[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

SUPPORTING ECONOMIC GROWTH AND JOB
CREATION THROUGH CUSTOMS TRADE MODERNIZATION,
FACILITATION, AND ENFORCEMENT

=======================================================================

HEARING

before the

SUBCOMMITTEE ON TRADE

of the

COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

MAY 17, 2012

__________

Serial No. 112-TR05

__________

Printed for the use of the Committee on Ways and Means

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COMMITTEE ON WAYS AND MEANS

DAVE CAMP, Michigan, Chairman

WALLY HERGER, California CHARLES B. RANGEL, New York
SAM JOHNSON, Texas FORTNEY PETE STARK, California
KEVIN BRADY, Texas JIM McDERMOTT, Washington
PAUL RYAN, Wisconsin JOHN LEWIS, Georgia
DEVIN NUNES, California RICHARD E. NEAL, Massachusetts
PATRICK J. TIBERI, Ohio XAVIER BECERRA, California
GEOFF DAVIS, Kentucky LLOYD DOGGETT, Texas
DAVID G. REICHERT, Washington MIKE THOMPSON, California
CHARLES W. BOUSTANY, Jr., Louisiana JOHN B. LARSON, Connecticut
PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania RON KIND, Wisconsin
TOM PRICE, Georgia BILL PASCRELL, Jr., New Jersey
VERN BUCHANAN, Florida SHELLEY BERKLEY, Nevada
ADRIAN SMITH, Nebraska JOSEPH CROWLEY, New York
AARON SCHOCK, Illinois
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York
SANDER M. LEVIN, Michigan

Jennifer M. Safavian, Staff Director and General Counsel

Janice Mays, Minority Chief Counsel

______

SUBCOMMITTEE ON TRADE

KEVIN BRADY, Texas, Chairman

GEOFF DAVIS, Kentucky JIM McDERMOTT, Washington
DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts
WALLY HERGER, California LLOYD DOGGETT, Texas
DEVIN NUNES, California JOSEPH CROWLEY, New York
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska
AARON SCHOCK, Illinois
LYNN JENKINS, Kansas

C O N T E N T S

__________
Page

Advisory of May 17, 2012 announcing the hearing.................. 2

WITNESSES

PANEL 1:
Mr. David Aguilar, Acting Commissioner, U.S. Customs and Border
Protection, U.S. Department of Homeland Security............. 10
Mr. Kumar Kibble, Deputy Director, U.S. Immigration and Customs
Enforcement, U.S. Department of Homeland Security............ 35
Mr. Timothy Skud, Deputy Assistant Secretary for Tax, Trade and
Tariff Policy, U.S. Department of the Treasury............... 53
PANEL 2:
Honorable George Weise, Executive Vice President, Sandler &
Travis Trade Advisory Services, (former Commissioner of
Customs). Testifying on his own behalf....................... 80
Mr. Darrell Sekin, Jr., President and CEO, DJS International
Services, and President, National Customs Brokers and
Forwarders Association of America, Inc....................... 87
Mr. Michael Mullen, Executive Director, Express Association of
America...................................................... 96
Mr. John Williams, Executive Director, Southern Shrimp Alliance 106
Mr. Karl Glassman, COO, Leggett & Platt, Inc................... 118

SUBMISSIONS FOR THE RECORD

The Honorable Charles Boustany Letter 1.......................... 73
The Honorable Charles Boustany Letter 2.......................... 74
Senators Ron Wyden, Olympia Snowe, Claire McCaskill, and Roy
Blunt.......................................................... 130
AAFA............................................................. 133
AAEI............................................................. 143
RILA............................................................. 147
NTEU............................................................. 151

SUPPORTING ECONOMIC GROWTH AND JOB CREATION THROUGH CUSTOMS TRADE
MODERNIZATION, FACILITATION, AND ENFORCEMENT

----------

THURSDAY, MAY 17, 2012

U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The subcommittee met, pursuant to call, at 10:04 a.m., in
Room 1100, Longworth House Office Building, the Honorable Kevin
Brady [chairman of the subcommittee] presiding.
[The advisory of the hearing follows:]

Hearing Advisory

FROM THE COMMITTEE ON WAYS AND MEANS

Chairman Brady Announces Hearing on

Supporting Economic Growth and Job

Creation through Customs Trade

Modernization, Facilitation, and

Enforcement

Thursday, May 17, 2012

Ways and Means Trade Subcommittee Chairman Kevin Brady (R-TX) today
announced a Subcommittee hearing to review customs operations
administered by U.S. Customs and Border Protection (CBP) and U.S.
Immigration and Customs Enforcement (ICE). The hearing will focus on
efforts to enhance economic growth and job creation by facilitating
legitimate trade, modernizing customs procedures, and enforcing U.S.
Customs and trade laws. The hearing will help the Committee develop
customs reauthorization legislation. The hearing will take place on
Thursday, May 17, 2012, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 10:00 a.m.

In view of the limited time available to hear witnesses, oral
testimony at this hearing will be heard from invited witnesses only.
However, any individual or organization not scheduled for an oral
appearance may submit a written statement for consideration by the
subcommittee and for inclusion in the printed record of the hearing.

BACKGROUND:

The Committee last conducted a comprehensive review of the
structure and resources of CBP and ICE from a commercial operations and
customs enforcement perspective in May 2010. Since that time, there has
been growing concern that, in particular, existing efforts to modernize
trade functions, facilitate legitimate trade, and enforce customs laws
may not be keeping pace with the growing volumes of trade.
CBP has been implementing several programs to automate trade,
improve compliance, and identify shipments that violate U.S. laws. In
addition, in working with CBP, the trade community has made large
investments in international supply chains through advance submissions
of cargo data and ``partnership'' programs between government and
business. This hearing will explore how these enhanced targeting and
screening tools can be improved to reduce costs, smooth movements of
legitimate trade by trusted partners, and increase compliance with the
customs and trade laws of the United States.
With respect to enforcement of traditional customs laws and revenue
collection, more enforcement-related training and other measures may be
needed to ensure CBP can effectively address fraudulent practices that
circumvent U.S. laws, including in the areas of antidumping and
countervailing duty collection, intellectual property rights
enforcement, and textile enforcement. This hearing will explore how CBP
manages its resources and whether any structural or other changes are
needed to ensure that U.S. customs and trade laws are enforced.
In announcing this hearing, Chairman Brady said, ``Trade is vital
to our economic engine, creating jobs and lifting wages here at home.
Today, more than 50 million U.S. workers are employed by companies that
engage in international trade, and U.S. trade represents over 30
percent of U.S. GDP. Streamlining legitimate trade is an essential
component to our competitiveness in the global marketplace. This
hearing will explore how to allocate resources and develop models so
that we can move the ever-increasing volume of legitimate trade more
efficiently, while effectively filtering out trade that doesn't comply
with our laws.''

FOCUS OF THE HEARING:

To meet the challenge of effectively and efficiently processing the
volume and increasing complexity of trade in the future, CBP's
structure, policies, operations, and modernization must support its
trade facilitation and commercial enforcement functions. This hearing
will examine the following topics:

Modernizing: Modernizing CBP's Automated Commercial
Environment (ACE) is critical to supporting the increase in import
volume and the successful pre-screening of cargo. Complementing ACE is
the International Trade Data System (ITDS), the window through which 48
government agencies with border responsibilities must function
electronically and seamlessly. Together, these systems will allow CBP
and other agencies to process goods more quickly and cost effectively,
as well as collect and use trade data. The hearing will focus on what
is needed to process all agency requirements at the border in the face
of the ever-increasing volume of imports.

Streamlining: CBP must find new models to manage the
importing process by streamlining the flow of legitimate trade and
providing benefits through a risk-based approach. CBP's advance cargo
data initiatives and industry partnership programs must work together
to process legitimate trade. The Subcommittee will explore, among other
things, how CBP can use an account management summary processing
approach as opposed to a shipment-by-shipment approach to facilitate
trade by known and established industry partners, increasing compliance
by allowing more focus on shipments posing greater risk.

Enforcing: Revenue collection and trade enforcement
activities are critically important missions for CBP and ICE. While the
overwhelming majority of trade is compliant with U.S. law, the agencies
face increasing challenges in revenue collection and customs
enforcement as the sophistication of those who seek to evade our laws
increases. The hearing will examine whether these agencies are meeting
this challenge.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
page of the Committee website and complete the informational forms.
From the Committee homepage, http://waysandmeans.house.gov, select
``Hearings.'' Select the hearing for which you would like to submit,
and click on the link entitled, ``Click here to provide a submission
for the record.'' Once you have followed the online instructions,
submit all requested information. ATTACH your submission as a Word
document, in compliance with the formatting requirements listed below,
by the close of business, Thursday, May 31, 2012. Finally, please note
that due to the change in House mail policy, the U.S. Capitol Police
will refuse sealed-package deliveries to all House Office Buildings.
For questions, or if you encounter technical problems, please call
(202) 225-1721 or (202) 225-3625.

FORMATTING REQUIREMENTS:

The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
not alter the content of your submission, but we reserve the right to
format it according to our guidelines. Any submission provided to the
Committee by a witness, any supplementary materials submitted for the
printed record, and any written comments in response to a request for
written comments must conform to the guidelines listed below. Any
submission or supplementary item not in compliance with these
guidelines will not be printed, but will be maintained in the Committee
files for review and use by the Committee.

1. All submissions and supplementary materials must be provided in
Word or WordPerfect format and MUST NOT exceed a total of 10 pages,
including attachments. Witnesses and submitters are advised that the
Committee relies on electronic submissions for printing the official
hearing record.

2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.

3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental
sheet must accompany each submission listing the name, company,
address, telephone and fax numbers of each witness.

The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.

Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.

Chairman BRADY. Good morning, everyone. Our hearing today
will focus on three critical aspects of the Customs mission:
Modernization, streamlining or facilitation, and enforcement as
well as the accurate, timely measurement of improvement in all
three. I want to welcome everyone and extend a special welcome
to our guests.
Just 100 years ago, the main function of Customs was
revenue collection revenue. For over 125 years, Customs duties
were our main source of funds. At that time, America's imports
were a mere $153 billion a year, and duties collected totaled
about $310 million. Today the value of imported goods is
approximately $2.3 trillion a year, and duties, taxes, and fees
collected on these goods bring in almost $37 billion. The value
of imports in 2011 has grown to over four times what it was
just 20 years ago.
Trade is vital to our economic engine, creating jobs and
lifting wages here at home. Today more than 50 million U.S.
workers are employed by companies that engage in international
trade, and U.S. trade represents over 30 percent of America's
economy.
In the 21st century, lowering tariff barriers and
increasing quotas is not enough. Time is a trade barrier, and
streamlining legal trade is an essential component to our
competitiveness in the global marketplace. This hearing will
explore how to allocate resources, develop the models, and
measure progress so that we can move the ever-increasing volume
of legitimate trade more efficiently and halt trade that
doesn't comply with our laws.
Customs is the air filter to our economic engine, allowing
good, clean imports to flow through, while the harmful elements
are screened out before they cause damage. To develop better
tools and measurements, I intend to move forward on a
bipartisan basis to pass Customs reauthorization legislation
this year. The last time this committee last passed a Customs
bill was in 2004, and it is long overdue.
CBP and ICE play pivotal roles to ensure that our trade
agreements, our preference programs, and U.S. trade laws are
enforced. The Treasury Department also plays an important role
in furthering CBP's trade mission, and we depend on it to
oversee CBP's important Customs revenue functions.
I strongly believe that for the United States to remain
competitive, we must have the most modern and automated Customs
structure we can realistically develop, the first component of
a sound Customs policy. I support the modernization of CBP's
Automated Commercial Environment, which is vital supporting
increased imports and pre-screening of cargo. I hope the CBP
has turned over a new leaf in making ACE a reality and will
quickly operationalize the cargo release module that we have
been awaiting for some time. I understand that ACE will soon be
expanded to accommodate export processing, which today is
partially an archaic paper process.
Complementing ACE is the International Trade Data System.
In working with Treasury, CBP has been leading 48 agencies in
developing ITDS so that our companies deal with an electronic
and seamless one-stop government, one window at the border
instead of a morass of multiple clearance processes. These
programs will allow CBP and other agencies to more quickly and
cost-effectively process imported goods and to more efficiently
collect and use trade data.
Second, in addition to automation, the sophisticated nature
of trade demands better streamlining of Customs processes,
particularly for low-risk importers. CBP's advanced cargo data
initiatives and industry partnership programs must work
together to better facilitate legitimate trade. Companies that
partner with CBP to improve trade compliance should realize the
benefits of a more efficient system that create incentives for
cooperation above the norm.
CBP has the potential to develop new models to facilitate
legitimate trade in a risk-based manner, such as through
pooling expertise in Centers of Excellence and Expertise as
well as the Importer's Self-Assessment program instead of
shipment-by-shipment approaches. These models would enable CBP
to focus on high-risk imports and expedite low-risk shipments
while leveraging limited government resources. I would like to
maximize the role of the Office of Trade in carrying out these
functions.
The third component of sound Customs policy is collecting
revenue, enforcing our laws without jeopardizing legitimate
trade. While the great majority of incoming trade is materially
compliant, CBP and ICE face increasing challenges as the
sophistication of those who wish to evade our law increases.
CBP and ICE have designated eight critical sectors as Priority
Trade Issues to focus their enforcement resources, such as
intellectual property rights enforcement, textiles, and
antidumping countervailing duties.
I also want to congratulate fellow Ways and Means Committee
member Dr. Charles Boustany on his bipartisan legislation to
address evasion and underpayment of antidumping and
countervailing duties, and I look forward to considering it.
We also can't forget that our trade agreements beneficially
create new obligations on our trading partners that increase
compliance. The TPP negotiations are taking this several steps
further.
In conclusion, I want to emphasize that CBP and ICE
consultations with this committee, with other agencies, and the
private sector on its rulemakings and other major actions must
be systematic and meaningful. This hasn't always been the case.
There have been some bumps in the road in the past, and I think
that consultation helps achieve a better product.
Today we will have a comprehensive discussion on efforts to
enhance economic growth and job creation by facilitating
legitimate trade modernizing Customs procedures, enforcing U.S.
Customs and trade laws in preparation for moving Customs
reauthorization legislation.
Chairman BRADY. I will now gladly yield to our Ranking
Member of the Trade Subcommittee, Mr. McDermott.
Mr. McDERMOTT. Thank you, Mr. Brady. I want to thank the
chairman for holding this meeting and thank our witnesses for
coming today. I want to start by recognizing the tremendous
challenge that the CBP faces and the acting commissioner, Mr.
Aguilar. Previous commissioner appointee was not confirmed, and
therefore, Mr. Aguilar is sitting in for him in one of those
situations where you have the job but you don't have the power,
and we appreciate what you are going through at this point.
Your agency is tasked with protecting our borders from a
range of security threats, a task that rightly became a central
priority after 9/11. The agency also has to facilitate
legitimate trade in goods across our borders, a task that is
all the more complex given the exponential rise in trade.
Since Customs was subsumed in the Department of Homeland
Security in 2002, our committee has expressed significant
concern that CBP has not met this dual mandate and pushed CBP
to sharpen its trade focus, both through statutory mandates and
through oversight. Former Commissioner Bersin and now
Commissioner Aguilar and key members of the CBP team have
worked to respond to our concerns, and clearly you have made
real progress, and we commend you for that.
But even with this progress, CBP is facing challenges with
the trade side of the mandate. We are working our way towards
Customs reauthorization bills, so we are here today to
understand the nature and the origin of the problems and to
look for solutions.
There are three areas that I hope we can focus on. One is
bringing the U.S. Government's system for processing imports
into the 21st century. It is, after all, the 21st century.
Ensuring the CBP, number two, is getting off the sidelines and
fulfilling its obligations to stop foreign companies from
evading our trade revenue laws; and, three, ensuring that CBP
can partner with innovative companies to stop imports which
undermine U.S. intellectual property.
On the development of CBP's computer systems, the need is
clear. We ought to get off paper and onto a computer. Our
current system of processing imports is, simply put,
inefficient. Importers submit duplicative data and paper
documents to CBP and other regulatory agencies just to have
their goods cleared at the port.
Now, I come from a high tech district, and just on the face
of it, this redundant paper-based system not only costs
importers more time and money as they wait for goods to clear,
but it also costs CBP and other agencies wasted time and money.
CBP's mismanagement of ACE development hurt business. Our
economy and Congress lost some faith in CBP to get the job
done. Now I understand that in the past 2 years, CBP has taken
good steps to get ACE back on track. Today I hope to get a
better sense of how real that progress is and whether it is
sufficient--significant enough that the committee should
support continued development of the ACE ITDS system. It is--I
think an electronic one-stop system for importers would be a
great trade facilitation benefit for businesses and over time
could be a platform where CBP can finally automate a range of
other programs such as drawback and inbound cargo.
On evasion of trade remedies laws, CBP's failure to act,
even when affected U.S. industries provide CBP with very
specific information about evasion is simply unacceptable. The
purpose of AD/CVD duties is to level an un-level playing field
which is harming our companies. If CBP does not take adequate
steps to collect these duties, CBP is allowing that harm to
continue.
Finally, on protection of U.S. intellectual property, the
administration, ICE, and CBP deserve credit for the work being
done at the National IPR Center to target and stop infringing
imports. There are two areas where CBP should partner with
innovative companies to bolster this work. The first is
effective implementation of a provision enacted as part of the
National Defense Authorization Act to allow CBP to share
details on products suspected of being fakes with the right
holders. The second is giving CBP the authority to share
illegal devices used to infringe on copyright works such as
video games with right holders. I hope to work with the
administration and the committee to address both of these
issues, and we welcome your testimony. Thank you.
Chairman BRADY. Thank you, Mr. McDermott. Now for our first
panel of government witnesses, the Acting Commissioner of
Customs and Border Protection, David Aguilar. Kumar Kibble,
Deputy Director of Immigration and Customs Enforcement.
Welcome. Timothy Skud, Deputy Assistant Secretary for Tax,
Trade and Tariff Policy with the U.S. Department of Treasury.
Gentlemen, thanks for coming today. We have reserved for each
of you 5 minutes. Commissioner Aguilar.

STATEMENT OF DAVID AGUILAR, ACTING COMMISSIONER, UNITED STATES
CUSTOMS AND BORDER PROTECTION, U.S. DEPARTMENT OF HOMELAND
SECURITY

Mr. AGUILAR. Good morning, Chairman Brady, Ranking Member
McDermott, and distinguished Members of the Subcommittee. I
want to begin this morning by thanking the Members of the
Subcommittee and the Congress for your unwavering support to
U.S. Customs and Border Protection and its men and women. Your
support continues to enable us to work with our private sector
partners to transform, do exactly as the chairman and the
ranking member stated, to transform our entry and clearance
processes, the way that we do business, and to meet our mutual
and continuously evolving needs. It is indeed an honor this
morning to appear before you today representing the thousands
of men and women of the United States Customs and Border
Protection.
I would like to begin to discuss the actions we are taking
at CBP to develop a fully modern agency focused not only on
protecting, which is critically important, but just as
critically important also on promoting our national security
and economic well-being well into the 21st century. This is an
exciting time of innovation and implementation, and I want to
underline implementation, at CBP, and I, along with the men and
women of CBP, are committed to continuing our partnerships with
the trade industry and furthering our co-creation efforts to
enhance the many important initiatives that we have undertaken.
Last week CBP held its 2012 trade symposium, its first ever
on the west coast, where we focused on many of the initiatives
transforming the way that CBP approaches the trade operations
with the trade community and especially with other government
agencies. We are charged with some of the most critical parts
of America's economic and physical security.
In fiscal year 2011, CBP processed nearly $2.3 trillion in
trade. We operate at 329 ports of entry and process over 100
million cars, buses, trucks, trains, vessels, and aircraft
arriving at our ports of entry every year. We move more than 28
million commercial shipments arriving via air, sea, and land,
250 million more arriving in small parcels via express carriers
and mail.
With such a large and growing volume of goods and people
crossing our borders, CBP must perform its responsibilities
efficiently to avoid delaying shipments or increasing costs and
causing inefficiencies for U.S. businesses. It is essential
that we stay agile in modernizing our processes and
methodologies, especially as we face a world of increased trade
volumes and the rapidly escalating complexity of modern trade.
Going forward, my focus on trade policy centers on several
strategies and six key themes aimed at transforming as to how
CBP carries out its trade and security missions. Specifically,
those themes are consistency and harmonization; modernization
of our processes and IT technology capabilities; building up
the trust-based programs that have been so successful; co-
creation with the trade industry on how we move forward;
bidirectional education where we learn from the trade and the
trade learns from us as to how we operate so that we can align,
synergize, and dovetail at every opportunity; and lastly, trade
enforcement and revenue collection, bringing substantive
meaning to the enforcement and the revenue collection of our
responsibilities.
Building a consistent approach across commercial ports and
between Federal agencies will allow us to increase data
sharing, reduce duplicative data filing, and reduce regulatory
barriers to efficient cargo release. We have focused our
efforts on the creation and implementation of things such as
the Centers for Excellence and Expertise.
In October of 2011 CBP established two of these centers:
One for pharmaceuticals, one for electronics. I recently
announced just last week the expansion of two additional
Centers for Excellence and Expertise, one in the petroleum,
natural gas, and minerals arena, and the other in the
automotive and aerospace arena. All four of these centers bring
to bear all of our trade expertise on a single industry, on a
single sector of industry in one strategic location. The
centers are virtual, a mix of virtual and physical collocation
that are staffed with trade disciplines and positions using our
account management principles to authoritatively facilitate
trade issues. Ultimately, they provide one-stop processing to
lower the trades cost of business and enhance CBP's enforcement
efforts.
Our most visible modernization effort is transition from
ACS to ACE to automate and streamline the clearance and
collection process. In March, we announced the completed
development and successful deployment of ACE rail and sea
manifest, capabilities to all direct arrival rail and seaports
through ACE.
We are also seeing significant progress on our simplified
entry cargo release program, which is another successful result
of our co-creation efforts. Approach to modernizing our trade
operations is critical in co-creation. Simplified entry
provides importers with a chance to file earlier in the process
with a streamlined filing which can be amended. This is a
first-time ever capability that has been provided to the trade
industry.
Additionally, we continue to work towards establishing a
comprehensive trusted trader program, specifically to
strengthen co-creative program such as the Air Cargo Advance
Screening, C-TPAT, and the Importer Self-Assessment program. We
are working closely with the other agencies that are so
critical to our successes.
As we move forward, I think it is important to reiterate
those themes. Our economy grows stronger when the way we do our
job is more compatible with today's business practices. Our
partnership with the Congress, the trade community, and other
government agencies is critical to strengthening our Nation's
economic prosperity and national security.
I thank the committee again for the opportunity to appear
before you today, and I will look forward to continuing our
work together, our partnership, and to answering any questions
that you might have of us.
Chairman BRADY. Great. Thank you, Commissioner.
[The prepared statement of Mr. Aguilar follows:]

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Chairman BRADY. Mr. Kibble?

STATEMENT OF KUMAR KIBBLE, DEPUTY DIRECTOR, UNITED STATES
IMMIGRATION AND CUSTOMS ENFORCEMENT, UNITED STATES DEPARTMENT
OF HOMELAND SECURITY

Mr. KIBBLE. Chairman Brady, Ranking Member McDermott, and
distinguished Members of the Subcommittee, it is my privilege
to testify before you today regarding ICE's investigative
efforts and strategies to combat illegal trade practices and
commercial fraud activities. As you know, the growth of
international trade is an integral part of our Nation's
economic prosperity. It is imperative, therefore, that we
protect American innovation and are attuned to any new threats
to public safety and national security it may pose.
Today I will focus on three of our major priorities as an
investigative agency: Protecting American innovation from
theft, cracking down on complex international property theft,
and strengthening our borders to combat the threat posed by
transnational organized crime.
ICE's Homeland Security investigations HSI Directorate is
the largest investigative program within the Department of
Homeland Security, with an extensive portfolio of enforcement
authorities. Specifically, HSI investigates a wide range of
trade fraud, including intellectual property theft and
commercial fraud. Both IP theft and commercial fraud pose
significant threats to the U.S. economy and health and safety
of the American public. To focus government efforts and to
enhance government efficiency, HSI led the creation of the
National IPR Coordination Center. Now with 20 partners,
including other Federal agencies, Europol, Interpol, and the
governments of Mexico and Canada, the IPR Center brings
together the full range of legal authorities and law
enforcement tools to combat IP theft in the United States. And
we are now seeing tremendous results.
In March of 2012 HSI and our partners at the FBI executed a
joint enforcement operation which resulted in the arrests of 28
subjects, including two in Germany. These arrests were
ultimately the result of a merger of an HSI investigation into
a large-scale counterfeit smuggling scheme and an FBI narcotics
smuggling investigation. This investigation revealed this
organization to be involved in a web of criminal activity, not
only the smuggling of counterfeit merchandise and narcotics
trafficking, but also the use of fictitious personal and stolen
corporate identities to further those activities. The total
estimated MSRP of seized goods that this organization attempted
to smuggle was in excess of $300 million.
Overall, our IPR enforcement statistics have increased
dramatically over the last 3 years. From fiscal years 2009 to
2011, arrests jumped 115 percent, indictments rose by 206
percent, and convictions are up a total of 77 percent. Thus far
in this current fiscal year, our IP enforcement statistics
indicate that we will again surpass this past year's record
results.
In October of 2007 ICE created Operation Guardian, which is
the IPR Center's public health and safety initiative. Examples
of imports targeted as part of Operation Guardian are
counterfeit toothpaste containing antifreeze, counterfeit
prescription drugs, tainted pet food, counterfeit circuit
breakers, and contaminated food products. Since its inception,
more than 700 investigations have been initiated resulting in
nearly 200 criminal arrests, over 260 indictments, 171
convictions, and more than 3200 seizures valued at over $87
million.
We recognize, however, that law enforcement cannot do it
alone, and so we look to partner with private industry in our
efforts. To enhance and facilitate productive partnerships with
the public and private sectors, the IPR Center launched
Operation Joint Venture in fiscal year 2008. It gives industry
a point of contact they can use to provide us with leads and
tips regarding efforts to combat intellectual property right
infringement. Since July 2008 the IPR Center has coordinated
and conducted 671 outreach events with approximately 35,000
public and private sector partners.
HSI also has a long history of engagement in commercial
fraud enforcement, dating back to our past as investigators for
the former U.S. Customs Service. HSI investigates U.S.
importers, companies or other entities that attempt to
circumvent lawful trade mechanisms, including the payment of
required duties. The HSI antidumping and countervailing duty
program is another illustration of how HSI, in close
partnership with CBP, protect U.S. businesses from unfair trade
practices and protect the revenue of the United States. The
goal of an HSI antidumping or countervailing duty evasion
investigation is to ensure that U.S. industry is protected
against unfair trade practices and to ensure that the United
States receives legally required tariff revenue. Currently HSI
is involved in approximately 100 investigations relating to
open commerce, AD/CVD orders covering commodities such as
honey, saccharine, citric acid, tow-behind lawn groomers,
shrimp, steel, and wooden bedroom furniture. Textile imports
represent approximately 43 percent of all duties collected by
CBP, and Operation Unravel was conducted in fiscal year 2011 by
HSI, CBP, and the government of Mexico's Tax Administration
Service, or SAT, to primarily target illicit textiles
transshipment from China through the U.S. and ultimately into
Mexico under suspected false NAFTA claims. The results of
Operation Unravel are still being analyzed to identify
additional vulnerabilities in the bonded movement system.
So we continue to work using other initiatives as well
including targeting the vulnerability of in-bond diversion with
fraud investigative strike teams and have continued to build on
our commercial fraud program, expanding our statistics are
trending up. I want to thank you, again, for the opportunity to
appear before you today, and I would be pleased to answer any
questions you may have for me.
Chairman BRADY. Thank you, Mr. Kibble.
[The prepared statement of Mr. Kibble follows:]

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Chairman BRADY. Welcome, Mr. Skud.
Mr. SKUD. Thank you, Mr. Chairman, Ranking Member
McDermott.
Chairman BRADY. Mr. Skud, can you hit that microphone
again.

STATEMENT OF TIMOTHY SKUD, DEPUTY ASSISTANT SECRETARY FOR TAX,
TRADE AND TARIFF POLICY, UNITED STATES DEPARTMENT OF THE
TREASURY

Mr. SKUD. Sorry. Thank you, Mr. Chairman. Ranking Member
McDermott, Members of the Committee, thank you for the
opportunity to discuss Treasury responsibilities for Customs
revenue functions and to discuss the International Trade Data
System. Authority for Customs revenue functions is important to
the Treasury mission because taxation and regulation of trade
have an important effect on our economy and on global growth.
While enforcement of Customs revenue laws have been delegated
to the Department of Homeland Security, Treasury retains sole
authority to approve regulations. One recent example of such a
regulation, Treasury and DHS have published a proposed
regulation that would reform the in-bond and transit processes.
These reforms should enhance revenue collection, they should
limit evasion of antidumping laws, and they should promote
security by providing better control over in-bond shipments.
We work closely with CBP on many areas of mutual concern.
One of those areas and the focus of my testimony today is the
International Trade Data System. It is a key component of
efforts to modernize and coordinate interagency border
enforcement activities. Today, importers report separately to
numerous government agencies, sometimes on paper, sometimes
electronically. Wouldn't it make sense to have a single
electronic filing with that data distributed by computer to all
relevant agencies? That would reduce costs to government and to
business. This is the ITDS vision that CBP and 46 other
agencies are building as part of the ACE program.
Some ITDS functions are already operational. For several
years ITDS agencies have been able to obtain import data that
CBP already collects electronically and use that data to stop
unsafe shipments and to eliminate paperwork requirements.
Two years ago, the ITDS board identified three priorities,
on which I can report significant progress has been made. The
first priority was to add data elements required by other
agencies to the existing CBP reporting messages. CBP has built
that capability. It is known as the PGA Message Set. CBP
expects to test it this year.
The second priority. Accept electronically imaged forms in
place of paper. CBP has built a document image system to accept
imaged documents where paper is now required. CBP is testing
this capability now.
Third, establish a technical standard for communication
between agencies' electronic systems. CBP has adopted
interoperable Web services as a protocol for transferring data
among agencies. It was successfully tested last year.
When these three initiatives become operational, CBP will
have implemented for imports the basic electronic trade data
interchange system mandated by the SAFE Port Act. Testing and
implementation are planned for this year.
With progress on imports, we have begun work on exports. In
2010, the ITDS board recommended building ITDS export
capability on existing systems in order to save money and time.
CBP and the Census Bureau, which has authority for the current
export commodity reporting systems, have agreed to expand those
systems to include data required by other ITDS agencies.
Despite the challenges involved in a project of wide scope and
involving 47 agencies, the ITDS program can be successfully and
expeditiously implemented. Our board of directors looks forward
to working with this committee to make ITDS a success.
Mr. Chairman, that concludes my oral remarks. I am happy to
answer questions, and I thank you for the opportunity to
testify.
Chairman BRADY. Mr. Skud, thanks for being here today.
[The prepared statement of Mr. Skud follows:]

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Chairman BRADY. I thank all the panelists.
Mr. Aguilar, first, you know, in the past, CBP has not
necessarily devoted much time to consultations with Congress,
the trade community, trying to find as you would call it, co-
creation progress going forward. You and your predecessor have
changed that culture, have spent a great deal of time with that
outreach. I want to thank you for doing that, encourage you to
do more of it. I think it is very helpful.
I have got two questions, one dealing with ACE, one with
measurements. As you heard from Mr. McDermott, there is
bipartisan support for getting ACE in place, and there is
bipartisan concern about the delays and what the future is on
that program. The reason it is critical--you know, the Trade
Subcommittee on Ways and Means have three major goals. One is
to find new customers, level the playing field around the world
for our American products and services; secondly, to fight
protectionism, here and abroad, the delay becomes a barrier for
our products to be sold around the world; and finally what we
are doing today, which is streamlining the movement of these
goods and services. Time is the trade barrier in the 21st
century. ACE could be critical to creating more efficiently
efficiency in that system.
My question to you is, looking forward over the next 12
months, which ACE functionalities can we expect CBP to deliver?
Mr. AGUILAR. Mr. Chairman, as you said, ACE is absolutely
critical. ACE, simply put, is going to modernize into the 21st
century, is going to streamline, facilitate, and give us a
greater capability at targeting illicit commodities and goods
coming into this country.
Having said that, we have prioritized the ACE
functionalities that we are looking at putting forward. Some of
those include the going forth on the ITDS, as Mr. Skud pointed
out, following through with our simplified entry that is
already the force module, if you will, working towards full
cargo release. Critically important that we move forward on
those. Continuing our efforts to include the co-creation of
what all of the PGAs are looking for us to do. So one of the
things that, of course, we are faced with are the budget
constraints. But prioritizing what it is that we have in place
that will dovetail with what the needs are going forward.
Complete e-manifest for rail and sea, simplified entry of the
phase one, the document imaging system that we just talked
about, the PGA Message Set, and the interoperability.
Critically important. Moving forward, at or about the 12-month
period and continuing is going to be something that the trade
has asked for specifically, which is the entry summary edits
capability, and then of course working towards integration of
the exports capability in support of the President's export
initiative.
Chairman BRADY. So, Commissioner, in the first 12 months,
which elements are you looking at?
Mr. AGUILAR. It is going to be the ACE, continuing the rail
and sea that is going through the pilot now, it is going to
continue with the simplified entry that is basically moving
forward as we speak, and commencing, already commenced a pilot
on the exports initiative.
Now, as quickly as we can, because we have already
allocated from carryover monies, is what we refer to as
critical fixes on already deployed capabilities, and what that
means, Mr. Chairman, this is something that is critically
important to me, is going back to all of those deployments that
we have deployed in the past that have not worked as well as
they should have, as we planned them, and as we envisioned
them. So we are going back to fix those to get them to work as
they need to be operating.
Chairman BRADY. Okay. I think there will probably be
follow-up questions on ACE. Let me ask a final question on
measurement. We have two young boys. I have discovered that
putting a bunch of 5-year-olds on a soccer field doesn't
necessarily mean you will see a soccer game, and creating a
whole number of new programs and efficiencies doesn't guarantee
efficiency unless you measure it. So my question to you is,
what measurements--and I notice the World Bank study recently
ranked America 9th in measuring the efficiency of our supply
chain, in Customs efficiency we were ranked 13th in the world
and international shipments 17th. We did better in some other
areas such as tracking and tracing, consignments. The goal of
this legislation is to move up those rankings. So, A, what are
you measuring today in efficiency and accuracy and security?
And as we move forward with ACE and others, what other
measurements will you be looking at?
Mr. AGUILAR. Yes, sir. Critically important that we take a
look at the metrics, and for each one of these efforts that we
are undertaking, we have identified a set of metrics. I would
like to give you a couple on some of the things that are most
prominent as an example on ACE. Some of the metrics that we are
measuring is entry summary filers, and how that is progressing
moving forward, entry summaries by the filers, how many are
they actually conducting. Filer entry summary submissions to
ACE, summaries that are submitted, the percent of eligible
entry summaries that are filed in ACE, what percentage are we
seeing in an increase, and I have got some numbers that I can
provide to you later on if you would like, post-summary
correction submissions, something that the trade asked for, we
provided, and now we are finding that they are using it
tremendously. Validation activities under ACE.
I spoke earlier about our Centers of Excellence and
Expertise. We piloted these just back in October of 2011, but
moving forward on that, one of the things that we set in place
was our ability to capture the metrics. I will just go through
a couple of those to show the level of detail that we are going
through. But under risk segmentation and facilitating the
legitimate trade, some of the things that we are looking at, do
the centers maintain or improve the revenue gap within the
industry standards from the compliance standpoint? Do the
centers maintain or improve compliance of the revenue within
the industry standards? Are the centers increasing the
paperless rate that we are also interested in? Do the centers
improve the detection rate and increased seizures of high risk
products? And there is a litany of about 15 metrics that we
use. So for every one of these, undertaking these that we are
moving forward on, we have a metrics unit that we are looking
at for each one of them.
Chairman BRADY. Right. If you could supply those to the
committee, that would be helpful. Mr. Kibble and Mr. Skud as
well, when you are looking at your respective duties, what you
measure today and are contemplating, that would be very helpful
to me as we move forward. I cede my time to Ranking Member
McDermott.
Mr. McDERMOTT. Thank you, Mr. Chairman. I am a physician.
We are accustomed to talking over people's heads and using all
kinds of acronyms and all kinds of words that nobody uses in
ordinary speech. So as I listen to you guys, I think I am
talking to a bunch of doctors who are talking to a bunch of
people that don't know what you are talking about. ACE stands
for automated commercial environment, whatever the heck that
is.
Mr. AGUILAR. Yes.
Mr. McDERMOTT. We spent billions of dollars on it. And then
they said, no, it isn't working. And now we are doing something
new, and that is going to work. Would you explain to me in
terms that I can understand what it was that was attempted and
what didn't work? I mean, anybody here can answer. I don't know
who to direct that at, but if you could do that, I think it
would help the committee understand what this reauthorization
is about.
Mr. AGUILAR. I will begin, and then I will pass it on to my
fellow doctors here, sir.
We are moving towards an automated commercial environment
that takes into account all the technological capabilities that
basically exist in today's world to ensure that we automate,
that we connect all the dots of all the participating agencies,
all the agencies that have an interest on all commodities
coming into the United States. From a compliance, from a
revenue perspective, from a security perspective, ACE is going
to be that backbone that by way of technology, gives all of us
the insight that we need to have to do the following things:
And that is to facilitate, to streamline, to secure the global
supply chain, and to specifically target. In the simplest
terms, it will give us the means by which to assess risk, but
critically important to, in a very modern way manage risk.
So now as----
Mr. McDERMOTT. Could I just stop you there?
Mr. AGUILAR. Yes, sir.
Mr. McDERMOTT. It seems to me that if you are trying to
work on risk that one of the best ways not to make a mistake is
to not do anything, don't let anything come in. So if you make
the system so complicated that nothing can get through it, then
you will never have any problem, nothing will ever have
happened because it got into the country. Am I----
Mr. AGUILAR. And that is exactly what the ACE system is not
trying to do. It is going to give us the ability to segment
risk, to assess the risk once it has been segmented, and then
direct our efforts at that flow of goods and commodities that
we either know less about or that we have reason to believe we
need to target because of a high level of risk. Therefore,
basically identifying the needle in the haystack, if you will,
by blowing away all the hay of this $2.3 trillion worth of
imports that we do on a yearly basis. So we have spent a lot of
money on ACE, but I will brag on CBP over the last couple of
years in that more has been done in the last 2 years in the ACE
arena than had been done in the prior 5 years before that.
One of the things that we are looking at, Congressman, is
building in what I refer to as chunks, functionalities,
identifying the functionalities along with the trade community,
and looking to what is best going to serve the trade community
and CBP and the rest of the participating government agencies.
Taking them in chunks, building business cases, and being
incremental towards, as an example, cargo release, so that at
the end, we have a fully functional cargo release capability
that is built over a time period that takes into account the
incremental necessity and importance of segmentation and risk
identification.
Mr. McDERMOTT. What are the other agencies? What is your
feeling about this?
Mr. KIBBLE. Well, sir, I am a general practitioner, I am
not a specialist. However, I would say--and, I mean, this
relates to ACE but also other initiatives that CBP leverages to
selectively target. One of the things that we pioneered
recently through the Commercial Fraud Working Group, which is a
very close working group that involves leaders from both CBP
and ICE, are post-investigative analysis reports, and the idea
here is from an investigative perspective, when we conclude the
investigation, how do we take that tactical success and turn it
into something that is of more strategic value?
Well, we identified methodologies, schemes, things that can
be used to refine targeting algorithms at the National
Targeting Center and other systems that CBP leverages to,
again, focus in on the violators so that we can facilitate
lawful trade.
So, I mean, that is just a general observation I have there
is that we are partnering as we have never before, and not only
with one another, but obviously with industry to refine the
method in which we target illicit or suspect trade.
Mr. McDERMOTT. Do you have any comment that you want to
fill in anything?
Mr. SKUD. Well, I will just add, Mr. McDermott, that there
is sometimes a lot of confusion about what ITDS is, how is it
different from ACE. Well, they are not two different systems.
One system, ACE; ITDS is a part of ACE. The basic premise of
ITDS is let's use the Customs system, ACE, to collect
information for these other agencies as well so we don't build
separate systems for each agency to collect it, and Customs
stores it, gets it to the agencies, makes decisions about it,
and then gets that information back to Customs.
Mr. McDERMOTT. Is it seamless to you for countervailing
duty decisions and so forth?
Mr. SKUD. Well, I am afraid it is not seamless to me. The
goal is to make it seamless to the trader so that he is filing
one place, and he will get one answer back. I am afraid when
you are trying to stitch together 68 agencies, there is a lot
of seams in there, but we are focused on--the ITDS program has
been around for a while. For a long time, there was a lot of
talk about all the wonderful things we could do. In the last
few years we decided, look, it is time to concentrate on the
basics. Let's add the data, let's get it to the agencies, let's
get those decisions back to Customs. So we are trying to
concentrate on things we know we can build, things that can be
built quickly and at relatively low cost.
Mr. McDERMOTT. Thank you, Mr. Chairman, for extending my
time.
Chairman BRADY. No, thank you, sir. Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman. I want to commend all
of you and your agencies for moving them into the 21st century.
There are ample models in the private sector with credit card
architecture, online purchasing, similar relationships with an
Amazon and a PayPal, for example, that make it transparent to
that one user that literally links thousands of organizations
together with very little error. I know this is tedious dealing
with statutes and regulations, but having done many large
company implementations myself, nothing to the scale that you
all have, I feel your pain in that one sense, but it is very
critical to progress.
It brings me to my first question. Commissioner Aguilar, as
you know, CBP facilitates trade on behalf of 48 Federal
agencies at our border, and according to the agencies announced
initiatives for 21st century trade, you are also working to
improve cargo security while increasing trade competitiveness.
I have been told by a number of people, organizations in the
trade community that highly compliant importers find the
benefits of CBP's partnership programs to be severely
constrained by other agencies' holds at the border, and it is
my understanding these delays tend to be several days longer
than CBP holds.
I have also been told that a multi-agency partnership
program for highly compliant importers or a certified importer
program would greatly reduce these delays. I am thinking on the
TSA side with Global Traveler, for example, if, so we avoid an
inverse of Pareto's law where 90 percent of the people, in
effect, are punished for the suspicious behavior of maybe a
very small percentage.
As trade continues to increase, especially with the recent
entry into force of trade agreements with Korea and Colombia,
how is CBP working with other Federal agencies to streamline
legitimate trade processing, and how is your agency working
with other agencies to provide benefits to trusted traders?
Finally, as kind of a third part to that, have you
considered a multi-agency certified importer program?
Mr. AGUILAR. Yes, sir, all critically important questions.
Let me begin with the last one first. On a multi-agency trust-
based partnership, we are very aggressively working towards
something that looks like that but, as Mr. Skud said, when you
have 48 agencies coming together, all having different
interests for the right reasons, whether it is statutory,
regulatory, or otherwise, it is hard to do that. But we have
made some great strides, I believe, in moving in that
direction.
The one example that I will give in that venue is what we
refer to as a Border Interagency Executive Committee that we
created about a year ago that meets on a quarterly basis, and
for the first time, brings together all of these interested
agencies together at one table to start working towards that
synergy, towards an alignment of interests in order to start
identifying, as an example, what the PGA Message Set, what are
the elements that we would need as one government to basically
satisfy all 48 agencies at one time. We have created the
Message Set. It had never been done before. So we are moving in
that direction.
The issue of other government agency holds, approximately
60 percent of all holds placed on goods coming into the country
are placed by other government agencies besides CBP. So when
that happens, because we don't have that one whole of
government approach, that one single window, CBP acting as the
executive agent then has to go to each individual agency to get
the information required for them if they have a need for it,
and to get the actual release. Very time consuming.
Moving towards ACE, that single portal at ITDS, to where
all of the interested agencies come together in one window, one
component, one location where all the interests, whether they
are revenue, compliance, safety or otherwise, are targeted, if
you will, under ACE, and then fed to the agencies
electronically, very quickly get the feedback and released.
That is what we are working towards as we move forward.
Mr. DAVIS. Well, that is a good point to transition over to
Mr. Skud. How are you leading the 48 government agencies in the
International Trade Data System to ensure that all involved in
the import process are working together to harmonize their
treatment of importers that participate in trusted shipper
programs in the processing of their goods?
Mr. SKUD. Well, the ITDS role is really focused on building
the electronic platform to provide the information to the
agencies to allow them to make that decision, those decisions
based on the best information available quickly. Really, these
kind of policy decisions about interagency cooperation, these
are things that are done by the policy leadership in the Border
Interagency Executive Committee. That is really where the focus
for that is and not in ITDS.
Mr. DAVIS. Thank you, Mr. Chairman. I yield back.
Chairman BRADY. Thank you. Mr. Reichert.
Mr. REICHERT. Thank you, Mr. Chairman, and welcome to all
three of you. I especially want to thank Mr. Aguilar and Mr.
Kibble for your service and the men and women that serve in
your agencies. I do appreciate your service, too, Mr. Skud, but
I have a special spot in my heart for law enforcement, being an
old sheriff myself, so I appreciate the work that all three of
you do.
I can identify, as Mr. Davis said, a little bit with your
pain, the sheriff's office with 1100 employees in Seattle, we
had responsibility for the metro system, so our challenge was
to enforce the laws, investigate crime, and keep the buses and
the trains moving, and sometimes cops really don't understand
the part about keeping the buses and the trains moving, am I
right?
Mr. AGUILAR. Exactly.
Mr. REICHERT. I know you are working hard on that, so I
understand that aspect of it as well.
I want to address my first question to Mr. Skud. Now, you
said in your opening comments taxation and regulation of trade
have an impact on our economy. That is, I think, a pretty mild
comment. So I am really interested in your views on how U.S.
policy is actually deterring goods from moving through our
ports, specifically the harbor maintenance tax, and in
Washington State, as you know, we have the Port of Tacoma and
the Port of Seattle, and that harbor maintenance tax has
created a situation where some of our world partners are now
heading their ships to Vancouver, Canada, and Prince Rupert,
and so we are losing some business in Seattle as a result of
this tax, and it strikes me as a very clear cost advantage that
U.S. policy is conferring on foreign ports. The fewer goods
that are shipped through our ports obviously, the fewer jobs
they sustain.
So do you agree that imposing this tax and how it is
currently imposed on inbound marine cargo could discourage
shipping through U.S. ports and harm our competitiveness? We
like to think of ourselves in Seattle and in Tacoma as the Port
of Chicago because we only keep about 30 percent of the goods
that come into those ports, and 70 percent go across the
country. Vancouver is quickly becoming the Port of Chicago, and
we are concerned about that.
Mr. SKUD. Well, Mr. Reichert, as a native-born Seattleite
and graduate of the University of Washington, I have some
familiarity with the Port of Seattle and Port of Tacoma.
Mr. REICHERT. Good to hear.
Mr. SKUD. And under the current law, there is the harbor
maintenance tax on shipments coming into U.S. ports, including
those two ports, and to the extent that that raises costs on
shipments to those ports vis-a-vis competing ports in Canada, I
would have to agree that it provides an incentive for people on
the margin to ship through another port.
Mr. REICHERT. We see this as a pretty serious problem, as
you might guess, in our area of the country. Would you commit
to working with me on finding a solution to this problem?
Mr. SKUD. I would be happy to work with your staff to
address the issue.
Mr. REICHERT. Great. Do you have any ideas today on how we
might be able to do that or do you want to wait until another
time?
Mr. SKUD. I think I better wait.
Mr. REICHERT. Okay. I appreciate your commitment, Mr. Skud.
Thank you so much.
Mr. Aguilar, I have worked with Customs for a long time
over my career on the issue of circumvention devices here in
Congress, and, you know, this helps thieves pirate U.S.
intellectual property, including many video games made in and
around our congressional district by companies like Nintendo
and Microsoft. It is my understanding that Customs will seize
these devices but that you don't share them with the affected
U.S. companies. Do you have anything like Mr. Kibble described
as a joint venture, private-public relationship where you can
share these things with our public companies so that they know
what is happening when this technology is stolen?
Mr. AGUILAR. Congressman, one of the things that has just
come about, and we are very grateful, which will be a
tremendous tool for us, is the IPR information sharing
capability that we just issued the interim final rule on, and
under that, what we now have the capability to do is that
within 7 days of Customs, CBP seizing a commodity, we will go
to the importer and ask them for evidence if we believe that it
is counterfeit or is an IPR violation, a trademark violation,
and they, of course, are more than welcome to provide us with
some information to prove that it is not a violation.
After 7 days, we are now capable and very much willing to
share with the rights holders the information, pictures, things
of a commodity that we haven't had in order for them to help us
validate or verify that it is, in fact, a valid product, or
that it is a violative product. So we have that capability in
place.
Mr. REICHERT. Thank you. Thank you, Mr. Chairman.
Chairman BRADY. Thank you. Mr. Neal.
Mr. NEAL. Thank you, Mr. Chairman. I have a company in my
district that manufactures high quality knives and other types
of tools, and I have visited with them a number of times, and
they sell the tools in the U.S. and as well as internationally.
They have been in business for over 100 years, and they employ
100 people in Southbridge, Massachusetts, it is Hyde Tools.
They suggested that the procedures for filing an antidumping
action should be made more accessible to small and medium-sized
enterprises. They tell me they were forced out of the U.S.
market for a particular tool that was dumped by a foreign
company, but they didn't file an antidumping case because, as a
small business, they couldn't afford the expense.
For the witnesses here, would you care to suggest a path
forward, making it easier for these small business types to
file antidumping actions?
Mr. SKUD. We are all here on sort of the other end of the
collecting the money side, but I would be happy to work with
your staff to connect them with the right people at the
Department of Commerce who work on the input side, the filing
side.
Mr. NEAL. Okay.
Mr. AGUILAR. Congressman, I would add to that that one of
the things that was actually put in place because of some of
these concerns is what we refer to as e-allegations where when
there is a belief or there is an incident where a company or
individuals or an industry believe that something is happening
in the IPR environment, by way of virtual connectivity to CBP
through e-allegations, they can commence that effort also.
Mr. NEAL. Okay. Let me follow up with you, Commissioner, as
well. Coming from a State where there is a great deal of chip
manufacturing and also the acknowledgment that there are
millions of counterfeit chips that are imported into the United
States, I am told that these chips have been found in many
critical applications, military weapons, voltage regulators for
the automobile antilock braking and air bag systems.
You mentioned in your testimony that last month, your
agency published an interim final rule that reflects new
authority that permits Customs to share prior seizure, and also
photographs of suspected counterfeits with trademark holders to
assist your organization in determining whether or not the
goods are counterfeit. Can you provide the committee with any
additional information on that?
Mr. AGUILAR. Other than that we are now taking those
actions, we have that capability, we welcome that capability,
and it will help us tremendously in making determinations as to
whether the products that we have seized are, in fact,
violative by being able to share that information, that
product, that picture, things of that nature with the
copyrights holder. A tremendous tool.
Mr. NEAL. Thank you. And lastly, one of the witnesses on
the next panel who is the COO of Leggett & Platt, they have a
presence in Oxford, Massachusetts, in my constituency. In their
testimony they estimate that Treasury loses well over a billion
dollars in unpaid duties each year. That is a pretty
significant number. As a cosponsor of the ENFORCE Act, this
bill would help to create a formal process for stakeholders to
petition Customs to investigate possible evasion, and I hope,
Chairman Brady, that we can consider this legislation as well,
and for all the witnesses, what might you suggest along that
path?
Mr. AGUILAR. As to the pending bill, I think--I don't want
to speak for my fellow doctors here, but I think we would all
welcome the opportunity to assess and to work with the Congress
on any bills going forward, absolutely.
Mr. NEAL. Given that Boston port is the equivalent of open
heart surgery as you know.
I thank the panelists, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Neal. Mr. Herger.
Mr. HERGER. Thank you, Mr. Chairman.
Commissioner Aguilar, I understand that membership levels
for CBP's two partnership programs, the importer's self-
assessment C-TPAT have leveled off. In fact, ISA membership
hasn't budged since 2007 when the program was started and about
200 companies joined. The ISA was meant to incentivize better
compliance.
If a company opens its books and demonstrates trade
compliance, CBPs will offer tangible benefits, but industry
reports that it doesn't find the benefits to be material. What
kinds of material benefits can we provide especially for
smaller- and medium-sized companies?
Mr. AGUILAR. A couple of things on that question. The two
top trust-based partnerships that we have are, in fact, ISA and
C-TPAT. C-TPAT is over 10,250 members now. It has grown
dramatically. The ISA has, in fact, stabilized, and last week
that was one of the main focuses that we had at our trade
symposium. Identifying the benefits. ISA is compliance program,
C-TPAT is a security program. We are very seriously taking a
look at melding the two as one so that the benefits that are
derived from both will be a package, if you will. Everything
from front-of-the-line benefits, the reduction in inspections
or examinations. As an example, C-TPAT members right now are
seven times less likely than a non member to get inspected or
examined. The number of audits under the ISA that occur will be
reduced.
So those are the incentives that we are looking to package
up as one trust-based program. We are working with the trade
industry to see what other benefits we might be able to jointly
identify.
There are other efforts underway that I hesitate to share
with you in this venue only because we are still working on
them, but very quickly, I would anticipate within the next 60-
90 days, we will be able to share some of the incentive areas
that we are looking at within ISA because it is a critically
important program.
Mr. HERGER. Thank you. It sounds like you agree that this
is important to measure the outcomes of this program for C-TPAT
members, such as clearance times, not only to ensure efficiency
but also to encourage greater participation in the program.
Mr. AGUILAR. Absolutely. Congressman, I would add the
following because I feel it is critically important. Under our
C-TPAT program, there have been two studies by the University
of Virginia where both studies have shown, this is an
assessment on the participants, that the members have found it
very beneficial from both the benefits' perspective and
improvement perspective on their business processes when they
join C-TPAT.
Mr. HERGER. Again, one of the defining points I think would
be that we have more members joining, and I think there is a
concern that we haven't had more. So that is important we work
on that.
Also I was hoping you could go into more detail on the
Centers for Excellence and Expertise, CEEs. What were the
outcome from the two pilot centers in California and New York?
What benefits did they provide to the trade community and to
CBP.
Mr. AGUILAR. I have to tell you, Congressman, this is
something we love to talk about, and the reason for it is
because of the immediate outcomes were very depictive of our
vision for the CEEs and actually went beyond. The vision was
standardization, consistency, bringing more transparency to
that industry sector that we are dealing with, and driving a
more compliant and facilitative process.
As an example I will give you the following. On the request
for information, the so-called CF 28s that are filed at ports
of entry when a commodity or product is coming in, there are
members of the industry that will actually come in through
several ports, 60, 70, 80 of the 329 ports. In the past, the
way we used to work, each port would have the ability, and we
would exercise that ability and enforcement right, to ask for a
request for information. That would place a hold on the
shipment. Under the Centers of Excellence and Expertise, there
will be one request per information as opposed to 60, 70 or
several other ports of origination. There will be one response.
So it makes a tremendous difference on facilitation, on the
streamlining. It brings together, the CEEs bring together all
the disciplines within CBP in one centralized location as
opposed to the fragmented means that we operate under
currently. When we finish off the CEE's effort, we have
identified--at this point in the time, we have identified nine
industries where we believe Centers of Excellence and Expertise
will apply.
We have announced automotive and aerospace, we have
announced pharmaceutical, electronics, and petroleum, natural
gas and minerals. We are looking to go towards agriculture,
base metals and machinery, consumer products, and mass
merchandisers, industrial and manufacturing materials,
textiles, wearing apparel, and footwear as we move forward.
So each one of those will have that ability to standardize
and bring more consistency and harmony as to how we do business
and be more facilitative.
Mr. HERGER. Thank you. Thank you, Commissioner.
Chairman BRADY. Can you forward us the list of those future
CEEs?
Mr. AGUILAR. The ones that are being contemplated, yes,
sir, absolutely.
Chairman BRADY. Mr. Buchanan.
Mr. BUCHANAN. Thank you, Mr. Chairman. I want to thank all
of our witnesses for being here today. I just wanted to mention
one thing, quickly. I did get a chance to get down to El Paso,
met with Customs and Border Protection. They were telling me
out of the four ports of entry there, 21 million people
northbound a year. Very impressive. I was very impressed in
terms of the professionalism and just staggered by the amount
of work that the people do there in your organization.
But I wanted--I mentioned this a little bit earlier,
Commissioner, and I touched base with you. Let me run through
this. Sarasota Bradenton International Airport, which is about
an hour south of Tampa, maybe 50 minutes south of Tampa
International Airport, is a user-fee airport, and has one
dedicated CBP officer stationed there. Sarasota pays all the
costs of the officer presently. No commercial International
carriers are landing there today, so that there is no need to
clear Sarasota airport. So the single officer clears primarily
general aviation. Also, we have a port in my area, in terms of
Port Manatee, they work closely with the port.
In 2005, when Sarasota last had a Canadian commercial air
carrier, Canjet, they had some additional officers, CBP
officers were assigned to the work with that in terms of the
flights. They were brought down from Tampa. Sarasota reimbursed
all of the overtime and travel costs for all of the extra
officers.
Last year, Sarasota was close to securing an international
carrier with a proposed schedule of twice-a-week flights. When
they discussed this with the Tampa CBP director, they were
informed that the general counsel of Washington was
interpreting the U.S. law in a different manner than
previously, and applying it to a user fee airport. CBP is
requiring that user fee airports pay the annual full-time costs
of each officer needed, even if you are only using them once or
twice a week, and in this case, it would have been probably for
4 or 5 months a year.
As an example, Sarasota had secured Condor service from
Europe twice a week for 7 months, Sarasota would need to pay 12
full-time officers at an expense of $1.7 million roughly per
year, regardless of the fact that Sarasota would only need them
8 hours a week for 7 months. That renders the service
unattainable.
I guess my question was to you, as it results to that,
Commissioner Aguilar, why has CBP taken such a hard line? Is
this standard? It seems to me to be unreasonable. I am
concerned about tourism and economic development in terms of
our region, and I would say it would be not just applicable to
Sarasota but applicable to any airport around the country
because we would like to think that one flight could lead to
additional flights. We have almost a million people in our
economic region there.
Do you have any thoughts on that?
Mr. AGUILAR. Congressman, I am unfortunately unfamiliar
with the Sarasota situation as you just described it. I know
that we talked earlier. I would like to take that for the
record and get back to you. I agree with you that we need to
revisit if, in fact, the description you just gave, and I will
take it for the record and get back to you on it, sir.
Mr. BUCHANAN. I know that in the 4 or 5 years ago, they did
provide service out of Tampa and we paid all of the expenses.
So it is something that has been--you have had a precedent
before where you have done it. But now they have taken a hard
line and it is something we have been pushing pretty
caressively on it. I say ``we,'' the authorities at the
international airport there. Are there any other suggestions or
any other ideas that you would have as it relates to that
today?
Mr. AGUILAR. Again, I am unfamiliar with just what part of
the process we are in.
Mr. BUCHANAN. Basically it is a low activity airport, and
we need part time workers, but again, there would probably be a
premium because you have got to move them around or whatever.
We are willing to pay everything plus probably a little premium
on top. The airport is well-financed. So it is not a question
of picking up the expenses. It is just that they don't want to
have 10 people sitting around for a year where you really don't
need them.
Mr. AGUILAR. Exactly. I will review the situation and get
back to you with any options that may be available to us.
Mr. BUCHANAN. I would appreciate that. Mr. Chairman, I
yield back.
Chairman BRADY. Thank you. Mr. Schock.
Mr. SCHOCK. Thank you, Mr. Chairman. I, too, have a
question for Commissioner Aguilar. Thank you for being here.
Over the last several months, Customs and Border Protection has
taken some positive steps to enhance their supply chain
security. The air cargo advance screening program has been
successful and is a good model to build on as it continues to
expand. You also recently signed an agreement recognizing the
U.S. and European Union Custom Security Programs, which is
another positive step in securing the supply chain. I want to
say that we appreciate your efforts in this area and
congratulate you on this recent agreement.
At the same time, it is also important that we find ways to
improve the flow of the supply chain in a cost-effective and
efficient manner. One of the ways to do this is to reduce the
burden of importing lower-value shipments into the U.S. If
someone ships something into the U.S., the current exemption
from entry as you know is $200. However, if an individual comes
back from abroad and is bringing back goods into the U.S. with
them, there is a personal exemption of $800. The cost to
process of these low-value shipments and the disparity in these
two levels of exemptions seem both impractical and also
potentially a barrier to growth in jobs that could be created
from the importation of low-value shipments, such as Internet
sales of low-value retail goods.
My question for you is whether or not CBP would be
supportive of increasing this de minimis level from the current
$200 level to be something more similar to the personal
exemption level of $800 or more in order to reduce some of the
costly administrative burden of processing those level
shipments.
And also in mind of our bipartisan goal here in Congress to
increase exports and imports, obviously this is a barrier as it
stands. What is your position on that?
Mr. AGUILAR. Congressman, I think the question that you
asked, the way that I would answer it is in two parts: One is
from the operations of the revenue collection; and then the
second part, which I think goes more towards my partner, Mr.
Skud over here, is revenue generated. So I will take the
operations portion of that.
From an operational standpoint, the raising the de minimis
to $1,000 or whatever it would be, does not really impact us
operationally. This same amount of work basically will go into
collecting either the $200 or the $1000. So from an operational
standpoint, it would stay neutral. Now I can say----
Mr. SCHOCK. Doesn't it impact more goods?
Mr. AGUILAR. Again, I think that is the revenue-generating
portion that----
Mr. SCHOCK. Revenue aside, if you are affecting all
shipments of up to $800, I am sorry. If you are only affecting
shipments over 800 as opposed to shipments over $200, revenue
aside, you are having to touch and be involved with more
shipments or more.
Mr. AGUILAR. Yes, sir. And the assessments that we have
done, and we have done some of these minimally in the past, in
fact, there has been an actual assessment on the $200 up to
$1,000, and it has shown that operationally it would have
minimal impact.
Mr. SCHOCK. So you need to have the same number of people
and the same amount of work?
Mr. AGUILAR. Because it is done all virtually and
electronically, yes, sir. Now, the one thing I would add, and
then if Mr. Scud is interested, I will pass on addressing this
also from a revenue-generating perspective, is one thing we are
doing is on the informal entry, is that we are moving forward
to moving that up from $2,000 to $2,500, and we are formulating
the interim final rule as we speak in order to move that
forward, and that will probably be within the next 60 to 90
days, but again, that is only on the informal entry.
Mr. SCHOCK. Let me ask you looking at it from a different
perspective. Obviously as the agency from your perspective, it
doesn't reduce your burden, would you admit though that by
raising the de minimis level from $200 to $800, you are
reducing the burden on constituents, on the business community,
on the trading community, if you will?
Mr. AGUILAR. I think that is a fair statement, yes.
Mr. SCHOCK. Mr. Skud, do you have a perspective on this you
would like to share?
Mr. SKUD. Under the current statutory scheme, there is
regulatory authority to increase the de minimis amount if we
can demonstrate that the savings and processing costs would
be--would counteract the losses in revenue. And as Commissioner
Aguilar pointed out, because the processing would be the same
and the processing is largely electronic, and so all of the
costs are--they are--we haven't seen any evidence of savings
there, certainly, if there was a legislative change, that would
be, in essence, a tax reduction. Businesses generally look at
tax reductions as less of a burden, but the administration
hasn't taken a position on the bill to my knowledge.
Mr. SCHOCK. Okay. My time has expired, but we are working
on the legislative fix as well, so thank you.
Chairman BRADY. Thank you, Mr. Schock. Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman, thank you to our
witnesses as well. Mr. Aguilar, the United States and Canada
are each others' obviously largest export market. Can you tell
us what the status is on the U.S.-Canada Beyond the Border
Action Plan unveiled December 7, and is CBP pleased with the
progress of the plan to date, and what outstanding
recommendations do you see moving toward implementation, and
how will they benefit the trade community?
Mr. AGUILAR. Beyond the Border Action Plan consists of
over, I believe it is 34 or 35 actual items, of which CBP is
the lead for all about 16 of them, for obvious reasons. We were
basically at the border, and what we are looking to do on
Beyond the Border Action Plan is to harmonize policy, harmonize
operations, harmonize the consistent way in which we do
business. I can report to you that the efforts ongoing between
the U.S. and Canada and all of the agencies involved I think is
moving forward in a very positive manner.
For those that we are responsible for, of course, there are
some that are more challenging than others, especially when it
comes to the interagency alignment, if you will, and that is
not just from the U.S., it is also from the Canadian side, CBSA
is as responsible as we are for the ports of entry.
So that is being worked at the highest levels, actually
above CBP and CBSA, to make sure that that alignment happens.
But my report is that we are pleased. I think both Canada
and the U.S. are both moving very assertively forward. There
are going to be some challenges, which, I believe, my ex-
sheriff up here would appreciate on what we are calling NextGen
which is the, literally the patrolling capabilities between the
RCMP, ICE, CBP and other agencies jointly. But it is that
harmonization, that consistency that dovetailing, that synergy
that we are all working towards, and again, my report is, I
believe, it has moved forward very positively.
Mr. SMITH. Can you touch on some of those items you
mentioned by number?
Mr. AGUILAR. Well, one of the ones that is probably--one of
the challenging ones is probably CBSA, operating from Messina,
Messina, New York, the port of entry on U.S. land; pre-
clearance; another one is preclearance, working preclearance
operations by U.S. officers and Canadian officers on each
other's areas of operations; identifying ports of entry that we
may look to either build infrastructure on or build a policy to
align on. Some of these ports of entry we might look to
reducing, mitigating or even closing some of these in the
future. But again, those are the things we are harmonizing our
efforts on as never before.
Chairman BRADY. Thank you, Mr. Smith. Ms. Jenkins.
Ms. JENKINS. Thank you, Mr. Chairman. Thank you for joining
us.
Commissioner Aguilar, could you tell us about Customs'
allocation of import specialists trained in textile and apparel
verifications? We have been told that import specialists who
have been trained specifically to do textile and apparel
clarifications are often assigned to ports that receive very
little such trade. I know that Customs does an annual review of
import specialists and their locations.
With an increasing need for enforcement and facilitation at
high-volume ports, what are your plans to ensure these ports
have adequate staffing, and more importantly, adequate
training?
Mr. AGUILAR. A couple of things on that question, I think,
that is important to mention. One, is that the floors on all
trade positions, we have sustained, in fact, as we speak, we
are actually above those floors on the trade positions that
have been set by Congress. So I want to begin there.
To the question of textile import specialists as to where
they are assigned, I don't have the exact numbers, but I would
answer that question with the following: That brings to light
the importance of us undertaking the initiatives that we have
such as the Centers of Excellence and Expertise, because what
that will do, that will give us the capability, again, as I
said earlier, either virtually or physically, to service in a
specific portion of the industry.
I mentioned earlier that one of the CEEs we are looking to
provide is textiles, wearing apparel, and footwear, to where
the textile industry would have one centralized location with
all of the textile specializing import specialists, all of the
national account managers, all the account management, and all
of the other disciplines that will be brought to bear in one
centralized location to service the textile industry. So that
is the vision. That is what we are moving forward on.
Ms. JENKINS. Thank you, Mr. Chairman. I yield back.
Chairman BRADY. We are pleased to be joined by Dr. Charles
Boustany. Key Member of the Ways and Means Committee but also a
leader in trade issues. Dr. Boustany, welcome.
Mr. BOUSTANY. Before I ask questions, I ask unanimous
consent to include two letters, one from the Crawfish
Processors Alliance, and the other from our Louisiana
Agriculture Commissioner to be made part of the record as well
as testimony from one of our colleagues in Congress from our
Louisiana delegation, Mr. Richmond.
Chairman BRADY. Right. Without objection.
[The letters follow: The Honorable Charles Boustany Letter
1, The Honorable Charles Boustany Letter 2]

[GRAPHIC] [TIFF OMITTED] T0260A.045

[GRAPHIC] [TIFF OMITTED] T0260A.046

Mr. BOUSTANY. Thank you, Mr. Chairman.
I think we all agree that evasion of our trade remedy laws
is a serious problem, and additional authorities, perhaps
legislation, is going to be needed to provide more tools. I am
very sympathetic to the complaint raised by some American
companies that CBP, in effect, becomes a black box after
receiving allegations of evasion and provides little or no
feedback on the adequacy of the allegation, what steps are
being taken by CBP or another agency as a result of the
allegation, or even the ultimate outcome of any of the actions.
On the other hand, I have to say I am very concerned about
imposing artificial deadlines on investigating invasion because
some of these cases are more complex and just simply
arbitrarily placing a deadline would be problematic.
So I would like to understand how can CBP and ICE work
better with the private sector on evasion without undermining
its ability to investigate or otherwise address evasion. If you
could all answer that for me, I would appreciate it.
Mr. KIBBLE. Congressman, one of the joint ventures that we
have at the Intellectual Property Rights Center, one of the
things we do is in the outreach and training section. We have
very robust engagement with the industry, and we do communicate
whether we, for example, are opening a criminal investigation,
and perhaps, what location that may be at. Now, obviously, as
the investigation continues that we are limited in terms of the
types of things we can share in a criminal context.
But we are committed--we put together, in particularly,
talking about to seafood industry, for example, we have really
enhanced our engagement with the seafood industry in
particular, as well as others, to learn from the industry, to
inform our operations, but also, again, to share what is
appropriate to share in terms of the status investigations so
that it is not a black hole. There is not another lack of
information.
Mr. BOUSTANY. What happens when an E-allegation is filed?
Can you walk us through some of the steps?
Mr. AGUILAR. On the E-allegation specific. We, CBP, will
take the initial efforts to start identifying that which has
been reported. We work hand-in-hand with the Department of
Commerce which, as you know, Congressman, will actually take on
the investigative portion of that. Now, that is where I think
some of the concerns start to make into play. The antidumping,
countervailing duty system that we have in place right now is
very challenging and it is very complex. It is not any one
agency that can service the interested parties on the outside.
We, too, are very appreciative of the frustrations that exist
out there.
Mr. BOUSTANY. Is there a better way to set up an
interagency process or point of contact?
Mr. AGUILAR. I think the points of contact, and again, this
is my take on it, the points of contact are there. E-
allegation, the countervailing case development, moving it
forward, but it is just a complexity of the system that we have
in place and procedurally what we have to go to and what we are
constrained by once an investigation begins. There is only so
much that can be shared with the public.
Unfortunately, our system right now that we have in place
sometimes that takes up to 2 and 3 years before a final
decision is made. As you know, Congressman, at that point then
when we, the CBP, are given the go-ahead to start collection
proceedings, some of these companies have either gone out of
business, have changed names or are unaccessible to us in other
parts of the world.
So it is a very difficult, very challenging, very complex
system that we have in place, but the one thing I can tell you
with our partners in ICE and commerce, everybody is very
focused on moving within the constraints that we have as
aggressively as we can on the cases that we do have.
Mr. KIBBLE. Sir, if I could add one thing. These
investigations are so complex, and there are certain challenges
we face in terms of prosecution. But I will tell you the
antidumping countervailing duty investigations have been a
principal focus of the commercial problem working group, and
one of the things that I think will be helpful in terms of
expediting the resolution of these investigations and getting
more of them prosecuted is training.
Because we have a number--and this includes, by the way,
training for prosecutors, that perhaps also recognizes the
sensitivities in terms of the delays that these investigations
can take. But as the Commissioner indicated, there are hurdles
to overcome in terms of when these cases go a certain track.
Mr. BOUSTANY. We will work with you to hopefully get the
system even better.
One of the last issues, if, Mr. Chairman, if I might just
ask one quick follow-up question.
Boots on the ground. Your ability to get boots on the
ground to investigate a lot of these cases, that has been an
issue as well, and particularly foreign jurisdictions. Could
you address, briefly address that.
Mr. KIBBLE. There have definitely been challenges in terms
of, in some cases, travel advisory--and here I am talking about
commercial fraud in general, not just, or perhaps forced child
labor investigations and other types of disciplines. There can
be difficulties. I mean, in some cases there may be
unwillingness on the parts of the government to assist us in
furthering the investigations. Some of the inspections that--
the verifications that we seek to do. There are some challenges
there.
I would say that we have expanded our global presence,
within ICE anyway. We have about 71 foreign offices around the
world--we have been going through a footprint analysis to make
sure that it doesn't reflect this historic Cold War footprint
and looks at the challenges of the future and where the cases
are. And part of that, though, is there is one thing about
getting boots on the ground, but there is the willingness of
the government to work with us, so that is the significant
issue as well in terms of where we choose to invest the scarce
resources we have.
Mr. BOUSTANY. Thank you, gentlemen. Look forward to working
with what we have.
Chairman BRADY. Thank you, Doctor. I want to thank all of
the witnesses. Reminders, Commissioner Aguilar, you were going
to present, send us a list of the functionality for ACE for
this year and a list of the CEE topics subjects are going to
be, and I think all three of you have agreed to send us your
measurements, both what you are looking at today and what you
are thinking about looking at again. We are all in our jobs to
make improvements and progress, and if we know what you are
looking at, we can also obviously add our thoughts to that as
well. I want to thank you all for being here today.
Our second panel of witnesses is from the private sector.
First as he makes his way up here, a special welcome home to a
former Ways and Means staffer, George Weise, who will give us
his perspective both as a former Customs Commissioner and now
as an Adviser in Trade.
Mr. Sekin and Mr. Mullen will testify on how related
services add value to our supply chain.
Mr. Williams and Mr. Glassman will testify about the
importance properly assessing and collecting the anti-dumping
duties and the impact these duties have on their products and
ability to provide jobs.
And as we get settled in, I would like to pass Dr. Boustany
to personally introduce Mr. Williams.
Doctor?
Mr. BOUSTANY. Thank you, Mr. Chairman. Thank you again for
letting me participate in this hearing.
It is my pleasure to introduce John Williams with over 40
years of experience in every aspect of the shrimp industry,
John now serves as the executive director of the Southern
Shrimp Alliance.
In addition to his leadership role with the alliance, John
serves on numerous advisory panels, supporting the shrimp
industry on a wide range of issues. And it should not be a
surprise to anyone in this room that our Gulf shrimpers and
other aquaculture industries are facing serious challenges from
the invasion of anti-dumping and countervailing duty orders.
Given the hurdles our domestic industries face, and John's
firsthand knowledge, I look forward to hearing his expert
testimony today, and John, I just want to thank you for joining
us for sharing your insights on the problems and possible
solutions.
Again, Mr. Chairman, thank you for allowing me to
participate and I yield back.
Chairman BRADY. Thank you all for coming here today. We
will submit your written statements for the record, and I ask
you to limit your statements to no more than 5 minutes. Mr.
Weise, thank you for joining us.

STATEMENT OF THE HONORABLE GEORGE WEISE, EXECUTIVE VICE
PRESIDENT, SANDLER & TRAVIS TRADE ADVISORY SERVICES, (FORMER
COMMISSIONER OF CUSTOMS)

Mr. WEISE. Thank you so much for your kind introduction. It
is a pleasure to be back in this room where I spent 9 very,
very interesting positive constructive years. It is a
homecoming for me, and it is great to be here to talk about an
agency that has meant so much to me for so many years.
I am appearing today in a personal capacity, and not on
behalf of any organizations to which I am affiliated. In the
interest of time this morning, I will focus my oral comments on
the critical need to see ACE and ITDS fully implemented as soon
as possible, and I thank you for submitting my entire statement
for the record.
My hope in appearing before you today is to provide some
historical perspective on this important issue. My views have
been shaped from 40 years of experience in the Customs and
trade field, from my early days working as a GS-5 import
specialist for U.S. Customs in the Port of Baltimore, my
Customs oversight worked while serving this committee,
including the development and enactment of the Customs
Modernization Act of 1993, and my tenure as Commissioner of The
U.S. Customs Service from 1993 until 1997.
Since leaving government service in 1993, since then '93, I
have spent 15 years working in the private sector trying to
help commercial companies cope with government regulations and
get goods moved as quickly as possible.
Much has changed since I left office as Commissioner in
1997. The old Customs service in the Treasury Department has
become U.S. Customs and Border Protections. CBP is more than
triple the size of the former Custom service, with a much
broader mission and a focus on border security as a critical
component of the Department of Homeland Security in the
aftermath of 9/11.
Congressional oversight of the agency has also become more
complex. In the good old days, when the Committee on Ways and
Means and the Senate Finance Committee had exclusive
jurisdiction over the former U.S. Customs Service, numerous
committees and subcommittees now share oversight responsibility
for CBP.
Today, CBP is responsible for a myriad of challenging and
complex missions to safeguard our Nation and, for the most
part, is doing an outstanding job. Although it is
understandable that CBP has placed the highest priority on
security and anti-terrorism, it is also clear that CBP needs to
play a critical role in our national economic security by
effectively executing its trade enforcement and facilitation
missions.
As much as things have changed since my days as
Commissioner, I am also struck and distressed by how much they
remain the same in implementing the tools necessary to
effectively address CBP's national economic security mission.
With the leadership of this committee, the Congress enacted
the Customs Modernization Act in the fall of 1993, soon after I
became Commissioner. This legislation significantly changed our
Customs laws to enable modern techniques and procedures to be
applied to the importing process. Charged with implementing
that important legislation, it immediately became clear to me
that a new automation system was critical to achieve the
modernization objectives of the MOD Act, since the decades-old
automated commercial system which was in place at that time was
not capable of handling many of the new streamlined procedures
of the MOD Act. Also I was told that it was crumbling because
of overuse and lack of capabilities.
It was also clear that we had to find a way to consolidate
the data requirements placed on importers by the numerous
government agencies involved in regulating imports. To address
both issues, we began, at that time, back in 1994, working with
Congress to seek funding for ACE and ITDS. Needless to say, it
is extremely disappointing that nearly 20 years later, after
the expenditure of many millions of dollars, we are still far
from completion of ACE or ITDS.
I commend former Commissioner Bersin and Commissioner
Aguilar for their leadership in recent years. They have
recognized the importance of CBP's economic security mission
and made significant strides to address these shortcomings.
Notwithstanding these positive efforts, however, we are nowhere
near where we need to be.
In my judgment, the commercial operations of CBP are
lagging vis-a-vis the security mission of CBP. Despite
significant efforts and millions of invested dollars, we are a
long way from bringing ACE and ITDS to successful conclusion.
It is clear to me that the top priority to address these
issues is to find a way to bring ACE and ITDS to a successful
conclusion, and with that, retiring the ACS system as soon as
possible.
I understand that the current budget appropriation for CBP
only provides funds for operation and maintenance of the ACS
system and nothing for the development of ACE. This, in my
judgment, is a shortsighted approach that will not only foster
the continuation of costly and burdensome systems, but will
further delay the goal of creating a single modern system to
facilitate trade and enhance CBP's enforcement mission. It is
understandable why additional funding for ACE development was
not appropriated in light of the many millions of dollars
already expended over this program over the many years and so
little tangible to show for it. But again, I think an
historical perspective might help here.
During my term as Commissioner, I worked very hard but
unsuccessfully over my entire 4 years to convince the Congress
to fund ACE development. At that time, we were convinced having
built ACS the predecessor system, on our own, that we were
capable of building the next generation of automation as well.
The clear message I received, however, was the only way
Congress would ultimately approve ACE funding would be if
Customs brought in outside experts to do the job. Several years
after my departure, that is exactly what happened and the IBM
team was awarded the contract to build ACE.
Unfortunately, the program was then viewed as a contracted
IT effort rather than a CBP initiative, and the result of that
was CBP's key operational leaders were not engaged to the
extent that they should have been. Consequently, operational
requirements were not well defined, and the process bogged down
with a lot of wasted effort and well-deserved criticism from
many sources.
Another factor leading to the scheduling delays and higher
costs for the program was in the aftermath of 9/11, CBP
completely redirected much of its programming efforts and
understandably, so from facilitation to border security,
changing the game sort of midstream. The problem has now been
addressed by CBP in my judgment, and I think this committee has
appropriately commended Commissioner Aguilar for the efforts
that had been taking place. They have now created the ACE
business office, which actively and effectively involves key
stakeholders at every level.
Chairman BRADY. Commissioner, if I may, because we have
exceeded the time limit, perhaps we can ask you some questions
on the follow-up with your permission. Thank you again for
being here today. Welcome back.
[The prepared statement of Mr. Weise follows:]

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Chairman BRADY. Mr. Sekin.

STATEMENT OF DARRELL SEKIN, JR., PRESIDENT AND CEO, DJS
INTERNATIONAL SERVICES, AND PRESIDENT, NATIONAL CUSTOMS BROKERS
AND FORWARDERS ASSOCIATION OF AMERICA, INC.

Mr. SEKIN. Good morning, Chairman Brady and Ranking Member
McDermott. I am Darrell Sekin, Jr., President of the National
Customs Brokers and Forwarders Association of America and also
the President of DJS International Services, a small family-
owned customs brokerage and freight forwarding firm located in
Colleyville, Texas.
Since my start as a Customs broker in 1975, the industry
has undergone an enormous change, particularly in the area of
automation. Customs automation is a powerful tool facilitating
smooth trade flows and sharpening enforcement of trade laws.
Customs automation is the communications channel between
the importers and CBP. Customs brokers are instrumental to this
process: information, data and transmitting the information
necessary for the agency to function. That is why my first
point to the committee needs to be about the importance of ACE
and to underscore the comments of Mr. Weise.
The funding requests from the administration is inadequate,
and the pending House Appropriation Bill guarantees nothing for
ACE development. Currently ACE functionality is the bridge that
only goes halfway over the river, practically speaking, it
cannot process entries, its core responsibility until release
is finished. Release is in the on-deck circle, and without
funding for it, the system promises little incentive for
Customs brokers who file 97 percent of the entries to
participate.
My second point addresses the role of the broker. At one
point during my career, Customs regulated each and every aspect
of a Customs broker's business. In the mid 1980s, Customs
agreed to separate the commercial and proprietary aspects of
Customs brokerage from what has come to be known as Customs
business. The latter signified recognition that we are an
extension of Customs and that there must be intensive oversight
and supervision of Customs-related activities.
We are therefore licensed by Customs and subject to costly
penalties for errors and omissions in conducting Customs'
business. In short, the exchange for the privilege of engaging
in Customs brokerage and to ensure the integrity of the entry
process, we are committed to meeting Customs' exacting
standards and rigorous regulation. This is Customs and the
Customs' brokers grand bargain.
Customs is now seeking to expand the role of the broker. A
customs broker is viewed as a force multiplier because one
customs broker reaches, educates, and acts for a multitude of
importers, whether they be small, medium, or large-sized
businesses. There are many ways that customs brokers can
collaborate with Customs, such as education and certification.
To enhance the professionalism of the customs broker, our
national association developed a broker certification program
that requires a rigorous course of study and examination, and
also includes a continuing education requirement.
We have begun in partnership with Customs a series of
educational seminars for Customs officials.
NCBFAA is presently engaging with Customs in an effort to
update the Customs regulations that apply to customs brokers.
We must also generate support for new Customs programs and
we are working closely with Customs on ACE and on the air cargo
advanced screening pilot. We have also agreed to assist with
incorporating customs brokers into the development of the New
Centers of Excellence and Expertise. And finally, we must
advocate for a series of high-priority Customs issues.
NCBFAA recognizes that there are many challenges for
Customs to accomplish its missions. We support a number of
steps that will improve the commercial operations performance
of the agency such as drawback modernization and simplification
and a prospective system for anti-dumping and countervailing
duties. We must encourage efforts to expedite and facilitate
the trade function of other Federal regulatory agencies. One
such means to that end is the International Trade Data System,
a component of ACE that provides each participating agency a
window on the importation process. We support the committee's
efforts to gain continued adequate funding for ITDS.
Mr. Chairman, NCBFAA greatly appreciates the opportunity to
outline our views on Customs oversight and new policy
development. We stand willing to support the committee and all
of its work to accomplish these objectives.
Chairman BRADY. Thank you very much, Mr. Sekin.
[The prepared statement of Mr. Sekin follows:]

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Chairman BRADY. Mr. Mullen.

STATEMENT OF MICHAEL MULLEN, EXECUTIVE DIRECTOR, EXPRESS
ASSOCIATION OF AMERICA

Mr. MULLEN. Mr. Chairman, Mr. Ranking Member, I very much
appreciate the opportunity to testify today at the hearing and
applaud the committee for taking the time to examine the
critical issues around streamlining and modernizing the
shipment clearance process at our Nation's entry ports.
I am the head of a trade association that represents the
major express package companies: DHL, FedEx, TNT and UPS. Since
the trade committee last held a hearing on these issues 2 years
ago, I think it is fair to say that considerable progress has
been made. CBP has adopted an approach known as Co-Creation,
which Commissioner Aguilar described, where the private sector
is engaged from the outset in the development of new security
and border clearance programs. Co-Creation was used
successfully to develop the air cargo advanced screening and
the simplified entry pilot projects, which are described in
detail in my written testimony.
The Centers of Excellence and Expertise have implemented
the concept of account management for two industries, and CBP
is planning to expand this approach to additional sectors.
``The Border Agency Executive Council'' was created to
reinvigorate the commitment of government agencies with border
authorities to the international trade data system. And the
European Union has become the sixth partner to sign a trusted
partner mutual recognition agreement with the United States.
Former CBP Commissioner Alan Bersin should be given credit
for much of this progress, and current Commissioner David
Aguilar is carrying forward these efforts with strong
dedication.
But despite these positive developments, a great deal
remains to be done. A disappointing lack of progress can be
seen in the following areas: ACE funding has been seriously
reduced and is now only sufficient to maintain the current
operational status. Critically needed new capabilities are not
being developed.
The ITDS goal of a single transmission of information from
the trade and a single government release remains an
unfulfilled vision. As the agencies continue to deploy
standalone IT systems to meet their unique requirements, the
progress toward the ITDS goals is actually receding. Despite
strong appeals from the trade, the de minimis level for rapid
clearance for low-value shipments has not been raised above
$200 where it has remained for nearly 20 years. The Peterson
Institute of International Economics has done a study that has
shown significant savings to the private sector approaching
$100 million a year, and some savings also to the public sector
would result from raising this level.
C-TPAT benefits have not been expanded, and tier 3 status
continues to be limited to importers only, denying several
highly-qualified members in the carrier and other trade
communities the opportunity to hold this status. We are not
seeing progress toward a unified trusted partnership program in
the United States, and the trade community continues to be
plagued by the need to comply with unique programs for
different agencies. As the number of such programs is
increasing, we are actually going backwards in this area also.
In the best of all possible worlds, what should the border
clearance process look like by the end of this decade? The
government should look at the border as a business entity that
needs to be managed and develop all of the capabilities needed
to do so. With sufficient political will, I believe it is
possible to create a border 20/20 environment over the next 8
years with the following capabilities: Government information
requirements will be met by a single transmission of the
minimum data elements necessary, submitted as early as possible
in the supply chain; no paper documents will be required as
part of the clearance process; all government agencies will
coordinate to issue a single release prior to the goods
arriving at the port of entry; ACE will be fully operational
and will be the only U.S. trade clearance system; Centers of
Excellence and Expertise will exist for all major import
categories; the government will have a single trusted trader
program in which all agencies with border authorities
participate with a single application and validation process;
the U.S. de minimis level will be at least a thousand dollars
and will be automatically adjusted for inflation without the
need for additional regulatory or legislative action.
To sum up, this concept of the 2020 border represents an
ambitious proposal. The building blocks to create each of these
capabilities are in place today, but realizing this vision
requires a congressional oversight management process that
transcends narrow jurisdictional concerns and treats the effort
as a single project. Nothing less than the international
competitiveness of U.S. industry and ultimately U.S. jobs are
at stake.
Thanks very much again, and I look forward to discussing
these issues with you.
Chairman BRADY. Thank you, Mr. Mullen.
[The prepared statement of Mr. Mullen follows:]

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Chairman BRADY. Mr. Williams.

STATEMENT OF JOHN WILLIAMS, EXECUTIVE DIRECTOR, SOUTHERN SHRIMP
ALLIANCE

Mr. WILLIAMS. Mr. Chairman, Members of the Subcommittee,
thank you for inviting me to this hearing. I am John Williams,
the executive director of the Southern Shrimp Alliance, and a
shrimper with over 40 years in the industry.
I am here to talk about Customs enforcement, something that
is not a typical area of the expertise for a shrimper but it
has become a central part of my duties.
Customs enforcement should not be the responsibility of a
fisherman. There should not be blatant circumvention schemes
where millions of pounds of shrimp pour into our market from a
country that has no ability to produce that product. There
should not be businesses publicly advertising their expertise
at evading anti-dumping duties. Since 2005, the Southern Shrimp
Alliance has identified a wide variety of schemes designed to
evade anti-dumping duties. In that time, I have learned that
our industry's experience is not unique. Nearly every trade
remedy imposed has been undermined. Circumvention affects all
of us.
On shrimp imports alone, circumvention has resulted in
hundreds of millions of dollars in uncollected duties. This
means that dumped shrimp continues to be sold in our market at
prices that limit what shrimpers receive for their catch.
My experience working with Customs has been positive. One
operation closed down dusted shrimp circumvention. Customs
worked to establish that Cambodia, Indonesia, and Malaysia were
transshipment points to evade both duties and the import alerts
issued by the FDA. Customs has also closed fly-by-night shrimp
importers simply by opening investigations into their
activities.
As much as the shrimp industry has benefited from these
activities, there is also frustration. I am often frustrated
with the glacial place of progress on addressing certain
schemes that seem to be open and obvious. Customs officials, in
turn, express frustration on the limits of their abilities to
address circumvention. Our experience has convinced me that
Customs needs assistance in improving its enforcement of trade
remedies. I believe that given the right tools, Customs will do
the job. For this reason, the Southern Shrimp Alliance
enthusiastically supports H.R. 5078, the Preventing Recurring
Trade Evasion and Circumvention Act, introduced by Congressman
Boustany and Richmond last week.
The PROTECT Act makes circumvention a priority trade issue
that Customs must address. The toughest part of our early
interactions with Customs was the lack of continuity with those
officials responsible for enforcement. Reorganization agency
just made it worse.
The PROTECT Act simplifies this. If enacted, Customs would
have a trade remedy law enforcement division with a director
that reports to an assistant commissioner. Because high-level
enforcement positions have sat vacant with Customs, some have
questioned whether the agency considered the enforcement of
trade remedies to be a priority.
I know from my own experience that Customs takes
enforcement seriously, but there is little public record to
support that. Under current law, Customs provides very little
accounting of these activities. Under the PROTECT Act, Customs
is obligated to give a detailed accounting of its enforcement
efforts in an annual report to Congress.
The PROTECT Act also makes addressing circumvention a
principal negotiating objective of the United States in trade
agreement negotiations.
Malaysia has become an obvious transshipment point for all
kinds of products evading anti-dumping duties. From our work
with Customs, I understand that the Malaysian government has
refused to cooperate with investigations. At the same time, we
are negotiating with Malaysia to join the transpacific
partnership. Circumvention must be addressed in these
negotiations.
The PROTECT Act also instructs Customs to seek to negotiate
and enter into bilateral agreements to circumvention. Like with
trade remedy enforcement, if Customs declines to use this
authority, the agency must explain inaction to Congress on an
annual basis. The PROTECT Act substantially increases Customs
capacity to address circumvention by removing restrictions on
the information available for use in commercial targeting. The
Act also encourages enforcement by authorizing the sharing of
confidential information between various Federal agencies. The
PROTECT Act also improves Customs' capabilities by enhancing
its ability to collect information and authorizing Customs to
make adverse inferences against noncooperating parties. This
bill also prevents the abuse of the new shipper review process
and promotes better application of single entry and continuous
bonds to ensure duty collection.
In closing, I believe that these are vital steps forward,
and I am deeply appreciative of the fact that Congress has
taken these problems seriously as evidenced by this hearing
today and Legislative proposal the PROTECT Act. By introducing
the PROTECT Act, Congressman Boustany and Richmond have given
me some hope that in the future, Customs enforcement may not be
a part of my job.
Thank you, and I look forward to any questions you have.
Mr. BRADY. Thank you, Mr. Williams.
[The prepared statement of Mr. Williams follows:]

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Chairman BRADY. Mr. Glassman.

STATEMENT OF KARL GLASSMAN, CHIEF OPERATING OFFICER, LEGGETT &
PLATT, INCORPORATED.

Mr. GLASSMAN. Good morning, Chairman Brady, Ranking Member
McDermott, and members of this committee. Thank you for holding
this hearing on topics that are critical to our business,
employees, economy, and trade laws. I am the Chief Operating
Officer of Leggett & Platt, a global manufacturer based in
Missouri. We have 18,000 employees in 18 countries and 28
States and make a wide variety of products.
For the last 3 years, we, along with many of you, have been
focused on duty evasion. Clearly, there is work to be done to
create an effective enforcement program that ensures aggressive
and timely action.
Duty evasion has directly affected my company. Since 1883,
we have manufactured mattress innersprings. While we now make
many products, we are the world's largest innerspring producer,
and they are the heart of our business.
Chinese innersprings first entered the U.S. in the early
2000s, at prices lower than our cost of production. We
manufacture innersprings in China for the Asian market and know
it is not cost effective to produce and ship innersprings from
there to here. Still increasing volumes of Chinese innersprings
continued to be imported at very low prices.
In late 2007, after significant injury to our U.S.
operations from the low-priced springs, we filed successful
trade cases against China, South Africa, and Vietnam. Since
February of 2009, Chinese innersprings have been subject to
anti-dumping duties from 164 to 234 percent. Even before the
final anti-dumping order was issued, Chinese innersprings began
being transshipped to evade duties. Prior to July 2008, there
were no innersprings shipped from Hong Kong, yet by September
of that year, over 35 containers per month, worth $1.5 million
in sales and more in duties, were being shipped here at the
same dumped Chinese prices. This made no sense to us so we
hired a private investigator who found no evidence of
legitimate production in Hong Kong.
We traced 13 shipments of innersprings from China to Hong
Kong and then from Hong Kong to the U.S. in just 2 months. We
estimate 1 million innersprings illegally evade the anti-
dumping order each year. This represents over $50 million in
uncollected duties. If those innersprings were produced in the
U.S., it would account for over 58 full-time jobs earning more
than $2.4 million in wages and benefits per year.
We regularly provide Customs with specific evidence of
evasion. Since October of 2008, we have met with or sent
information to Customs on 30 occasions. Despite these regular
communications, including with the RED team, we have no
indication of any enforcement activity in our industry. This is
a systemic problem. We and 13 other affected industries,
collectively employing tens of thousands of American workers
formed the Coalition to Enforce Anti-Dumping and Countervailing
Duty Orders. Our stories are strikingly similar: the same
invasion schemes, lack of meaningful enforcement, and an
ongoing commitment of company resources to attempt to enforce
our own orders.
The consequences of duty evasion are significant. We
estimate that Treasury loses over a billion dollars in unpaid
duties each year with $400 million just from the seven of the
Coalition's industries.
The ripple effects of duty evasion up and down supply
chains, on our workers' salaries, and on our Communities cannot
be ignored. Coalition members have met with Customs, ICE,
Commerce, USTR, Treasury, this committee's staff, Senate
Finance staff, and several Members of Congress and their staff
concerning these issues. We are encouraged by the efforts of
many members to help find a solution.
Any legislation or policy changes must include meaningful
provisions capturing three core themes: First, prompt action.
Evasion must be addressed quickly. These are industries and
employees that our government has said are injured and who need
and deserve the benefit of their anti-dumping order.
Second, full use of existing tools. Our agencies should use
all available tools and authority, including requests for
information, audits, civil penalty proceedings and expertise of
affected industries.
Third, publicized results. Publishing regular decisions and
reports with meaningful details, and informing the industries
reporting evasion, would provide an immediate deterrent to
cheaters, increase transparency and accountability and
demonstrate the agency's will and capabilities to combat
evasion.
Codifying practices that are less than fully effective is
not enough. Our enforcement agencies need structured programs
with appropriate levels of responsiveness, transparency, and
accountability. We must find a solution. The alternative is
unacceptable. We are committed to helping come up with
solutions that go beyond business as usual and deliver an
effective enforcement program.
Mr. Chairman, members of this subcommittee, thank you for
the opportunity to address you today. I look forward to your
questions.
Chairman BRADY. Mr. Glassman, thank you for bringing
forward the issue of trade fraud. It has been prevalent for
some time, getting more complex. It is a major challenge for us
moving forward so thank you for focusing on that.
[The prepared statement of Mr. Glassman follows:]

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Chairman BRADY. Mr. Williams, my congressional district
abuts Dr. Boustany. We have got a few shrimpers around Texas as
well. Very interested in your testimony.
I want to welcome Mr. Weise back to the committee and thank
you for your expertise. You heard me perhaps in the first panel
talk about the need for measurements. In fact, United States is
ranked ninth in efficiency by one measurement, lower than that,
Customs' efficiency 13th in the world, international shipments,
17th. Whether that comparison's accurate or not, the point is
that we have become much more efficient, and to do that you
have to measure the efficiency and the accuracy and the
enforcement.
So I wanted to ask Mr. Sekin and Mr. Mullen and to ask any
of you to chime in if you wish, how are your customers
measuring efficiency of shipping, Mr. Sekin, and how are your
members, Mr. Mullen, doing the same? What do you use to measure
efficiency, time, cost, for both imports and exports?
Mr. SEKIN. I think one of the ways that our client's
measure efficiency is how quickly their shipments are
processed, how many examinations they get and when, shipments
are detained for examination, how long does that detention
last? There is a great deal of expense when a shipment is
detained for examination at the seaport, such as demurrage
charges or per diem charges on the container. It can be very
expensive. So a customer would measure how quickly they get
their product and can get it into the marketplace.
Chairman BRADY. Would you be willing to survey your members
to ask what some of those indicators might be with the broad
range of them that might be that they would feel comfortable
sharing with us as we go forward?
Mr. SEKIN. We would. We will get back to you with that.
Chairman BRADY. Thank you very much. Mr. Mullen?
Mr. MULLEN. Mr. Chairman, this is a very important subject,
and I would share what my colleague said about the importance
of time for release, the time from when the product actually
arrives at the port of entry to when it is ultimately released.
If there is a hold imposed, what the time is required to
resolve the hold, and I think a particularly meaningful
measurement that could be developed is that several government
agencies, it is hard to know exactly, but one number we use is
that nine government agencies have border control authority, so
in other words, have the authority to stop a product at the
border for one reason or another. Most of those choose to
discharge those responsibilities through CBP, but some do not.
But for each one of those agencies, a statistic should be
developed of all the products that are coming in that are under
the regulatory control of that agency, let's choose FDA as an
example.
Of all the products FDA regulates, what percentage are
stopped for some reason, an inspection or some other reason,
are put on hold? And of that percentage that are put on hold,
what percentage do they actually find that there is a violative
product, a noncompliant product? So to improve trade
efficiency, what you would want is that the number of overall
products that are being held, that percentage keeps going down,
and the number of violative products they find keeps going up.
That would be a very good measurement.
Chairman BRADY. I appreciate that. On the time for release,
what is the trend? Is it getting shorter? Is it getting longer?
Does it vary?
Mr. MULLEN. I think overall it has gotten better for some
agencies, but for some agencies it has gotten worse.
Chairman BRADY. Can you survey your members as far as
indicators they think would be meaningful as we move forward as
well as to the comfort level they have in sharing with us?
Mr. MULLEN. I certainly can.
Chairman BRADY. Any other witnesses want to weigh in?
Mr. WEISE. Just briefly, and I think you raised this with
Commissioner Aguilar. I think Customs has come a long way in
trying to measure the right things. I mean, back in my day, we
used to try to measure the instances of noncompliance as
opposed to measuring what total compliance should be. Once we
got to that point and we were able to demonstrate that we could
show marked improvement to get the compliance levels up to was
roughly 90 percent and the duty gap was only 1 percent. So we
were collecting 99 percent of what we should be collecting in
reviews, and we had 90 percent compliance level on most of our
many importers. But it is important to have those measurements
and metrics on both sides, both from an efficiency standpoint
as well as an enforcement standpoint.
Chairman BRADY. And our challenge, too, on enforcement is
that we often measure progress by bulks, by volume versus what
percentage you are actually stopping, you know, at the border
accurately, and it is hard to be noble about what that bulk of
fraudulent shipments is, so that presents a particular
challenge. Yes, sir, Mr. Williams?
Mr. WILLIAMS. Yes, I think if we are going to measure, have
any kind of measurement in our industry, you know, we are quite
a bit different from other folks here, I think it would be our
price. You know, that would determine, help determine the
amount of circumvention that is going on in our industry, and
that would be certainly a measurement by our price how much it
goes up and down.
Chairman BRADY. Good point. Thank you, sir. I will turn the
questioning over to Mr. McDermott.
Mr. McDERMOTT. Thank you, Mr. Chairman. As I listen to Mr.
Williams and Mr. Glassman, I try to figure out in my mind what
can we up here do to make it better? I mean, what kind of rules
and regulations should we write for Customs or is it a lack of
personnel? And I get a different view from Mr. Glassman and Mr.
Williams about how effective the agency is. Can you tell--I
mean, one is dealing with fish and another is dealing with high
tech stuff and whatever. Is it the sector you are into that
Customs is better at than they are in another sector? Or is it
the region you come from? Or is it something else? Why do I get
these different views from the two of you?
Mr. GLASSMAN. Mr. Congressman, I would speculate that the
fact that the FDA is involved in the food aspect of Mr.
Williams' product may be one of the points of difference. I can
only benchmark ourselves against the 13 other industries in our
coalition, and they have twin experiences to ours, constantly
giving CBP information and it going into that proverbial black
hole and no follow-up. I don't think that there is any need for
additional tools. We don't think that there is need for
additional expenditure on resources. What we are asking for is
to use the tools that are available to the agency today to
enforce timelines so there is accountability.
I certainly subscribe to Chairman Brady's position on
measurement. The very basic theory of continuous improvement is
to effect development or improvement, you have to have a
measurement system. Timelines are a measurement system. So we
need to invoke that into the process.
Mr. McDERMOTT. If I understand you, then, what you are
saying is we don't need more people, we don't need more money.
What we need is enforcement of what is going on by using some
kind of timeline that it has to be done within 2 weeks or 3
weeks or whatever it is.
Mr. GLASSMAN. And they also, sir, can leverage the
information that is given to them. I will give you a specific
example. In a meeting with CBP staff a year or so ago, they
said do us a favor and present to us a list of the top 10
importers of record, and then correlate that very tightly with
the recipients of those goods that you believe are, in fact,
circumventing. We did that very thing. Two weeks ago we were
asked for that same information. That is information that is
available to CBP and isn't utilized. We have full-time
employees purveying databases to try to get information that
goes into that black hole. Really what we are asking for is
time and attention and enforcement of our trade laws.
Mr. McDERMOTT. So explain to me, then, what you think is
not going on. I mean, they have the data, you presented it to
them, but nothing happened. Is that just sloth or is that they
are overworked or it is not complete data or they don't know,
or is there some other reason why it doesn't get dealt with?
Because it seems like it is all there on the table for anybody
who would look. Then the next thing is why didn't they take the
action? How do you explain it to yourself?
Mr. GLASSMAN. I admit it is frustrating. I believe it is a
lack of focus and accountability. One of the real benefits of
the PROTECT Act, as Mr. Williams delineated, is there is an
expectation of accountability and focus on circumvention. The
fact that circumvention isn't something in enforcement, isn't
something that gets a lot of visibility is a question to us. We
are as baffled as you are, sir.
Mr. McDERMOTT. Is it that there are better teeth in the
PROTECT Act or more teeth or----
Mr. GLASSMAN. The fact that there is a systematic approach,
the fact that we are using the 10 plus 2 information for
commercial uses is a benefit. The weakness that we believe in
the particular proposed Act, though, is the accountability or
the tools of measurement, the timelines, the transparency.
Those are the things that we think can help augment the PROTECT
Act to end up with a better end product.
Mr. McDERMOTT. So you are talking about additions to Mr.
Boustany's proposal in terms of tightening of the teeth?
Mr. GLASSMAN. It would potentially be a merging of the
PROTECT Act and the ENFORCE Act that Congressman Neal made
reference to earlier today.
Mr. McDERMOTT. So a marrying of the two?
Mr. GLASSMAN. That is correct, sir.
Mr. McDERMOTT. Okay. Thank you very much. Thank you, Mr.
Chairman.
Chairman BRADY. No, thank you, Mr. McDermott. Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman.
Mr. Mullen, I have heard from some in the trade community
that agency holds from agencies such as FDA, USDA, and DEA can
delay shipments several days longer than the CBP holds. To your
knowledge, have members of your association experienced
difficulties with paperwork requirements or any other
requirements from agencies other than the Customs and Border
Patrol, and in your view, what can be done to improve the
multi-agency processes and how can Congress streamline
legitimate trade processing?
Mr. MULLEN. Well, thank you, Mr. Davis. It is a serious
problem, and I think the comment was made during the first
panel that on a percentage basis more holds come from other
agencies now than those that are imposed by CBP for security
problems. And I think several things actually could be done to
help alleviate this problem. The first thing is that a number
of other agencies of the Federal Government don't see trade
facilitation as being part of their mission, and they are
enforcing a regulatory process that is based on a desire to
identify product safety and other problems that is critically
important, and that part of their mission is critical to the
health and safety of the American people, but they need to
understand that they have become partners in a supply chain at
this point, and they need to look at what they can do to
provide more trade facilitation for legitimate shippers.
So there are a couple of efforts underway right now to
really expand the basic C-TPAT model and create trusted trader
programs that would incorporate other agencies, and the
Certified Importer Project is the most important, I would say,
of those efforts right now, where if a company can validate its
supply chain from one end to the other, it shows that it has
good manufacturing processes, a secure supply chain, those
products should receive expedited treatment when they arrive at
our border.
A second thing that could be done is many of the holds that
other agencies put on products are because of document
requirements or for some small inaccuracy in the information
that was submitted electronically. Those kinds of problems,
where it is a highly--otherwise a highly compliant importer
shouldn't hold up the release of the product. Let the product
go, and the document can be provided or that little inaccuracy
in the submission of the information can be corrected after the
product has already been released. There are all kinds of ways
to audit this process to make sure that what the government
requires is actually provided.
And then the third thing I would say is some of these other
agencies could do a better job if they centralized some of
their resources. If it is just a question of examining
documents, which often are available electronically, if trying
to do that--instead of trying to do that at every port of entry
where their products are coming in, it is a virtual process,
centralize those resources in a place where the right expertise
would be available, and it might be available for a longer
period than 8 hours a day.
Mr. DAVIS. Do you think it would be more effective to have
a common data warehouse that all the agencies could draw from?
A shipper, in effect, signs on to what would be the equivalent
what we call in the private sector is part of a customer master
and then the different agencies can flag the information that
is relevant to them, but it is all transparent to speed, to
expedite the process through. In fact, not unlike making a
credit card transaction. If there is something that comes up,
it flags automatically by whatever network is observing that
and then action can be taken appropriately. Would that fit the
model that you are talking about?
Mr. MULLEN. Something like that would, I think, be
excellent if you are talking about consolidating the
information.
Mr. DAVIS. I think if you just have to fill out a form one
time--I mean, we see it in the entitlement programs all the
time, one error ripples across agency after agency and just
creates a tremendous backlog.
Mr. Weise, as the committee continues to evaluate ways to
improve trade processing and benefits to trusted traders, what
other trade streamlining measures should we consider as a Trade
Subcommittee? In fact, in your view how effective has the CBP
been at consulting and working with other agencies and what, if
anything, can Congress do to facilitate CBP's collaboration
with other agencies and the private sector?
Mr. WEISE. As I said in my statement, I think Customs is
doing much better than they have in the past in recent years,
that is CBP. The creation of CBP, obviously in the aftermath of
9/11, their focus was pretty much security, security, security,
and the concern was we might have a physical container with
explosives, et cetera. So rightfully so. But they are doing a
much better job. They have a number of outreach programs, they
are reaching out to try to partner with the business community,
but there is much more that can be done.
And I think, again, when you look at resources, the issue
we were just talking about in terms of your centralized data,
that is the International Trade Data System we tried to do back
when I was Commissioner in the 1990s. The import community is
being asked to do a lot in terms of doing C-TPAT, putting in
systems that will make sure that their supply chain is secure.
What they are asking from the government is don't be
duplicative about the data you are asking for. You are asking
for so much from so many sources. If you want us to do all this
to help secure the supply chain, help us out by asking for data
one time, it can be shared across all agencies, and then to Mr.
Mullen's point, all of the information that different agencies
require aren't critical for the release process. They may be
critical at some point before these products enter consumption,
but are not critical release.
Mr. DAVIS. Do you see the shippers actually being, or CBP
actually sitting down with the shippers, business process
managers, their systems people to actually see the--you know,
the level of granularity I think in many of the shippers is
much more sophisticated than what the Federal Government
actually uses, and I think a partnership could accomplish both
ends very easily to speed that but also accomplish the same
end.
Mr. WEISE. Exactly. My point that I made in my testimony as
well, it is more complicated. There is no unified voice
anymore, even from a congressional perspective. You have the
Ways and Means Committee and the Senate Finance Committee,
having a particular focus on what CBP should be looking at and
you have the Homeland Security Committees that may have a
different perspective, so CBP is getting mixed signals.
To me one of the things that is lacking that I said in my
submission is that we need to find a way to have communication
consistent across the business community, CBP, and the Congress
to make sure that there is a clear direction that is being
provided and that people are being held accountable in CBP in
carrying out those policies. I think that is what has been
difficult because of all the complexity of this very much
larger organization with all these different committees. There
is not a unified message that is being received that needs to
be carried out.
Mr. DAVIS. Great. Thank you very much. Yield back, Mr.
Chairman.
Chairman BRADY. Thank you. I think this hearing has been a
good bipartisan opportunity to focus on the nuts and bolts of
trade, making sure that Customs has the resources, the
authority, and the focus on its trade enforcement missions as
well as streamlining legitimate trade. Work of Customs is key
in determining our competitiveness in the 21st century, and I
very much thank the witnesses for their time and their patience
and their very thoughtful testimony. Our record is open until
May 31, 2012. I urge interested parties to submit statements to
inform our Customs authorization legislation, included as I
requested on the measurements, the indicators that we might
consider on making sure we are actually measuring the progress.
With that, thank you. This hearing is adjourned.
[Whereupon, at 12:21 p.m., the subcommittee was adjourned.]
[Submissions for the Record follow:]

Statement of Senators Ron Wyden, Olympia Snowe, Claire McCaskill, and
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