Witness Statements from House Subcommittee on Trade Hearing on Customs Issues

This is Part I of a multi-part series of summaries on this hearing. Part I focuses on the testimony of the National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA) Chairman of the Board of Directors, Peter H. Powell, Sr., which examined, among other things, the balance between security and trade facilitation. See future issues of ITT for additional summaries.

Highlights of NCBFAA's Testimony to the Trade Subcommittee

In his testimony to the Trade Subcommittee, Mr. Powell made the following observations with respect to the balance of security and trade (partial list):

CBP is losing its best management. According to Mr. Powell's testimony, CBP is dramatically losing its best management. He contends that years of experience in management at the agency are retiring from CBP in droves, leaving temporary, transitional and inexperienced executives in charge. CBP officials who fully understand the complex world of international trade and transportation logistics are vanishing and this institutional wisdom is not being replaced. Mr. Powell states that CBP must re-build its top-level infrastructure.

Technical means for security and facilitation are not in place at U.S. ports. Mr. Powell also points out that technical means to accomplish the tasks of security and facilitation are not in place at U.S. ports. The tools on the dock (such as vehicle and cargo inspection system (VACIS) machines used for non-intrusive inspections) are not available.

CBP's allocation of manpower is focused preferentially on security, not commercial operations. Mr. Powell notes that CBP's allocation of manpower at the ports now is focused preferentially on security, not commercial operations. For example, personnel are simply not available as commodity specialists for reviewing the classification of merchandise. Mr. Powell explains that the term "inspection" now refers to reviewing security, not ensuring the validity of entry data for the collection of revenue. This loss of commercial orientation is symptomatic of a shift that is proving very harmful to the smooth flow of trade.

Security will depend on more programs than C-TPAT. Although he points out that Customs-Trade Partnership Against Terrorism (C-TPAT) has become the "gold standard" for international trade, Mr. Powell emphasizes that security will depend on more programs than C-TPAT. Mr. Powell points out that only 7,200 importers out of approximately 400,000 can be involved in C-TPAT. He states that small, periodic importers cannot be realistically included; therefore coverage of these entities requires the involvement of intermediaries such as those within NCBFAA in order that they are not disadvantaged merely because of their size and limited transactions.

Security programs often prove duplicative, but problems are being resolved. Mr. Powell also points out that accompanying programs like C-TPAT are other Department of Homeland Security (DHS) agency programs that often prove duplicative, overreaching or at cross-purposes. As an example, Mr. Powell notes that CBP is presently fielding its "smart box" initiative, a full year after its on-again, off-again disinterest and then involvement with the Transportation Security Administration's (TSA's) Container Security Group. Mr. Powell states that the private sector has quite appropriately asked itself if all of these separate initiatives would ever be reconciled.

However, Mr. Powell did note that of late, DHS has responded to its role as integrator of cargo security programs and done an extremely effective job. Recently, in creating its Maritime Transportation Security Act (MTSA) subcommittee of the Departmental Advisory Committee on the Commercial Operations of CBP (COAC), in bringing together resources at the departmental and agency levels, and in convening broad representation from the commercial community, DHS has proven itself to be on-track for resolving the trade's misgivings.

Problems associated with CBP and FDA's joint implementation of Bioterrorism Act. Mr. Powell testified that a relationship that has proven to be particularly problematic and falls beyond DHS' reach is the joint implementation of the Bioterrorism Act by CBP and the Food and Drug Administration (FDA).

As an example of these problems, Mr. Powell cites recent problems with prior notice transmission at the Northern Border when the Automated Commercial System (ACS) went down for several days. This resulted in PN requirements not being processed, even though they were filed by shippers. In response to this problem, FDA required a second, duplicative filing of PN, which Mr. Powell states came at a substantial cost in time and resources to the trade.

Congressional demands for immediate solutions to port security. Mr. Powell also addresses Congress' inclination to establish requirements without consultation and to demand action without concern for its effects on trade. One such example is a port security provision introduced in both Houses of Congress that would create a $5,000 fine for a shipper's failure to move uncleared merchandise from the dock after 5 days (instead of the current 15 days). However, the provision ignores such facts as: goods ordered inspected by CBP cannot be moved, inspections often take 7 days to occur, etc. Mr. Powell states that legislation such as this must be resisted by those most familiar with the operation of trade and its value to the nation.

(See ITT's Online Archives or 05/25/04 news, 04052599 1, for BP summary of a Journal of Commerce editorial stating that few believe this provision will be included in any maritime security bill that emerges from Congress. See ITT's Online Archives or 05/25/04 news, 04052505, for BP summary of S.2279, the Senate's Maritime Transportation Security Act of 2004, which contains this provision.)

Transcript of Mr. Powell's testimony (dated 06/15/04) available at http://waysandmeans.house.gov/hearings.asp?formmode=view&id=1668

NCBFAA Press Release on hearing (dated 06/17/04) available at http://www.ncbfaa.org/whatsnew/pressreleases/2004/powelltestimony.htm

List of witnesses and panelists for hearing available at http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=152