Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Trade Symposium – So Let’s Change the Process?

During the two days of the Customs and Border Protection Trade Symposium, we heard from a number of high level Customs managers, including Alan Bersin, Commissioner, and David Aguilar, Deputy Commissioner. Their message in a nutshell was expediting trade and protecting national security are not mutually exclusive, but rather go hand-in-hand. While a welcome point, the Symposium’s primary message from Customs was tell us what we can do better, also a welcome point.

Comm. Bersin spent his opening message talking about the need to heighten the flow of legitimate trade as providing greater security. He also spoke about expediting legitimate commerce as the way to heighten the U.S. security profile, national security equates to economic health, the private sector is the engine of American prosperity and progress, and we need to eliminate dumb rules and focus on smart policies. Security and prosperity are the twin goals and so "let the reinvention begin."

The opening message was followed by a presentation on "U.S. Trade, A Top Priority." Moderated by former U.S. Trade Representative Carla Hills, it covered familiar ground for those who recognize international trade is a major economic engine for the U.S. and indeed the world. We heard broad themes such as information flows across borders and is worldwide, it is possible to eliminate impediments without compromising security and safety, and non-essential regulations lead to cost and delays. An example cited frequently in many panel discussions was the auto industry trade which flows between the U.S. and Canada. Approximately thirty (30%) percent of that cross-border trade is between U.S. companies with their Canadian operations. The auto industry is highly integrated and moves significant quantities of parts across the land border between these two countries. For this reason, we heard in later panels about the need to simplify the entry process. Given that one car may have parts in it which crossed borders perhaps as many as 28 times, it is easy to understand why the auto companies favor simplifying the entry process. The question Customs must tackle is whether its limited resources should be focused on something wanted by only a handful of (albeit vocal) companies, unless the result can widely benefit other industries.

On the panel with Ambassador Hills were Comm. Bersin, Jayson Myers (President and CEO, Canadian Manufacturers and Exporters), Jean-Guy Carrier (Secretary General, International Chamber of Commerce) and Francisco J. Sanchez (Under Secretary for International Trade, Dept. of Commerce).

Comm. Bersin sounded a familiar theme – the need to secure the flow of goods and people but as far away from the 347 ports of entry as possible and as early in time as possible. Customs is currently processing about $2 trillion worth of imports and about $1.8 trillion of exports yearly. The focus of the agency is on risk assessment, expediting lawful traffic and trusted shipper (C-TPAT) and traveler (Global Entry) programs. Customs is also focused on driving down transaction costs and driving down frictions regarding cargo movement so as to allow the U.S. greater competition with lower labor cost countries.

Mr. Myers spoke about the need for common understanding about issues and common recognition of those common issues, e.g. trade and security. He sounded themes such as government policies need to promote economic growth, and regulations need to be low cost and simple to comply with as a means to obtain greater compliance. The goal of policies, according to Mr. Myers, should be a well-informed impact on business as compliance relies on actions by business. Being from Canada, Mr. Myers was focused on cross-border issues and so cited the fact there are more clearances yearly at the Ambassador Bridge (between Windsor, Ontario and Detroit, MI) than all of the U.S. trade with Japan. He used the illustration of one ship holding 4,000 containers, which equates to 4,000 trucks to move those containers, but perhaps as many as 28,0000 clearances due to parts movement. Finally, he also mentioned the need for public-private partnerships, plus government-to-government partnerships, along with partnerships between agencies with similar missions within governments but also across foreign governments.

Mr. Carrier spoke about the need for a multi-government approach to security and trade. He also sounded another common theme, trade and investment are the keys to prosperity, citing ATA carnets, INCOterms and standards harmonization as focuses for his association to facilitate both.

Mr. Sanchez sounded similar themes, but most interesting was his comment that 42% of all U.S. trade is within the Western Hemisphere. He also mentioned that FY 09 GDP growth was 2.9% with about 50% related to export growth.

In the question and answer session which followed, the topics included common forms and data sets (which are most successful when accomplished multi-laterally); how are regulations written (what is really needed? is the information available? what is the timeline to provide the data? what will companies need to do to be able to meet the requirement?); in the context of trusted trader programs, 35% of that trade is intra-company, 30% is within closely held supply chains, and for those members, the question is what is the payback?

There was an additional recommendation about focusing on industry sectors and working with those within a sector, especially emerging sectors where regulations may not already be in place so those enacted make the most sense.

Given that only 1% of U.S. companies export and 58% export to only one country, there was mention of the partnership the government has with UPS, FedEx and the Postal Service in which these entities identified one company exporters, trained sales people about government exporter services, which resulted in those sales staffs making calls and pitching new markets to their customers. 24,000 companies have already been reached which has led to significant increases in exporting. So, why deal with just these large companies? Perhaps it made sense to pilot the idea with these large entities, but if the government is serious about increasing exports, it needs to start working with its natural business partners - brokers, forwarders and consolidators - to really make this effort work.

Given the complexity of complying with free trade agreement rules of origin, a positive note was struck when mention was made of the efforts of a World Trade Organization Working Group to propose changes to simplify rules of origin, and seeking to do so on a multi-lateral basis.

Again, giving the benefits to the big guys, the efforts of Customs to work together with the Express Association of America to identify advance manifest data for air was discussed. Five data elements were supposedly identified (but not named) with the goal of release prior to arrival. While Customs turned to the couriers for help in identifying what data elements would be available to allow longer lead time for advance manifest filing, it came out the couriers were only required to use best efforts and there was no penalty for being wrong. Given best efforts was the standard and anyone who deals with the couriers knows how easily things can go off course, one is left to ask - just how serious was this endeavor?

Comm. Bersin did also mention the noteworthy intention of expanding C-TPAT from the current 7,000 members to 40,000 members in the next five (5) years. While perhaps a laudable and certainly a noteworthy goal, the bottom line is where are the benefits? Customs continues to ratchet up its inspection rate, and goods continue to get delayed. In many locations, the issue with the long-promised green lane, i.e., expedited release, is the existing and crumbling infrastructure. So, just what benefits will be granted to make the expense of joining worthwhile? One rather odd proposal made by Comm. Bersin was in the land border environment, He proposed CBP Officers inspect goods in the foreign country, seal those trucks/containers and then the vehicles would go through non-port of entry lanes to destination. Where will the infrastructure funds come from to make that possible? What about more tangible benefits in the all transportation modes?

Perhaps Customs might consider going back to the original report issued in 2002 by the post-9/11 COAC Working Group which proposed a number of possible C-TPAT benefits. Those should be revisited, updated and perhaps some of them adopted. Customs does not have the ability to rewrite the tax code (a proposed benefit), but it certainly can regulate its own operations. Why not reduce the bond amount required of a C-TPAT member? Why not move back from the current five (5) days prior to arrival when doing selectivity? Targeting can surely be done sooner, such as 24 hours after the vessel leaves its last port of call? How about requiring CES operations to charge a reduced fee to C-TPAT members? Perhaps these too might be viewed as more cosmetic than substantive, but right now, there are serious questions about just how valuable C-TPAT is to its members. Customs needs to tackle that point in partnership with the trade (and not just COAC), a need which will become greater assuming more countries expand their AEO operations and C-TPAT does not begin to seriously focus on exports.

There were also breakout sessions on a variety of topics, such as the National Export Initiative, the future role of the broker and intellectual property rights, but in reality, the goal of the Symposium appeared to be for attendees to give Customs ideas as to what it could do better. Frankly, a more structured process might have done a better job of achieving that goal. To its credit, in the breakout sessions, a number of the speakers were from the private sector, but if the goal was to get serious input from the trade community, then something more than Q and A sessions is needed. Perhaps next year, Customs might consider a different format. Yes, it is important to hear from the top management at the agency, but in the end, Customs needs to hear from the trade. So how about this – next year, let’s have serious working groups? Continue the process of having attendees sign up in advance for specific topics, but have those topics decided, at least in part, by the trade, and then cut the amount of presentation time used to explain the issue and its current status in half and have a structure for the input being sought through interactive sessions.

 

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