A recent legislative development at U.S. Customs and Border Protection (CBP) has triggered an earthquake in cross-border circles. Co-sponsored by members of the U.S. Senate and House of Representatives, the Securing Accountability for Foreign Import Records Act (SAFE Act) Once it hits the ground, it will completely change the rules of the game for Chinese sellers entering the U.S. market.

For entrepreneurs who have registered a U.S. company or plan to conduct cross-border business through a U.S. company, this is not only a tightening of the customs clearance policy, but also a fundamental reshaping of the qualifications of the main body of the enterprise, tax compliance and financial management.Enterprise Finance GroupAs a one-stop business service platform, we will provide you with an in-depth explanation of the core points of the bill and provide you with a compliance breakthrough.

A member of the U.S. Senate Finance Committee and a member of the Louisiana House of Representatives, along with a member of the House Fundraising Committee and a member of the Texas House of Representatives, co-sponsored a bill on March 9 called the Securing Accountability in Foreign Entries (Safe) Act.

The bill requires that a business acting as an Importer of Record (i.e., a purchaser, consignee, or customs broker of goods) meet the following conditions:

• If an individual, a U.S. citizen or an alien lawfully and permanently admitted to the United States;
• In the case of an entity, one of the following three scenarios needs to be met:
  1. An alien who has a physical location in the U.S. and at least one owner or full-time employee who is a U.S. citizen or an alien lawfully and permanently authorized to reside in the U.S. (an individual may not serve as the importer of record for more than one entity);
  2. An entity organized under the laws of Canada, Australia or a Covered Country;
  3. is an Affiliate of a U.S. entity that has been in continuous operation for a period of not less than three years; maintains not less than 1,500 full-time employees in the U.S.; has annual gross receipts or assets in the U.S. of not less than $1,000,000; and has filed a certification with U.S. Customs and Border Protection designating the Affiliate as its agent for service of process and agreeing to be jointly and severally liable for all duties, taxes, fees, and penalties owed by such related party at the time of its recordation as an importer.

In addition, this bill provides clarity on the definitions of a business's registered address and full-time employees:

• Full-Time Employee: A written statement issued for the individual under section 6051 of the Internal Revenue Code of 1986 indicating that the individual's employment status is full-time; and the individual is employed by no more than one entity of record as an importer.
• Business Registered Address: premises with a street address where the importer conducts substantial business operations, including maintaining the presence of employees; and does not include shared office space (unless the importer permanently occupies the office); an address associated with a registered agent, other agent, customs broker, freight forwarder, or mailbox service; or an address used solely for the purpose of receiving mail or establishing a virtual business address.

The bill also clarifies that Customs cannot determine eligibility based solely on the commitment of the customs broker or surety (Bond). Importers of record would be required to utilize a continuing import bond of at least $100,000; this provision would take effect 60 days after enactment for new importers of record and 360 days after enactment for renewals of import bonds.

Customs brokers' guarantees would only cover declarations if they acted as the person of record for the import. The bill allows a customs broker that is wholly owned by an express carrier to act as the import record keeper and to use its customs broker's guarantee if the carrier has at least 300,000 employees in the United States and maintains a significant physical operating presence in the United States, including substantial infrastructure for cargo handling, sorting, and customs clearance operations.

The bill also requires that customs duties be paid from a bank account and that the identity of the account holder be verified through the Anti-Money Laundering Customer Identification Program. This verification is to be completed prior to the first declaration of goods by the newly designated import representative; the importer is required to provide CBP with his bank account and bank identification number.

1. The qualitative change from registration to access

At the heart of the bill is a redefinition of "who can be the person of record for importation."

In the past, Chinese sellers could clear customs by registering a U.S. company or borrowing the IOR of a U.S. customs broker, but the new bill sets an extremely high threshold for physical presence.

This means that the Chinese seller's operation of spreading risk by registering multiple shell U.S. companies will be completely shut down. For small and medium-sized sellers, the cost of maintaining a real office in the US with full-time US employees is extremely high and almost unbearable.

In the face of this qualitative change.Enterprise Finance GroupWe suggest you: instead of blindly registering a shell company, you should plan ahead for a real-life compliance structure. We provide professionalU.S. Company Incorporation ServicesWe will provide you with in-depth guidance on how to fulfill the "physical location" requirement of the Act and help you find the optimal solution between cost and compliance. Please feel free to contact us (Tel: 16620947137, WeChat: Qicaiyingjituan).

2. Completely blocking the "shell" and "bill-paying" models

Bond and guarantee penetration regulation: Customs cannot determine eligibility solely on the basis of the commitment of the customs broker or guarantor. Importers of record will be required to utilize a continuous import bond of at least $100,000 dollars. Of particular note, the bill allows customs brokers wholly owned by express carriers (e.g., FedEx/UPS) to act as import recorders, subject to the threshold of having at least 300,000 employees in the U.S. and maintaining a significant physical operational presence.

This will actually exclude the vast majority of small and medium-sized freight forwarders and customs brokers in the "IOR" option. Combined with the recent U.S. Customs crackdown on "borrowed Bond clearance" (5H inspection), the previously prevalent "buy single export" or freight forwarders to provide "double clearing package tax" services will face High legal risk, because the freight forwarder will not be able to meet the qualification requirements as IOR.

Chain-of-Funds Penetration: Requires tariffs to be paid from a bank account that has been verified by the AML Client Identification Program (CIP), and the bank account and bank identification number must be provided to CBP.

This means that the flow of funds, goods and documents must be "three flows in one". Sellers can no longer pay customs duties through underground money changers or third parties, and Customs can directly penetrate the tax responsibility to the ultimate beneficiary.

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3. The definitive end of the "double clearing and taxation" model

Collapse of business model: The core logic of "double clearing and tax package" is that freight forwarders act as IOR to solve sellers' tax and customs clearance problems. However, under the new law, it is almost impossible for forwarders to meet the threshold of "1,500 full-time employees" or "300,000 employees".

The SAFE Act, if landed, will mean that Chinese sellers through the "asset-light" mode to enter the U.S. market era is over. It is not only the tightening of the customs clearance policy, but also the fundamental reshaping of the qualifications of the main body of the U.S. Customs importers.

Advice to Chinese Cross-Border Sellers: Abandon Illusions and Assess the Bottom Line

Don't expect to circumvent the new regulations by simply registering a US company. Focus on evaluating whether your supply chain profits can support the cost of setting up a real office in the US and hiring US-based employees.

Supply chain front-loading (overseas warehouse stocking): If the IOR condition cannot be met, consider shipping in bulk to a compliant entity in the U.S. (e.g., a subsidiary or large distributor in the U.S.), which will act as the IOR to complete the importation and then distribute it in the U.S.

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Whether you choose to set up a real office in the U.S. or a subsidiary as a compliant entity, professional localization services are essential.Enterprise Finance GroupWe have been in the business service field for many years, and we not only provideU.S. Company RegistrationThe company is more than capable of connecting you to subsequentBookkeeping and tax preparation, tax complianceServices to move your U.S. business from "asset-light" to "asset-stable".

Select "Whitelist" logistics: Compliance channels will be extremely scarce in the future, and logistics partners with strong Native American backgrounds need to be targeted in advance.

Follow legislative developments: The bill has been endorsed by compliance giants such as Flexport and industry associations. Although it has not yet become final law, it represents a bipartisan consensus on trade enforcement in the US. Chinese sellers need to keep a close eye on the progress of its deliberations in the Senate and prepare for the worst.

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During this critical period of policy change, professionalism must be left to the professionals.Enterprise Finance GroupOur team will follow up on the U.S. legislation in real time and provide you with the first-hand interpretation of the policy and response program. Whether you are ready to register a U.S. company, or need to deal with the quarterly accounting and annual audit requirements after the implementation of the bill, we can provide you with one-stop services. Hotline: 16620947137 (WeChat: Qicaiyingjituan).

Enterprise Caiying Group: Your Compliance Escort to the Sea

In the face of increasingly stringent compliance requirements in the U.S. market, theEnterprise Finance GroupWe are not only your service provider, but also your trusted strategic partner. We specialize in providingShenzhen, Guangzhou, Shanghai, Beijing, Hangzhou, Hong Kong, USA, Japan, Korea, Southeast Asia, Singapore, BVI, CaymanDomestic and international company registration services, as well asCompany Annual Audit / Bookkeeping & Taxation / Tax Compliance / Change of Information / Bank Account Opening / ODI Filing / FDI Filingand other business services.

From registering a U.S. company, to responding to the quarterly bookkeeping requirements of the SAFE Act, to bank account opening and tax compliance, Enterprise Caiyin Group is there to help you through the entire chain. If you have any questions about how to build a compliant cross-border structure, or need professional one-on-one consultation, please feel free to contact us.

Tel: 16620947137
WeChat: Qicaiyingjituan

Let's work together to sail steadily into the new blue ocean of the U.S. market with a compliant stance.