New Customs Reform Act Introduced
Entitled the Customs Facilitation and Trade Enforcement Reauthorization Act of 2009, the new bill introduced in the Senate, see S. 1631 at http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/~c111bKxb
The Principal Deputy Commissioner is delegated organizational authority over the activities of CBP, while the enforcement authority remains with the Deputy Commissioner, who remains the top civil service employee of the agency. Given the confusion and outright inability to pursue effective enforcement of many trade fraud cases caused by the transfer of the Customs agents into Immigration and Customs Enforcement (ICE) (due primarily to the conflicting mandates of the two agencies, meaning ICE’s focus on immigration issues), one wonders whether forcing the Commissioner of Customs to be the sole arbiter of priority setting within the agency is the best choice. It is likely Congress is considering another senior-level appointee as a further means to aid the agency in heightening the significance given to trade facilitation, but it is not clear that goal will be accomplished with this proposal without the potential for significant disruption to the agency’s existing operations. Whether it makes more sense to reconsider this specific proposal or create one or more other positions within the agency to be filled only from the business community is another question. For now, the disconnect between law enforcement and trade operations is already considerable. How much greater will the divide become given this new position?
The Office of Trade is also changed in that the Assistant Commissioner (AC) who heads it will be required to have at least five (5) years of related experience outside the federal government. This AC is to direct development and implementation of the laws and regulations administered by Customs; advise the Commissioner on how various programs and regulations are impacted by proposed changes and as currently administered, as well as WCO matters; direct and administer trade priority issues and the Joint Strategic Plan (to be developed with ICE); direct trade enforcement and compliance assessment activities; oversee trade modernization; and direct customs revenue administration.
The Commissioner is also directed to appoint a Trade Advocate to work within the Office of Trade who will act as a liaison with the public and between Trade and Field Operations, as well as work with COAC, the Trade Support Network, and other private-sector interests. Although no qualifications are mentioned, this is certainly a position that should be filled from the business community. Perhaps it is wiser to seek to heighten the importance of trade facilitation through the Trade Advocate position than through creation of the Principal Deputy Commissioner position. At the same time there is a proposal to appoint a Deputy Assistant Commissioner to oversee facilitation and enforcement activities at the ports through Field Operations, and to also coordinate between Field Operations and Trade. Given that both Field Operations and Trade are headed by Assistant Commissioners, perhaps the Trade Advocate position should be enhanced to include this portfolio and given a higher stature.
The bill also creates a Customs Facilitation and Trade Enforcement Division to be headed by a Deputy Assistant Commissioner. This person is designated to oversee facilitation and enforcement activities at the ports through Field Operations, and also to coordinate between Field Operations and Trade and ensure uniformity.
As proposed, there will be created not less than 40 Commercial Enforcement Officers to be stationed at various ports of entry to supervise and coordinate all the trade enforcement activities of Field Operations’ personnel and coordinate enforcement activities with Trade. If Customs intends in the future to propose regulatory, interpretive, or policy changes, it will first have to submit those proposals to a Customs Review Board, consisting of the Commissioner and officials from DHS, Treasury, Commerce, and U.S. Trade Representative.
In its Office of Policy, DHS is tasked to create a Director of Trade Policy to ensure that U.S. economic security interests are protected.
As to ICE, it is to be headed by a Director (currently a DHS Assistant Secretary) who is subject to Presidential appointment and Senate approval and must have at least ten (10) years of law enforcement and five (5) years of management experience. The Director will oversee immigration policy, including detention and removal; advise the DHS Secretary about any policy or operation that will impact U.S. Citizenship and Immigration Service; and conduct criminal investigations of customs violations. ICE is to appoint a Chief of Policy and Strategy whose focus is to be on immigration policy. What the bill does not do is put CBP and ICE under unified management, leaving ICE in charge of how Customs will prioritize cases, including the timing of investigations and other significant law enforcement support, something that has been a glaring hurdle since the agents were moved from legacy Customs to ICE, as noted above. Immigration issues have overwhelmed the agents, resulting in such a significant lack of resources that it has to become very difficult for trade fraud cases to be pursued.
The new bill mandates Customs to develop further benefits for C-TPAT members. At the same time, it also eliminates the provision which limited the use of security data to non-entry purposes. In other words, any data submitted for security purposes can now also be used for compliance purposes. Additionally, the agency is also directed to establish a Customs Facilitation Partnership Program, which is to be extended to those involved with the entry of merchandise, including intermodal transportation system providers, contract logistics providers, air, land, and sea carriers, customs brokers, importers, and forwarders. Sounding very much like C-TPAT, this new partnership program is to take risk into account, but then extend priority to members for clearance of merchandise during resumption of trade following any incident in which merchandise was found to pose a threat to consumer health and safety. Benefits under this program are to be developed in consultation with COAC. Eligibility for participation is to be set by the Commissioner but should include the party’s history of compliance, including properly maintained importer of record numbers (see below for more details), bonds (although no explanation is given as to what properly maintaining bonds is intended to mean), and prompt responses to Customs when requesting information or documents, liquidated damages, or civil penalties. Customs is to evaluate and respond to all applications within 90 days, establish a means for verifying all data provided, and create a reverification process. This new program is to be administered through Trade and be staffed by no less than seven (7) positions. It would seem the very benefits arising out of membership in this new partnership program are benefits that should be extended to C-TPAT members without the need to spend the money, create the procedures, or otherwise meet the requirements of a new program. Why mandate a separate program?
There are also provisions urging prompt completion of ACE and ITDS, including funding levels. Customs is further reorganized to establish a Commercial Targeting Division within Trade and National Targeting and Analysis Groups within the Division. The Commissioner sets their priorities, but they are to include at least intellectual property rights; health and safety-, agriculture- and textile-related laws and regulations; and general and non-general revenue laws and regulations, including antidumping and countervailing duties.
Oddly, one of the provisions in the bill calls for the Secretary of DHS to establish an importer of record program to assign and maintain importer of record numbers. DHS is directed to develop the relevant criteria; provide a process by which importer numbers are assigned; maintain a centralized database of the numbers, including history; and put measures in place to avoid issuing duplicates. While aware of and sensitive to the issues created when IRS numbers are improperly obtained and importer identity theft or other enforcement activity results, requiring the importing community to acquire new numbers and completely change their way of interacting with the agency again requires the expenditure of significant sums of money by the private sector in circumstances where the benefit to the private sector is not evident. It would appear the solution here is for Customs to clean up the database and institute better and more comprehensive controls regarding the acceptance and amendment of data in the first place.
The bill would also formalize the interagency Import Safety Working Group. Its membership remains the same as that proposed by the Bush Administration. The Working Group is expected to identify "best practices": to assist importers with matters such as inspection of foreign manufacturing facilities, inspections prior to export from the foreign country, and protection of the international supply chain; assist federal, state, and local governments and agencies, as well as port authorities, to improve communications and coordination when responding to threats; and identify appropriate steps to increase importer accountability and the engagement of foreign government agencies to ensure the safety of imports into the U.S. One area of concern to the trade is whether these best practices will develop to the point of becoming regulatory requirements, thereby limiting the flexibility companies have to develop their own forms of good corporate governance and risk management. A Rapid Response Plan is also to be developed to deal with an incident in which merchandise entering the U.S. poses a threat to health or safety and in mitigation and/or recovering from any such incident.
The National Intellectual Property Rights Coordination Center (Center) is formalized under ICE to be headed by an Assistant Director. The Center is to coordinate investigations into the sources of infringing goods, including those who produce, smuggle, and distribute such goods; coordinate domestic and international law enforcement training; coordinate U.S. activities intended to prevent the import and export of infringing goods; support the interdiction of infringing goods; collect information from non-federal sources; and coordinate information from all sources and disseminate it for investigative and tactical purposes. ICE is given responsibility for the Center, but Customs is directed to take steps to educate the public about the dangers of counterfeit goods.
While it is not surprising that greater importance is being placed on IPR enforcement, given how few individuals within Customs truly understand trademark, copyright, and patent law, there is a provision in the bill which directs that 15 days after seizing merchandise, Customs is to publish on its website information about the seizure to permit any person to identify the merchandise and determine whether it is a "technology, product, service, device, component, or part…primarily designed or produced for the purpose of circumventing a technological measure which effectively controls access to a work for which a person has a copyright…has limited commercial …. purpose or use other than to circumvent such a technological measure; or is marketed for use in circumventing such a technological measure…." In response to an application responding to such a publication, Customs is to release the date of importation, the port of entry, a description of the merchandise, the quantity and country of origin, the name and address of the foreign manufacturer, the exporter, and the importer.
The concern here is one of due process. On the one hand, it is understandable that those whose rights are being circumvented want prompt action. On the other hand, this publication is taking place before the party accused of the violation is given the opportunity to respond. There is a companion requirement for Customs to obtain and release samples of seized goods to rights holders. It has long been the law that Customs is to release samples to trademark and copyright holders. This proposed revision, however, raises a number of new questions, such as: How is Customs to determine how many samples to pull for this purpose? How long is Customs obligated to keep those samples? What happens if there is a dispute over whether or not the device does indeed circumvent?
For what may well be the first time, the bill also allows the debarment of an importer who is found to have imported or exported goods made with convict, forced, or indentured labor under penal sanction, or by individuals who were coerced or subjected to human trafficking. The civil penalty for trading in such goods is three times value for the first offense and six times value thereafter. ICE is to establish an Office of Labor Enforcement to coordinate enforcement. Lists of producers are to be published in the Federal Register. The expectation here, too, is that publication will occur only once the claimant’s rights are exhausted.
Interestingly, given all the foods that have been labeled as transshipped, honey is singled out. Customs is to provide a national standard for the identity of honey by country or region. While the goal is clearly to identify honey that is sufficiently impure so as to pose a threat to health and safety or could be circumventing an antidumping case, there is ample experience with the actions of the Customs laboratory and its less-than-stellar methods of testing, whether dealing with garlic, shrimp, or honey, to name some recent examples. So why is it that Customs is delegated the duty to determine the pureness or origin of honey alone? Why is that not left to the FDA, which has mature and scientifically vetted operational and laboratory procedures to establish such standards? And why only honey?
Drawback is changed to clarify that substitution is defined as goods classified under the same 8 digit HTS number and the claim is filed to be within five (5) years of importation. There are other changes proposed designed to simplify existing procedures. There are also requirements imposed for the tracking of in-bonds and reporting certain data to Congress about the in-bond system amid ongoing concerns about the integrity of that system.
Finally, the bill contains several occasions when Customs is directed to consult with the private sector, specifically COAC and the TSN. In many ways, Customs has been a model for other agencies in terms of its repeated efforts to work with the private sector. However, Congress should keep in mind that, due to the associated costs, both of these groups tend to have as their participants members from larger companies. As a result, Congress should add other groups to the preferred private sector consultation list, such as national and regional trade associations that, through their committee structure, are often able to advance the interests of small- and medium-size companies.
As this bill has just been introduced in the Senate, and bearing in mind the health care, economic, climate change, and education issues facing Congress, it is not clear when the bill will move forward. Nonetheless, given that its sponsors are the Chairman and Ranking Member of the Senate Finance Committee, the chances are quite high that it will be enacted in this session of Congress. That said, while overall there is widespread support for its provisions, there are some parts of the bill that are problematic. The sooner those can be addressed, the sooner the bill is likely to go through with minimal opposition and result in Congress finally allowing CBP to put security and trade facilitation on the same priority level, which is sorely needed.
, codifies the changes made when the Department of Homeland Security (DHS) was created by calling for the creation of the Customs and Border Protection Agency (CBP) to be headed by a Commissioner. As is currently the case, the Commissioner position is subject to Presidential appointment and Senate confirmation. The bill creates a new Principal Deputy Commissioner, who would also be subject to Presidential appointment and Senate confirmation. In the absence of a Principal Deputy Commissioner, the Assistant Commissioner of the Office of Trade fills that position.
