King-Hinds Urges USPS to Suspend New Duty Collection Requirements in Territories

Saipan - Congresswoman Kimberlyn King-Hinds has submitted formal comments to the U.S. Postal Service urging the agency to suspend implementation of new duty collection requirements for mail originating in the U.S. territories until legal and administrative concerns affecting territorial residents are addressed.

The USPS interim final rule establishes procedures for the collection and prepayment of customs duties, taxes, and fees on certain goods mailed from the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, and the U.S. Virgin Islands into the customs territory of the United States. The rule follows the suspension of federal de minimis treatment under Executive Order 14324 and subsequent regulations issued by U.S. Customs and Border Protection.

In her comments, King-Hinds acknowledged that USPS did not make the underlying decision to suspend de minimis treatment, but emphasized that the Postal Service remains responsible for ensuring that the system used to implement the policy complies with the distinct laws governing each territory.

With respect to the CNMI, King-Hinds pointed to protections contained in the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States.

Section 603(c) of the Covenant provides that imports from the Northern Mariana Islands into the customs territory of the United States are to receive the same treatment as imports from Guam. Under existing customs law, qualifying goods that are the growth, product, or manufacture of the CNMI may enter the U.S. customs territory duty-free.

King-Hinds previously raised concerns with the Department of Homeland Security after her office observed CNMI-manufactured products being assigned tariff charges through the third-party system intended to implement the Executive Order.

"The payment and clearance system used by USPS must be capable of identifying goods entitled to this treatment and must not assess duties solely because a parcel originates outside the customs territory," King-Hinds wrote.

Her comments also cite Section 703(b) of the Covenant, which establishes protections concerning revenues collected with respect to the Commonwealth. Citing the contemporaneous section-by-section analysis of the Covenant, King-Hinds noted that the provision was understood to require payment to the Commonwealth Treasury of "the proceeds of essentially all taxes and duties and fees collected with respect to the Northern Marianas," other than those relating to Social Security benefits.

King-Hinds argues that these protections continue to apply when the federal government requires amounts to be collected through a private third-party vendor.

"The Federal Government cannot avoid its obligations under Section 703(b) by requiring the collection of these amounts through a private intermediary," King-Hinds wrote. "Where payment of a fee is required as a condition of complying with the federally established customs process, the use of a third-party vendor does not remove that fee from the revenue protections established by the Covenant."

The comments call on USPS to identify each duty, tax, governmental fee, processing charge, brokerage charge, or other assessment that a CNMI mailer may be required to pay, explain the legal authority for each charge, identify who receives and ultimately retains those amounts, and coordinate with CBP and the Department of the Treasury to determine which revenues must be accounted for and transferred to the Commonwealth Treasury under Section 703(b).

King-Hinds also raised concerns about the administrative burden the new process could place on residents and small businesses in the territories. Under the rule, an ordinary CNMI resident mailing goods may be required to determine tariff classifications, country of origin, value, applicable exemptions, and other customs information before paying required duties and fees and presenting proof of payment at a postal retail counter.

Those requirements are further complicated in the CNMI because the system must distinguish between CNMI-origin goods entitled to duty-free treatment, qualifying U.S. goods returning to the customs territory, foreign-origin goods subject to duty, and goods incorporating foreign materials that may nevertheless qualify as CNMI products.

"Proper implementation therefore requires more than the application of a system designed principally for foreign-origin shipments to mail originating in the territories," King-Hinds wrote.

The comments argue that if the federal government continues to apply the suspension of de minimis treatment to territorial shipments, USPS should establish procedures specifically designed around the legal and practical circumstances of the four affected territories rather than requiring territorial residents to navigate a system developed principally for international shipments.

King-Hinds also noted that errors in classification or exemption determinations could result in residents being charged amounts they do not legally owe or being required to complete additional procedures before USPS will accept their mail. Her office has already observed CNMI-manufactured products being assigned tariff charges through the third-party system associated with implementation of the Executive Order.

King-Hinds recommended that USPS suspend implementation of the requirements in the affected territories until the agency establishes a process to accurately collect, account for, and remit tariffs, duties, and fees, including required third-party vendor fees, consistent with Section 703(b) of the Covenant. She also called for a methodology to administer the tariff-free treatment of qualifying CNMI-origin goods and procedures that recognize the distinct political and legal arrangements governing each of the four affected territories under U.S. customs law.

"These are fundamental questions concerning the lawful administration of the rule in the territories and should be resolved before residents are required to comply with the new process," King-Hinds wrote. "Proceeding without first addressing these concerns creates real legal and administrative liabilities for the Postal Service and, more importantly, risks imposing costs and burdens on American citizens living in the territories without adequate consideration of the rights and protections guaranteed to their communities under federal law."