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POSITION PAPERS
SECURING THE INTERNATIONAL SUPPLY CHAIN:
A WORK IN PROGRESSBy Peter Friedman, CONECT Counsel
There is a tension in Homeland Security policy - between CBP's data-driven approach, and those who would maximize physical inspection of imported cargo. I have been concerned that the advocates of physical inspection have been gaining some steam, as reflected by legislation passed in the House that would require all cargo being put on domestic passenger planes to be inspected within three years, and all containers shipped by sea to the United States from foreign ports to be scanned for radiation and density within three to five years.
Past Congressional hearings have had the potential of putting the US Customs and Border Patrol Commissioner on the griddle. Others who have testified on this topic include the General Accountability Office (GAO) which has issued reports critical of C-TPAT, and Stephen Flynn, who has raised security alarms in the past. These hearings have had the potential to influence the debate on cargo security; fortunately, the bottom line of these hearings has been far more positive than I had feared: overall, those who testified commended and supported the CBP Commissioner while advocating additional resources - manpower for C-TPAT verification and non-invasive scanning equipment for CSI as well as domestic inspections.
The Government Accountability Office (GAO) has offered several recommendations to address shortfalls in C-TPAT and CSI. While GAO has been both critical of CBP and supportive of the progress CBP has made. In response, CBP has embraced GAO’s recommendations, and cites corrective actions the Bureau either has taken or plans to take to implement them.
GAO has listed many concerns with CBP’s “trust and verify” method for the C-TPAT program, specifically that the CBP’s certification and verification process is not rigorous enough to ensure the security procedures outlined in members’ security profiles are reliable, accurate, and effective. The GAO has also stated concerns that benefits granted to members upon certification (and before validation) are too subjective, and the CBP’s overall record keeping for the program is incomplete and unreliable. The GAO has cited several factors that limit CBP’s CSI program and its ability to successfully target containers to determine if they are high risk. Specifically, staffing imbalances, combined with a lack of minimum technical requirements for equipment used at host ports, in addition to CBP’s use of manifest information – which can be unreliable and incomplete – as a data source to help characterize the risk level of U.S. bound shipments, give, according to GAO, CBP limited assurance that inspections conducted under the program are effective.
In order to address these program deficiencies, GAO has recommended for the C-TPAT program that CBP eliminate the weaknesses in its validation process, hire more staff to conduct validations, and install internal controls for the program. For the CSI program, GAO has recommended that CBP increase staffing at CSI ports and develop minimum technical requirements for the capabilities of inspection equipment.
When he was Commissioner of CBP, Robert Bonner explained to Congress that CBP intends to accomplish its “twin goals” of building more secure and more efficient borders with the C-TPAT and CSI programs. Using words such as “dynamic” and “evolving,” he emphasized that these programs are a work in progress, but given the global nature of the supply chain and the difficulty of regulating overseas activity, private sector participation in the C-TPAT and CSI programs has been critical in increasing supply chain security because these sectors have the greatest ability to leverage their corporate strength and demand more security enhancements from foreign entities.
Bonner expressed confidence in CBP’s trust and verify method and stressed that C-TPAT members are major U.S. importers of which CBP is familiar and confident. He admitted, though, that resource limitations have delayed progress, and that changes will be necessary. In defense of the CSI program, Bonner responded to Congressional inquiries regarding the quality of testing equipment in host ports by saying he has personally seen the equipment and believes they are up to par. He reminded the Committee that the foreign host countries pay for this equipment themselves. But in general, Bonner made it clear the CBP will continue to work with its partners to continue moving these programs forward.
CUSTOMS AUTOMATION
Peter Friedman, CONECT Counsel
Position: The Coalition of New England Companies for Trade (CONECT) urges Congress to fully fund 1) development of the Automated Commercial Environment (ACE) for the U.S. Customs Service; and 2) continuation of the Automated Commercial System (ACS) until replaced by ACE.
Background: Since the 1980s, the U.S. Customs Service has been moving from paper to electronic information flows. Today, more than 90% of all import entries are processed electronically. The Customs Automated Commercial System (ACS) handles approximately $1 trillion in imported goods in millions of entries each year. Unfortunately, ACS is now also operating at 90% of its capacity -- well above its design specifications. More important, it is based on out-dated, pre-internet technology. ACS crashed four times in late 1998, halting goods at the border for up to six hours. The backlog of freight created by this system breakdown took weeks to clear up.
Funding for ACE: Customs has estimated that it will cost about $1.2 billion to build a new Automated Commercial Environment -- ACE. Congress initially appropriated $130 million for Customs to begin development of ACE. Unfortunately, this is far less than needed to keep the project on its 5-year timetable. We urge Congress to increase funding for ACE development for following reasons:
- We Can't Return to Paper. It is unrealistic for Customs entries to be processed by paper. Yet there is no electronic back-up system. Many experts predict that unless something is done, ACS will experience a catastrophic failure in the near future.
- An ACS Failure Will Hurt New England Manufacturers and Their Workers. In today's just-in-time world where products are manufactured using parts and raw materials from global sources, even a brief shut down of the nation's ports can have huge repercussions. If parts don't arrive on time to manufacturing plants, assembly lines in the U.S. will be shut or slowed down.
- American Taxpayers Have a Right to an Efficient System. U.S. importers pay $800 million each year in merchandise processing fees to cover the cost of collecting tariffs. These same importers also pay billions of dollars in tariffs that go into the U.S. treasury. They have a legitimate right to expect a system that is up-to-date.
- A Modern System Enhances Compliance. A modern system for transmitting import entry information will enhance Customs' ability to track down Customs fraud and other types of illegal activities.
DOHA ROUND OF WORLD TRADE TALKS
DOHA ROUND OF WORLD TRADE TALKS
Ray Bucheger
Office of Peter Friedman, CONECT Counsel
It is in the best interests of the New England business community that barriers to international trade be eliminated. As the Doha round of World Trade Organization negotiations would eliminate many barriers to trade and thus stimulate increased imports and exports, CONECT supports the Doha objective, and the extension of Trade Promotion Authority (TPA) which is necessary for progress to be made on Doha.
The Doha round of WTO negotiations began in November 2001 in Doha, Qatar. Unfortunately, little progress has been made since the negotiations began due to the inability of the European Union to overcome French objections to elimination of agriculture subsidies, as well as grandstanding by lesser developed countries who seek improved market access to the developed economies, without apparently any willingness to improve their own intellectual property, phytosanitary, and other requirements for joining the global trading economy.
Many people believe the Doha trade talks (and the rest of the President’s trade agenda for that matter) are contingent on Congress extending TPA. TPA would give the President and perhaps more importantly, the other countries with which we are negotiating confidence that the specific terms of the treaty to which they have agreed will not be subsequently amended by Congress. Under TPA rules, Congress must simply vote to approve or disapprove the treaty as negotiated by the President. They argue that there is no sense in negotiating a trade agreement this large if Congress would simply amend it to death, which it could do absent TPA.
At the same time, Congressional opponents of TPA say they want evidence that negotiators can make progress in the Doha round and argue that there is no reason to extend TPA if the round is doomed to failure.
This is an interesting and complicated dynamic, and only became more interesting and complicated when the Democrats took control of both Houses of Congress. While many Democrats claim to have seized victory in their districts and states due to their support of trade protectionism, the Chairmen of the House Ways and Means Committee and the Senate Finance Committee, the two Committees with jurisdiction over trade matters in Congress, are supportive of the Doha round and extending TPA (with greater protections for workers and the environment).
Whether completion of the Doha talks depend on an extension of TPA or if an extension of TPA is contingent on progress with the Doha talks, and regardless of the rank and file in Congress who are opposed to free trade, CONECT urges Congress to grant the President an extension of TPA so that the Doha negotiations can continue and the President’s free trade agenda can move forward.
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