CBP's Proposed CAPE System Raises Question on System's Role in Trade Fraud Enforcement
CBP's proposed administrative mechanism for issuing refunds of tariffs imposed under the International Emergency Economic Powers Act raises questions on how the system will factor into the Trump administration's increased emphasis on trade fraud enforcement. While enrollment in the CAPE sytem may not lead to increased likelihood of enforcement against a given company, it could lead to additional follow-up efforts by CBP and limits on "ghost" importers by ensuring importers are operating through U.S. banks, various lawyers told us.
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The Consolidated Administration and Processing of Entries (CAPE) system currently is being developed by CBP to issue IEEPA refunds following the Supreme Court's decision finding a lack of tariff authority under IEEPA (see 2603310086). Under the system, importers seeking refunds will be required to create an ACE account, given CBP's recent decision to eliminate non-electronic refunds, and file for IEEPA refunds electronically through the CAPE system.
Jackson Wood, director of industry strategy, Global Trade Intelligence at Descartes, told us that this requirement will lead a ton of companies to "scramble to get ACE accounts set up" and start submitting things to ACE that they have never submitted before, such as post summary corrections and protests. Wood said he's concerned this will lead to CBP following up with individual importers and asking them for more information on how they operate their import programs, which in turn will chill refund claims themselves.
"I think you'd have to be pretty naive to think that it's going to be frictionless and that there aren't going to be attendant risks to just starting to give CBP all of this information about your business when perhaps you haven't done it to that degree in the past," he said.
However, other trade professionals were less concerned about the enforcement exposure CAPE could bring. For instance, Lawrence Friedman, partner at Barnes Richardson, said that under the proposed program, the importer will seemingly have to "extract the data from ACE, reformat it, and send it back via CAPE." While this process might be "needless and overly complicated," it's fundamentally CBP getting its own information back.
Russell Semmell, partner at Davis Wright, echoed this observation, telling us that there's seemingly no information required to be submitted through CAPE that CBP doesn't already have access to.
Therefore, the process "doesn't seem to add risk so long as the importer is honest about what it sends back," Friedman emphasized. "Anyone making a false claim through ACE might have a serious problem. The description of the system says it will validate the claim, which seems to be a check against what is already in ACE."
John Peterson, partner at Neville Peterson, said the CAPE system could be a way for CBP to get importers to have to go through U.S. banks for enforcement purposes. This requirement could curtail "ghost" importers "by ensuring that importers are operating through banks which have Federal registration, know-your-customer programs, anti-money-laundering programs, and the like," Peterson said.