Few Clear Benefits Apparent from EU Trusted Trader TTIP Proposal, Execs Say

The EU's proposal would set minimum conditions for trusted trader programs in both the U.S. and the EU, and provide for cooperation between the programs, including mutual recognition and a "common set of procedures, benefits, data elements and electronic interfaces" for trusted traders, eventually "leading to the creation of a transatlantic authorised operators programme." If adopted, success would depend on the benefits the program provides to trusted traders. “The devil will be how much they really live up to providing those benefits, and how you can prove to somebody that goes through all the trouble of meeting those requirements that they really are going to have a lower inspection rate," Express Association of America (EAA) Executive Director Michael Mullen said. “That’s always the issue that’s generated a certain amount of [criticism] on behalf of the trusted trader programs.”

European traders are ahead of U.S. traders in utilizing a single customs declaration form (here), said Jon Kent, a lobbyist representing that National Customs Brokers & Forwarders Association of America. CBP and NCBFAA are working to create a “Simplified Summary,” which will constitute a single customs filing containing payment and administrative information compiled from transactional dataflows over the course of a month, but that is “a long way off,” Kent said. EU’s recent customs proposal also seeks as a benefit clearance of goods in the premises of a trusted trader or “Authorised Economic Operator” (AEO) in the EU’s case. But that might not be feasible, Kent said. “That’s a bit much.”

Industry advocates are hoping the “Accelerated Border Clearance” (ABC) model in development by UPS, CBP, and being considered by about a dozen countries, continues to gain traction. The two entities are looking to start “a couple” pilot programs by the end of 2016, said UPS Vice President for Global Customs Policy and Public Affairs Norm Schenk. That model would form a “green lane” for shipments involving pre-certified companies that provide prior information, and it would predicate release decisions on a trusted company’s account history, rather than provide for assessments on a shipment-by-shipment basis. “It has been pretty well-received, because it’s a win-win for both customs administrations and companies,” Schenk said. But it appears that companies could hire less customs brokers if ABC is implemented. “One of the big costs for companies moving across the supply chain of all sizes is customs brokerage fees" and "fees associated with other government-run agencies,” Schenk said.

But even if mutually recognized trusted trader/AEO programs are written into TTIP and implemented, it’ll still be tough for the EU to prove that it’s conducting fewer inspections than it otherwise would on shipments from designated U.S. companies, Mullen said. “That’s what’s already caused some people not to bother going through the expense of joining C-TPAT in the United States, because they’re just not sure,” he said. Furthermore, companies heavily invest in compliance and auditing preparedness to receive tangible trusted trader benefits, but many countries granting UPS preferential status have not reduced inspections on UPS shipments, Schenk said. “In terms of clear benefits from a company perspective, there’s not a lot that are out there,” he said. For instance, “on the clearance side, quite frankly, the clearance rates overall are pretty good right now. I think there’s certainly room for some improvement, but I’m not sure it’s enough that it’s going to move the needle on the dial.”

Another barrier to an effective bilateral trusted trader regime is the lack of a government-wide program structure in the U.S., Mullen said. While CBP administers the Customs-Trade Partnership Against Terrorism (C-TPAT) and is in the test phase for an interagency trusted trader program with potential for international applicability, currently, two out of every three cargo holds at U.S. borders are done by non-CBP government agencies, Mullen said. “We still need to get to that goal in the United States, but it would be great if we agree to it in a trade agreement, and the U.S. would have to do it,” he said. While Mullen said the greater volume of shipments anticipated alongside TTIP will eventually necessitate “some kind of ‘Trusted Trader’” program, he added that he doesn’t expect the U.S. government to implement any broad trader preference program before the conclusion of TTIP negotiations. “A lot of these product safety agencies don’t have any trust in the trade,” Mullen said. “They view the private sector as suspicious until proven otherwise. It’s tough for them to sign up for that kind of a program.”

EU barriers to recognizing trusted traders exist as well, Schenk said. Currently, companies must apply on a country-by-country basis to receive AEO status in any EU member nation. But U.S. stakeholders hope TTIP allows a one-application-fits-all approach, whereby companies could gain AEO status in EU countries other than the one they applied to, Schenk said. This could encourage more companies to participate, he said. The American Association of Exporters and Importers has pushed for TTIP to include an agreement which would require all TTIP member states to recognize in the same vein any company deemed low-risk by any TTIP member state that has adopted the World Customs Organization’s SAFE Framework of Standards to Secure and Facilitate Global Trade, AAEI CEO Marianne Rowden said.

Mullen said adoption of ACE, expected by the end of the year, could provide an impetus for the U.S. to move toward a more integrated trusted trader program, but he added that will not happen anytime soon. But Kent said he didn’t think single-window would be needed to implement a bilateral trusted trader TTIP framework. Kent predicted that the U.S. and EU would set up trusted trader relationships between individual U.S. and EU agencies, tying the Food and Drug Administration’s and Consumer Product Safety Commission’s planned trusted trader programs to their respective EU equivalents, for instance. “I don’t think that’s in the cards for quite a long time,” Kent said of the possibility of the establishment of the U.S. or EU government establishing across-the-board trusted trader” programs.

The EU customs proposal also seeks full implementation of single-window systems in both the U.S. and EU. Mullen said the proposal charts the path toward a common export/import declaration for parties on both sides of the supply chain. But the EU has “started to waffle” on setting a deadline by which governments would be required to notify traders of the status of goods release, Mullen said. The proposal includes language that provides for notification “in a timely manner.” EAA plans to press U.S. negotiators to insert more specific language into TTIP, akin to the six-hour deadline established through the Trans-Pacific Partnership, Mullen said.

Single-window harmonization could be too difficult to achieve across the Atlantic, as Europe has a more extensive regulatory environment than the U.S., Kent said. “Europe has got its concerns, both political, and health and safety concerns, that are different than ours,” he said. “So it just seems to me that complete harmonization is unlikely. It would force every peg into the same hole, and that’s probably not what people want—not people there; not people here.”

Another difficult TTIP goal of U.S. stakeholders is to increase EU de minimis levels, which will be difficult given that EU member states assess a value-added tax (VAT) on all shipments, meaning that European governments enjoy the associated revenue streams, where governments can make a lot of money, Schenk said. In principle, the EU supports “the idea of simplifying the process, but they don’t want to give the revenue up associated with the VAT, so we’re continuing to work on that one,” he said. “I wish I could say we had an agreement on that, but we haven’t given up yet, and we want to pursue that, because higher de minimis levels are really a launching pad for many companies.” While the U.S. hopes that the EU would set an $800 de minimis level, same as the U.S.’, that could be a tough sell, Schenk said. “We’ve got a number of different proposals in.” The proposal includes no mention of de minimis thresholds.

U.S. and EU negotiators are “quite optimistic” with the proposed customs text, and both sides hope the provisions can be finalized by the end of 2016, Schenk said. Overall, the EU proposal is a good first step for trade facilitation under TTIP, Schenk and Mullen said. “The EU has put something forward that obviously has some shortcomings to it, and there are a number of things that the U.S. is going to want a lot more specific commitments on,” Mullen said. “But for this point in the negotiation, I don’t think it’s that bad.”