U.S. Customs rules are changing, and shippers should be paying attention now, not later.

Companies must evaluate their importer of record arrangements and ensure they have deep levels of supply chain visibility ahead of the changes, experts said.

The U.S. is preparing to install new restrictions for foreign importers while establishing higher penalty floors for those noncompliant with customs regulations, according to an executive order signed on June 3 by President Donald Trump.

The order could introduce complications for overseas brands and shippers without an adequate level of supply chain visibility, experts told Supply Chain Dive. For example, importers must provide ownership disclosures, anticipated volumes and production methods, and customs brokers must “conduct greater due diligence of their importers,” U.S. Customs and Border Protection said in a news release.

“This Executive Order helps CBP better detect when bad trade actors try to break the rules,” Susan Thomas, executive assistant commissioner for the CBP’s Office of Trade, said in the release. “These are major advances in protecting our revenue and increasing supply chain transparency—both critical to ensuring fairness for everyone and safeguarding our nation’s economic and national security.”

The changes, which are set to take effect within 180 days of the order, add to the risks importers face for non-compliance, according to Rathna Sharad, CEO and founder of FlavorCloud, a cross-border shipping platform.

Here’s how the order is poised to shake up importing rules and penalties — and what shippers should do to prepare for the looming overhaul.

Crackdown on foreign importers of record

All importers of record will need to maintain “a minimum level of tangible domestic assets, bonding, or both” to ensure they abide by trade laws, according to the order. This will allow the U.S. to more effectively penalize foreign entities in instances of noncompliance, experts said.

U.S. brands typically act as the importer of record or have an entity such as a customs broker act as the IOR on their behalf, Sharad said. While these businesses are easy to levy penalties against due to their U.S. ties, foreign IORs can be a different matter, with some leveraging shell companies that are difficult to take action against, she added.

The order said future guidance from the Secretary of Homeland Security will prioritize preventing entries that use “shell companies, sham transactions, or artificial corporate or organizational structuring in an attempt to qualify as a U.S. IOR.”

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To meet the minimum requirements to qualify as located within the U.S., an entity must have its principal place of business in the country, a physical presence where significant business is conducted and sufficient tangible U.S. assets, per the order. The Secretary of Homeland Security will provide further guidance pertaining to the definition of “located in the United States,” according to the order, although no timeline for such guidance was shared.

In the lead-up to the new rules, cross-border shippers should evaluate any foreign IOR arrangements currently in place, stress-test their bonding and domestic asset positions against higher minimums, and verify the accuracy of their ownership and supply chain disclosures and documentation, law firm Holland & Knight said in a June 9 alert.

The order also eliminates informal entry capabilities for foreign IORs. Type 11 informal entry generally allows imports below $2,500 to pass through customs in a streamlined manner versus the more rigorous compliance measures attached to formal entries. Type 11 has often been leveraged by low-value importers since the elimination of the de minimis exemption last year, according to Izzy Rosenzweig, CEO of Portless, which offers direct e-commerce fulfillment from Asia.

“If you do a shipment of a package to an individual person, almost always now it’s under Type 11,” Rosenzweig said.

Trump’s order is eliminating the ability for foreign IORs to use informal entry partially because such importers bring in “substantially higher volumes of low-value articles” and face lower financial consequences for noncompliance since penalty amounts are correlated to value. Blocking informal entries for foreign IORs puts all importers on equal footing, the order said, noting that the U.S. faces hurdles when attempting to enforce its trade laws against overseas actors.

Sellers outside the U.S. or domestic companies using China-based carriers may have a tougher time maintaining their current import activity under the order’s changes, Rosenzweig said.