. According to CBP statistics, the total value of all imports claiming the administrative exemption in FY 2023 was $54.6 billion. We assume that the share of the total value of qualifying low-value shipments containing goods subject to Section 301 tariffs was the same for entries entered under the “release from manifest” process as compared to type 86 entries. With this assumption, we estimate that the total value of all qualifying low-value shipments that would have been subject to Section 301 tariffs in fiscal year 2023 was $41.1 billion. The total value of type 01 and 11 entries covered by Section 301 tariffs that same year was $215.9 billion. Hence, we estimate that qualifying low-value shipments made up 16.0 percent of the total value of goods covered by Section 301 tariffs. This rule would therefore strengthen the incentive for China to eliminate its acts, policies, and practices related to technology transfer, intellectual property, and innovation that are unreasonable or discriminatory and burden or restrict U.S. commerce. ( print page 6864)

Targeting of Violative Shipments

In addition to the primary benefit of this regulation, strengthening U.S. trade and national security actions, the proposed rule will also support CBP's efforts to identify and intercept items violating import laws and regulations. The proposed rule would require all shipments claiming the administrative exemption under 19 U.S.C. 1321(a)(2)(C), entered under either the proposed new basic or the proposed new enhanced entry process, to provide a 10-digit HTSUS classification for the merchandise within the shipment. In the absence of the proposed modification to the rule as proposed in the ELVS NPRM, basic entries would not be required to provide 10-digit HTSUS classifications. This additional data element would allow CBP to more effectively target and screen basic entries in order to identify violative shipments ( e.g., prohibited items that are not allowed to enter the United States and other items ineligible for entry under the administrative exemption). CBP seizure statistics show that low-value shipments pose a security concern when compared to type 01 and 11 entries. In particular, CBP finds that goods claiming the administrative exemption have higher seizure rates for narcotics, IPR violations, and prohibited items than goods entered through entry type 01 and 11. See Section 5 of the standalone RIA for more details on the security concerns posed by low-value shipments. Imports claiming the administrative exemption made up 87 percent of total seizures in fiscal year 2023.

Macroeconomic and Distributional Effects

We estimate the macro-economic and distributional effects of the proposed rule using USAGE-TERM, a computable general equilibrium (CGE) model of the United States. At its most disaggregate level USAGE-TERM tracks variables like inputs, output, employment, investment, trade, and prices for 513 sectors in 70 regions across the U.S. A summary of the results of the CGE analysis follows:

• In the low impact scenario, we estimate that the average price of imported goods would be 0.29% higher. We estimate that consumer prices would be 0.10% higher in year 1 and 0.12% higher in year 10.
• We estimate consumer welfare losses of $9.5 billion in year 1, shrinking to $6.7 billion in year 10.
• We estimate a decrease in GDP, compared to the baseline, of 0.03% in both year 1 and year 10.
• Sectors that benefit from the proposed rule, like apparel, textiles, and leather, would see job growth. These sectors would employ 5,900 more people in year 1, and 3,900 more people in year 10 compared to the baseline.
• We did not explicitly model the impacts on the logistics and express sectors. To the extent that consumers use more logistics and express services we would expect these sectors to benefit from the proposed rule.
• These job gains, which could be a result of new jobs being created or fewer job separations, would be offset by a net reduction of jobs in other sectors. On net, the U.S. economy would have 97,000 fewer jobs in year 1, due to an increase in job separations and a reduction in new hires. By year 10 the economy would return to full employment.^[46]

• In the high impact scenario, we estimate that the average price of imported goods would be 0.51% higher. We estimate consumer prices would be 0.17% higher in year 1 and 0.21% higher in year 10.
• In the high impact scenario, we estimate consumer welfare losses of $16.5 billion in year 1, shrinking to $11.6 billion in year 10.
• We estimate a decrease in GDP, compared to the baseline growth of GDP, compared to the baseline, of 0.06% in year 1 and 0.05% in year 10.
• Sectors that benefit from the proposed rule, like apparel, textiles, and leather, would see job growth. These sectors would employ 9,700 more people in year 1, and 6,400 more people in year 10 compared to the baseline.
• These job gains would be offset by fewer jobs in other sectors. On net, the U.S. economy would have 136,000 fewer jobs in year 1, due to an increase in job separations and a reduction in new hires. By year 10 the economy would return to full employment.

B. Additional Requirements for Regulatory Analysis

Table 4 provides a cost accounting statement for the proposed rule. Estimates correspond to the low-impact scenario based on our understanding that many low-value shipments are likely to be consolidated under the proposed rule to lessen costs associated with fees. Therefore, CBP considers the low-impact scenario as the primary estimate of the impact of this proposed rule.

Table 4—A-4 Accounting Statement for the Proposed Rule

Category	Annualized estimate (in 2024 dollars)	Source citation
Benefits
Monetized benefits	None	RIA, Chapter 5.
Quantified, non-monetized benefits	None
Qualitative (unquantified) benefits	Greater enforcement/effectiveness by requiring goods with 232, 201, and 301 duties to utilize entry types subject to duty payment. Improved targeting of violative shipments by requiring certain qualifying low-value shipments to provide HTSUS codes that describe the contents of the entry. In certain cases, CBP estimates that consolidation of shipments would lead to faster merchandise release, enhanced national security and improved health and safety
Costs
Monetized costs	$10.9 billion (low scenario) or $19.7 billion (high scenario) in consumer surplus loss	RIA, Chapter 3.
Quantified, non-monetized costs	None
( print page 6865)
Qualitative (unquantified) costs	None
Cost Savings Monetized costs	None
Quantified, non-monetized cost savings	None
Qualitative (unquantified) cost savings	None
Transfers
Monetized budgetary transfers	None	RIA, Chapter 3.
Other monetized transfers	$8.5 billion (low scenario) or $6.4 billion (high scenario) in additional duty revenue, paid for by U.S. consumers assuming full pass-through by foreign producers and returned to consumers to offset consumer surplus loss
Distributional Effects
Effects on State, local, and/or tribal governments Effects on small businesses	The proposed rule affects consumers, which could include anyone in the United States, including businesses, not-for-profit organizations, government jurisdictions, as well as individuals. As a result, a substantial number of small entities are likely to be affected. Prices for an individual affected low-value shipment could increase by 12.2 to 31.2 percent, depending on whether only tariffs or tariffs plus broker fees are incurred, the type of carrier transporting the shipment into the United States, and the underlying value of the shipment. Lacking readily-available information describing the number of qualifying low- value shipments and their value imported annually by small entities, CBP cannot certify this rule under the Regulatory Flexibility Act at this time. Instead, it conducts an Initial Regulatory Flexibility Analysis (IRFA)	RIA, Chapter 6.
Effects on inflation	Inflation increases by between 0.1% and 0.17% in year 1	RIA, Chapter 4.
Effects on growth	GDP growth is 0.03% lower in year 1	RIA, Chapter 4.
Note: Present value calculations use 2025 as the base year. Costs are annualized over 10 years from 2025 to 2034 and reflect a 2 percent discount rate.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et. seq.) (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), requires agencies to assess the impact of regulations on small entities. A small entity may be a small business (defined as any independently owned and operated business not dominant in its field that qualifies as a small business per the Small Business Act); a small not-for-profit organization; or a small governmental jurisdiction (locality with fewer than 50,000 people).

Under the requirements of the RFA, as amended by SBREFA and Executive Order 13272 entitled “Proper Consideration of Small Entities in Agency Rulemaking,” agencies must consider the potential impact of proposed regulations on small businesses, small governmental jurisdictions, and small organizations during the development of their rules.

Specifically, CBP is required to prepare an RFA analysis and take other steps to assist small entities, unless it certifies that the rule will not have a “significant economic impact on a substantial number of small entities.” The Small Business Administration (SBA) provides guidelines on the analytical process used to assess the impact of a particular rulemaking on small entities. Generally, an agency first conducts a threshold analysis to determine whether it can certify the proposed rule. The threshold analysis provides the factual basis for such a determination. If the results of the threshold analysis indicate that a rule may have a significant impact on a substantial number of small entities, or if the agency is uncertain, it is required to prepare an Initial Regulatory Flexibility Analysis (IRFA) and publish the IRFA for public comment with the proposed rule. The analytic components of an IRFA are:

1. A description of the reasons why action by the agency is being considered;

2. A succinct statement of the objectives of, and legal basis for, the proposed rule;

3. A description of, and, where feasible, an estimate of the number of small entities to which the proposed rule will apply;

4. A description of the projected reporting, record-keeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the type of professional skills necessary for preparation of the report or record;

5. An identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict with the proposed rule;

6. A description of any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize any significant economic impact of the proposed rule on small entities, such as,

the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities;

the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities;

the use of performance rather than design standards; and,

an exemption from coverage of the rule, or any part thereof, for such small entities.

This section presents data and analysis in support of these requirements. First, we provide an overview of the proposed rule, and then we conduct the threshold analysis in Section 6.2 of the RIA. Because the significance of impacts of the proposed rule on small entities is uncertain, we also prepare an IRFA in Section 6.3 of the RIA.

Overview of the Proposed Rule

This proposed rule makes merchandise subject to an ad valorem tariff pursuant to a trade or national ( print page 6866) security action under Section 232, 201, or 301 ineligible for the administrative exemption in 19 U.S.C. 1321(a)(2)(C).

Such shipments would instead need to be entered through an alternate entry type, such as entry type 01 (formal) or entry type 11 (informal). Importers of such goods would then have to pay both the additional duties owed under a specified trade or national security action and regular customs duties, if applicable, when the value is below $800. To enable CBP to determine which entries are ineligible, CBP would require a 10-digit Harmonized Tariff Schedule of the United States (HTSUS) classification for all shipments of merchandise entered using the basic or enhanced entry processes proposed in the ELVS NPRM and claiming the administrative exemption. In the ELVS NPRM, CBP proposed to require that HTSUS codes be collected for qualifying low-value shipments entered through an enhanced entry process. Modifying these changes proposed in ELVS, this Trade and National Security Actions and Low-Value Shipments NPRM would expand that requirement to low-value shipments entered through the basic entry process proposed in ELVS, by requiring the provision of a 10-digit HTSUS code(s) on the bill of lading or other entry document.

This proposed rule would strengthen the United States' trade and national security actions, especially for Section 301 tariffs. For example, the goal of the current Section 301 tariffs is to discourage China's acts, policies, and practices related to technology transfer, intellectual property, and innovation that are unreasonable or discriminatory and burden or restrict U.S. commerce. Additionally, trade and national security actions can be used to protect domestic industries from substantial threat of serious injury, or the threat thereof by import surges or adjust imports that threaten to impair national security. An industry that is particularly vulnerable to circumvention by qualifying low-value shipments is the U.S. textile and apparel manufacturing industry. A large volume of textile and apparel imports claim the administrative exemption thereby avoiding tariffs. Specifically, approximately 50 percent of the value of current qualifying low-value shipments is attributed to textiles and apparel that would otherwise be subject to additional duties under Section 301.^[47] Broadly speaking, an estimated 15.9 percent of imports covered by Section 232, 201, and 301 tariffs are exempt from the additional tariffs under the administrative exemption.^[48] By including imports that would have been eligible for the administrative exemption without this rule, CBP would increase the effectiveness of these specified trade and national security actions. These actions would help protect national security and discourage unreasonable or discriminatory practices.

This rule would also increase CBP's inspection efficiency by shifting a large share of low-value shipments into alternative entry types. Qualifying low-value entries are more challenging for CBP to efficiently inspect than other entry types because they arrive with more limited data. As a result, CBP officers must do more work to ensure a low-value shipment is admissible and otherwise complies with applicable U.S. trade laws and regulations. Shipments entered using entry type 01 or entry type 11, in contrast, arrive with more detailed information about the contents of the goods included in the shipment.

Furthermore, shifting low-value shipments to an alternative entry type is likely to result in consolidation of multiple items into a single shipment. Specifically, the $800 limit for qualifying low-value shipments incentivizes importers to de-consolidate goods into numerous low-value shipments to avoid paying tariffs. Absent the ability to avoid tariffs, importers are likely to be incentivized to reduce per-unit shipping costs by consolidating items in bulk shipments. This consolidation results in fewer, higher value entries, where multiple items can be reviewed by CBP officers at the same time.

Finally, the proposed rule is likely to improve CBP's ability to accurately identify the contents of a shipment claiming the administrative exemption even if it does not contain goods subject to a trade or national security action under Section 232, 201, or 301. Many of these goods currently use manifest clearance to enter the United States. The “release from manifest” entry process (or the proposed new basic entry) is (or would be) less costly for importers, because less information is submitted to CBP, but the release of shipments by CBP is slower, averaging 3 days.^[49] In contrast, shipments using entry types 01 or 11, or the current entry type 86 (or the proposed new enhanced entry), are (or would be) typically released by CBP within 1 day. This proposed rule would require a 10-digit HTSUS classification for all basic entry shipments. As a result, importers will likely opt for enhanced entry, with its faster clearance times, given that the difference in administrative costs between basic and enhanced will become negligible. Having the HTSUS classification, along with several additional data elements required for enhanced entry, will improve CBP's ability to identify violative shipments. Furthermore, because enhanced entry is an automated process with required data elements being submitted in advance of the shipment's arrival in the United States, additional efficiency gains for CBP officers and importers are likely.

Threshold Analysis

A threshold analysis conducted pursuant to RFA/SBREFA involves determining whether the proposed regulatory changes will significantly impact a substantial number of small entities subject to the regulation. Responding to this question requires understanding both: (1) the number of affected entities that are small; and (2) the economic impact on these small entities in the context of the proposed regulatory action.

Should the proposed rule go into effect, entities could be affected in two ways:

1. Imports subject to a trade or national security action under Section 232, 201, or 301 would no longer qualify for the administrative exemption in 19 U.S.C. 1321(a)(2)(C), which allows a shipment to be imported duty-free when the aggregate fair retail value in the country of shipment for articles imported into the United States on the same day and exempted from the payment of duty does not exceed the administrative exemption limit of $800 per person per day. Consignees ( i.e., consumers) of these imports will pay higher prices for the goods resulting from tariffs and, possibly, additional processing fees.

2. Paperwork for other imported goods using the administrative exemption will need to include HTSUS codes to facilitate CBP's ability to confirm that the goods are not covered by Section 232, 201, or 301 tariffs. Consignees of these imports will pay higher prices for the goods resulting from additional processing fees assessed by CBP and by licensed customs brokers. ( print page 6867)

Judicial review of agency compliance with the RFA requirements limits the scope of regulatory flexibility analyses to directly regulated entities (SBA 2017). In the case of the proposed rule, the entities that would have claimed the administrative exemption absent the proposed rule are considered directly regulated and therefore the subject of the threshold analysis. Here, consignees ( i.e., consumers) are the entities or individuals potentially eligible for the administrative exemption. As described in detail in Section 3.4 of the RIA, we assume that all duties and fees are incurred directly by consignees.

Consistent with the scenarios evaluated in the above sections, this section conducts the threshold analysis under two scenarios meant to act as upper and lower bounds of the effects of this proposed rule. These scenarios highlight the uncertainty regarding how importers will respond to the rule requirements:

• Low Impact Scenario: All importers respond to avoid fees. Importers of Section 232, 201, and 301 goods consolidate while importers of goods not subject to specified trade or national security actions either consolidate or move to postal. In this scenario, price increases are limited to required tariffs, because all other fees are assumed to be fully mitigated.
• High Impact Scenario: In this scenario, less consolidation of shipments occurs. As a result, in addition to tariffs, prices are also affected by higher fees. See Sections 3.3.1 and 3.3.2 of the RIA for detailed descriptions of the price shocks under each scenario.

Substantial Test

This section explores whether a substantial number of affected entities are small. The RFA does not provide a definition of a “substantial number.” In its guide to government describing how to comply with the RFA, the SBA states:

“Substantial number” depends on the number of regulated entities and the size of the regulated industry. The interpretation of the term “substantial number” is not likely to be five small firms in an industry with more than 1,000 small firms. On the other hand, it is important to recognize that five small firms in an industry with only 20 firms would be a substantial number. Depending on the rule, the substantiality of the number of small businesses affected should be determined on an industry-specific basis and/or on the number of small businesses overall. (SBA 2017, p. 21.)

This analysis evaluates the extent to which a substantial number of consignees that would become ineligible for the administrative exemption due to the proposed rule are small entities. Affected consignees could be anyone in the United States—including businesses, not-for-profit organizations, and government jurisdictions as well as individuals—that purchases a good valued at $800 or less from a retailer that manufactures products outside of the United States. Individuals are not “entities” as defined by the RFA, and thus are excluded from this analysis.

All small entities in the United States have the potential to be affected by the proposed rule. As described in Chapter 3 of the standalone RIA document, the proposed rule affects products produced by 19 industries defined at the 3-digit North American Industry Classification System (NAICS) sector, with more than half of the affected goods coming from the apparel industry. Ideally, this analysis would rely on all historical low-value shipment transactions to characterize the entities most likely to be affected by the proposed rule. In the absence of that information, we characterize which industries are most likely to be affected, and which portion of consignees may be small entities, using data on consignees who imported goods using type 86 entries over the course of an example day in fiscal year 2023. This analysis relied on the following steps:

1. Identify a sample of businesses that are consignees. As noted above, we rely on a sample of shipments using type 86 entry for one day in fiscal year 2023 as a representative sample of consignees importing qualifying low-value shipments absent this rule. On this date, CBP identified nearly 1.2 million consignees associated with approximately 1.6 million type 86 entries. Within this list, CBP detected 786 likely businesses based on the names provided in the “header party” field and randomly selected 394 of these businesses for analysis.^[50 51]

2. Obtain the business profiles of the consignees. We uploaded the names and location information for the 394 businesses to D&B Hoovers' website and relied on D&B Hoovers' proprietary algorithm to match entities with the information stored in its database.^[52] For the 394 businesses in our sample, D&B Hoovers' search functionality was able to match profiles for 182 entities (46 percent). The 212 unmatched consignees either do not have business profiles in D&B Hoovers or the owner's name and location information provided by CBP do not match the business records on the site. For the 182 matched entities, we collect primary NAICS code, number of employees,^[53] and annual revenue information as presented in D&B.^[54]

3. Determine which businesses in the sample are small businesses. We compare number of employees and annual revenues with the SBA's definitions of small business associated with each six-digit NAICS code (SBA 2023).^[55]

The 182 businesses in the sample are associated with 117 NAICS codes (6-digit) spanning many sectors. Table 5 provides a sample of NAICS codes represented by the consignee businesses to demonstrate the breadth of industries associated with type 86 entries on a given day. As shown in Table 6, the consignees organize into nearly every 2-digit sector NAICS code. Using the 6-digit NAICS codes for classification purposes, 92 percent of businesses in the sample qualify as small businesses.

Data from CBP does not identify the type of good associated with the consignees, therefore we are unable to differentiate between entities that would be affected by Section 301 tariffs (in both the low scenario and high scenario) and all other entities that would be affected by fees in the high scenario only.

Taken together, this analysis finds that a substantial number of small entities may be affected by the proposed rule. ( print page 6868)

Table 5—Example NAICS Codes Among Sampled Consignees

NAICS code	Industry
111998	All Other Miscellaneous Crop Farming.
221118	Other Electric Power Generation.
236115	New Single-family Housing Construction.
238340	Tile and Terrazzo Contractors.
238910	Site Preparation Contractors.
238990	All Other Specialty Trade Contractors.
311615	Poultry Processing.
325199	All Other Basic Organic Chemical Manufacturing.
325412	Pharmaceutical Preparation Manufacturing.
325510	Paint and Coating Manufacturing.
325910	Printing Ink Manufacturing.
332312	Fabricated Structural Metal Manufacturing.
332322	Sheet Metal Work Manufacturing.
332710	Machine Shops.
333310	Commercial and Service Industry Machinery Manufacturing.
335313	Switchgear and Switchboard Apparatus Manufacturing.
339940	Office Supplies (except Paper) Manufacturing.
423110	Automobile and Other Motor Vehicle Merchant Wholesalers.
423120	Motor Vehicle Supplies and New Parts Merchant Wholesalers.
423110	Automobile and Other Motor Vehicle Merchant Wholesalers.
423120	Motor Vehicle Supplies and New Parts Merchant Wholesalers.
423110	Automobile and Other Motor Vehicle Merchant Wholesalers.
445110	Supermarkets and Other Grocery Retailers.
449110	Furniture Retailers.
449210	Electronics and Appliance Retailers.
531311	Residential Property Managers.
532111	Passenger Car Rental.
541618	Other Management Consulting Services.
561730	Landscaping Services.
611110	Elementary and Secondary Schools.
811111	General Automotive Repair.
811192	Car Washes.
812112	Beauty Salons.
812910	Pet Care (except Veterinary) Services.
Note: The NAICS codes presented in this table represent a sample of industries associated with entry type 86 consignees on a typical recent date, not a comprehensive list of all affected industries. See the main text for details.

Table 6—Number of Small Businesses in Sample of Consignees

Two-digit NAICS code a	Sector	Total businesses in sample	Small businesses in sample	Percent small
11	Agriculture, Forestry, Fishing and Hunting	1	1	100
22	Utilities	2	2	100
23	Construction	11	11	100
31	Manufacturing	2	1	50
32	Manufacturing	7	6	86
33	Manufacturing	17	16	94
42	Wholesale Trade	14	12	86
44	Retail Trade	23	22	96
45	Retail Trade	8	8	100
48	Transportation and Warehousing	5	5	100
49	Transportation and Warehousing	1	1	100
51	Information	5	5	100
52	Finance and Insurance	1	1	100
53	Real Estate and Rental and Leasing	5	5	100
54	Professional, Scientific, and Technical Services	21	20	95
55	Management of Companies and Enterprises	2	1	50
56	Administrative and Support and Waste Management and Remediation Services	9	7	78
61	Educational Services	2	1	50
62	Health Care and Social Assistance	5	4	80
72	Accommodation and Food Services	6	5	83
81	Other Services (except Public Administration)	18	17	94
99	Unclassified b	17	17	100
Total		182	168	92
Sources: IEc analysis of 182 businesses named as consignees of type 86 entries for one day in 2023 (provided by CBP), business profiles from D&B Hoovers, and SBA small business size standards (SBA 2023). See text for details.
Notes: ( print page 6869)
1. While 2-digit NAICS codes are used for presentation purposes, the 6-digit NAICS codes were used to determine which businesses are small.
2. All businesses identified with NAICS code 999990 in D&B Hoovers are presumed small.

Significance Test

This section tests whether the effects of the rule would be significant for the small entities identified above. The RFA does not define a “significant effect” in quantitative terms. In its guidance to agencies on how to comply with the RFA, SBA states,

[i]n the absence of statutory specificity, what is `significant' will vary depending on the economics of the industry or sector to be regulated. The agency is in the best position to gauge the small entity impacts of its regulation. (SBA 2017, p. 18.)

DHS component agencies typically assume that an annual per entity cost exceeding 1 percent of the annual gross revenues for that entity is significant (Houser 2012). Therefore, this analysis considers the 1 percent threshold when analyzing these potential impacts.

To accurately assess whether small entity consignees are likely to be significantly affected by the rule requires data on the total volume of affected shipments each entity is likely to purchase. Data describing total historical qualifying low-value shipment volume for the 168 small businesses in the sample of consignees provided by CBP is not readily available. Instead, we compare the value of the shipments with the percent increase in cost considering Section 301 tariffs (for the low and high scenarios) as well as the increased fees associated with entry (for the high scenario only). While the value of a shipment is not a measure of revenue, it provides a proxy for the capacity of entities to absorb the potential increases in shipment costs.

Low Impact Scenario

In the low impact scenario, qualifying low-value shipments formerly claiming the administrative exemption incur tariffs averaging 21.25 percent on an ad valorem basis (see Chapter 3 in the standalone RIA available in the docket of this rulemaking). As described in Chapter 3, we assume consignees incur 100 percent of the tariff. Table 7 presents the distribution of affected shipments by shipment value, using entry type 86 shipments imported in fiscal year 2023 as a representative sample ( i.e., the exact distribution may differ for shipments cleared off the manifest that would have entered with an administrative exemption in the baseline).

Table 7—Distribution of Qualifying Low-Value Shipments by Shipment Value

Shipment value bin	Mid-point of shipment value	% of total entry type 86 shipments
$0-$5	$2.50	18.5
$6-$25	15.50	43.0
$26-$50	38.00	20.0
$51-$75	63.00	8.4
$76-$100	88.00	4.7
$101-$200	150.50	4.7
Over $200	500.50	0.8
Source: IEc analysis of data provided by email from CBP on September 9, 2024.

Using the mid-point of shipment value for each bin, the weighted average value per shipment is approximately $32. Applying the tariff rate likely to be incurred by consignees, we find that the increased cost per shipment is approximately $6.80 (21.25 percent of $32). We do not have readily available data on the number of affected shipments imported annually per entity. Therefore, it is uncertain whether tariff rates of this magnitude impose a significant impact on small entities importing these affected shipments under the low scenario. However, a 21.25 percent increase in the cost of importing affected goods represents a significant impact relative to the value of the shipment.

High Impact Scenario

In the high impact scenario, consignees of affected low-value shipments experience price increases resulting from the tariffs described above in the low impact scenario. Additionally, some consignees incur additional price increases resulting from fees required to file and process shipments (for a detailed description see Chapter 3 in the standalone RIA available in the docket of this rulemaking). Table 8 summarizes the additional per shipment fees that might be incurred, depending on the carrier providing shipping services. None or some combination of these fees apply, depending on whether the shipment includes a good subject to additional Section 232, 201, or 301 duties, and whether a broker is already involved in the shipping process in the baseline.

Table 8—Per Shipment Fees

Type	Fee ($/shipment)
Broker fee: 1
Commercial non-express carrier 2	$1.00
Express commercial carrier 3	30.00
Postal carrier 3	8.55
Merchandise Processing Fee: 4
All	2.53
Sources and assumptions: ( print page 6870)
1  A licensed broker is not currently required for the “release from manifest” entry process, nor would the ELVS NPRM require one for the basic entry process if the ELVS NPRM is finalized as proposed. We assume for the purposes of this analysis that a broker fee is charged for any entry requiring an HTSUS code and is similar regardless of whether the filer uses enhanced entry, entry type 86, 01, or 11. (Source: Personal communication with representatives of a major broker association on 9/26/2024.)
2  Email from CBP dated 10/11/2024.
3  Fajgelbaum and Khandelwal (2024).
4  Minimum merchandise processing fee for informal entries as of October 1, 2023. (As viewed on 10/11/2024 on https://www.federalregister.gov/​documents/​2023/​07/​28/​2023-16197/​cobra-fees-to-be-adjusted-for-inflation-in-fiscal-year-2024-cbp-dec-23-08.) Informal entries apply to shipments that do not exceed $2,500 and is the entry option most likely to be used for shipments currently exercising the administrative exemption ( i.e., shipments that do not exceed $800).