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80–260 2013

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 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

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 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

Jennifer M. Safavian, Staff Director and General Counsel 

Janice Mays, Minority Chief Counsel 

SUBCOMMITTEE ON TRADE 

KEVIN BRADY, Texas, Chairman 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

WALLY HERGER, California 

DEVIN NUNES, California 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

JIM MCDERMOTT, Washington 

RICHARD E. NEAL, Massachusetts 

LLOYD DOGGETT, Texas 

JOSEPH CROWLEY, New York 

JOHN B. LARSON, Connecticut 


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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 


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(1) 

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:] 


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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.’’ 


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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 shipmentby-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 


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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

f 

/. 

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 


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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 


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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 


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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 


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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 trustbased 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 sucVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

joloto on DSK67XMDP1PROD with HEARING
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cessful 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 cocreation 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 cocreative 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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joloto on DSK67XMDP1PROD with HEARING80260A.001

u. S. Customs and 

Border Protection 

rz,~ 

"CS STATEMENT ~ 

OF ,,'1.- cs 

DAVID V. AGJl/L~ ACTING COMl\~l)roN[R 

u.s. CUSTOMS AN~~D[R PROTECTION 

OEt'ARTMENT ~~UJ\1E LANO SECURITY 

~ REG NG A HEARING ON 

"Customs Trad~ ernization, Facilitation, and Enforcement" 

~C$ BEFORE THE 

~ 

//~ U.S. HOUSE OF REPRESENTATIVES 

V COMM ITTEE ON WAYS AND MEANS 

SUBCOMM ITTEE ON TRADE 

Thursday, May 17, 2012 - 10:00 :l.R1. 

11 00 Longworth House Office Building 
11 


joloto on DSK67XMDP1PROD with HEARING80260A.002

In lroduClion 

ChainnaJJ Brady. Ranking Member McDermott. and distinguished Members of the Trade 

Subeommittee. I am pleased to appear before you today with Deputy Assistant Secretary 

Skud. and Deputy Director Kumar Kibble. My name is David Aguilar. and I am the 

Acting Commissioner for U.S. Customs and Border Protcction (CBP). I am delightcd to 

discuss mycommitmcnt to CBP's trnde mission and the actions we are taking at CBP to 

develop a fully modem trade agency focused not only on protecting but als~ 

promoting our national and economic security we11 into the 21 ~ cen~'li 

~ 'l" 

I want to begin by thanking the Committec for its unwa~ support to CBP. Your 

support is cnabling us to work with our private se~ ~ners to tr:msfoml our trade 

"-

processes to meC1 our evol vmg needs ~ 1:t~ 

.~ 

From its inception by the fifth act ~ first congress. Customs has been charged with 

V 

collecting revenue and dutie~ products entering the U.s. More than 220 years later. 

e; 

and as we approach o~ anniversary as CBP. our trade role is more oomplex than 

cver before, an~ our responsibilities. Of eoursc, CBP has a vital role in preventing 

a terrorist ~<$;rom o<:curring within our borders. And we have been very vigilant in 

pursuing this mission. But CBP also has a critical role in the global marketplace. 

facilitating trillions of dollars in legitimate trade while enforcing U.s. trade laws that 

protect the economy, the health and the safety of the American people. 

2 
12 


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CBP is charged with some of the most critical pans of America's economic and physical 

security. With that comes the J"I."quirement that we stay agile by modernizing our 

processes and mcthodologies. especially as we face a world of increased trade volumes 

and the rapidly escalating complexity of modern trade. Cfir has taken a number of very 

important steps to transfornl itself to meet the demands of trade in the 21 " Century. and I 

look forward to sharing these effons with you. 

(l)<$' 

First, I would like to provide the CommiUec with a sense of the key ~~ms ofCBP's 

approach to its critical trade mission and then explain the cor~~plcS Ihat infonn our 

mission priorities. We are striving to create trade proce~ ~at are consistent and 

harnlOnizcd across operations at all pons of entry 't~.s. importers and exponers 

can operate in an environment defined by pre~ ~ility and unifomJity. We are 

developing systems and processes that ~~7.e and reflect the operational realities of 

.~ 

modern business. We arc \\ Orkin~tablish a comprehensive trusted trnder program 

oS 

that encomiXlsscs all aspects ~ompliance. We are committed to close and continued 

o 

cooperation with the ~~ommunity to jointly create trade initiatives that arc relevant 

and responsive t~mic trade busincss practices. We arc dedicated to enhancing the 

knOWlcdgc#illS of our workforce by working with the trade community to deepen 

our understanding of the way business and industry operate in the ever changing global 

marketplace. Finally. we are working closely with our federal panners and Ihe impon 

community al the border \0 ensure that we arc aggressively enforcing our trade laws and 

collecting the correct revenue with all due diligence. 

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To establish the foundation for a more modem CI3P. well equipped for future challenges, 

we arc now focusing on the creation of Centers for Excellence and Expertise (CEE). The 

CEEs will fundamcntally transfom the way CBP approachcs trade operations and works 

with the intcrnational trade community by expanding efforts to inercase uniformity of 

practices across ports of entry, facilitate the timely resolution of trade compliance issues 

nationwide, and further stTCngthen critical agency knowledge on key industry practices. 

To ensurc that our automated systems are capable of handling the increasi~lumes of 

data that now through the global trade environmcnt. CBr is focuSin~~~ceSSfUIlY ~ managing the transition from the legacy Automated comme~rt!'i)s em (ACS) to the 

Automated Commercial Environment (ACE). a modern,~~le system that provides 

cfficicncy and transparency to the trade eonllnuni~n~c government agcncies that 

rcgulate border activities. We will utilize the~~ and ACE to create simplified entry 

and financial proccsses to minimize th~~ doing business. Working with our 

.~ 

partners in the trade community, ~~ addressing key areas. like rcdelining the role of 

V 

the Customs Broker as a eritie. partner in managing the ever-increasing volume and 

CO 

complcxity of trade a~~iSing our tT\lstoo trader programs to rcnct.:t current business 

rcalities. To en~~ictable and efficient clearance of cargo. we arc also working 

very Closc~our fcderal agency partncrs to de"clop shared approaches to risk 

management and compliance activities. We arc revitalizing our trade enforcement and 

rcvenue collection activities by aligning efforts with our partners in ICE Homeland 

Security Investigations (HSI) to cxpand the scope ofthc National Intellcctual Propeny 

Rights Coordination Center (IPR Center) to cover commercial fraud enforcement. a 

critical responsibility for the protection of U.s. domestic industry. 

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ConSiSleni and Harmonized Modern Trade Processes 

Efficicnt and cffectivc processing of goods and people to and through the United States is 

a crucial part ofCBI"s trade mission - to support our Nation's cconomy, promotc job 

growth and help our partners in the tradc community remain competitivc in a constantly 

evolving world economy. In 2011, CBI' proccssed ncarly S2.3 trillion in trade - a 10.5 

pcrtcnt increase over Fiscal Ycar (FY) 2010. Wc operate 329 ports of cntry, and process 

over 100 million cars, buses. trucks. trains, vessels and aireraft arriving at ithin our 

borders each year. We move more than 28 million commerdal ShiP~~'?trriVing in air 

~ and maritime cargo. and 250 million more arriving in small ~~~ia express carriers 

and mail. ~ '" 

'V ~, 

With such a large and growing volume of g~ ~d people to process, CHI' must 

perform its responsibilities efficiently t~'?!; dciaying shipments, increasing costs and 

~ 

creating inefficiencies for U.S. bU~. Indeed. modem business pracliccs oftcn rely on 

V 

"just-in-timc" dclivery; dCIW ncccssary shipments of products can derail or shut 

down business. As a ~ wc are activcly implcmenting programs to integrate our 

processes into ~ busincss operations. 

(y<$' 

Callaoor(lt;,-e ''''<:gratio" a/Trade Processes 

Increasing our knowledge of global trade praclices is vital to our modernization cfforts. 

Wc conduct cxtcnsive outreach with the trade community to devclop strategies to 

integrate and hannonil.e private sector trade praclices with CBP's processes to expedilc 

trade. This outrcach has led to thc devclopment of our "bi-directional cdueation" and 

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"co-cre3lion" initiatilles. which institutionalizc our commitmcntto incrcase our 

understanding of business operations and encourage partnerships with the prillate sector. 

"8i-OiN'Cliona/ EdllC(ltion" 

Indecd. "bi-directional education" e!Torts with the trade community have enabled CI3P to 

improve its understanding of how modem trade works. But we need to continue learning 

more about each other and the challenges we both face as economic and !b.~realities 

continue to change. We belie\'e CBP has an ongoing responsibility ~Id efficiencies 

~ into our trade processes to dri\'e down transaction costs for i~Qt. 

R)" 

In October 2011, CBP established two CEEs with\O~ffiCe of Field Operations, to 

increase unifonnity of practices across ports ~~. f~cilitate the timely resolution of 

trade compliance issues nationwide, an~'«importantlY, strengthen the agency's 

~ 

knowledge of key industry practic~~e CEEs initiative is a lransfonnalional concept. 

[t was initially rccolmnende~ ~e Advisory Commillt'C on Commercial Operations of 

o 

Customs and Border ~~ion (COAC). and we halle aeted aggressillely on their 

proposal. :9t?:f 

<v~ Of our two current operating CEEs. one IOcuses on infonnation technology and consumer 

electronics, and the other addresses phannaceuticals. health and chemicals. I TCt:ently 

announct'd the opening of t\\'o additional CEEs. One, focusing on the automotille and 

aerospace industries will be based in Detroit. The other. based in Houston, will focus on 

the petroleum. natural gas and minerals industries. I would be remiss if 1 did not mcntion 

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the significance of the $3 million included in the President's Budget for the Centers of 

Excellence and Expertise. This funding will be used to provide for software, tools, and 

equipment to allow for virtual interaction and collaboration with the private sector. other 

agencies. and within CBP; investment in bi-dirt."Ctional training to develop industry 

expertise; ami resources for outreach and collaboration with the private sector on CEE 

operations and activities. The CEEs are a priority for us and further demonstrates CBP's 

commitment to the synergies of our risk-based trade facilitation and enforc~ l\ 

missions. ~<:::::J1j 

~ 

The CEEs represent CBP's focus on transforming our Cl~~ ~ procedures to align with 

modem business practices. By having the centers~~n industry-specific issues, CBP 

is able to concentrate its trade eXJX.'Ttise on sir~Fiiidustries and provide tailored support 

10 unique trade environments. Today, ~1?d import documents for trusted partners 

.~ 

within the ek"Ctronics and Pharma~al industries are routed to their respective CEE. 

V 

While revenue collection cor&CS to be carried out at the ports of entry, thc centers will 

o 

perronn all validatio~tfties, protcsts, post entry amendment/post summary correction 

reviews, and pri~losure validations for the trusted partners within their industry. 

<v~ Because of their dynamic role in trade facilitation, the CEEs arc able to playa more 

strategic role in trade enforcement. By focusing industry expertise in the CEEs, they arc 

bener able to work collaborativdy on specific enforcement issucs. To this end, the CEEs 

rcpresent a strategic vision for trade enforcement, as they arc able to partner with the 

industry to beller identify threats. In tum, the approach to trade processing at the new 

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ccntCTS will reduce costs for the trade community, facilitatc Icgitim3le trade through risk 

segmentation. inercase agency e,~pcrtise and deliver greater transparency and unifoTlTlity. 

Because of the protocols developed in our CEEs, we have been able to react as soon as 

we receive infomlation about potentially coumcrfeit and/or haTlTlful medicines that might 

cntcr the country. The Centers are working with a number of partners. For e"ample, 

they collaborated with ICElHSJ on an enforeemem action against an indivi~charged 

with smuggling 40,000 tablets of countcrfeit drugs into the country. ~t::.::Jt(j 

~ ~ The CEE's most robust interdiction effort to date was f~~ on counterfeit prescription 

drug Avastin. Upon receiving notification that co~e~ drugs had been discovered in 

the United States. the CEE immediatcly took ~~10 interccpt future shipments. The 

Ccnter manually targeted and held ShiP#scnt from sclcrted overseas fiTITIs and 

.~ 

ereated systemic alerts that would~naticallY hold any shipment sent from or to a 

V 

party of interest. The CEE's~rts to interdict counterfeit AVllstin continue at this time. 

0° 1-,C0 

To advance coo~1£n with industry, we arc working closely with stakeholders from the 

trade com~<S:o identify issues of mutual interest or that need resolution via CBP's 

intelligencc, targeting, and enforcement capabilities. We anticipate these industry 

representlltives will provide us with up-to-the-minute infOTlTlation on industry trends and 

issues that impact CBP processing and enforeemcnt. 

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"Co-Crealioll" "lid End·lo-End Supply Chuin Mwwgemenl 

An example of a signature achievement in "oo-creation" is the Air Cargo Advance 

SCfC('ning (ACAS) program which is a more secure way ofmo\ing cargo by air. The 

ACAS pilot grew out of the October 20 10 incident where authorities discovered t\\·o 

packages from Yemen containing explosive devices bound for the U.S. Forensic expens 

said the,e bombs were set to detonate in mid-air over Chicago. This plot \~ttributed 

to AI Qaeda in the Arabian Peninsula. In response. CI3P and the ion Scrurity 

~ Administration (TSA) immediately reached out to express ca~~d began receiving 

pre-loading data on shipments from 28 countries to prot~\ cargo shipments into the 

U.S. Today. the ACAS pilot has e.\!Xlnded to 145~U~S in the express environment 

and provi ·d es another ··kd"· f layer m our ns -base S~tcgy - as a dIrect result 0 our 

pannerships. we have received over 18 # transmissions of data and to datc. thcre 

~ 

has not becn a single "Do Not Lo~~der issued. 

OV 

CO 

CU£>, TSA, and the C~Air Cargo subeommittee worked diligently to devclop the 

ACAS StratCgi~~hat was recently relcased. We are now also beginning the second 

phase of ~ include passenger carriers as well as freight forwarders. Additionally, 

ACAS is yielding other opportunities for expeditcd release of merchandise arriving at the 

U.S. ports of entry. We are e.\ploring opportunities to leverage ACAS and offer a 

simplified entry process to ACAS !Xlrticipants by integrating with the Simplified Entry 

Initiative. ACAS is an excellent model of public-private partnerships and is essential 10 

furthering our national security efforts and facilitating tnlde more efficiently. 

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CBP's Customs-Trade Partnership Against Terrorism (C-TPA T) program is at the 

forefront of our partnership with the tmdc community to beller secure goods moving 

through the international supply chain. With the globali;r.ation of business. many of our 

ports are already saturated and simply cannot accommodate t:scalating cargo examination 

rcgimts. Bccaust ofthtse constraints. CIlP has rtcognizt:d the nted to build on trustbased partnerships in our enforcement efforts. C· TPAT has enabled CBP to innuenee 

supply chain security at intcmationallocations whCl\' WI.'" havt: no reach. C~ 

continuing to expand this partnt:rship from its t:UrTent enrollment of ~~t.ooo certified 

partners. We are also strengthening C-TPAT to ensure that ~rt~ member com(Xlnies 

aT(! fulfilling thcirt:ommitment to the program by sCt: uri ~~ movement ofthdr goods. 

~~ Another trusted tradt-r partnershIp . program w~re ". expandmg . IS the Importer S cl· f 

AsSt:ssment program (ISA). which is a ~1(;.ry approach to tradc compliancc that 

~ 

currently has 231 companies parti~ng. The program provides the opportunity for 

oS 

importers who have made a ~mitm ent of resources to assumc responsibility lor 

o 

monitoring their own &ianee in exchange for benefits. We arc also working to 

deepen our part!~s in the import saft:ty art:na. CIlP. the Consumt:r Product Saft:ty 

commissi~C) and importers have implemented the Importer Self·AssessmentProdut:t SafClY Pilot (ISA- PS). which supports our goal of maintaining a high level of 

product safety compliance. 

Finally. CBp·s innovative concept for intellectual propcny rights (IPR) distribution chain 

management will transfonn IPR risk assessment. increase efficiency. and support U.s. 

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e<:onomic competitiveness. This CaP-private se<:tor partnership program aims to 

improve trR targeting by enabling CBP 10 identify and release shipmems of authentic 

goods without inspection oc-eausc it will movc the shipmcnt into the trusted scgment of 

imports. These efforts arc being undertaken in close consultation with tho;: COAC and 

funding for implementation of this program is included in the Presidcnt's FY 2013 

Budget. 

~~ By knowing importers' supply chains, CBP will be able to focus its ~~es on 

!\. 

shipmo;:ms that have a high or unknown risk of containing c0:t,c0it and pirated goods. 

U.S. importers will benefit from increased Predictabi i?t..~"Jl.tlr supply chains and 

reduecd costs bct:ause they will not have to bear t~d,\!ays and costs caused by physical 

inspections. Additionally. right holders will ~~t from the economic impact ofCBP's 

enhanced ability to identify and scire ~~mtcrfcit and pintt~d goods. 

~ .:;;t;:' 

We also realize that we CannbCly exclusively on ollr own internal processes to 

e; 

successfully exe<:ute ~~ssion; inu.·ragcncy collaboration is fundamental to achieve our 

modernization ~rough the Bordcr Interagency Executive Council (Bl EC). CDP 

continues ~ towards a "one-govcrnment"" approach to panllcrship programs. The 

BIEC was formed to improve interagcllcy eoordillation 011 matters rclatillg to import 

safetyalld is the foulldatioll for ellhanccd effons in the area of impon safcty and trade 

enforcement. Key issues currently being addrcssed by the llIEC illclude information 

sharing to improvc targeting and enforcemem in addition to increased partncrships 

betwcen thc government and the trade community. 

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Further reinforcing the collaborative efforts of the BJEC is the Import Safety Commercial 

Targeting and Analysis Center (CTAC). located within CBf>. This is a multi-agency 

fusion center for turgeting commercial shipments posing a threat to the health and safety 

of the American public. Agencies with import safety authorities arc c<rlocated at the 

CTAC to sharc targeting tools, resources. data. and expertise to protttt U.S. consumers 

from hamlful goods. 

~~ A final example of our intcragency coordination efTorts is the II'R C~ The II'R 

t<-. 

Center is a multi-agency center creat~>d to provide a unified ~ 'tlh'ernmcnt rcsponse to 

the growing, global economic and health and safety iSSU~ed by IPR theft, 

commercial fraud. unfair trade practices and the i~a~portation of sub-standard and 

unrcgula1t>d commodities. led by ICElHSI. ~~borates with other federal law 

enforcement agencies and foreign coun$;. CBP was the source of more leads and 

.~ 

referrals in FY 2011 to the IPR C~br multi-jurisdictionallmuhi-national criminal 

V 

investigation than any other ~ral agency. 

0° ~<0 The II'R ccnter~ys a task foree model to enhance government-private sector 

P3rtnershi~Ptimi;(C the expertise of its member agencies to share information, 

develop initiatives and coordinate enforcement actions related 10 IPR thefL Through 

these strategic government-industry and interagency parlnerships. the II'R Center protects 

the U.s. public's health and safety. economy. and Ollr nation'S military. 

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For example. the WR Center led criminal investigations into three individuals whose 

identity and criminal activities were first uncovered by CBP's targeting and enforeemt'Ot 

elTons. In 2011, Ncil Fclahy and Stephanie McClosky both pled guilty to trafficking in 

counterfcit goods. Their schemes to intpon counterfeit computer hardware for sale to the 

u.s. military were first identified during CBP's Operation Infrastructure. Chun-Vu Zhao 

was also convicted in 2011 of conspiracy to sell counterfeit networking equipment to the 

U.s. military. and her case began when CBP seized her shipments and refc~he ease to 

rtf 

the IPR Cenler for investigation. Following these successful cOlla~s, CBP 

t<... 

continues working with ICElHS I and the IPR Center throUg~ct0hg special operations 

and supponing criminal investigations. R::> ~ 

~~ Modernization or CRr ~ ~ 

One of our most visible modemi7.ation ~'l:fiS our transition from ACS to ACE. whieh 

.~ 

will automate and streamline the~nce and collection process. ACE is speeding Ihe 

V 

1101'.' of legitimate shipmcnts~ning the backbone for a "single window" through which 

CO 

the international trad~~unity will electronically provide all infonnation needed by 

federal agencies;:!sJlie impon and expon of cargo. The ACE program is essential to 

irnproving~emrnent' s ability to assess cargo for security, health. and safety risks, 

while facilitating legitimate trade and ensuring compliance with U.S. trade laws. 

Not very long ago, we found ourselves at a turning point with ACE. The program was 

sulTering from managemenl challcnges and governancc issues. In 2010, the program was 

placed on the Office of ManagemeHt and Budget'S (OMB) list of26 troubled f~'deral 

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Infonnation Tcchnology (IT) projects. Since that time, CBP has worked aggressively, 

with the support of DHS and OMB, to tum the program around. 

We established the ACE Business Office within the Office of International Trade to 

refocus the development and identification of program priorities from a true business 

process pcrspcrtive and in line with the needs of ACE stakeholders. Our stakeholders 

arc now represented and involvcd as nevcr before. Wc have also made Si~,mt 

improvements in the program's governance strocturc, tcchnology m~<;;)mcnt and 

acquisition practices. ~ ,,'1.- ~ 

In March. CBP marked a key milcstone on one o~A\.r E program priorities when wc 

announct-d that we had cornplck-d developme~ ~ successfully deployed ACE rail and 

sea manifest capabilities to all direct a~l and sea ports. 85 percent ofthc rail and 

.~ 

sea carrier community are alreadY~ or preparing to use ACE. and wc arc on track to 

V 

decommission legacy syste~1 and sea capabilities by the end of the fiscal year. 

010 

1-.'0 

We have made ~'?:i.ti al progress towards fullillin g the Intcrnational Trade Data 

Systcm (I~SiOn by developing the functionalityofthrce major initiatives. on which 

we have begun testing: thc Partner Governmcnt Agcncies (PGA) Message Set, the 

Document Image System and the PGA Interopcrability solution. In April, we published a 

Federal RegistCT Notice authorizing the pilot of Document Imaging System capabilities, 

which allow trade members to electronically supply documentation nceded during thc 

cargo release and entry summary processes to CHI' and other federal agencies. 

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We also ~ognb:e th31 repetitive and cumbersome entry requirements arc incmcient, 

ineffective and expensive. We are seeing significant progress on our Simplified 

Entry/Cargo Release program. which is another successful result of our "eo-ereation" 

approach to modernizing our trade operations. Simplified emry provides importers with 

the chance to file earlier in the process with a streamlined filing. which can be amendeda first-time fcature for the trade Ih31 allows for an expanded window of opportunity to 

identify potential risks to e ilP. The capability for filers to update informat~i11 result 

in more accurate data for COP. thereby enhancing cargo security. ~t with the 

~ trade community, we will begin a pilot in the air mode oftraJ~iOn lateTihis month. 

Finally. an Export Manifest pilot began in March at eighQ:Y')i. The participating 14 

carriers represent fifty-six peree11l of the total con~e~d U.s. export volume. 

~ " 

These achievements arc evidence that ~ to the program's governance have put 

.~ 

ACE back on the correct course. ~"";.ve assembled the right team to meet the needs of 

V 

the private sector. CIl£> and ~articipating government partners. These improvements 

e; 

demonstrate th31 wc ~(J.,e capabilities necessary to eonsiste11lly dclil'cr on needed core 

functionality as ~ve forward. 

<v~ However. thcre is still a tremendous amount of work to be accomplished in ordcr to 

realize our "single window" vision and support the government's need to ensure safety. 

security, and compliance of our intem3lional1radc, and also to realize benefits to industry 

such as faster processing. speedier clearance. and increased certainty in our processes. I 

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look forward to continuing to work with you to fully intplement ACE, the cornerstone of 

CBP's trade modernization strategy_ 

~'eognizing that customs brokers are crucial partners, we arc also seeking to modernize 

the way we interact with customs brokers to automate the broker exam application. 

transform the broker licensing process to incorporate a more efficient background 

investigation process, and pre-certify quali/ied brokers to assess clients' re~ss and 

cligibilityto participate in our ISA program. The Role of the Broke~~~ve is at the 

forefront of our effons to meet this goal. ~ ,,'"J... ~ 

Additionally. CBP is working through the deVeIO~~ an Advance Notice of 

Proposed Rulemaking for the o\<erhaul of par~r~Broker Regulations. This overhaul 

looks at developing continuing cducati~tzr;cenSCd brokers; due process proceedings 

.~ 

for brokers. including penalties a~~pension and revocation of licenses; increased 

V 

outreach and education to un~nscd panies; and "business model alignment" betwccn 

£; 

the trJde and CBP, "~~cludes conducting customs business within the geographic 

bounds of the U~lates. CBr·s goal is 10 seek comment on all facets of the broker 

regUlation~he widest possible audience. Especially important is feedback from 

small and medium enterprises. as this provides insight on a broader scope ofbusinesscs. 

CBP will continue \0 meet with local and regional broker associations and intends to hold 

webinars \0 assure we receive meaningful insights that are unique to certain ports and 

border regions. 

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Enforcement 

Just as CBP is cvolving, thc facc of trade continues to change as wcll. One ofthc many 

new challenges presented by evolving trade operations involves the use of unfair trade 

practices by competitors seeking 10 gain an edge in the global marketplace. 

As President Obama noted in his State of the Union address this year. robust monitoring 

and enforcement of international trade agreements, and enforcement of d01~C trade 

laws. arc crucial to eXlXlnding exports and ensuring U.S. workers am~~~sses are able 

~ to compete on a level playing field. To strengthen our cap3c~~onitor and enforce 

U.S. trade rights and domestic trade laws. agencies must~~inate and augment their 

efforts to identify and reduce unfair foreign trade ~e~ to ensure that U.s. businesses 

receive the maximum benefit from our intem~~ trade agreements and domestic laws . 

. ~~'l>' Growing concern about unfair tra~etiees and implemcntation of newly signed trade 

-S 

agreemcnts havc caused us t~examine the antiquated laws and proccsses wc currcntly 

e; 

operatc undcr to addre~ny emerging dcvelopmcnts. 

t§ 

~ 

CBP add4tionaltTade risks and priority issues through multi-disciplinary tradc 

strategies that provide solutions to both enforcement and fac ilitation 

challenges. Specifically. we have implemented thc CBP Trade Strategy to direct actions 

and resources around trade issues posing significant risks. The strategy is organized 

around priority trade issues, which were developed using a consistent risk-based 

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analyticalapproacll witlla clcar cmpllasis on imcgmting and balancing thc goals oftmdc 

facilitation and entorcement. 

With a stmtegic approach to addressing trade risks. CBP can successfully facilitate 

Icgitimatc tmde while efTcctivcly protecting the American public and t'COnomy. This 

includes protecting American business from thell of intellectual propeny and unfair tmde 

pmctices. enforcing tr'Jde laws related to admissibility, collecting the app~c 

revenue, and shiclding tllc Amcriean public from hcalth and public s~~rcats. 

~ 

CUP manages its highest trade risks through Priority Tr~~ue~ s (PTls) which intcgratc 

the key tradc risks from political. economic, infm~c~ and resource concerns while 

balancing the goals of trade facilitation and t~ ~forccment. Wc have regular and 

frequent convCfSations with stafT from ~t Senate Finance Committec and tile House 

.~ 

Ways & Means Committee on ke~iSSliCS' including streamlining the drawback 

V 

process. Thc PTis eovcr anti~nping and countervailing duty. impon safety. intcllectual 

(0 

propeny rights, trade ~cnts, and textiles and apparel. 

r§ ~ 

AlllidllmPi# COlmlcn'ailing DUly 

We are enforcing antidumping and countervailing dUly detcnninations and ensuring 

timely and accuratc collection ofdutics. In Fiscal Year 2011, CUP issued ovcr $4 million 

in penaltics for ADfCVD violations. Our Re-Enginecring Dumping (RED) Team 

devcloped enhanccd AD/CVD cnforccment tools and trJining, increased coordination 

with the U.S. Dcpanment of Commerce, and made progress in automation to reduce the 

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administrative burden of AD/CY!). The RED Team created spedfic scenarios to 

promote the use of Single Transaction Bonds for AD/CYD evasion at CBP ports, and is 

implementing a new standard operating procedure to proactively enforce AD/CYD cases. 

The RED Team conducted the first joint CBP-Commerce training ",ebinar for CBP field 

starr on AD/CYD cases. The RED Team is also testing national automated tools to 

provide more efficient means to process AD/CYD entries and instructions. 

~~ Imporl Snfety ,,<:::> 

t\. 

CBr recognizes the challenges we face in maintaining safe a~ ~re imports. CBr 

established a Division for Import Safety within our om~'},nternational Trade. Our 

Import Safety Division has been closely collabo~g ~ coordinating across federal 

agencies to streamline the import process by ~~ng the redundancy ofinspection 

activities, targeting high-risk trade, cns~~mplianee with U.s. trade laws among 

.~ 

agencies with overlapping authori~d deploying risk-based management stratcgies. 

V 

Key aehicvements include th~nnulation of the Border Interagency Executive Coundl, 

e; an increase in import~ related seizurcs. integration of other government agencies 

into the Intero~y Web Service, dri ving the "single window" concept, 

imPlemcn#fthe PGA Message Set, launch of othcr government agency risk 

targeting, and cxpansion of Ira de participation and benefits for Import Safety'S tlllstcd 

trader program. 

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IlIIeflecllwl Property Righl.I' (IPR) 

Theft of Ameriea's intellectual property is a serious crime that threatens the 

competitiveness of companies, the jobs of workers. the health and safety of consumers. 

and our national security. As Ameriea's frontline. CBr protects our Nation by meeting 

these threats head-on with 3n aggressive 5-ycar strategy to facilitate the entry of 

legitimate goods. enforee the laws that prohibit the entry of counterfeit goods. and deter 

future theft of intellectual property. The critical steps c llr completed in F~ll to 

implement this strategy. with support from an appropriations initiati"'~ 2011. 

~ included acquiring modem tools and processes; JXlrtnering w~ I(;keholders; and 

investing in resources and outreach. These steps, includ~~ucation of840 CEll' 

oflicers at high-risk ports with Integrated IpR Fie~~ng, enabled us, in concert with 

ICE/HSI. to increase the number of lpR seizu~ m slightly less than 20.000 in FY 

2010 to nearly 25.000 in FY 2011, ou~ cated" product identification manuals also 

.~ 

enable CEll' officers 10 make spcc~nd morc accurate detertninations on the 

V 

legitimacy of imported prod~ We also acquired portable scanners that will enable 

o 

officers to make on-t~~ determinations whether or not a pharmaceutical is authentic. 

Cilp is prcsentl~ing with industry to deploy these tools to the field. 

<v~ On April 24. 2012. CBI' published an Interim Final Rule amending its regulations. in 

part. to reflect new authority contained in the National Defense Authorization Act of 

2012 (NDAA). This new authority permits CBr to share, prior to seizure. unredaeted 

samples and photographs of suspected counterfeits with trademark holders so that they 

may better provide information to assist CIlI' in determining whether goods arc 

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30 


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counterfeit. However. the rcgulations also provide protections for importers by giving 

them notice and an opportunity to respond before an unredaeted sample is shared. The 

provision in the NDAA granting this new infonnalion sharing authority parallels Ihe 

authority Ihalthe Administration sought wheo it submitted a legislative proposal. 19 

U.S.c. 1628a. to Coogrcss io 20 11. However, the NDAA is oarrower thao the 

Administrntioo's legislativc proposal because it does oot apply to merehaodise sllspected 

of infringing a copyright. it only applies 10 merchandise that is imported. a~does not 

contain provisioos for shariog infornlation when CBr eoforces the rts..~~illenniUm ~ Copyright Act against copyright circumvention devices aod ~0t:n orders issued by 

the International Trade Commission. The AdminS ratio~s forward to working with 

Congress to find a comprehcnsive solution. A rp ,,\ ' 

~~ Trn(/eAgreemenls ~ 

.~ 

We are also continuing to work w~ernal and external stakeholders to facilitate 

.::> 

legitimate trade and address ~s of non· compliance while effectively communicating 

!Zi 

the tenns of our free ~~greements and preferential trade legislation. COP recently 

issued a Trade ~ents enforcement plan to ensure that claims for duty preferences 

are valid. ~~ot enforcement plan identifies a minimum numbcrofverifications 

spread among all 20 Field Omees that arc to be completed for FY 2012 for free trade 

agreemems (FT As) and prefcrentialtrnde programs. In addition. COP recently 

implemented the Korea FT A. eRr issued draft imcrim regulations and implememing 

instructions for COP field resources and the trade community, established a Korea FT A 

page on our website, and programmed CBP automated systems to allow for Korea FTA 

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31 


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claims. The same efforts arc currently underway for implemcnting the Colombia Trade 

Promotion AgrcemclU and will be donc for the Panama Trade Promotion AgrcemelU 

when it enters ilUO force. 

TexTiles {lnd Apparel 

CBP is ensuring the effcctive enforcement of the anti-circumvention laws. trade 

agreements, and trade legislation regarding the importation oftextilc and ~1. In FY 

2011, the Textile Production Verification Teams. in conjunction Wit~b)JHS , visited 

~ 165 manufacturing facilities in nine countries to assess comp~~ ith U.S. trade 

prcference programs. We also delivered thc results oft~~ieo Tc ~tile Task Force's 

Exporter Operation to the Mexican government, ~e~11 assist Mexico with its 

enforcement of the Nonh American Free ra ~~ment (NAFTA) claims on impons 

into Mexico. And, our textiles offiee e~ed the Right to Make Entry Workgroup, a 

.~ 

multi-discipline team whose goal ~eVeloP guidance for CBP 1ield personnel and 

V 

updatdreissuc directivcs andb:uI3lions. 

0° 1-,<0 

In addition to th'f!!>'liforccment activities. wc also conducted a number of outreach 

events, SU~~OViding capacity building training to Central American governments 

and private sector members on textiles and rules of origin under the Dominican RepublicCentral America-United States Free Trade Agrt:ement (CAFT A-DR). This activity 

enabled the pon of Los Angeles/Long Beach to make 51 wearing apparel/textile seizuTCs 

for Righi to Make Entry issues. duty circumvention and smuggling between September 

2011 and February 2012. The textiles office also regularly provides updated guidance to 

22 
32 

f 

Chairman BRADY. Mr. Kibble? 


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the trade and CBI' to increase both enforcement and facilitation. The most rcrent 

guidance clarified Frce Trade Agreement claims and acceptable wording on affidavits 

provided to CBI' by the importer. 

Conclusion 

Chainnan Brady. Ranking Member McDennolt, and distinguished Members of the Trade 

Subcommittee, thank you again for Ihe opportunity to appear before you t~o present 

an overview ofCBl" s efforts to fulfill its goals of becoming a truly lfw;J..~tradc agency. 

As the many examples I have cited show, Customs and Bo~frU::roteetion ~ is commiucd to 

modernizing our tools and technologies as well as our~dures and our requirements. 

Our ceonomy grows stronger when the way we ~r ob is more compatible with 

today's business prnctices. Our partne~h{t~ the trade community is critical to 

strengthening our nation's economi~~~;ity and our national security. We are 

aligning our security and trade t~l1g eITorts. And by doing so, we are becoming ever 

more eITcetive in stoPPill ~erous and illegal shipmcnts while facilitating 1cgitim3lc 

international trade th~CSitalto the U.S. marketplace and to our national economy. 

':S)rtf 

I look forw~rtF;5'l11SWCring your questions. 

23 
33 

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 indictVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00037 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

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ments, 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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u.s. Immigration 

and Customs 

Enforcement 

STATEMENT ~~ 

OF ,,<:::> 

~ KUMAR C. K1BB~ 'l,.. DEPurYDIRECT~ . 

'V 

U.S. IMMIGRATION AND CU~MS ENFORCEMENT 

DEPARTMENT OF .ts£AND SECURITY 

REGARDI HEARING ON 

.~ 

"CUSTOMS TRADE F~ITATION AND ENFORCEMENT" 

V (l> BEFORE TIlE 

o 

HOUSE OF REPRESENTATIVES 

COMl\1JTTEE ON WA VS AND MEANS 

~ SUBCOMMlITEE ON TRADE 

THURSDAY,MAY 17,2012 

1100 LONGWOR1lf HOUSE OFFICE BUILDING 
36 


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INTRODUCTION 

Chairman Brady. Ranking Member McDennon, and distinguished Members of 

the Subcomminee: 

II is my privilege to testify before you today and discuss U.S. Immigration and 

Customs Enforcement's (ICE) investigative efforts and strategies to combat illegal trade 

practices and commercial fraud activities. The growth ofintcrnational trade is an integral 

part of our nation's economic prosperity, and we must ensure we are a~ the new 

threats 10 public safety and national security it may pose. ~ ~\:j 

ICE's Homeland Security Investigations (HSI) di~~$ the largest 

investigative program within the Department ofHom~ecurity (DHS), with an 

extensive portfolio of enforcement authorities. ~¥ Y, HSI Special Agents possess 

statutory authority to enforce more than ~flt~eraJ laws. Specifically, HSI investigates 

a wide range oftnde fraud. inCludin~~cctuaJ. property (IP) theft and commercial 

fraud. Both IP theft and commer.§!'~ud pose significant threats to the U.S. economy 

and the health and safety American public. 

To focus goV~1 efforts and enhance government efficiency, HSI led the 

aeation of the ~ Intellectual Property Rights Coordination Center (the IPR 

Center), w~~mbats violations of intellcctual property rights, Specifically trademark 

counterfeiting and copyright piracy. Now with 20 partners, including other federal 

agencies, Europol, lNTERPOL, and the governments of Mexico and Canada, the u>R 

Center brings together the full range oflegalauthoriries and law enforccmmt toois to 

combat u> theft in the United States. 

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Through the IPR Center's Commercial FraOO Unit, HS[ aggressively pursue:! 

commercial fraOO violations, including dumping and countervailing duty evasion 

schemes, pharmaceutical smuggling. tobacco smuggling. and border enforcement HS[ 

enforces U.S. trade laws and international agreements, as well as investigates and 

aggressively seeks prosecution ofnoncomplianl importen, exponers, manufacturers, 

brokers, and others who commit trade-related crimes. HSI works closely with U.S. 

Customs and Border Protection (CBP) in these efforts, and engages the ~unity 

through an aclive outreach program. ~ ~\j 

Today, I would like 10 discuss some of the ilU1ovati~1tnitiatives and 

operations instituted as part of this ongoing strategic c~ In par1icular, I will focus my 

remarks on our efforts to keep dangerous and ub~ products out of the U.S. 

"-

marketplace. the methods by which we Pro~tcllectual property rights, and the 

approaches we usc to target schemes ~ed to circumvent lawful trade medlanisms. 

V ~ PROTECTING IN LL~OUAL PROPERTY RIGHTS 

U.S. law enfo~t agencies have overlapping areas ofrcsponsibility for 

enforcing intellgproperty laws. Reoogniring WI the collective leverage of 

resources ~ial to success, the IPR Center was designed to share infonnation and 

promote a coordinated U.S. government response to criminal lPR enforcement. 

The lPR Center includes embedded, co-located rq=sentation from the following 

agencies: CBP; Federal Bureau of Investigation; Food and Drug Administration Office of 

Criminal Investigations (FDA-DCI); U.S. Department of Commerce's Office of 

Intellectual Property Rights; U.S. Patent and Trademark Office; Consumer Product 

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Safety Commission (CPSC); U.S. Department of State's Office of International 

Intellectual Property Enforcement; U.S. Postal lnspedion Service (USPIS); Defense 

Criminal Investigative Service; Air Force Office ofSpociallnvestigatiO!l5; U.S. Naval 

Criminallnvestigative Service; General Services AdminislTlIlion's Office of the Inspector 

General; U.S. Afmy Criminal Investigation Command; Defense Logistics Agency; 

National Aeronautics and Space Administration; Mexican Revenue Service; Royal 

Canadian Mounted Police; lNTERPOL; and Europol. (l).~ 

The IPR Center utilizes a multi-layered approach eonsisti'!t ~~ csti gation, 

interdiction, prosecution, and outreach/training to fight IPR ~~ O accomplish this, 

the IPR Center is organized into fOUf unil5: the Field ~~u it, the Programs Unit, 

thc Outreach and Training Unit, and the Policy 4minis tration Unit. 

"-

The Field Support Unit CJl'.ccutes th~ Center's command and control function 

for multi-jurisdictional, large-seale i~~rions. This unit is responsible for deconflieting leads that are recciV~~c IPR Center among all partner agencies and then 

forwarding actionable nfo~n 10 the field. The Field Suppon Unit also runs a 

certified undCf'C()vl;l' ~on to lafget proactively the sale and distribution of 

counterfeit, Ub~ and tainted products online, and works closely with the 

Dcpartmcr4f-<)'::ice to prosecute IPR violators domestically and internationally. 

The Programs Unit develops HS[', enforcement initiatives, as well as interagency 

initiatives. In addition, it develops procedures for HSI's many different lPR actions and 

activities, including ongoing operations, and coordinates HSI's participation in 

international enforcement operations. 

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The Outreach and Training Unit is the point of contact for all potential partners 

and sources ofinfonnation, including the private sector, federal, state. local, and foreign 

law enforcement, as well as the public. The IPR Center also coordinates with the World 

Customs Organization, INTERPOL and the U.S. Departments of Commerce, Justice and 

State to conduct training and provide suppon for anti·counterfeiting efforts with 

international customs administrations and law enforcement agencies domestically and 

internationally. ro-t$" 

Finally, the Policy and Administntion Unit coordinates the Ih.~enter·s standard 

~ 

operating procedures and policics, and performs collaborati~2t with other U.S. 

Govenunent agencies and the Office of the U.s lntell~ ').Il)pcrty Enforcement 

Coordinator. ~ .. 

The central goal ofthc IPR Center i'fc~ll)viJje a "ooc stop shop" for IPR law 

enforcement and industry around ~~ the world. We recognize that law 

enforcement cannot do it alone. ~ we look to partner with private industry in our 

efforts. To enhance and ~e productive partncnhips with thc public and private 

sectors, the IPR Cmt~chcd Operation loint Venture in FY 2008. This effort is 

designed to in~fljupport. communication, coordination, and cooperation for our 

ongoing ~forcement initiatives and our critical public health and safety effons. 

Operation Joint Venture is an HSI initiative designed to provide all private industry with 

valuable information about our efforts to combat the impor1ation of hazardous and 

counterfeit products. It gives industry a point of contact they can usc to provide us with 

leads and tips regarding effons to combat intellectual property right infringemml. 

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Since July 2008, the IPR Cenler has coordinated and conducted 671 outreach 

events with approximately 35,000 public and private sector partners. This outreach is 

paying dividends. For instance, in June 2009, the IPR Center received infonnation from 

the Motion Picture Association of America that a website, ninjavideo.net (NinjaVideo), 

was illegally distributing pirated copies of motion pictures and other audiovisual works. 

NinjaYideo provided its millions of visitors the ability to illegally download high quality 

infringing copies of copyrighted movies including movies that were cu n theaters 

or 001 yet released, as well as television programs. Despite receivinl& tal Millennium 

~ 

Copyright Act lakedown notices, the NinjaYidoo organiZllti:t,.,c:fb'inUed to distribute the 

infringing material. ~" 

To date, the NinjaVideo investigation has ulted in the arrests and convictions 

"- offive of the six co-conspirators with sent~ ranging from 22 months in Federal 

prison to three years' probation With ~ ined restitution CJlceeding $470,000 to the 

victims. A sixth co-ronspirator ~s a fugitive. The defendants in this investigation 

collected more than S500,~m online advertisers and donations by usern duriog the 

website's 28 mooths ~~tion and facilitated the infringement of millions of dollars of 

copyrighted mOt!f>'l:felevision programs and software products. Duriog a one week 

period the ~fvideo website distributed nearly 600,000 copyrighted motion pictures 

and more than 1.1 million copyrighted television programs. 

Overall, IPR enforcement statistics for HSI increased dramatically over the last three 

years. From Fiscal Year (FY) 2009 to FY 2011, lIlTests jumped 115 percent from 266 to 

574, indictments rose 206 percent from 116 to 355, and convictions climbed 77 percent, a 

notable increase from 164 to 29 1. FY 20 12 arrests have already reached 373 in the first 

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silt months of this fiscal year- a strong indicator that our IP enforcement will again 

swpllSS the previous year's results. 

PROTECTING HEAL TO AND SAFETY 

Operatio" Guardia" 

Opemtion Guardian (Guardian) is the IPR Center's public health and safety 

initiative. Guardian was initiated in October 2007 in response to severaltPents in 

which hazardous imports into the United Slates caused serious PUbl~ety concerns. 

~ 

The IPR Center leads a working group comprising ~ P, the FDA-OCI, 

USPIS, the Department of Justice Computer Crime 8l'f\,~')cctual Property Section, the 

U.S. Department of Agriculture, and the SC~, interdict and investigate 

"-

substandard, tainted and counterfeit prod~ng imported into the United Slates that 

pose health and safety risks to oons~~ 

Since the inception OfG~, HSI and its partnen have initiated more than700 

investigations resulting in ~ 200 criminal arrests, obtained over 260 indictments, 

executed 282 search ~u, secured 171 convictions. and made more than 3,200 

seizures valued ~'?ir S87 million. 

«f 

Operation Safeguard 

Operation Safeguard. fonnerly Operation Apothecary, began in FY 2004 and is an 

ongoing oper1ltion that identifies, measures, and atlacks potential wlnenbilities in the 

entry process that might permit the smuggling of commercial quantities of counterfeit, 

unapproved, and/or adulterated phannaceuticals, using international mail facilities, 

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ellpress courier hubs, and land borden, The name was changed in FY 2012 in order to 

consolidate the HS I and CSP operations under one name. Operation Safeguard is also 

being utilized to evaluate the type, volume, and quality of declared pharmaceutical 

products being shipped in international mail packages. Safeguard combines the expertise 

ofHSI, esp, FDA-OCI, and USPlS to conduct regular surge operations to secure new 

intelligence, investigative leads, and assess the deterrent effect of the prior surge. 

In suppon of the Safeguard mission in FY 2011 and thus far in~, HSI 

personnel have coordinated and conducted 18 Safeguard enfO~ges in 

conjunction with CSP, FDA and USPIS at international mli~~iC:S and express 

courier hubs throughout the United States. These sur~~ resulted in the ell8mination 

of more than 8,800 parcels, more than I ,100 Of~h were either detained or seized. In 

FY 2011 and thus far in FY 2012, through !f!?riOO Safeguard, HSI special agents have 

conducted 66 investigations, 25 crim~~ests, 6 indictments, the execution of30 

search warrants, obtained 18 oo~~nl and made 341 seizures valued at over 

$33.2 million. 00. 

~C>.>0 lNTERNATIOJEFFORTS 

R4~:~ that enforcing intellectual propeny laws is an international effon, the 

IPR Center works with the World Customs Organiution (WeO), INTERPOL, and the 

U.S. Departments of State, Commerce, and Justia: on II. variety of initiatives, including 

providing tnlining in IPR enforcement to our foreign law enforcement partners. 

HSI is recognized worldwide as an expert on criminal cwtoms matters, and holds 

positions as Chair for the weo's Enforcement Committee and Chair of the Commercial 

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Fraud Working Group. In addition, HSI has assigned a Deputy Director to Brussels to 

coordinate our intemationai IP efforts. In March 2011, the JPR Center proposed, and the 

WCO accepted, Opcnition Short Circuit, I three month surge operation in JuJy 201 1 

through September 2011 to combat the importation and distribution of substandard and 

counterfeit eloctrieal items. Over 43 countries participated in this operation which 

resulted in the seizure of more than one million items, including; almost 4,SOO boxes of 

holiday lights, over 350 boxes ofsurge protectors, over 3,700 boxes of on cords., 

almost SOO,OOO individual batteries, IS,OOO boxes ofballmes, 42~wer supplies, 

33,600 power adaptors, and 115,000 charsers. ~ q,; 

'V ~" ~' COMMERClAL FRAUD 

HSI has I long histOf)' of engl~~ commercial fraud enforcement dating 

back to our pIS! as investigators for ~~~er U.S. Customs Service. HSI, as the 

Department of Homeland securi~vestisative ann, investigates U.S. importers, 

companies or other nti ies~lIemP' to circumvent lawful trade me<:hanisms, 

including payment 0* duties. 

Illicit ~ goods are often smuggled into the U.S. through methods similar 

to those ut~b~ drug traffickers and human smugglers. Individuals illegally import 

items by sea, air and land, penetrating U.S. borders with falsely described and/or 

mislabeled merchandise. Schemes iTIClude the exploitation of the in-bond system, 

transshipping to third countries and falsifying the country of origin, Of Slealing the 

identity of. legitimate imponer. ASI works closely with CBP and numerous other I.w 

enforcement partners 10 identify and combat these schemes . 

• 
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In-Bond DilYrsion and Trad, SCh'M'S 

HSI and CBP have identified illegal diversion of in-bond merchandise as a 

vulllC:l'D.bility that can endanger public health and safet y, damage the U.S. eoonomy, and 

facilitate or finance the illegal activities of organized crime. The in-bond system allows 

foreign merchandise to physically enter the United States at a port of entry to transit the 

United States for export to a third oountry. When oonducted properly, irtlJ,..t$f;; 

transactions facilitate trade by allowing the use of U.S. inftastru~the ~ 

transportation of goods to foreign maricelS. In-bond mo em~ ~ incredibly valuable 

to trade, but also have an inherent vulnerability beca~~~ be diverted to smuggle 

restricted or high-duty items into the United Stat~ .. 

"-

To mitigate potential VUlnerabilities~e entry process that might allow 

smuggling of oommercial merchand ~~ nded warehouses, HSI established Fraud 

Investigative Strike Teams (FIS~T operations, which began in 2004, focus on 

protecting the integrity of*bond process. FIST personnel COIlSist of HS I special 

agenlS, CBP officers entati ves from other federal agencies. These teams focus 

on identifying# riZed manipulations of oommercial men:handise within bonded 

areas and tin g unauthorized access by employees who lack proper immigration 

documentation and/or the background investigations required to have access to the 

bonded warehouses. 

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Trade Sche",e Utilizing the Identities ofLqitimllte I",poners 

HSI uncovered an elaborate trade scheme to smuggle counterfeit goods 

manufactured in China into the United Stales utilizing containers falsely associated with 

legitimate importers. Through the use ofan unwitting customs broker, the conspirators 

fraudulently stole the identities of legitimate corporations to import counterfeit goods to 

evade dete<:tion at the Port Newarlc·Elizabcth Marine Terminal. In total they imported, or 

attempted to import, more than 13S containers of counterfeit goods into ~ited States. 

Many of the containers of goods held millions of dollars in merch~~tOgcther they 

had an estimated retail value of more than $300 million. ~ '2> 

Some of these same conspirators also engaged ~Spi acy to launder what 

they believed to be the procec:ds of narcotics and ~al gambling activity through banks 

"-

in Olin&, the United States and elsewhere. f April 2012, 26 individuals associated 

with this investigation have been %~ more than $3 million in proceeds have 

bcenreoovered. ~ 

OV 

o Anti·D~".piIIg IUId ~~rwUling Dutiu 

The umPing and Countervailing Duty (AO/CVO) Program is another 

illustratio~~ HSI and CBP prote<:t U.S. businesses from unfair trade practices and 

protect the revenue of the United States. When the U.S. Department of Commerce 

(Commerce) determines that an imported product is being dumped or benefits from an 

actionable subsidy and the International Trade Commission finds injury or threat of 

injury to a U.S. industry, an anti-dumping duty order or countervailing duty order is 

imposed to offset the dumping or actionable subsidization. 

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H51, with assistance from CBP and Commerce, investigates importers or other 

entities attempting to circumvent payment of required duties. The goal of an H51 

AD/CVD evasion investigation is to ensure that U.S. industry is protected against unfair 

trade practices and to ensure that the United States receives the legally required tariff 

revenue. 

Currently, H51 is involved in approximately 100 investigations relating to open 

Commerce AD/CVD orders covering commodities such as honey, sacc~trie acid, 

tow-behind lawn groomers, shrimp, steel, and wooden bedroom ~. 

~ 

Operation. Unral'li!l 

,,')... 

Textile imports represent approximately ~ t of all duties collected by CBP. 

" In 2009, HSI and CBP officials were a1ert ~~everal schemes used in the undervaluation of textile products import~ ina, including, but not limited to, incorrect 

classifications, underreported ~~, and questionable entry documentation. Due to 

the severity of the Problem~ and CBP, with the cooperation of the Mexican 

Government, initiat ::\~tion Unravel. 

Operatio a\leJ was a three-phased initiative, commencing in March 20 11, 

which was~~ed to identify shipments of Chinese textiles that were ultimately being 

smuggled into Mexico, frequently in contravention of the Nonh American Free Trade 

Agreement (NAFTA). The first phase focused on shipments at the port of Los 

AngcleslLong Beach and then moved under hond to and tItrough a port of export to 

Mexico. This phase involved physical cargo examinations al the unlading stage and 

corresponding examinations at the point of export. 

12 
47 


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The second phase involved intensive data analysis by the CBP New York 

National Targeting and Analysis Group on imports of apparel into the United Slates from 

Mexico with a preferential NAFTA dutyforigin claim. Based on this analysis, a group of 

Mexican producers was identified for additional scrutiny by CBP field pcnonnel in the 

fonn of extensive entry/decllll"8tion reviews. Thiny·two percent of the companies 

targeted produced discrepancies that resulted in recovery of over 5200,000. 

The third phase involved HSI and CBP personnel visiting the * of38 

U.S.-based exporters ofNAFTA originating goods used in the prod~)i ofwcaring 

!'-

apparel that was ultimately imponed from Mexico with a ~al NAFTA claim. 

Nearly all of the companies were found to be iSSUingi~\!AFTA certificates of 

origin for expon to Mexico. Furthermore, m05t ~c.,wmpany officials did not, or 

"-

claimed they did not, understand the reqUi~ts of the ag:rc:cment. 

The results ofOpcration U~~ still being analyzed to identify additional 

vulnerabilities in the bonded mo~~t system and have led to the referral offour 

companies to HSI for pot~0crimina1 investigation. 

Overall, ~ fraud enfort:emcot statistics increased over the last ttuu 

yean. ArTc::sts~ 24 percent from 90 in fY 2009 to 112 in fY 2011; indictments 

increased if percent from 43 to 66; and convictions rose slightly from S9 to 62 - an 

increase ofS percent. 

Another scheme designed to eircumvcnt lawful trade mechanisms is trade-based 

money laundering. HSI's Trade Transparency Unit (lTV), which aggressively targets 
48 


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1:rIIde-bascd money laundering and commercial fraud, has partnernhips with Argentina, 

Brazil, Colombia, Paraguay, Mexico, Panama and, most re<:ently, Eeuador. The core 

component of the lTU initiative is the exchange oflrade data with foreign counterpans, 

which is facilitated by existing Customs Mutual Assistance Agreements or otha similar 

information-sharing agreements. The partner countries recognize the value of sharing 

trade data with the United States and gaining the tools to analyze their own data. 

Recognized as the best mechanism to eombat trade-based money laUndrS have 

been highlighted in numerous U.S. government publications inc[~~e National 

Money lAundering Threat Assessment, the Department Of~~'S National Money 

lAunderil1g Strategies. and the: Department of State's ~atio1Ul1 Nal'cotia Centrol 

Strategies. ~ .. 

By combining international efforts, ~s can identify international trade 

anomalies indicative of trade-based ~~aundering. T1ti5 information is then used to 

;~ . initiate and support internatiOnal#na1 investigaliol1ll related to customs fraud, tax 

evasion, money laundering~ther financial crimes. It bears mention that HSI is the 

only federal law enfo~t ageney capable of exchanging trade dala with foreign 

govenunents to ~gale these types of comes. 

Ad~~y, lTUs are contributmg 10 the $uccesSC:!; ofHSI mvesllgalions With 

the assistance of the HSI Headquarters lTU, the: HSI office of the Special Agent in 

Charge (SAC) Los Angeles, California in July 2010 closed a two-year investigation of a 

Los Angeles based toy company suspected of money laundering, cash transaction 

Structuring. and bulk cash smuggling. HSI Headquaners lTU personnel provided 

analytical support and assisted the: SAC office with the execution of a sean:h WlmlIlt 

14 
49 


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i$Sued on the company. The case cuimillflted in the arrest of the company's Chief 

Executive Officer, oompany owner, and accountant. Additionally, a Colombian 

businessman involved in the aforementioned aiminal activities with the company was 

also arrested. 

Additionally, in February 2010, three individuals were arrested and three Miami 

businesses were searched on charges involving the export of goods to a U.s.-designated 

terrorist entity in Paraguay. The enforcement actions were a direct resul~ptTStive 

efforts among HSI. the Joint Terrorism Task Force, CBP, and the p~y TI1J. By 

~ 

analyzing both sides of the tnIde transactions, special agcn~rle to detect 

fraudulent shipments of electronic goods destined for ~y from Miami. HSI special 

agents worked closely with Paraguayan ITU co~ to identify false invoices 

"-

containing fictitious addresses and COnSign~es, concealing the true destination of 

prohibited shipments. .~~ 

~ CONCLUSION OV 

o 

IPR theft and ~fu] importation ofmicit goods pose a significant threat to 

IlfItional $tJCuri~'?iic safety and the economic security of the United States. HSI 

invcstigati~ave shown that these illegal traders and criminal organizations are profitdriven, and exploit loopholes and vulnerabilities in the in-bond system and financial 

sectors to advance their criminal enterprises. HS I has unique expertise, as well as the 

necessary infrastructure and established key law enforcement partnerships. to effectively 

support investigative and operational activities focused on dismantling criminal 

15 
50 

f 

Chairman BRADY. Welcome, Mr. Skud. 

Mr. SKUD. Thank you, Mr. Chairman, Ranking Member 

McDermott. 


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organizations - thus reducing public safety hazards and limiting negative economic 

impact to this country. 

HSI will continue to leverage all its tools to coordinate and unite domestic and 

intemationallaw enforcement efforts to combat international trade crimes. We are also 

dedicated to building on agency outreach programs with the trade community to enhance 

cooperation with all private sector partners. 

Thank you again for the opponunity to appear before you today, r your 

conhnucu . .• support 0 f ICE Invesllgatlve · ··" euorts. . 

~(;:) "' 

~ 

I would be pleased to answer any questions you may ~ 

~" 0~ ~'l>-4, 

~ V~ 

",0 

o ~C$ 

~ ~ 

16 
51 

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 


joloto on DSK67XMDP1PROD with HEARING
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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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Statement of Timothy E, Skud 

Deputy Assistant Secretary for Tax. Trade. and Tariff Policy 

U,S. Department of the Treasury 

Testimony before the Subeommitll:e on Trdde. Committee on Ways and Means 

May 17,2012 

Hearing on "Supporting Economic Growth and lob Creation through Customs Trade 

Modernization, Facilitation. and Enforcemcnt" 

Mr. Chairn13n, Ranking Member McDermott, and Members of the Subcommittee, thank 

you for the opportunity to appear here today to discuss the Treasury Department's 

responsibilities for customs revenue functions and the International Trade Data System 

(ITDS). 

Treasury ReSPOnsibility for Customs Revenue Functions 

As the Committee is aware, the Secretary of the Treasury has authority for "customs 

revenue functions," as defined by the Homeland Sccurity Act of 2002, This includes not 

only revenue collection, but also the regulation of international trade for certain eeonomic 

purposes, which has an important effect on our economy and on promoting global 

growth. 

'Ibe Treasury Department has delegated authority for enforeing the laws irwolving 

customs revenue functions to the Department of Homeland Security (DHS). but has 

retained sole authority to approve customs regulations involving import quotas, trade 

bans, user fees. origin, copyright and trademark enforeement, duty assessment, 

classification, valuation, preferential trade programs. and recordkeeping requirements. 

The Treasury Department also TCviews Customs and Border Protection (CBP) nalings 

involving these issues when those rulings arc to effect a change in practice, In addition. 

the Treasury Department shares the chair of the Commercial Operations Advisory 

Comminee (COAC) with CBP. 

As pan of the Treasury Department's responsibility for customs rcvcnue functions. we 

have worked closely with DHS and CBP over the past year on particular areas of concern 

to this Commillee. For example. Treasury and DHS have recently published a proposed 

regulation that would refonn the "in-bond" and transit processes. This reform would 

enhance TCvenue collections and hclp limit cvasion of antidumping laws and should also 

promote security by providing both more infonnation about and better control over inbond and transit shipmcnts. Othcr areas where we have recently worked closely with 

CBP and olher agencies include implementation of free trade agreements and protection 

of intcllectual property. 
54 


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International Trade Data System llTDS) 

The focus of my remarks today, however, is another area where the Treasury Department 

has worked closely with CBP as well as many other agencics. the IntcrnatiOl131 Tmde 

Data System (ITDS). 

The lTOS project is an intcragcncy ctTort to build an electronic "single-window'" system 

for reporting imports and exports to the government. Currently, importers or exporters 

must make multiple reports to multiple agencies. The goal for the ITDS Progmm is to 

eliminate n:dundant reporting. replacing multiple filings with II single electronic filing. 

Relevant data will be distributed electronically to the appropriate agencies. prol'iding 

agcncies with the ability to process that data electronically. 

ITDS will allow agencies to obtain data more quickly, process cargo more expeditiously. 

and identify unsafe, dangerous, or prohibited shipments. Moreover.lTDS will reduce 

costs for business and government by eliminating redundant reporting of data. thereby 

facilitating trade. 

The SAFE Port Act (P.L 109-347, October 13.2006) fonnally established ITDS and 

gave the Secretary oCthe Treasury the responsibility to coordinate interagency 

participation in ITDS in consultation with an interagency commillee consisting of the 

agcncies participating in ITDS and thc Officc of Management and Budget (OMIl). The 

SAFE Port Act also requires all '"agcncies th31 require documentation for clcaring or 

licensing the importation and exportation of cargo" to participate in ITDS. 

Forty-seven agencies. including CBP. arc working together to implement ITDS. Pursuant 

to section 405 of the SAFE Port Act, Treasury chairs the intcragency coordinating 

commillee, Ihe ITDS Board of Directors. CIll' as thc nation's face 31 the border. plays a 

leading role. and has the responsibility of building ITDS functions into the Automatcd 

Commereial Environment (ACE). CBp's new trade processing system. 

Status of Implementation of ITDS 

Some ITDS functions are partly operational. For several years. ITDS agencies have been 

able to obtain import data that CBP already collects electronically. Some of these 

agencies have successfully used that data to interdict shipments and also to eliminate 

paperwork requirements. A recent cxample of interagency coopemtion is the Coast 

Guard (USCG) pilot of manifest functionality in Charleston. South Carolina. The USCG 

used infonnation received through ACE to place and remove restrictions on the 

processing and clearing of bills of lading. containers. and vessels. 

Rccent Progress on ITDS for Imports 

Two years ago. the ITDS Board of DiTCi:tors recommended three concrete measures to 

advance the rTDS program. 

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55 


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First. the Board n.~ommended that CBP immt>diatcly add data elements required by other 

agencies to the major import reporting messages (manifest, entry, entry summary), so 

traders would be able to provide data for other ITDS agencies through ABJ (Automated 

Broker Interface - the data intake module for both ACE and the Automated Commereial 

System (ACS). the CBP trade processing system that is being phased out). 

Second, the Board recommended that CBP develop the capability to accept transmission 

of "images" (such as .pdf files) of forms which currcntly must be submitted on paper. 

Such imaged forms could be transmitted as "attachments·· to filings with CBP and then 

forwarded to the relevant agencies. 

Third. the Board recommended that CBP make decisions related to technical 

interoperability wilh other agencies· systems. in order to allow other agencies 10 make 

plans for investing in aUlomated systems to work with car systems. 

The past 12 months have seen significant progress toward implementing these thre<' 

goals: 

• Collect ITOS Data Electronically: CBr has built the capability to collect data 

clements requircd by other agencies through a "PGA (Participating 

Government Agency) Message Set" so the information that call be transmitted 

through the ABI. CB!' expects to test this new capability in 2012. 

• Accept mage " of J)O/:uments: CBp has built the capability 10 aceepl 

electronic transmission of··imaged" documents, documents that currently must be 

submil1 ed on paper, through its Doeument Image System". CBP is testing this 

capability and is accepting electronically submilled EPA and NOAA forms that 

arc required for importing certain products. 

• Establish System-to-System Communication among ITDS Agencies: COl' 

has implemented a standard protocol for transferring data to other agencies' 

electronic systems. known as " Interoperable Web Sen·ices." This capability 

was successfully tested when CEll' tr.ll1smilled emry and entry summary data to 

the Consumer Product Safety Commission. 

The bulk of the work on developing these three functionalities has been completed. Once 

the PGA Message Sct is added to CBp·s major import messages, CBP makes data from 

that set available to agencies, and the Document Image System is regularly used to 

transmit "imaged·' copies of documenls Ihat now must be submitted on paper. the basic 

electronic trade data interchange system thai is mandated by the SAFE Port Act will have 

been implemented for imports. Completion of testing and implementation arc planned 

for 20l2. 

Electronic collection and delivery of these data will make agencies better able to interdict 

unsafe cargo. This progress should discourage proliferation of multiple expensive 

electronic import reporting systems, reduce collection of paper documents, and make 

importing less expensive. Finally these steps will provide the necessary loundation for 

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56 


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more advanced "value-addcd" ITDS functions, such as the automated processing of data 

and intcragcncy electronie communications. 

ITDS for Exports 

The progress thut hus been made on ITDS for imports has allowed the Board to tum its 

811ention to exports. In 20 I 0, the ITDS Board recommended building on existing export 

systems in order to achieve ITDS export capability. CI3 ]> and the U.s. Census Bureau 

(which maintain the current export commodity reporting systems) have since agreed to 

expand these systems to include data clements required by othcr lTOS agencies to 

enllance their processing capabilities and to support their export-related missions. 

Inbound and oUlbound manifests contain largely the same infommtion, about the means 

of transport and shipments. In 2010 the ITDS Board also suggested that an automated 

export manifest system be based on the work already done for an inbound manifest 

system, which is nearly complete. CIl ]> has decided to usc that work as the basis for a 

new automated export manifest system, which would include single-window capability to 

deliver data to other agencies. and to link data from that system to export commodity data 

from AES to improve export enforcement. 

Finally. an interface is planned between these export systems and USXPort, a Department 

of Defense automated export licensing application system. which is being expanded 

under the President·s Export Control Reform Initiative to provide a Single-window 

licensing platform for all agencies that license exports. 

Challenges 

Funding limitations have resulted in a reduction of contractor support for thc ITDS 

program. and a consequent loss of knowledge and expertise. Competing priorities have 

also seen ITDS funds redirected for other uses. We sec value in focusing on basics and 

building on existing capabilities. For example. the ACE Portal. an existing website that 

allows agencies to obtain data collected by CBP. can be enhanced to provide easier 

access to more data. The Interoperable Web Services tool can also be used to provide 

agencies data they currently do not receivc. Basic import processing. such as license 

vcrification and notification of clearance. can be a focus in CBP's work to dClfelop 

automatcd cargo release and simplified entry processing in ACE. 

-4 -
57 

f 

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 comVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00061 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

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Benefits of ITDS 

Once fully implcmented. ITDS will have a number of significant benefits for the private 

sector and thc government. including: 

• Reducing the burden on busincss and increasing the efficiency of the 

government's colleetion of international trade transaction data by substituting 

standard cleetronic messages for thc redundant rcponing - oftcn on pa~r fonns -

that occurs today. 

• Enhancing the ability ofCBP and other agencies to I3rgei risky cargo, ~rsons, 

and conveyances. 

• Extending the eap3bilities of ACE by bringing together critical security. public 

health. public safety. and environmental protection infonnlltion through a 

common platfonn, which will foster an "aecount managcment" approach to 

imponing. 

• Reducing the tl-chnical barriers to authorized sharing of data with other 

governments by accepting electronic filings reponed using international standards 

for trade reponing (World Customs Organization standards). 

• Improving compliance with laws and regulations that apply to: 

o Carriers - for example. highway safety and vessel clearance f«juircments. 

o People - for examp!c. immigration requirements for drivers and crews of 

commercial conveyances, and 

o Goods - for e.xample. laws addressing public health and safety. animal and 

plant health, consumer protection. and enforcement of trade agreemcnts. 

• Providing convenient access to data on international trade that are more accurate. 

complete. and timely for Federal agencies with a statistical mission. 

• Providing a single billing and collection point for the variety of taxes and fees 

incurred by traders. 

• Providing Federal agencies with a convenient. single point of access to data on 

trade transactions. with each agency having its own. and appropriatc. levcl of 

access. 

Conclusion 

Despite the challenges we currently face. I am confident that the ITI)S program can be 

SUC1:essfully and expeditiously implemented. On behalf of the entire ITOS Board of 

Directors I can say we look forward to working with the Commitlce to make ITDS a 

success. 

Mr. Chainnan, thank you again for the opponunity to testify this morning. I would be 

happy to answer any questions you may have. 

-s -
58 

munity, 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 emanifest 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 


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59 

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 followup 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. 


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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 


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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. 


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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 


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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 


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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 


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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 testiVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

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mony 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 


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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 


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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 fulltime 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 


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‘‘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 operVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00073 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

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ationally. 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 


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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 highvolume 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 posiVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00075 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

joloto on DSK67XMDP1PROD with HEARING
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tions, 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] 


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f 


joloto on DSK67XMDP1PROD with HEARING80260A.045

The Honorable Charles 60ustany 

1431longworth Hou$/" Office Bldg 

Washlnglon, OC 205 15·11307 

Dear Congre"man Boustany, 

May 15, 2012 

Louisiana's abundanl fisheries and natural resources allow this state to provide Ihe nalion wilh high 

quality $/"af<X>d that is sale lor consumption, without lear 01 being tainted with antibiotics, chemicals 

and otlle.contaminants that are harmlullO human heallh. In lacl, the Louisiana sealood industry 

contributed almOSI S1 billion 10 the economy. 

As you may be aware, Ihe Louisiana sealood induSlry is lacing a se.ious economic trisis due 10 Ihe 

increased volume of imported seafood. Additionally, the number of domestic processors of our seaf<X>d, 

and corresponding jobs related to Ihis industry, has decrea$/"d significantly due 10 the n<X>d of lower 

priced imports. Ma ny ollhese products are being diverted to this country because Canada and the 

European Unk>n have banned the import of these prodoxts due to the presence of banned antibiotics. 

According to the 2009 report from President Obama's Food Safety Working Group. more than 75940f 

this nation's seafood comes from non-\).S. watef';. We have been made aware thai none 01 the these 

products are being tested for antibiotics banned by the United Stales Food and Drug Admlnistriltion, 

chemicals and other contaminants. While we do support global trade and economic development, we 

would li ke to $/"e responsible trade that assures a safe f<X>d supply. Our citizens deserve the Same 

protection that citizens of Canada and the European Union are receiving in terms of a sale supplyof 

seal<X>d. 

Over the last lew months, several recommendations have been made to help preserve our louisiana 

seaf<X>d Industry. I firmly believe that the Preventing Recurring Trade Evasion and Circumvention 

IPROTECT) Act that you have authored will help to accomplish t his. I strongly support this legislation and 

yourello'u to increase communication between agencies within the federa l government and give them 

new tools to combat the evasion of import duties. 

Please leel free to contact me should you have any questions. 

Sincerely, 

Mike Strain, DVM 

Commissioner 
74 

f 

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, 


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75 

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. 


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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. 


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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 


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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. 


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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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STATEMENT OF 

George J. Weise 

Committee on Ways and Means 

Subcommittee on Trade 

Hearing on Customs Trade Modernization, Facilitation 

And Enforcement 

May 17, 2012 R>~ "I:) 

~ Chairman Bradv. Ranking Member McDermott and other diS~~Shed Members of the 

Subcommittee on Trade of the Committee on Ways and M~S' it is an honor and a privilege to 

appear before the Subcommittee on which I so prou9l.v 5e~d 35 a staff member from 1984 

until 1993 to discuss the commercial challenges facl'ho:!:\.!} Customs and Border Protection 

(CBP), the agency that has been very special to~ hrOughout my long career. 

I am appearing today in it personal capa~~~ the views that I e~pres5 are mine alone and 

should not be attributed to my firm, ~r and Travis Trade Advisory Services, where I 

currently serve as Executive Vice 5l~ent, or any of its clients. In the spirit of full disclosure, 

our firm is actively involved in ~ng with numerous commercial clients in carrying out the,r 

compliance responsibilities. r'@.ViSU.S.CustomsandBorder Protection {CBP) and we also are 

engaged as a sUbcontrac~ several Govt'rnment contracts, including working at CBP on the 

development of AC~ 

My hope in appe~g before you today is to provide some historical perspective on the 

important issues the Subcommittee is addressing today with respect to CBP. My views have 

been shaped from 40 years of experience in the Customs and trade field, from my early days 

working as an Import Specialist for U.S. Customs in the port of Baltimore, my customs oversight 

work while serving this committee, including the development and enactment of the Customs 

Modernization Act in 1993, and my tenure as Commissioner of the U.S. Customs Service from 

1993 until 1997. Since leaving Government,l have spent fifteen years working closely with 

private companies to meet their compliance challenges. I also currently serve on the 

Commercial Operations Advisory Committee (COAC), the official industry advisory board to 
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CBP. I request that my full statement be entered into the record and I w ill summarize my 

comments. 

Times have changed but so much remains the same. 

The focus of todays hearing is on CBP's efforts to enhance economic growth and job creation 

by facilitating legitimate trade, modernizing customs procedures and enforcing Customs and 

trade laws. Before addressing these issues, I must first acknowledge that much has changed 

Since I left office as Commissioner of the u.s. Customs Service in 1997. Due to the Government 

restructuring in the aftermath of 9/11, the old Customs Service in the Treasury Department has 

become u.s. Customs and Border Protection (CBP). CBP is more than triple the size of the 

former Customs Service with a much broader mission and a focus on borde~ 

critical component of the Department of Homeland Security. Congress" 

agency has also become more complex. Whereas, the Committee on and Means and the 

Senate Finance Committee had exclusive jurisdiction over the for~ s. Customs Service, 

numerous committees now share oversight responsibility for~ 

Today CBP is responsible for a myriad of challenging and ~P ex missions to safeguard our 

nation. CBP must secure our borders against terrori~ 3lld criminals, reduce illegal 

immigration, enforce countless trade laws, inter~~l'b:;n raband and counterfeit goods, and 

prevent unsafe products from entering the "\ilt!1""'tplace while facilitating legitimate trade and 

travel that are essential for the natio~'S . ~"'ity and global competitiveness. It is not an eaSV 

job and, lor the most part, CSP has per ed admirably. Although it is understandable that 

CBP has placed the highest prioritt a, curity and anti-terrorism, it is clear that CBP needs to 

playa critical role in our nation~0momic security as well by effectively executing its trade 

enforcement and facilitatio~r0'<i;;'ons. We are here today to assess CSP's progress in this 

endeavor. ~"""? 

As much as things ~'\(;..anged since my days as Commissioner, I am also struck and distressed 

by how much th~main the same in terms of progress towards implementing the tools 

necessary to effectively address CBP's national economic security mission. Reflecting back to 

my days on this committee, it became clear to us that significant changes needed to be made to 

the old paper-based, transaction focused, inefficient means of clearing imported merchandise 

into the United States. With the leadership of this committee, after nearly five years 01 

struggling to create comprehensive legislation to achieve these goals, the Congress enacted the 

Customs Modernization Act (the Mod Act) in the fal l 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. 
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As we moved to implement many of the provisions of the Mod Act, it became clear that the 

Customs' automation system, the Automated Commercial System (ACS), was not capable of 

handling many of the new streamlined procedures called for in the Mod Act. I was also told at 

that time that the decades old ACS system was nearing collapse due to the sheer volume of 

trade. II became very clear Ihal a new automation syslem was c,iticallo achieve the 

modernization objectives of Ihe Mod Act. 

It was also clear Ihat. 10 reduce Ihe burden on Ihe trade communily and to improve the 

targeting capabil ities of CBP and other government agencies, 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 working with the Congress to 

seek funding for ACE, the new Automated Commercial Environment, to SIr 

importing process and ITOS, the International Trade Data System, des· 

ine the 

window" for government data requirements on imports. Needless~ s ,it is extremely 

disappointing that nearly 20 yea~ later, after the expenditure ~ ~y millions of dollars, we 

are still far from completion of ACE or ITDS. R)" 

Where we are today? ~ ~ 

CBP in recent years. under the leadership of form~lb;;mmissioner Bersin and current Acting 

Commissioner Aguilar, have recognized the ~~'trtnce of the CSP's economic security mission 

and have made stndes to address CSP's s.ll~mings in this area by ma~ing ACE and ITDS 

development priorilies of Ihe OrganiZa~CBP has also launched some outstanding trade 

facilitation initiatives, such as Cente~[xce lence and Expertise (CEE), and has embarked on 

working with the trade to develwb.~Simplified Entry" process, currently in pilot mode, and has 

made concerted efforts 1~~'1:f!"{J,.~ dialogue with the trade community to simplify other 

processes to ease the ad~TUra ive burden on importing inlo the United States. 

Notwithst~ndio8 th~siti e efforts. we ~~ not where we oeed to be. 10 my judgmeot, the 

commercial ope~ns of CSP are lagging vis-~ vls the security mission of CSP. Despite 

significant efforts and millions of invested dollars, we are a long way from bringing ACE and 

ITDS to successful conclusion. The business community is frustrated because they have 

invested millions of dollars in security programs to support CSP, but they don't feel they have 

gotten an adequate return on their investment because CBP has not reciprocated in meaningful 

actions to facili tate trade. They believe that the entry and clearance process is still too 

cumbersome and costly, and that, without ITDS, government data requirements are duplicative 

and overly burdensome. 
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All of ther.e issues are e~acerbated by the current environment of shrinking budgets and t he 

fact that congressional oversight is now diffused in the many committees having jurisdiction 

over CBP resulting in mixed signals on setting the organilation's priorities. 

Where do we SO from here? 

ACE and ITD5 Implementation are erIKial 1 

While it is always easier to describe a problem than to find a solution. it is dear the top priority to 

address these issues is to find a way to bring ACE and ITDS to sIK~essful conc lusion and retire ACS as 

soon as possib~. I understand that the ~urrent budget appropriation for CSP only provides lor 

operation and maintenance of ACS and nothing for ACE development. This is a short"sighted apprO<l~h 

that will oot only foster the continuation of C<>'itly and burdensome systems but w~her delay the 

goal 01 neating a single modern system to facilitate trade and enhance CBP's<::)~ement mission. 

It is easily understood in thiS tight budgetary environment, why add tion~~lng for ACE development 

was not appropriated. particularly in light of the many millions of do~~eady pended on this 

program over the years with few tangible results. Again. an histor~~rspective might help here. 

During my term as Commissioner. I worked very hard but uns~lully to convince the Congress to 

fund ACE development. At that time we were convinced,..I!.avlnYbuilt ACSon our own. that we were 

capable of building the next generation of automation (~" ~ well. The clear mess.age I received, 

however, was that in light of a recent (at thaI time) ~acle with IRS attempting to build its own 

automation wstem which fa iled miserably, the o~~ Congress would ultimately approve ACE 

funding would be if Customs brought in out'~~rts to do the job. 

~ Several years after my departure that 15 ~Iy what happened and the IBM team was awarded the 

contract to buifd ACE. unfortunate~~rogram was then viewed as a contracted!l effort rather than 

a CBP initiative. resulting in CSP' operational leaders not being engaged as actively as they should 

have been. Consequently.op. nal requirements were not well deflned and the procen bogged 

down with a lot of wasted and well deserved criticism from many sources. Another factor ~ad ng 

to scheduling delays ~her com for the program was that in the aftermath of 9/11, CBP redirected 

much of its progr~g effortslrom facilitation to border security. 

This problem has now been addressed by CSP with the creation orthe ACE Business Office. which 

actively and effectively InllOlves key stakeholders at every level. As a result, we have seen some real 

progress in recent months with the successful development orthe so-called M1 task for rail and sea 

manifests. The irony is now that CBP 15 making tangible progress. the investment dollars are dryIng uP. 

with still so much more to be done. particularly to address the needs and challenges of importers. It is 

critical that a mechanism be found to re-open the now of ACE (and ITDS) development funds. while 

holding CSP accountable in meeting establiShed goals and objectives. To deliver a successful !lDS 

program, it is also critical to find a mechanism to ensure that all relevant participating government 

agencies are working diligently to achieve the brooder goals of "single entry"' bV allowing importers to 

input ~I I necessary import data once to be shared between agencies as approp,l<ote. 

, 
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Chairman BRADY. Mr. Sekin. 


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Improved (ommunication 

In addition to moving as swiftty as possible to complete ACE and ITDS implementation, it would be 

useful to seek an impro~ed mechanism to facililale a constructive dialogue involving CBP, the trade 

community and congressional ~aders to explore mechanisms to assist CSP In more effectiyely carrying 

out its trade facilitation/enforcement mission without undermining its security efforts. To CSp's credit 

the Trade Support Network, with oyer 300 members from the trade cOmmunily, was established early 

on and has coordinated svecessfully with cap throughout the ACE eHort. CBP has done a better job in 

reaching out to the trade community in recent years ~ia the TSN and other mechanisms. 

However, there does not appear to be an eHective mechanism in place to ensure that the business 

community's voice is realty being heard by either CBP Or the various congressional committees that have 

Jurisdiction over CSP. Some would also Question whelher COAC has achieved its o~ally stated 

purpose of ensuring that meaningful private sector Input Is being provided to~ adyance of critical 

policy decisions being made in the commercial arena. ~or example, some h~~ggested that COAC 

should be more proactive, rather than reactive, in setting the COAC age~nd others have suggested 

that COAC was more releyanl when it reported directly to the Oepa~M: ralher than 10 CSP. It also 

has been suggested that a mechanism be found for COAC to m~'odicaIlY with key congressional 

committees from time to time to discuss trade priorities. rp 

an lation ~ ~ 

I am aware that, largely out of frustration with th((q;t\s QUO, some trade community advocates have 

pushed legislation mandating a reorganization ~&P. As a former Commissioner and someone who led 

a major reorganization during my term Of~, I understand the good intentions of this legislation, but 

I would argue for preseNing ma.imum ~Iity to the Commissioner in restruduring the organization, 

CSP should, however, be open 10 a ~gue with inlere"ed parties on ali issues alfecting its ability to 

carry out its trade mission, inclu ' eorganization. Some have questioned, for example, whether the 

OHice of Inlemational Trade, ed in 2006 largely to better seNe CSP'strade mission, has been 

expanded and en 

Conclusion 

,particularly in light of the fact that virtually ali fiekl trade officers are part 

ions. Others have suggested that the Office of Trade Relations needs to be 

Thank you, Mr. Chairman for the opportunity to share my view. with you today. I reali,e I haye not 

offered any bold new solutions. Sut hopefully the perspectives that I haye provided can assist the 

Committee in formulating a strategy moving forward. This concludes my statement and I am prepared 

to answer any question, at this time. 
85 

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. 


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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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WRITIEN TESTIMONY 

OF 

DARRELL SEKIN JR., PRESIDENT 

0~ NATIONAL CUSTOMS BROKERS AND FORWARDER SOCIATION OF 

AMERICA, INC. W 

,,')., 

~ BEFORE f~ ' 

0~ 

SUBCO~~EE ON TRADE 

V~ COM ~i:m'EE ON WAYS AND MEANS 

OUSE OF REPRESENTATIVES 

~ 

«) ~ 

May 17, 2012 
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Good morning, Mr. Chairman. I am Oarrell Sekin, Jr., President of the National Customs 

Brokers and Forwarders Association of America (NCBFAA) and also the President of OJS 

International Services, Inc., a small, famil~·owned customs brokerage and freight forwarding 

firm, located in Colleyville, Te~as. I have worked in the industry for over forty years and have 

been a licensed customs broker since 1975. 

Since that time, the industry has undergone erlormous charlge, particularly in the area of 

automation. Gone is the world of typewriters and paper documents, giving way to the 

Automated Broker Interface (ABI), our avenue into the Automated Commercial System (ACS). 

This system, which my fellow customs brokers and I helped develop in the late 70s and early 

80s is, still the primary system for filing entries in 2012, although it has evolved into much 

more: irllerfacirlg with other federal agencies, collecting the reverlue, assisti ith matters of 

rliItiorlal arld homeland security, providing statistical irlformation for me 

arld supplying the enforcement tools needed to ensure the safety an 

American public. ~ 

1j 

Customs automation is a powerful tool, facilitating smooth tril6tttows and sharpening 

enforcement of trade laws. Customs automation is the C)!..~ i)nications channel between 

importers and U.S. Customs and Border Protection (CBP)~ ~1Jstoms brokers are instrumental to 

this process, gathering the data and transmitting t\.e'1\formation necessary for the agency to 

function. As the volume of internationaltrade~e cl\s the point where CBP cannot hope to 

e~amine each individual shipment crossing,~ ~r. ers, the agency relies on automation and, in 

turn, on customs brokers as a reliable mec~ to meet its responsibilities . 

. ~ 

At one point during my career, Custo ulated each and every aspect of a customs broker's 

business. We were in essence~p iva,b! sector adjunct to the Customs Service. Recognizing 

that there were commercial as to the business where regulat!on was unnecessary and 

unwarranted, in the mid·80s dustry and Customs agreed to separate the commercial and 

proprietary aspects of cus~ brokerage from what has come to be known as Wcustoms 

business.w The latter' . recognition that we are an tension of Customs and that there 

must be intensive 0 ht and supervision of customs·related activities. It is understood that 

care must be e~ d in permitting an enterprise to engage in this business. At stake are the 

government's revenues and consumer health and safety. 

Thus, becoming a customs broker requires us to pass a very difficult, technical examination. 

Generally, only ten per cent of aspiring brokers pass that exam. We are licensed by CBP and 

subject to costly penalties for errors and omissions in conducting customs bUSiness. In short, in 

exchange for the privilege of engaging in customs brokerage and to assure the government of 

the integrity of the entry process, we are committed to meeting CBP's exacting standards and 

rigorous regulation. Conducting wcustoms business" is a privilege that is not easily 

accomplished nor maintained. It is CSP's and the customs broker's "grand bargain" - Customs 

can rely on the accuracy and integrity of the information they receive; a customs broker 

assumes a speCial, unique place in accomplishing the agency's mission. 
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Recognizing this, CBP is seeking to expand the role of the broker. A customs broker is thought 

of as a Nforce multiplier" because one customs broker reaches, educates and acts for a 

multitude of importers, most notably small and medium-sized businesses. A single professional 

broker can provide reliable information from hundreds of American companies who otherwise 

would have limited ability to process an entry to the satisfaction of Customs. CBP has thus 

sought to leverage the reach of customs brokers in order to further facilitate trade and 

promote the vitality of the American economy. 

But, at this pOint, it is important to know t he limits of what a customs broker can provide to 

CBP. First, a customs broker is retained to work in the interests of his client, the importer. His 

expertise is acquired by the importer to expedite the entry of imported merchandise into 

American commerce, paying the correct duties and fees and demonstrating to government 

agencies that the requirements of U.S. law are being met. His client is the rter, to whom 

he must direct his primary loyalty. \;)qj 

A customs broker's understanding of the transaction and knowled~ its specifics is based 

entirely on the representations of his client - unless he has g09'l r'&on to believe otherwise. 

Importantly, the customs broker does not see the goods dur ~ meir passage into the United 

States; he must reasonably believe what he is told by a hose integrity is unchallenged. 

As thousands upon thousands of customs entries are..Rr~ck-;-ed daily, the customs broker 

cannot and does not physically examine the merch di,s e being imported. Thus, he works.Q.l1 

behalf of the importer who is the party liable for_ttJe 10rrectness of the information provided to 

CBP. ~1:.""' 

That being said, however, there are ma ays that customs brokers can collaborate with u.s. 

Customs and Border Protection, to utual advantage and, in the end, furthering the wellbeing of the importer and the im rbrig process. Since 2011, the National Customs Brokers 

and Forwarders ASSOciation of ita (NCBFAA) and CBP have worked intensively together to 

o meet the challenges of commerce in the 21" Century. 

been concluded, following are some ideas that we have 

discussed that seem t 

<v~ 

Education and Certification 

1. Professionalism of Customs Brokers: We recognize the professionalism of 

the customs broker must be enhanced so that he/she can address the everevolving requirements of international commerce. The national association 

has developed a certification program for customs brokers that requires a 

rigorous course of study and examination. We are considering an additional 

requirement that brokers acquire practical experience in the industry before 

they are fully licensed. NCBFAA is also considering a regimen of continuing 

education in order to keep their credentials in good standing. 

2 
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2, Customs Broker E~am : We have discussed the possibility of the Association 

administering the customs broker e~amination, in lieu of the present e~ams 

administered by CBP. This would be akin to the way that the bar assumes 

responsibility for testing new lawyers. 

3. Educating CBP: We have begun, in partnership with CBP, a series of 

educational seminars for senior customs officials. This would educate 

officials on the functions and capabilities of a customs broker so that this 

expertise can be better leveraged by CBP. We believe that great advantage 

can be ach ieved by also participating in the curriculum established for 

educating new customs officers at their academy and in the ports. 

ra~ Customs Broker Responsibilities ....... c;;::s 

~ NCBFAA is presently engaging with cap in an effort to yP.d ~ customs regulations that 

apply to customs brokers ("Section 111 H). Among th *,es under discussion: 

R'l 

1. Clarifying the broker's responsibil, t{ialidate new clients; 

2, Modernizing the regulations to a~ with current electronic capabilities and 

business practices; rl>~ 

3. Participating in the self Assessment (ISA) pre-certification program, 

potentially performi e comprehensive review of the ISA applicant's 

package and eva ~ g the applicant' s readiness to participate in the 

program; and

e

O 

4. promo ~~terests of the broker's small and medium-sized clients who 

WOul~ ise qualify as "trusted partners." 

~ ~ Generate Support for New Customs Programs 

1. ACE: NCBFAA has assumed responsibility for educating its members on the 

value of the new CBP Aut omated Commercial Environment (ACE), with the 

goal of rapidly improving participation by the broker community. The 

Association has appointed an "ACE Champion," communicated broadly on 

the importance of the new system, and witnessed an increase from 1% to 

almost 10% participation in a matter of months. 

The Association and its members have also worked for several years as key 

members of the Trade Support Network (TSN) in the design of ACE. NCBFAA 

3 
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is currently partnering with CBP in the development of Hcargo release, Has 

well as insisting on completion of auxiliary features such as document 

imaging and edits. 

2. Centers for E~cellence and Expertise: The Association has agreed to assist 

with incorporating customs brokers into the development of the new Centers 

for Excellence and Expertise. Oesigned to focus on commodity lines, these 

Centers will greatly enhance the resources available to importers and 

customs brokers, while providing CBP with uniformity and consistency, as 

well as expediting the processing of customs entries. The Centers are new 

and their capabilities are just emerging. It will be important for them to 

serve small and medium-sized businesses whom we represent, not just the 

large importers who already have substantial capabilitie m we also 

represent. \:)I'l:f 

3. Air Cargo Advanced Screening: NCBFAA and its ~~ members are working 

with CBP in the roll-out of the Air Cargo Advf\l~ Screening (ACAS) pilot, 

which will rely on freight forwarders' partit~at1on in order to reach small 

and medium-sized shippers. ACAS wil ide security-required data earlier 

in order to protect the U.S. agains er dfI t attacks against our international 

air cargo system. ~ \ ~ 

~~ Advocate For A Series of Hi h-Pri i Customs Issues 

The National Customs BrokerQ~d Forwarder Association recognizes that there are 

many challenges for CBP JQccomPlish its mission. We understand, then, that the 

Association must be ~'kd in addressing public policy issues designed to improve the 

performance ofth~~nCy. 

(If 

1. A~din g: Construction of the Automated Commercial Environment is 

/YrQI t o Customs meeting its core responsibilities. The present system - ACS 

"Vis close to 30 years old and must be replaced_ The Administration's FY2013 

budget request is patently inadequate: $138M provides no capacity for 

continued program development; instead CBP is relying on carry-over funds 

from past years that are being used now but will be depleted by mid-fY2013. 

The Ways and Means Committee has long championed completion of ACE, 

but the time is at hand when the Committee must make a strong statement 

within the House that completion of Hcargo releaseH and other core 

functionalities must continue even in these austere times. 

2. Drawback: Drawback is the customs process of crediting exporters of 

products with the import duties that they have paid for those products or 

their components. As drawback customs brokers know, the process for 

4 
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obtilining drilwback is hopelessly complex, time-consuming i1nd resourceintensive for both the practitioner and for CBP. For several years, members 

of the Association have worked with CBP, their partners in the trade 

community i1nd the Committee to simplify i1nd modernize these processes. 

As ACE further eliminates paperwork, it is t ime t o enact legislation that will 

accomplish these objectives. We strongly urge inclusion of drawback 

simplification in upcoming customs authoriZiltion legislation. 

3. Anti-dumping/countervailing duties: As you consider ways to promote 

more effective enforcement of the trade remedy laws, we encourage the 

Committee to codify the recommendations of the Commerciill Operations 

Advisory Committee (COAC) to design and implement a prospective system 

to assess anti-dumping and countervailing duties. We ~ a prospective 

system would better promote fair trade by informing1 arketplace of 

fairly traded prices at the time purchasing decision~ made. A prospective 

system would also enable CBP to more effectiv~lIect duties owed and be 

less resource intensive for both importers a~i~ government - thereby 

freeing up CBP resources to better targ~ actors who purposefully seek 

to evade proper duties owed. ~ 

4. Role of the Broker: As previousl ~ioned, the Association is working with 

CBP to evolve this conce . elieve that this can best be accomplished 

within the rulemaking pr ,including modernization of Section 111 of the 

Customs Regulations. e espectfully ask the Committee to encourage this 

process. ~ 

oS 

S. Court of Int 2J~ at Trade (CIT): NCBFAA requests the Committee to 

examine w~at the Court of International Trade can be empowered to 

more ~tioUSIY resolve international trade disputes. We support efforts 

by. T Bar Association to recommend chilnges in the jurisdiction i1nd 

a~rity of the CIT to the Committee. 

6. er Government Agencies: Increasingly. customs brokers must interact 

with the laws regulating imports that bestow enforcement responsibilities on 

agencies other than CBP (e.g., the Food and Drug Administration, the 

Consumer Product Safety Commission and over 40 other agencies). We have 

strong working relationships with those i1gencies, both through our niltional 

and regional associations and through the individual brokers at the ports. 

We encourage efforts to expedite and facilitate these enforcement activities. 

One such means to that end is the Interniltionill Trade Oatil System (ITOS) 

which is a component of ACE and provides each participating agency a 

window on the importation process. We support the Committee's efforts to 

gain continued and adequate funding for ITOS. At the same time, we express 

our appreciation to the Committee for its support for the continued exclusive 

5 
93 

f 

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 


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94 

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 capabiliVerDate Mar 15 2010 08:42 May 06, 2013 Jkt 080260 PO 00000 Frm 00098 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80260.XXX 80260

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ties: 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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TESTIMONY OF 

M ICIIAEL C. MULLEN 

EXECUTIVE DIRECTOR 

EXPRESS ASSOCIATION OF AMERICA 

COMl\lIlTEE ON W A \'S AND MEANS 

SUBCOMM llTEE ON TRA DE 

UNITED STATES HOUSE OF REI'RESENTATIVES 

May 17. 2011 

Streamlining and modcrnizing the border clearance process for goods e~ng the Unitcd 

Statcs is a critical challenge. Key aspects of this process still use antiqual~roaches lhal do 

not reflcrt 21M century business operations. IT capabilitics or public.pri""'»:;;lOr pannership 

opponunities. The trade community is encouraged that the Subcom'!l..ltLcc on Trade of the Ways 

& Means Commiucc is holding this hcaring to examine these imPfiln<4Jt issues. 

No segment ofthc trade community is more cngaged ol}...fl1pe issucs than the members of 

the ElIprcss Association of America (EAA). EAA membc~rs \: bHL. Federal Expn.'ss. TNT and 

UPS. the four largest express consignment opemtors in th . d. providing fast and reliable 

service to the U.S. and more than 200 other countries~d ~c itorics. Thcse four companies have 

CStimak-d annual rcvenues in ellccss ofS 100 billion~)lloy more than 1.2 million people. utilize 

more than 1000 aircrall, and deliver morc than 3Q.. 'l'ilhon packages each day. The multitude of 

customers utilizing thc services of EAA m~iP an extcns;I'e variety of commodities 

domCl;ticallyand internationally and woullt. 11 significantly from a streamlining and 

modernizing of customs' and other gov~ t agencies' border clearance operations. 

I. Trade Facilitation and Strca$ng 

A. Co-Creation - the Ne()~~ic.private Pannership 

On October 28. AI'Qaida in the Arabian Peninsula auempted to ship explosil'c 

devices hidden in pr I anridges coming out of Yemen and destined for thc United States on 

express delivc go flights. This plot was successfully thwaned thanks 10 good 

intclligenec. a 's potentially tragic incidcnt had the uncxpttk'd benefit of raising the concept 

ofa trusted pan cn;hip between government and the private sector to a new lel·cI . The day aller 

the Yemen bombs were diseovered and the plot disrupted. the four member companies of the 

Ellpress Association of America (EAA) - DHL. FcdE~. TNT and UPS - hJd a {clephonc 

conference with senior U.S. Customs and Dorder Protection (CDP) and Transpol1ation Security 

Administration (TSA) officials. All panieipants in the call agreed that providing infonnation on 

air eJrgo shipments earlier than the Trade Act mandate ofrour hours before arrival was required. 

Thc express companies we~ pcrmilled to take the lead in developing an operationally fcasible 

approach to providing this data as early as possible in thc supply chain. The express fimls found 

the data could be transmitted several hours before the shipment Icllthe last point of depanure on 

its trip to the United States. and each company worh-d wilh thc CBP National Targeting Center 

to dcvelop the technical means to del;I'er the information. 
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This project beeame the Air Cargo Advance Screening pilot or ACAS. ACAS represents 

a breakthrough in the development of public-private partnerships to achiel'e mutual S<.'euril)' and 

trade facilitation gools, or, as the CBP Commissioner has described il. ACA$ is a "game 

changer". To establish ACAS. CUP and TSA employed an approach Ihat has come \0 be known 

as "co-creation", in which the private sC<!\or determined al the outset an operational concept for 

the projcct. how the data would be lransmincd. and how the reaction \0 the results orthe risk 

asscssmcm would be managed. These pillars of the projcct were then discussed wilh the 

government and refined \0 ensure the elTon would meet their requirements. The private sa:!Or 

also dl'Cidcd the pace and direction orthe c.xpansion of ACAS \0 additional countrics. within a 

sct of priorities that was dClcnnined by CBI' and TSA. This approoch difTers significantly from 

the nonna) m~'lhod of allowing the business community to comment on the governmelll's 

approach to a ~urity issue only after a regulation has b..-en draft~'(\. After the P.kt projcrt has 

run for a sufficient amount of time and the results arc analyzcd. the ACAS pri .kctor 

participants will engage with CBP and TSA to dr~ft a reb'lliation that is ba~ the operational 

lessons learned from the pilot and that incorporntes the nexibility and o~ibnal feasibility of 

the approach employed in the pilot. ACAS will evolve into the ACE N..cargo module. 

The process of"co-creation" has now become the prefe~ .0tiod at CIlP for designing 

new requirements that will impact the trade community in a i!lQ.l~nt way. The Simplifi<,d 

Entry program was dcv<'loped using this process, where a~l\c~rivatc scrtor working group 

detcnnined thc paramcters of a pilot that would test the in tion requirements, transmission 

channels and operational parameters for providing t'rl\IY t earlier. Membcrs of the Express 

Association of America arc also key participants in ttl( ~implified Entry pilot. Just as the ACAS 

pilot is fundamentally changing manifest data a~know it. Simplified Entry will result in entry 

data bcing provided much earlier than is the ~ ay. with release also being granted earlier. at 

wheels up when the plane departs for the Uq!tt1:l tates for air cargo. Simplified Entry also is 

testing the operational protocols and~a ~fl'l;mis ion channels that will develop into the cargo 

release module of ACE. In this rega, participation of the Food and Drug Adnlinistration 

(FDA) and other government agenc' Simphtied Entry is imperative to allow the project 10 

develop validated concepts for a b Icd govcrnment relea se at the bordcr. 

The kind OfhighlYa!C d partnerships between the public and private sectors 

represented by the ACAS implified Entry pilots provide the most significant bcnefitto 

being a member of a t ~ der program. They allow the trade community to shape the 

paramcters ofthc g ent's approoeh to streamlining the entry process and meeting new 

sccurity challcn aving thc opportunity to ensure the government shipment clearancc 

process is alig IIh operational business requiremcnts represents a true partnership between 

co-equal parties. and allows the govemment to realize the benefits of best practices from the 

trade community to impro~e supply ehain efficiency. 

13. cle~ant C-TI'A T Benefits 

But improving the benefits of the traditional Customs-Trade Partnership Against 

Terrorism (C-Tf'AT) program should remain a high priority. CBP should create a Tier II I 

membership category. which currently is only restrick-d 10 importers. for carriers and other 

members of the supply chain. Beyond any specific benefits in tenns of fewer inspections. T ier 

III membership is a fonnal recognition that a finn goes above and beyond CBP's S\.'Curity 

standards. ro~iding this status for carriers would allow the creation of end-to-cnd Tier III 

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supply chains, Express consignmcnt operators represe11l a gold standard for supply chain 

security manageme11l. with minute-by·minutc control of a shipment from the time it cntcrs thcir 

systcms to delivery to the final customer, Thcir physical. personncl and IT security procedures 

significantly exceed C·TPA T standards. making these companies excellent candidates for Tier 

III status, Another potcntial new C·TPA T benefIt would be n"ducing bond requirements. 

Companies in C·TPA T are low risk for duty cvasion or product dil'crsion or other problems for 

which the bond program is dcsigned. CBP should also be required to measure inspection rates 

and clearancc times and vcrify that C-TPA T mcmbers arc experiencing fcwcr inspections and 

g~"\ling thcir goods cleared faster than a non-mcmber. Fcwcr inSIX"i:lions is the core C-TPA T 

bcnefit that would encouragc a company 10 join. particularly a small and ml-dium enterprise. 

C Rcali zing Mutual Recognition Agreemcnt Bencfits 

Mutual recognll!on betl'cen C-TPA T and othcr COU11lTlCS' trusted gra11lS has the 

potcnllolto hannomzc clearance requIrements and sllnpllfy the entry p~~;;n a global baSIS. 

but the reality of the mutual recognItIon agre<:ments estabhshed so fa ra iln g well short of thIs 

gooL Only the validation step of the partnership program is be~'n mQbally rceognized, which 

docs have some value in reducing the number of validation vis' ompany will cxperience. 

But much more could be done. Countries could agree o~a I application process and set of 

infoTl113tion requirements for thcse programs. and the a' t also could sc,,'c as a basis for 

haTl1lOnizing customs dcelaration data clcmcnts. Thc.wor~ CuslOms Organi7..ation has provided 

a tcmplate for taking thcse additional steps. Mutual~~gnition agreemcnts should provide a 

single risk aSSl'Ssmcnt process for program partic!J:\lnts that genuinely results in fewer 

inspections and a more rapid clearance for boflltPJIl\lrts and exports. Congress should require an 

annual report from CBP th31 describes ho\\~"t>i:nefits of mutual rceognition agreements are 

aligned between the U.S. and partnerin&.-it"lions. The report should describe how C·TPAT 

members receil'e analogous benefits i~'):r countries to those the U.s. pro~ides to members of 

the foreign trusted tradcr program. <.!!j7both sides the benefits should be commercially 

meaningful. 0. 

o 

D. Unifying U.S. 1~rade Progroms 

Ition should star1at home. Congress should require all agencies with 

sibilities to participate in a singlc trusted trader program with the pri~ate 

sector. C-TP uld serve as a modcl for this program. with othcr agencies adding their 

requirements to e application and validation processes as nct.-ded. The COStS of applying to a 

myriad of diffcrent programs arc a disincentive that discourages participation. as considerable 

rcsources arc in" olved in meeting varying program requirements. As an initial step. Congress 

should mandate consolidation ofC-TPA T and TSA's Certified Cargo Screening Program 

(CCSP) with a single application and \'Cuing proccss. This will require hannonizing lhe 

company based approach ofC-TPA T with the location based approach ofCCSP. bU1that should 

not be an insuTl1lOuntablc obstaclc. 

The Certified Importer Program has lx"i:omc a now wcll-dcveloJX-d model ofa unifit-d 

trusted trader program that allows a product to he validated from the raw materials stage, through 

manufacturing, testing, and quality control to dcli,'ery via a secure supply chain. The program 

ensures govcrnment requirements regarding product safelY, security, and trade complianec are 

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met and exeeeded by the best practices of highly eomplialll importers. Certified Importers 

maintain risk signa l dct~~tion controls that pmvide alerts to appropriat<" govl"TTIment agenc;",s if a 

problem is deteeted or a recall required. In return for meeting these high standards. eertifi~xI 

imports should receive a consolidated. automated release from all govemmelll agencies. prior to 

arrival at the port of entry. These shipments also should be exempt from transaction-based 

certificates and documem requirements altime of entry. as well as from new government user 

f~"es when the importers high self-management standards arc meeting the requirements the user 

fee is designed to enforce. Congrcss should specifically authorize the Certified Importer 

Program and mandate engagement by an initial core group of agencies. to include CBP. FDA. 

USDA and CPSC. 

E. Implemenltng Account Management - the Centers of Excellence a~ld Ex rtlse 

The Centers ofExeellcnce and ExpertIse (CEE) have been 'cry su I In 

meanmgfully Implemenhng the concept of account management CBP ~ nc~"<J plans to add 

t"·o addll10nal centers r~..::cntly. one m Detrol! for automobIle and ae~acc Imports and a 

second in Houston for petroleum. natural gas and mincrals. CIlP h64hlbe encouraged 10 

continue to expand the CEE concept for managing low risk im rom Customs-Trade 

Partnership Against Terrorism (C-TPAT) and Importer Self ment (ISA) mcmbers. By 

centralizing the import process for trusted shippers in wh sentially a virtual port of entry. 

groups ofCBP experts can become vcry familiar wit~i IC industrics' supply chains. the 

vol ume and type of commodities they ship. and thei :tndard risk management procedures. 

CEEs represent a significant step in raising the ':..,!!!ept oftTUsted partnerships to a higher Inc! 

by providing a single point of contact and a~~ication channel for rapidly resolving any 

issues that arise with a low risk importers . ents. This is the kind ofrckvant benefit to CTPAT membership that industry has 0~S red. 

>:' 

II Modernization 0, ..:::> 

. . MV>eJ A. RalSlng the De ~ mls LC"eI 

A critical m~.ation mcasur<". that also would improve enforcement. would be raising 

the level for d~mi ~~ shipments. which require no payment of duties or taxes or official 

customs dea m the current S200 10 Slooo. This level has not Ix..::n raised for almost 20 

years. despite t explosion of eeommerce and the corresponding increased participation of small 

and medium businesses in i11lernationaltrnde. A higher de minimis level offers significant 

b<:nefits to both the trade and CBP. 

By reducing and simplifying the workload for CBP. the changes would allow officers to 

focus their efforts more on security issues and higher risk shipments. The changes would allow 

CBP to reallocate resources from entry document processing and review to SL'C urity. targeting 

and enforcement activities. Officers could dedicate more time to manifest review. risk 

assessmc11I and more productivc and focused inspections. These increased efficiencies may even 

allow a reduction in th.e number ofeBp olliecrs assigned to entry ports. Due to bener utilization 

ofCBP resources. studies have shown thai the proposed changes will likely result in a net 

ft."<Juction of costs to the Government 

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The increase in value thresholds will not adversely affect scrurity and enforcement. as 

full manifest delai) and pr.:·amval ;nfomla\ion is still rcquin:d for all shipments. The entry 

reform changes apply only 10 smaller and lower value shipments, thus there is no increased risk 

of commercial viol3lion5. Simplified enlry and release of these low va lue shipments facilitates 

CBP focusing of resources on larger commercial shipments where such cnfom:mcm will likely 

have more dfttl;vc results. 

For the trade community and the public. increasing the de minimis level is advan la g~'Ous 

\0 several panics. beyond the reduced labor/operator expense reductions for the imponcrs due 10 

filing fewer formal entries. With more shipments eligible for simplified entry procedures, 

companil'S and individuals would reali~e reduced brokerage expt'nses, Total costs would be 

reduced for all customers. but small businesses with numerous low value shipments would sec a 

proponionately greater reduction in costs. The advantages would also accrue t~rsonal 

shippl'rs in the fonn ofsimplilk'd procedures for entry and release. less papl'T\ and n..'duced 

costs. With internet purchases increasing every ycar. the proposed chang~Qib d simplify the 

cntry process for personal use shipments. which should not be subjeetto!1~trictions intended 

for commen;ial shipments. ~ 

Through Free Trade Agreements and the APEC forum thrpll(li1 States has focused the 

allcntion of other countries on the need to raise their dc minim ¥l..'~ls. Raising the U.s. level 

would improve Ollr credibility in these eITons and demons~~ded leadership. The bill 

introduc~'d by Representative Schock last year to raise the'<1V,tmimis lewl \0 SIOOO has 

allracted ncarly 200 co-sponsors, so a h,ghcr dc miniw 1o;:,l'el enjoys broad bipan,san suppon, 

Thc increased Icvel also is supponed by an overwhch\!.illg majority of the trade community. 

CBP has made n..-.;ent progress in raising ~h.,; intorn,al entry level from S2000 \0 S2500, 

Canada and the Unil~'d States ha,'e agreed t~' ~Iy raise their infonnal entry level to S2500 as 

pan of the Beyond the Border Agrt'Cmcnl. ' ornml rulemaking process to implement this 

step has been underway for over six ~~. ut hopefully the final rule will be issued soon. 

B. Implementing ITOS V.t::::' 

Another vitally impo de modernization step the U.S. Government could take is the 

implementation of the Inte nal Trade Data System (ITDS). The competitiveness ofU,S. 

industry oontinut'S \0 s m the lack of a unified government approach to the border 

clearance process. . e initiating the ITDS process in 1995. we seem to be no closer today to 

the goal of SUb~i ~ single transmission of required infomlation and the r<Xeipt ofa single 

go,'ernment c ce for an impon. Proliferatioo of unique agency IT systems is exacerbating 

the problem an uiring the trade community to submit similar data elements to different 

systems and on different timelines. 

The U.S. Go\'emmenl should require a single. consolidated sct of data clements that arc 

submiued once by the trade to satisfy all go,'ernmcnt1\.'<jui11'mcots. The ITOS single submission 

should be the basis for providing U.S. Government-wide release of goods prior to arrival at the 

border. unless infomlation analysis indicates the n~'t.'d for a hold. All agencies should use riskbased algorithms and automated targeting as the basis for a common decision on the rclease of 

goods. 

The more than 15 year history of ITDS demonstrates that taking the appro.1ch has failed 

of allowing each agency to more or less voluntarily dcdde whether they will participate in a 

meaningful way in the proje<:1. I thought the SAFE Port Act of2006 mandated quite clearly that 

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particip3lion in ITDS was required. but progress since then has becn minimal. Congress should 

mand3le creation of a specific plan for the ncar tcrm impicmem3lion of ITDS with a timeline of 

set dates when each agency will achieve full oper.ltional engagement in a single release process. 

Based on volume. CDP and FDA would be the two logical agencies to begin Ihe effort by 

creating a unified clear.lnee process. 

C. Eliminating Paper 

We arc long pastlhe date when Ihe 19'" century practice of paper documentation for 

elearing imports and exports should have been climin3led. Express consignment operators arc 

among the world's most highly automated companies. but one EAA member estimates they 

provide over one million sheets of paper per year 10 CI3I' as pan oflhe shipmenWearance 

process. Wilh CBP's Documenl Imaging System (DIS) r ... aching full opcralio~l>Cllpabilily this 

year. Congress should eSlablish a date when paper documents will no lon!l"'\.~ceeptcd as part 

of the border clearance process. and mandate th31 agencies requiring pal*'\.~larations. licenses 

and other forms for trade purposes oblain the documemation IhroUghtb~ . 

D. Moocmil:ing Brokerage Operations :l.--

Congress could provide additional Ii regarding 

Ihe brokerage process. The first slep I il for customs 

brokers. The current requiremenl 

designated as a pennit qualifier in 

difficult to keep a licensed broker in 

lillie practical reason 

contacllocally. i 

icss reason for this outdated 

a licensed broker in 

, outdated. It is 

to location. cost of Ih·ing. etc. Thcre is 

10 have a person availabic for customs to 

Location Filing Program (RLF). there is even 

can accomplish the same objectiv ... without 

one national permit without local district 

broker responsibilities or liability. 

be 10 authorize Ihe sharing of brokerage infonnation 

spcrifically fronl the licens~-d brokerage company to 

entity and with third party service providers. The 

i in light of the signifieam changcs that have 

i and actually do not allow the brokerage unit of a 

with the S<:(:urity unit Importers expect Iheir logistics providers to 

I business solutions that encompass services in addition to CuSloms 

also ensuring a high level of supply chain S<:(:urity without imposing 

burdensome and unnCCi:ssarily bureaucratic requirements For them to provide information to 

different panics within the company or wrillcn permissions. legisl3lion needs 10 allow sharing 

brokCT3ge infom131ion both internally and externally 10 develop new products. provide a full 

range of ser\'iecs to customers. or outsourec certain administrative tasks such as bill ing and/or 

collections. 

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E. Funding ACE 

Achieving all the trade facilitation and modernization goals oullined abol"e depends 

critically on one action: implcmentation of the Automated Commercial Environment (ACE) 

mUSt be adl"qu3tely fundl-d. Budget cuts in recent years have rcdun-d ACE to a maintenance 

mode where new functionality is not being creatcd. CBP has significantly improved its 

managemcnt ofthc program o\"er the past two years. which has been recognized by OMB. 

Despite the reduced resources. sea and rail manifest capabilities an: being suttessfully 

implemented. The management problems that plagued ACE development in the past seem to be 

under control. 

In Man;h this year a business coalition supporting increaSl-d ACE funding. organized by 

the U.S. Chamber of Com mcree, sent a lencr to Secretary of Homeland Securil)',ltapolilano 

highlighti ng the necd to increase funding for ACE. The 27 year old AutomaIC~!mmen;ial 

System which ACE will replace is atlhe limit of ils capabilities and requit:{!\~ificant 

maintenance support. ACE will not only improve gOI'emment security j1r~ses and allow 

integration of Olher government agcncics' T<."quirements into a single nological frameworl;. 

bUI also i.s a required capability to improve the intcrnational com~ti~ess of the U.S. trade 

communIty. ,..:: V 

Congress should authorize incremental. carefully l~~c'tI increases 10 ACE funding to 

achieve discrcle improvcmentS in system capabilities. Th such step should be providing an 

addillOnal $80 million in the FY201J budget to fund t)ttr ~ elopment of the cargo release 

module. The Simplified Entry program is provid n~~perational concept for cargo release. 

and this capability will allow the initial integrati0..!.1\0f other gOl'ernment agencies into a single 

release process. ~fl>'" 

III. The 2020 Border ~ 

In the b<.'st of all possible ~ what should the border clearance process look like by 

the end of this decade? The go\'~nenl should look at the border as a business entity thai needs 

10 be managed and develo a ~ capabilities needed 10 do so most efficiently and safely. Wilh 

sufficient political will. J e;t is possible to cn:ate the following environment over the next 

eight years: ~ 

• Goveromen ation requireroents will b<.' met by a single transmission of the 

minim~ ~ e!emen\l; necessary. submitted as early as possible in the supply chain. 

which ~'J;~s security. trade compliance. product safcty and other regulations. 

• Infomtal!on requirements will be tailored to prodUCI and mode of transportation. 

• No paper dOCUmenlS will be required as part of the clearance process. 

• Based on a consolidated risk asscssme11\ process. all gOl'em111e11\ agencies will coordinate 

to issue a singlc release prior to the goods arriving at the port of entry. 

ACE will be fully operational and willthc only U.S. trade clearance system. 

• Centers of Excellence and Expel1ise will exist for all certified impol1er products and will 

hal'c thc al1lhority 10 resolve any anomalies or unique issues wilh clearing goods on a real 

time basis. 

The U.S. Government will ha"e a single trusk-d trader program. in which all agencies 

with border authorities participate. with a single application and validation process. 

7 
103 

f 

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 


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104 

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 antidumping 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. 


joloto on DSK67XMDP1PROD with HEARING
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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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joloto on DSK67XMDP1PROD with HEARING80260A.067

SOUTHERN SHRIMP ALLIANCE 

P.O. 8 0x 1577 Tarpon Sprinl:\S. FL 34688 

9SS E, M LK Dr. Suitc () Tarpon Spring.s. FL 34689 

727-934-5090 Fax 727-934-5362 

TESTIMONY OF 

JOHN WILLIAMS 

EXECUTIVE DIRECTOR 

OFTHE 

SOUTHERN SHRIMP ALLtA 

tlEFORETHE R)" SU8COMMITfEE~<i¥tA()E COMMITfEEONWA :NO MEANS 

U.S. HOUSEOF ~ ENTATIVES 

H..E'A;R NG ON 

SUPPORTING ECONOM.-l£ GROWTH ANt) JOB CREATION 

TllROUml cus1.'6Ms TRADE MODERNIZATION. 

FA IL ~YiON. AND ENFORCEMENT 

May 17.2012 0'0 

~C$ 

Mister Chainnan\Q.~Membcrs ofthe Subcommi!\~. thank you for inviting mc to 

panicipate in this h~~'i ~m John Williams. the Ex~utive Dirc.:!Or of the Southern Shrimp 

Altiancc. 

For owr fony years. 1 have work~-d in the shrimp industry. firsl as a Ie<:nage deckhand in 

Sneads Ferry. Nonh Carolina. Ihen as captain ofa boal. Ihen as a vessel owner and OperalOr. and 

Ihen as owner of multiple shrimp lrawlers OUI of Tarpon Springs. Florida. In four de<:adcs. 1 

ha,'C learncd a 101 aboul shrimping and J have also learned quite a bit aboUllhings Ihal arc nol 

dirc.:lly related 10 calching shrimp bUI an: a necessary pan ofwor!.;ing in Ihis industry. 

After our fishery was on Ihe verge of a 10lal Shuldo"·n. 1. like many olher shrimpers. had 

10 learn our syslem of fisheries management. In Ihe laSI decade. Ihe shrimp industry has gone 

from a posilion of eonswm confronlation and friction with federal regulalors 10 onc where Ihe 

induslry now fully panieipaK'S in Ihe regulalory process and onen panners with federal agencies 

in addressing difficult scicnlifie and managcment issues. 1 am convinced Ihal thai this 

cooperalive approach has produced far bener OU lcomes for Ihe resouree and c"er)'Olie involved. 
107 


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After our prices collapsed fo llowing thc explosion of shrimp aquaculturc throughOlJt poor 

pans of the world with lax cnvironmental regulations and minimal labor protections. I. like many 

other shrimpers. learned p<linfullessons about imemationaltrade. We have leam~-d to 

distinguish the myths from the realities in the conventional wisdom that aquaculture is simply a 

mor.: emeient way for producing seafood. We have learned that the positive story of aquaculture 

developmcnt told as pan ofa public relations strategy sits on top of uncomfortable facts like 

continued gOI'emmcnt subsidies. weak r.:gulatory authority. crass exploitation of vulnerable 

sources of labor. and irreversible environmental hann. 

And as we have worked to insure a place for commercial shrimp fishermen in the futurc. 

I. like many other shrimpers. am also learning about marketing niche products. Shrimpers are 

always lectured that the survival of our indu51ry depends not on a level playing field with impons 

but the development ofa premium market for wild-caught product. However. the prevalence of 

fraud in the seafood markd. as evidenced by the enforcement challengesle 00d impons have 

posed to U.S. Customs and Border Protection ("CDP") and U.s. Immigr. and Customs 

Enforcement (" ICE"). has undennined any faith the industry can hav,,~ lie ability to maintain 

such a market once it has been fully developed. Nevenhcless. the ~alhitry is undertaking any 

and all elTons to assure its survival. Morc and more shrimpers a~arning not just ho"' 10 

lx'<Come Inore efficient fishemlen but how to get the best pri~1for their catch once they hal'e 

r.:turned to port. 'l,.<::) 

Panicipating in the shrimp industry has kd tft1\lot ofstT1lnge turns. I have enjoyed the 

challenges ofbccoming familiar with fisheries ma~~mcnt . intt'TTlational trade. and marketing 

theory and practice. Dut when we started w?i.i?~losely with Customs. I would not have 

beliel'ed someone if they told me that I WOUI~,:~'1ld up testifying to Congress about issues related 

to Customs enforcement. However, in '5t~ years. after eountk'Ss meetings and briefings on 

circumvention orthe antidumping dut~~rs on shrimp and. more disturbingly. the regulatory 

actions of the U.S. Food and Drug ~d'hl1nistration. I have becomc acutely aware of the limits on 

the government's ability to insu~lpliance with our trade laws even by well-imentioned 

government officials. ~<:f? 

I. The SubSllintiaM:: of Petitionin for Winnin a nd [nforein a Trade Remedl' 

My in\'Olve~ with customs enforeement began a decade ago. when the Southern 

Shrimp Alliance was organized to deal with a flood of cheap fanned sbrimp imports. Prices for 

landed shrimp at the docks were plummeting for everyone in the industry; from the flects of 

lT1lwlers down in the valley of Texas to the day shrimpers working in the Pamlico Sound in 

North Carolina. 

On any given topic. the lhousands of shrimpers in the industry have thousands of 

different opinions_ But in the face orthe import flood, we were all pretty much agreed Ihal 

action had to be taken. The industry organized to address the threat to its existence. I remember 

sitting in a hotel confercnee room in one orthe earliest meetings. literally passing a bat around 10 

be able to pay for the «>om. We quickly became aware that bringing a trade case was a 

substantial undenaking. panieularly because so 1IIany dilTerent coulllries were dumping shrimp 

in our market. 

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Everyone who had come together got to work: finding the money nL'Cessary to have a shot 

at obtaining relief. In light of the amounts required. it was a huge undertaking. The fact that we 

were able to raise the money to bring a case is. on its own. one of the great collective 

achiel'ements of this industry. Even more so because the lion's share of the support came from 

fishennen. who opened up their own waUCIs 10 contribute to the cause and worked eoUcrtively 

with scveral state governments to elTL'Ctively tax themselves to fund the litigation. 

But gening the money IOgether was only the first step. After we filed petitions for relief 

from dumped imports from Bra~il. China, Ecuador, India, Thailand, and Vietnam in l)e<;ember 

of2003. the industry had to prosecute the case. With their survival hanging in the balance and in 

the face of tremendous eommereial pressure. shrimpers and processors gave dClailed accounts of 

how unfairly-tradL-d imports wen: harming their n:spective businesses. Officials from the U.S. 

International Trade Commission. in fact. came down to Tarpon Springs to SL'C my business first 

hand. In the end. we prol'ed to the satisfaction of the Commission that s~ri rs were suffering 

material injury by n:ason ofunfairly-tr.ldL"-d imports and antidumping du . ers were issued by 

the U.S. [)(,partmcnt ofCommeree on shrimp from the six countries ~ mary of2005. 

Gelling antidumping duties impoSL-d was only the St.'<Cond -t~. Just as soon as we had 

fully demonstrated thal the industry was materially injured. '1:..lb'erc foreed to disprol'c what 

turned out to be inaccurate predictions about how much a ;tiltstating tsunami had hobbled the 

shrimp farming industries of India and Thailand. Again,CSQrtmpers and processors wen: asked 10 

provide substantial amounts ofinfonnation to the U International Trade Commission in the 

wake of Humcane Katrina in order to justify 111ai ;n:;,ing the trade relief that had just been won. 

This changed circumstances review ·~tll~ the Commission was unexpI.'Cted. but even 

without that review. the industry has to!- ldPate in the annual administrative reviews 

conducted by Commerce to insure the c il'ene;s of the trade T\'lief. In addition, we have also 

had to track and consult with the~u it~ tatcs Trade Representative and CommL'n:e regarding 

all of the challenges brought agai • e a11lidu11lping duties on shrimp at the World Trade 

Organi7.alion. The industry~ p;trtieipated din.'Ctly in numerous appeals of dumping duty 

determinations at the Court I emational Trade and the Court of Appeals for the Federal 

Cireuit. ~ 

In shon. the tmcnt nceded to bring and maintain relief against unfairly-traded 

impons is substantial. The costs are requircd beeause our laws. appropriately. allow input from 

many different affL'CiL-d panies before trade T\'lief is imposed. Just as we hal'e to demonstrate 

material injury by reason of unfairly-traded imports, exportel"$ and importel"$ aT\' gil'en multiple 

opponunities 10 show that no unfair trade is occurring. Andjust as we arc able to respond to 

claims by c.'pon crs and imponers that impons are fairly traded. exporters and importers were 

given the chance to disprol'e that the shrimp industry was injured, that the injury resulted 

because of dumped imports. and that a11lidurnping duties ",,'en: required to pre"ent further injury. 

We understand the process and we understand why the system invites broad participation 

before action is taken. Cireuml·Cluion. however. changes the calculus. We can accept the high 

coSIS ofa trade remL"-dy if everyone is playing by the rules, but when the response to a tr.lde 

remedy is widespread illegal eircuml'ention there is a gross imbalance in how our system is 

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stroC1l!red. Whcre circumvention is rampant. our industry must bear the burdens of due process 

while foreign exporters and U.s. importers become laws unto themselves. 

Shortly after thc petitions were filed. we saw huge changes in the sourcing of imported 

shrimp. The following arc just a few examples. Shrimp imports from Indonesia. previously a 

small supplier offaml~'d shrimp. exploded. Coumrics like Cambodia. which did not have a 

functional commercial shrimp industry. began to export large quantities of shrimp. Shortlyalla 

the amidumping duty orders were imposed and the "dusted" shrimp exclusion was granted. we 

saw. for the first time. massive quantities ofpt.'Cled shrimp from China entering the U.S. market 

as "dusted" shrimp. Similarly. according to ship manifest dam. the one Chinese exporter 

excluded from the antidumping duty order saw its shipments outstrip anything from its past 

historical ~pcrience. We saw inexplicable growth in exports of frozcn shrimp from China to 

Malaysia and. 3t the samc timc. similar inercases in the exports of shrimp from Ma laysia to the 

United Stmes. We also saw large increases in imports offamled shrimp!.~ Mexico and in 

Chinese shrimp shipped "in-bond" to U.S. ports purportedly for eonsum~n in other eountries. 

We have secn circum,'ention on a massive scale and have ~&~ gIY spent the last 

5Cven years working to bring these schemes under control. We di'lfot expect that enforcement 

of the trade remedies would be an essential component ofmlJi.fi\J.intng trade relief. But. every 

year. tt'tlS of millions - ifnot hundreds of millions - of iX!:Gt of shrimp enter the U.S. market at 

absurdly low prices in a fraudule11lmanncr to a"oid the dilPlpline of our trade remedy laws. 

These C\'asion schemes ha,'e significantly weakt'tledl\, trade relief we worked hard to win. As 

a practical mailer. circumvention has meant that~1 ~en already facing tight margins and 

increasing costs ro:-ceivcd less at thc dock than Yo( the market price would have oc'Cn with a 

fully-cfTcctive trade remedy. After paying f~ initiation and litigation of the case. we should 

nOl also have to be responsible for POlici~'ftradc remedy as well. 

As shrimp boms cominuel:~ up and shrimpers exit the industry. what sticks with 

me thc most is that this continuin occurs because of the illegal actions of foreign exporters 

and U.S. importers. We are n91@ ing about some theoretical argument about the validity of the 

antidumping laws. Wc are)ll.ltmg about the intentional. knowing, an d premeditated violation of 

our government's laws ~tegulations. 

Frankly. ma(v ur industry ",sent the fact that we have had to spend so mu~h time 

addressing circumvention. As we have learned more about the prevalt'tlcc of circumvention. we 

are astonished at how far things have gollen out of control. Over thc last 5Cveral years. we havc 

becn stunned to learn how the schemes we face arc uscd. to lesser or greater degrees. to 

~ircumvem nearly every trade remedy in placc. We ha"e found common cause with domestic 

industries across a wide spectrum that are confronted with the same illegal activity that has 

gulled our traM relief. We haw m,)\"~'d past allempting to Cl)m'ince peoplc that circum,'ention is 

widespread to. instead. trying to get a handle on how to rein in a practice thm threatens the 

fundamemal utility of trade relief for many different industrit:s. 

In sum. the Southcrn Shrimp Alliance has become knowkdgeablc about Customs 

enforcemem bccause we hJve been left with no other choice_ Unchl'Ch'd. thc circum"cntion 

expcrit'tlced in the market aftcr tradc relief would ha,'e entirely undennined the effo:-ct,,'eness of 

the trade remedies. And ahhough we have worked successfully to address somc of the unlawful 

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evasion with various federal agencies. unless we maintain vigilance thesc same tactics will once 

again thrcaten the basic efficacy of the trade relicfwe worlt:cd "ery hard to obtain. 

II. T .... o Agl'ncics, T .... o "en' lliffHenl Appro~chcs 

From a practical standpoint. the first question the shrimp industry confronted was how 10 

address circumvention. As the scope of ciKumvention schemes bcrame evident. we first 

consulk-d with the United States Tradc Representative and CornrneKe. Our e~perience with 

Commerce has been. 10 date. frustrating. 

In response to mounting, irrefutable evidence ofwidesprcad circumvention impacting a 

large number of antidumping duty orders. Commerce has responded by narrowly defining its 

obligations in addressing eircum"ention and identifying CuslOms as the agency vinually 

exclusively rcsponsible for policing the colk"<:tion of antidumping duties. Commerce administers 

and vigorously enforces anti-circum\'ention provisions that addn'ss legal !?tf?brnwntion of Ira de 

remedies. but has exercised its discretion to avoid dir\.'Ctly addressin\: tll/£o/ circum\'ention cven 

when e"idence of such schemes is disco"ered in the course ofCom~s administrative 

re"iews. 1;:-

One example oflhis is how Commerce has chosc~~ress potential problems with the 

way in which imponers identify emries of shrimp impo m China os either subjcct lo 

antidumping duties or not subject to antidumping du~. , rg~ quantities of shrimp from China 

continue to enler the United Stales. wilh "ery liule of,jtidcntified as subjccllo antidumping 

duties. The public record in administrative re"i$;.WJi does not allow us to detenninc how much. 

exactly. is being claimed as subjcct to duti~A,~er infonnalion that has been made public 

gives an indication thaI it is not very muc~ 

With the antidumping duty 1rdO--<\;n Chinese shrimp. the China-wide duty deposit rate is 

112.81 %. wilh sonl<' individual e~~ers r\."<:ci"ing lower rates. And yet, in a report to Congress 

on collections of antidumping ~t"lountervailing duties. Customs noted Ihat for the S38.518.126 

in shrimp imponed from Ch~iJrin~ fiscal year 2008. 3 grand total of $56 in antidumping 

duties was dcposited wit.I\.dW agcney. If those numbers are right. they imply that nearly all of 

Ihe shrimp entered in,t't4.~'uni ed Slates from China was claimed to have been exempt from any 

anlidumping duty d(~itS. 

The public records ofCommercc's conduct ofadministrnti\"e reviews of the antidumping 

duty order on shrimp from China confinn that the agency has found incidents of shrimp 

incorrectly imported as nOl subject to antidumping duties.l Nc,·erthclcss. despite the agency's 

U.S. Customs and Bordcr 

II " 

Issues and Decision MCmO[f:"~d~"fm~f:§~~~~~~~~~~~~~~~' iii ~'R" A"m'"'''"'''',, Review) ("The Petitioners correctly nOle that at 

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experience and the overwhelming evidence regarding circumvention of the antidumping duty 

order on shrimp from China generally, Commerce has elccted to not look behind importers' selfidentification of what emries of shrimp are or are not subject 10 antidumping duties. 

Commerce's sec no evil. hear no evil. speak no evil approach to circumvention is of 

JXlnieular concern now, as the agency considers whether to rc"oke the amidumping duty order 

with respect to a Chinese exporter. SpI.'cifically, the agency must determine ho", to deal with 

evidence recently made public regarding substantial al\eg~-d evasion oflhe shrimp antidumping 

dUly orders by one U.S. importer with exporter afliliales in foreign countries. including China. 

Summari~ing the evidencc amassed from investigations conducted by ICE and NOAA Law 

Enforcement agents, the Assistant U.S. Auorney alleged that the importer had engaged in 

significant unlawful circumvention of antidumping duties: 

As to shrimp from countries subject to ami-dumping duties. particularly Vietnam. 

Ocean Duke transhipped the shrimp through Cambodia and label~ falscly. as 

product of Cambodia (thus not subj~-.;tlO anti-dumping duties)<t)ner the 

imposition of the anti-dumping duties on shrimp in 2004, bel~en May 2004 and 

July 2005 Ocean Duke imported as product of Cambodia ~'\r IS million pounds 

ofaquaculture<!, or farnled shrimp, with a L-';lared~IIi\P1'O\ er $42 million. 

Howevcr. during all of2004 and 2005. Cambodia ced only an estimated 

385,000 pounds of aquaculture<! shrimp. lmemal 311s and statements of fonner 

employces confinn the transhipment ofshrin!i\rrom Vietnam through Cambodia. 

Ihus making possible the export of 15 mil~~undS J 

This appears to be a case offirst im~ n for Commerce. The domestic industry fccls 

strongly thaI the evidence relating to alle!:l~:'l!i~ umvention is compelling enough to prt.-.;Iude 

rcvocation. while the U.S. importer and~ xponer affiliate strenuously disagrce. arguing that no 

convictions have been made baSI.'~,~~ allegations as the defendants wen: convicted of 

crimes regarding seafood mi Slabe~, in the same p~ding. In the past. Commerce has 

avoided meaningfully addn::ss~videnec of circumvcntion Doing so again hen:: will 

affinnallvely result m a~~t ~tanllal hole bemg opened m the scope of the anlldumpmg duty 

order on shnmp from C~ 

Ofla tc. cort~ has publicly cxpn::ssed concern about wldcspread elrcum,entlon 

am hopefulthm thiS concern WIll eventually wm out o,'er bureaucralle goals ofl1l11ltmg 

DcJXInment found certain importers improperly classified subject entries as nondutiablc."). 

"Government's Position with ResJlCCtto Sentencing." United States v. Lin. CR-Il00297(B)-PA at 5 (Feb. 6. 2012). 

Both in the criminal trial when: the Govcrnment's filing was made and in the current 

administrati"e proc~",ding befon:: Commercc. respcCli,'e counsel for the importer and thc 

criminal defendants have contested the validity orthe Government'S allegations. argued 

that no criminal convictions have resulted from the allcgcd unlawful activity, and 

obSCT\'ed that the presiding Judge did not accoum for the allegations in sclllencing the 

defendams for crimes rclated to the mislabeling offish products. 

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responsibility and preserving resources. Until thal happens. howevcr, the domestic shrimp 

industry will continue focusing its energies and resourees on working with Customs and ICE to 

address circum '·emion. 

Because of our work with othcr industries thal are also seriously impacted by 

cireumvention, I am aware that our experience with CuslOms has not necessarily been 

rcpresentative of what other industries have experienced working with the agency. From other 

industries, I have heard complaints that Customs' enforcement eITons seem like an impenetrable 

blaek box and that circumvcntion allegations submitted by these industries appear to go nowhere. 

Although the shrimp industry has had ;ts own share of frustration in trying to get the agency to 

focus on particular circumvention sehemcs that arc impacting the U.S. shrimp market. our 

experience has been on the whole positive. 

My personal view is one of greal appn..'<!ialion for the time and eITort expended by 

enforcement officials at Customs and ICE counteracting mmpa11l circu~~n. Customs and 

ICE enforceme11l personnel take their responsibilities very seriously. en and women that I 

have met within thaI agency are, by and large. deeply oITended b~ tka circumvention. They 

are. in many instances, fruStrak-d by their inability to do more an~ cnt hurdles to 

enforcement. The Southern Shrimp Alliance has on scv~ml i~cnt occasions publicly 

expressed gratitude for Customs' enforecment aeilons. ponsc of some Customs oflicials 

to our statements has been to diselaim credit and protest fi1;) the agency has not been able to do 

ncarly cnough to desc ..... ·c pmise. We try to thank th:;:m..and they tell us that we should be 

pressing harder on thc agency for not being more ~ive. 

There is no question that Customs c~o more, but therc is no denying that the 

agency's aClions have hclped our indust ~", my direct experience with Customs, based. in part, 

on infonnation that the Southern Shrim niance has provided to the agency, the shrimp 

industry has benclik'd from: 0 

• The Commercial Tfo.. ng Division's development of a guidance for diITerentialing 

betwecn true "du~'e4I' shrimp and non-'"dusled" shrimp which facili at~-d an intensive 

examination mpling program at the ports confirming widespread abuse of the 

excluSiO~'" 

• The Office of Regulmory Audit's conduct of quiek-rcsponse audits on importers 

sUSp<.'<!k-d of fraudulently identifying country-of-<>rigin to cvade antidumping duties 

and other regulatory controls:} 

HQ H034575. "Request for Inttomal Advice; Shrimp from China; Antidumping Duty" 

(May 10, 2010) and U.s. Governmcnt Accountability Ollice, Seafood Fraud: FDA 

Program Changes and Betlcr Collaboration among Key Federal Agencies Could lmpro~e 

Detection and Prevention, GAO-09-258 at 15-16 (february 2(09) ("GAO Seafood Fraud 

Report"). 

GAO Seafood Fraud Report at 16. 

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• Innovative and creative efrons by Customs' laboratories to confirm illegal 

transshipment ofshrimp:6 and 

• The closure of many Ily-by-nig/lt importing operations following Ihe opening of 

invcstigations by the agency, 

Althoug/lthere is a lot more that must be done before the problem of cireumvention as 

cxperienced j u", "'illl slrrimp impom' is brought undcr control. these e/Torts arc greatly 

appreciated by our industry. Where seafood importers used 10 dismiss OUI analysis as unfounded 

speculation, Customs has l'Onfirmed shrimpers' fears rcgarding the prcvalcnce of fraud within 

the U.S. seafood market. 

Customs' (and ICE's) findings have made it impossible to claim that eireum\'cntion docs 

not o<;eur and, cven if it docs, occurs only in isolat~-d instances. I'ublishcd accoums of the 

agency's estimates of the extent of eireumvention of the shrimp antidurnlifj)'uuty orders. 

coupk-d with the Southern Shrimp Alliance's own estimak'S rcgardin$~'c'lm1\'Cntion schemes, 

support the conclusion that illegal eireumvemion has resulted in th ~slon of /III",lred" of 

milliolls of J"lIa,.,,' in antidumping duties. Circumvention to this nt has significantly 

undennined the effeetivencss of trade relief. ,,'1..-

III. I're,·tnting Circunn't ntion '1..-\:) 

While we ha"e had some success in add4; some forms of circumvention of our 

antidumping duty orders. every time one avc~u hut down, another sehemc takes ils place. 

Just as one depressing c~a111plc. we labored :t,Jl over a year w develop evidence 

demonstrating that three Malaysian eomlR!~~ were transshipping ChilK'SC shrimp to the Unik'd 

States \0 evade antidumping duties and ~Pbll lmpon Alert. Once these thll't: companies' 

cxpons were shut down. thanks, I bf~' to Customs' enforcement e/Torts, six new Malaysian 

companies - wilh no prior hi510~~~poning shrimp - began ~porting similar qua111itics of 

shrimp to the United States. 0 

Because of our ~C§iei7.ed efforts in this area. the Soulhern Shrimp Alliance has now 

become something of~ring/1o se for information and allcgations regarding cvasion of the 

antidumping duty o(~. Where once we struggled to find ways to marshal compelling evidence 

to pTOve what we bellcved to be happening, now " '0 are alerted to schemes that " 'c could 110t 

have imagined on our own, One whistleblowcr providl-d the Southern Shrimp Alliance with a 

treasure tTO"e ofdo<;uments selling out a cireumvention scheme we are stil ilrying to fully 

unravcl. 

In many ways, addressing cireumvemion is like fig/lting the mythological Hydra of 

Gn.,<,k legends: CU I off onc head and tWO grow back. But I feel strongly that you do not back 

away from ajob just bt:t:ause it is difficult. In this case, giving up in the face of seemingly 

intractable opposition would !ead to a terrible result. The bad guys would win. P('(lple who 

violated the law would be rewarded and those who abided by the law would suffer. 

&atI5. 

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r do not believe that the persistence and broad scope of circumvention is due to a lack of 

commitment on the part of those Customs officials responsible for enfoKement. Policy makers 

in the agency may believe that resources an.: better all()(:ated elsewhere, agency lawyers may s/"'C 

their jobs as reining in ovcrlealous in\'!."Stigators. and other officials may prot!."St that 

enfoKemem detracts from trade facilitation but the people who deal with fraud on a daily basis 

W3nttO see the problem stamped out, 

In working with Customs. I ha"c heard numerous officials voice the same concerns on 

limitations about what th<':y eM do to m<':aningfully addt<':SS <':ircum\'('tItion. That is why th<': 

Southern Shrimp Alliance is dceply appreciative for the introduction of H.R. 5078. the 

"I'reventing Recurring Trade Evasion and CiKumvention ACI," by Congressmen Boustany and 

Richmond. The PROTECT Act dir..'Ctly addresses a number ofissuC$ that Customs officials 

have naggl.'d for us ovcr the years. 

For example. I havc been repeatedly informl.'d that an inabi ity~O . ~tigate facilities 

suspected oftransshipmem in Malaysia has been a major impediment covering illegal 

ciKum\'Cntion originating from that country. Section 104 oflhe~di CT Act g()(:s dinxtly to 

Ihat problcm by instructing Customs to seck to negotiate and ent 0 bilateral agr~"CmenlS with 

other countries 10 improve enforccme11l of trade remedy law\:.I1C ustoms anempts to do so and 

another coumry is not amenable to such an agreement. thef~e T Act 3uthoril.cs Customs 10 

lake that fact into consideration when addressing c"asio,(lJ"Ycged regarding that country's 

cxports. Just as importantly. if Customs dL'Clines 10 ~k-lo negotiate and cntcr into bilateral 

agreeme11ls under this authority, it will have to de(en~ l1S inaction in an annual report to 

Congress. 1>" 

I have also been repeatedly inr.~~ t even whcre Customs can investigate a foreign 

facility and detennincs that it is not ca e of producing the merchandise e.xported to the United 

States. Customs still must amassif idellce that the goods " 'CTC actually produeL'd by 

som~'Ol1e who would be subject t 'dumping duties. Section 102 of the PROTECT Act 

directly addresses this conccMJ....® ugmenting thc agell(:y's ability to collect infonnation and 

authorizing Customs to maJik..'ltd\·crse infcrenees whcre,'er a party has failed to act to best of their 

ability to comply with ~ts for information. 

In addition,1I$.~o ECT Act closes down some of the ways in which the new shipper 

review process has been abused, removcs limitations on invaluable data that was not previously 

available for COnlmercialtargcting. and facilitatcs the sharing ofinfonn~tion b\.'Iwt'Cn ag~ncics 

responsible for administering our trade la"'s. The PROTECT Act also eharg!."S Customs with 

developing policies for the application of single entry and continuous bonds to facilitatc the 

colk'<:tion of antidumping and countervailing duties - tools that ha,'e been underutili7.<.-d in 

ensuring compliance with trade remedy laws. 

All ofthcsc features of the PROTECT Act are a substantial improvcnlent over cxisting 

law. But e"en more important than the substa11live changes proposed by the bill is the fact that 

the PROTECT Act raises the profile of circumvention. The bill establishes an enforcement 

division dedicated to enforting trade I\'medies and responsible for interacting with domestic 

industries about their circum,'ention concerns. The bill also makes addressing circum,'ention 

one of the principal negotiating objcrti\"es for trade agreements. And the bill rI."'quires Customs 

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115 

f 

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, 


joloto on DSK67XMDP1PROD with HEARING80260A.076
116 

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. 


joloto on DSK67XMDP1PROD with HEARING
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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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BEFORE TIlE 

UNITEO STA TES ffOUSE OF REPRESENTA TIVES 

COMMITTEE ON IVA I'S ANO M EANS 

TRADI:.· SUBCOMMfTTEE 

,11,1 t' 17. 20/1 

TESTIMONY OF KARL G. GLASSMAN 

CHIEF OPERATI NG OFFICER, LEGGETT & I'LATT. INCORPORATED 

G<JOd afternoon. Chainnan Rrndy. Ranking Member McDennot1. and Members of Ihis 

Commil1ce. Thank you for holding Ihis Hearing on a se1 of lopics Ihal are crilie~lj}our business and 

employees. to lhe U.S. l.'C<>Ilomy. and 10 our lrade la\\'s, f::::Jt'lf 

I am the Chief Op"raling Officer of Legge'lt & I'lall. a di ed global manufacture, 

headquartered in Carthage. Missouri. We ha,'e O,'er 18.000 emplolce-pmners in 18 oounlri es across 

Ihe ,,·orld. Here in Ihe Unilcd Slales. we have operalions in 28 s . let.and manufaclure a wide "ariety 

of engineered components and produclS. ~ 

O"er Ihe lasl Ihree ycars. " ·c. along wilh many me'lllbo,,1 ofCOngreSs. ha,'c focused a greal deal 

of energy on the g1O\\'ing and serious problem of c"as~ 'of our trade laws. While a solution has nol 

yel been reachcd. the focus on lhe issue. and Ihc ny queslions Ihat ha"c becn askcd. hal'c only 

underscored ils significance. It is clear that nl work ",mains 10 be done 10 enSure Ihal the 

aClions of Ihe gO"ernmenl agencies ch"'gcd w.i,1b'\t;nforcing Our trade laws reneel lhe importance of 

aggressive and limely enfo=mcm and thl\il.lII',licam consequences for American industries and their 

employees if enforeemenl elTorts conlinu~tit(all shm1. 

V 

It might be helpful for me ~eseribe how duly e"asion has alTe<:led LcggclI & Plall, Our 

company's original product ~Ghe mallress innerspring. which we patcnlcd in 1883 and ha ~ 

manufoclurcd continuously siJ>cl,.) While we now produce a wide range of products. innersprings arc 

Ihe hcart of our business. ~tl? the largest innerspring manufacturer in Ihe world. 

Chinese inn~lt~gs began COllling into the United Stnt<."S in Ihe early 2000s. at prices lower 

Ihan our cOSt of l/Ction. We manufacture inncrsprings in China for Ihe Asian market. and know 

first hand thaI il is nol cost ..... lTecli,·c to produce and ship innersprings from China to the United Stales. 

Nc"el1hcless. mOre and more Chinese innersprings conlinu<.-d to entcr Ihe U.S .. at "ery low prices. 

By December 2007. our U.s. innerspring operalions had d<.'leriorated 10 the poim that we filcd 

anlidumping cases against inncrsprings from China. Soulh Africa. and Vietnam. As you know. 

deciding to bring a lrade case requi"" a ,'cry significant commitmenl of a company·s lime. personnel. 

and money, al a time when Ihe industry has bt.'C'I1 financial ly dcvastatcd by low-priced imports. 

Winning a lrade case requires satisfyin g rigorous legal requirements Ihrough a lransparenl. oonleslcd 

quasi_judicial process. Commerce must find that goods arc improperly subsidi~ed andlor sold in the 

U.S. al less Ihan fair value (dumped). and the !TC mUSI establish Ihat a domeSlic industry has sulTcrcd 

(or is lhrealcned " 'ith) material injury. The standard for malcrial injury;s \"Cry high. but both ag<.'Ilcics 

ullimately rulcd in our favor. Our cases all rcsultcd in antidumping dUly orders. Since Februar~ 2009. 

innersprings from China ha,·c becn subjecllo antidumping dUlies ranging from 164% 10 234%. 
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Unfonunatcly. c,'en before the final antidumping order was issued. we staned seeing evidence 

thaI Chinese inncrsprings were being transshippo.xlto the U.S. Ihroogh third countries to e"ade dUlies 

For example. impor1s from Hong Kong. at Ihe same low prices as the dumped Chinese 

innersprings. Sk)TOCkeled overnight. Prior 10 July 2008 Ihere had been no innersprings shipped from 

Hong Kong. yet by Seplember 2008 (wer 35 container loads per month - easily wonh SI.5 million a 

month in commercial sales. and much more than Ihal in duti~'S - W'cre being shippt,xI here . 

J U • 'A'· JI'N JI'L AUC. SI:P OCT ""'. U£C TO TAL 

.--.... ' '.0" ,..1 ' 

1Hf 1,4. 10.166 >l.!O1 11.200 ~ I"." 

._ ,t.:!>O ,,,'11 ].6.111 1l"'1 ,UI. 1.W ',U' 012 9.ll1 11." J....!(jl' l\.1n .'f,. Il.m 106' I •. ,.. llJ'! .IUll 2"~ !J.tO, 1.100 '-J 

'''.II! 

1lI.u1 

n" ~~ : : - . . 

Given our knowkxlge of ong Kong's market and Ihe ~~imJUstry. this made no sense to 

us. We hired a pri"ute in"estigator who was unable to linp~~ evidence of legitimale innerspring 

produclion We also traced 13 shipments of inncT$prin~ fr<>b( China to 1I0ng Kong ami then from 

Hong Kong 10 the US. m December 2008 and Janua!1\2009 alonc Sh,pments from Hong Kong 

abruptly stopped m September 2010 "-

Smce the order went IntO eITc'Ci. we 1!...~ c SCCn skyrocketmg Imports from TaIwan and 

Malaysia. again. places where then: was no i\lirodUCIion ofinncrsprings. 

T.I~ •• JAN flCK "'" ". " . \IN· " -L AI){; S£P ~ NOV IN:e TOTAL 

-, 0 - e; -, 

- ~ '.911 ,.~ ... 11 t.:!19 11.,1(1 ,~ ,~ '1.-1'" 

- ll~ 6,7'U' • ,- ,~ ,,~ 1U!4 ,,~ ". ,,~ ,,- ,".1.lO ",. n,6O(I ~ '.140 n .... ' ~ ~,. 11.211 ,..,21 U.IOI 1.9" '.~ ~, 

n" :=0~ - I~GJI !un ,, ~ '0.'" '.~ 1J10 ,~ ,~ ,- "'Jl. 

no> ~ 

'101 ... ,;. ~ fro MA" "" MA" ~ JIlL .. "c. St:P ~ ~ov , To r AL 

,." 

,. m ,. ,., 

,-

,- 11 " 10 lJ.426 11.010 J1.11O lM~ lO.OOI 11.1. .~. .. UIl 1.,. 1l.1S< 1"'" 1,124 11.oa ~"' J1.1 .. 'U' ~ ".C9l 11.961 ".W ~,. 

"'.'" ."1/ .,. IJ.!" " 1).1" !4.m 42.:000 ...... 1 ,,- !4.0IO ".11' ~- !7.&J' m., 

ml .~ lUll .... 'l? 

We have de"eloped substantial and credible cvid""ce that many Qf the cxponers in th~'$C 

cQuntries an: im'oh'cd in lransshipment schemes. and an: actually shipping Chinese· produced 

, 
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innersprings to the U.S .• all of which should be eon-red by duties up to 234 percen1. Wc estima!c that 

potemially I million Or more port~-d innerspring units illegally ""adc Our antidumping order "'"Cry 

year. COIlSCT"l·ati,·cly. this would represent o\"er SSO million dollars in antidumping dutic-s - on our 

produel alone - thaI should hu,'c been paid 10 the U.S. Treasury. 

us m: "po<"! Doto · "'_ too Uunt<j 

_ .-._-.- .-.-.- .-.- -

-

-

-

-

-

To understand the scope of this "!"""''''N alone. if those innersprings had been 

produced in the United Swcs. it would 11 time employccs. earning o,'cr $2.4 

million in wages and benefils per year. ,.",~"" ",~, and communilies would 

similarly benefit E,:;:':O;:,,: f,:O::'h:cr~~~~~~~q~;:,~,:'~:,',';~~ :',;:,:~ ~~~ :, much larg~'T amoun15 of dUlies going uncollecled. and communilies. 

:~~:;if!~;i~~];:~ ~~~::~:~~::;:i;:::~'; more evidence of evasion. Since October 2008. than 30 scpamle occasions. Despite OUr best 

continue to come into the United SWtes without paying 

In I. w·c again mel w'ilh CUS10mS to discuss this problem. Atlhm meeling. W'e 

first learned about RED Team. a ll1sk force ereatcd afler the Senate Finanec hearing on this 

same issue in May 2011 Customs' otToeials agrecd to make lhe review of one of our e-Alleg,uion. 

(originally submincd in 2(09) a line itcm 3tthe RED Team's October meeting and relay l"CSults back to 

us. Despile numerouS follow-up calls and emails. Leggetl has n01 been made aware of any specific 

enforcement actions or seen any market changes that would indicate enforcement has incrcaS<.'d in our 

induSlry. 

Ours is nOl an isolalcd problem. In Seplernl:>cr 2009. we. and four olh'" industries. fOmle<! lhe 

Coalition to Enforce Antidumping and Counter .. ailing Duty Orders to work togethcr to find a solution. 

Today lhe Coalilion includes 14 indu~lries. ~mp oying 1hous.and~ of Am~rkan workers in high-qualily 

manufacturing. agricuilure. and aqWlcullurc jobs. all w;th trade orders th~t arc being undcnnincd by 

dUlye,·as;on. hcry induSlry in our Coa lilion could lell you s!ories "cry similar to ours. Our members 

J 
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ha"e al50 invested their timc and money to dC"clop direct and reliable evidence of evasion using 

tl"<'hniqul"S such as tr;msshipment through Ihird countries. miselassilication al the lime of importalion. 

the use of falsified documents. and mis-labeled country of origin markings. 

One of the most ",markable aspects of our Coalition has been the striking similarity of Ihc 

e"asion seheml"S. the lack of meaningful enforcemC1u. and the efforts and huge commilmcnt of 

resourees mad~ by our varied members to eSl;Cntially enforce and police their own orders. Compani~"S 

bring trade cases becausc they have Iheir backs against the wall. and facc a choicc betwecn fighting 10 

defend their industry or going OUI of business. As)'Qu would imagioe. it is inen:dibly frustraling and 

disappointing for compani~s \0 limp into the ITC and Commerce after deciding 10 i",'esl the enOrmOuS 

amounts of resources to bring a trade case. only 10 see their hard-carned rcmedy underminl"d by e"asion 

thai our government is either unwilling or unable to successfully combat. 

lllc consequences of duty evasion are significant. For e.,ample. we coll ~ely estimate that 

th~ Treasury loses aimOSI S400 million each y.:ar in unpaid dUlies duc to the illc~asion of orders in 

just se,'cn of the Coalition's industries. A sU"'ey across thc wide range of inaujllTi es wilh tradc orders 

would undoubtedly yield a much. much larger number. Moreover. the ri,\'p'R,."'efrects of duty evasionup and down OUr supply chains, on Our worh-rs' salarics. and on ourco'1'l¥unities - cannOt be ignon:d. 

Members of our Coalition have met, individually an necti"ely, wilh Customs. ICE. 

Comml-r.::c, USTR. Treasury. this Commitll-e's stafT. Senate I'~nce stafT. and numerous Senalors and 

Represcntati"es and their 5tafT concerning these issues. We have been very encouraged by Ihe elTorts 

of many of Our Senators and Repr,:scnlati,'cs, and th<'ir l\.' 10 help find a solution. 

We believe it is impcrath'e thai any legisl~on or polky changes addrcssing this problem 

indude m<'aningful provisions capluring th ....... co mes . 

Firs!. prom!>! a~!ion . The most imponant ih~g for afTec!ed industries is !hal cvasion be addressed 

quickly. We do not believe that s",cessfu~mcrcial enforcement and "iminal cnfOrc<:ment are 

mUluallyexciusi,·c. Howe,""r. Il ... c3ici-Ofprompt commercial cnforcement - e,""n if this means 

simply collecting the duties - will ~ore cOeetivc in changing the chea!crs' behavior Ihan one 

criminal "pe'll walk"' Ii"e years ~ftt1'a n entry is made. 

i'rompt eommcrcial ~::emcnt would limit 'he impact in the mar1<et of lHerchandise entered 

using a duty cvasion s~c. Sening reasonable limelines and dcadlines for action would rnsure Ihat 

cvasion is promp~ ~tcsscd. Taking action years after evasion occurs or is rcpor1ed means that 

domestic producJ<:oo",;nue 10 be hun by illegal trade practices while more timc passes. E,'cry day 

this practiec continues is a day that U.S. industries and employees a", not gelling the benefit of th<' 

remedy thai Congress intcnd,-d thcm to rc<:eivc when they brought and won their tradc cases. II is 

ironic that Slrict statutory deadlines ~"1lsure prompl action when a petilion is f,led to address the 

injurious efTecl ofimpons. but <:nforc<:mcnt ofan order arising from Ihat petilion can drag OUI for )'<'ars. 

!i«ond. (ull use of all uisling tool". We nC<.-d to know that the gO"ernment agencics 

responsible for enforcing !rade onlcrs arc !'£9uired 10 use ill their existing tools and authority to eombal 

evasion. Tools like risk·based targeting. while imponanl and useful, an: not cnough by themsel'·es. 

Such lools muSI be coupk-d with prompt enforcement using all existing tools and authorities, such as 

issuing CF-28 requests for informal ion. conducting audits and focused aSSl.'Ssmcnts. and using 

infornl3lion already being ooll=ed. 

, 
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Prompt and aggrcssi"e use of these lools by aCli vciy-engaged enfOlU'mcm agencies will show 

trade cheats that our agencies are paying allention and " 'ill use c"ery mcans at their disposal to enforce 

these orders. 

We belie,'c Iha! Our agencies Can do more 10 work logether on this problem. For example. 

Customs and Commerce could. and we belie"e should. share. wilh each olher and ",ilh domeslic 

panics. more proprielary information thaI is gathcn:d in Ihc course of Iheir enforcement and 

administralive programs. 

We nOle Ihal Congress has rcttnlly legislaled Ihal Cusloms change ils praelice in cases where 

Cusloms belie"cs inlellectual pmpeny ri gl!!s are being violaled. They now inlend 10 share eonHdcnlial 

infomJation and physical samplcs of imponcd g<><:>ds wilh holders of trademarks and OIher mark •. in 

order 10 allow Ihe Owner of Ihe mark 10 evaluale whelher the imponed g<><:>d is infringing Iheir 

inldleclual propeny. This impon3nt change rcnecls the recognilion that Ihc aITec induslries are in 

the best position to assist in enforcement. The same is true in duty evasion_ CO/'I ies and industries 

who haw fought for and obtainl"<l relief under the trade laws arc the single ree of e~pertisc and 

information to assist our enforcement agencies when duty e" asion is ted. Yel. While our 

enforcement agencies are willing 10 accept thc evidence we devc)oPl'k have no idea whelher the 

information is helpful. or what is being done wilh it. Our membetslwould like nOlhing more than to 

ha,-, our agencies help!!§ 10 help!h£!!! be mOre cITe'!:li"e. R::> ~ V 

We also beli,,'c that an actively engaged agency - h,t ... lhat is ulilizing the full eXlent of its 

c~isting authority 10 address this illcgal behavior - Id have 3 deterrent CITl'CI on future duty 

evasion. Our e~p<.'Tience has been that. for th~"SC un\.:~pulous importers. success begets fun her 

cheating. Witllout fear of enforcement from Ihe %::~ tasked with policing our borders. thcy ean and 

will continue to " 'ade these duties. at increasin 'tl:ii\Ylb . 

Third. publidl("(1 resulls. PubliSh~gular and timely public reports lhal contain meaningful 

amounts of detail. and mfomling the eOn.!li1in,es reponing the " 'asion in the I1rst place. will promote a 

number ofimponant policy goals_ 0. V 

Fir.;{. this will promole nc of companies and individuals who arc tempted to lry to evade 

duties. Publiei7.ing the resull a vigorous enforeement program will send a clcar message that our 

enforcement agencies will,t iii tools 3tthcir disposal to combat evasion. that the U.S. government is 

On to them and will gcr tolerate the blatant disregard of Our laws. and that parties tempted 10 

engage in such illc §~havior do so at their peril. We believe it will provide an immediate and 

eITective dete""n panics that might othcrn'isc consider auempting to engage in evasion. 

Second. it will promote tnmsparency of thc process. Today"s opaque s)"Stem lea,·cs the 

stakcholders injured by the evasion wondering whether anything is being done to hclp them. and also 

allows agencies to handle evasion allegations with lillie to no oversight. 

Third. it will promole a£(ountabili1V. Transparency goes hand in hand with acrountabilily. and 

we ha"c seen other situations where Customs has signilicalltly improvl"d its operations whcn n."quircd 

to publicly ~ount for its internal activities. Requiring public reponin g will promote accountability. 

and we belie,'c will result in a mOr~ efficient and cfTc"Ctive enforeement program. 

5 
123 

f 

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 


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124 

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. 


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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. 


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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 fulltime 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. 


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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 


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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 


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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:] 


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

Roy Blunt 


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COP bO;III~ about il~ renewed U$l' of single lran5<lction bonds to insure revenue. but, according 10 the 

GAO, Ihere isn't communication or coordination 10 ensure that each port reQuires lhe:.e bonds on 

suspicious cargo. We are all fo.competition, but we are not lor port shopping. 

Unfortunately, the GAO critique of CSP's bonding practices is nOl a new one. The gaps identir.ed by the 

GAO are the same identified last year in .. report issued by the Inspe<:10r General of the Department of 

Homeland Security. 

Duty evasion - merchandise launde'lng - is not some new issue that allows for time to see how COP 

responds. The problem Is well-koown and so Is COP's response to It: inaction. 

Furthermore, CSP's discussions with oursl .. f! indicate that even when a single transaction bond is 

actuallv obtained for questionable cargo, the agency continues to liquidate the previously entered 

merchandise, which triggered the oriSinal suspicion. In other words, without the legal jargon, even 

when CBP takes One step to stop evasion, they continue to assign what they susjlect are incorrect tariff 

rates to merchandise that raised their suspicion. 

Whars al<o concerning i, that the GAO determined that CBP ,till has nOt adopted a practice of 

sV'tematically collecting the vital information needed to detect and deter evasion. This was a problem 

identified nearly two years aso. This includes: 

1. How many confirmed cases of evasion it has detect~ 

, 

2. The outcomes of the evasion allegations submitt~ by p!"ivate se<:tor tipoffs. When COP testified 

before the Senate. it said that a key element of its efforts to combat evasion is the information it 

receives from the private sector, yet it does not keep track of what happens with such 

information. 

3. FaWnS to systematically determine how much in duties is assessed for evasion and how much 

are collected. The GAO determined that CBP only collects two percent of the duties it assesses 

due to evasion. In fact, of the $208 million it assessed in just civil penalties between 2007 and 

2011, Cpg collected only $S million. CBP is unable to provide information about the duties CBP 

determined were owed through successful evasion investigations and how much of those duties 

were collected. 

4. When evasion i, uncovered, CBP does not systematically keep track of the country-of-origin, the 

product information, the method 01 evasion, and who the importer 01 record is. 

In other words. whatever system COP uses to detect evasion. it does not appear to be based on the most 

relevant data. And when COP suspects evasion 01 a specific product. there is no integrity in its approach 

to combatlns it and to ensuring that duties and penalties that are owed can actually be collected. 

Oller the past two years. we worked with petitioners. respondents. producers. importers. organil~ 

labor. and various federal agencies. We worked to understand the problem of evasion better. and how 

to combill it better. We came up with the ENFORCE Act. which enjoys broad support. In fact. there is 

no private se<:tor oppos~ion to the bill ofwhi'h we are aware. As a result. the foundation Is laid for 

Senate passage of legislation that includes the main elements of the ENFORCE Act. A central component 
132 

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, 

of the legislatkln would require CBP to adhere to timel ines for investigating allegations of evasion and, 

a long the way. ta~e steps to enSure that an affirmative determination that evasion occurred enables Ihe 

agency to actually collect the AO/CVD duties and penalti"s Ihal are owed. 

Enactment of meaningful legislation. like the ENFORCE Act. to combat duty ellasion will not happen 

without the leadership oflhe House Committee on Ways and Means. As it considers this issue and 

advances its own legislative approach, our hope is that you will ~eep in mind this final point: 

Just as CBP needs statutory discipline to fac ilitate trade, it ~eds statutory di~ipl ne to enforce Our 

nation', trade laws, particularlv AO/0IO laws that repre""nt a key element of protecting American 

proo,,<:ers Irom "nl~ir import' ~nd whn ..... lien ~nd ron<i" .. n' apl'lic~ ion h .. lp ,u"ain hr""d ... public 

SIlpport for American trade policy. 

Despite two years 01 inten ... congre~~i<:lnal pre~sure - including IWO Senate hearings .... veralleg ~lative 

proposals, GAO testimony and an Inspector General reportlil1ie has changed at CBP. If Ihe agency is to 

do the most effe<:live job at combating AD/CVD evasion possible, we conclude Ihat it will require 

Congress to act where CBP's leadership has not. 

There is nO evidence, that without statlltory discipline, CBP will elle<:tively use its current authority to 

dete<:t or deler eva~ion and carry out its respon~ib ty to protect American businesses and the worker<; 

upon which they rely from unfair trade practices. 

We thank you for considering our views and look forward to working wilh the Committee on this and 

other important issues. 
133 

Statement of AAFA 


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we wear-jobs 

\Vrille n Tes(imOIlY 

Submitted by the 

Ameri can Apparel & Footwear Association (AAFA) 

Heforelh e 

House Way" &: Mcan_~ Connnill"e Subco "nnillce on Trade ~ 

Do - Supporting EconomicGro ... th and J ob CreaHon through 

Customs Trade Modernization, Facilita tion, and Enforcement 

May ' 7. 20' ''' 

Thank y<>u for prQ\iding US Ihis oPlJOnunity 10 submillestimony in relation 10 the hearing dIed abow. 

We applaud Ihe .ubrornmiltee for addressing this issue al II time when the need for balaIlCing security 

and t",de facilitation is essential. 

The Ameriean Apparel & Footwear A.$$ociation (MFA) is Ih~ naliopallrade association repres<lnting 

the apparel and footwear industries, and Iheir suppliers. AA 'A members produce and market appa ..... l 

and fooh'~ar throughout Ihe UniU,'d Slales and the world, In sho", MFA members make ",-cl)'Where 

and sell C'."ery\,'here, \\ith trade preference beneficiaries and free t.-ade agreement partners. ,,;th SOme 

of the most of ad'"ncro economies and some of the fastest d",,,loping markets to some of the poorest 

countries on earth. in this hemisphere and arounq the.world. 

While apparel. footwear. textiles and textile-products U'Prescnted only 5.7 perrent of all U.S. imports in 

2011. these products accounted for almost balf (48.0 perrent) of all import duties collected by U.S. 

Customs and Border Protection (CBP) duriNI the year - to the tune of $13.7 billion. 

Consequently. any efforts undertaken by your subromrnitt"" to rcl'orm CBP's trnde facilitation. 

enforcement or security activities.would ha'" a significant impact on the U.s. apparel and foot""ar 

industry in general andAAFA's rnem~rs in particular. 

At the outset. we would like tp reite.-ate MFA's "nw,wering «Immitment to national security. MFA 

members rt'OOgIlize.the importance of p"""nting the importation of high·risk shipments into the 

United States, particularly the smuggling of weapons of mass destruction and related materials. AAFA 

members are «Imtl)itled to working with eBr and other U.S. law cnforeement agencies to p""..,nt this 

from happening and 10 keep America secure and safe from terrorist threats. 

MFA members ha'"e been at theforcfront nfthese efforts. in,..,,;tingsigniflCant resources tosee"re their 

supply chains and working «Illaborat""ely ";tb the g<wemmenl to make the United States .secure. 

Strik ing the right balance between enhancing nntional security and facilitating 

trnde: is critical to MFA memhcr;. Today. 99 percent of all footwear and 9B 

percent of aU apparel sold in Ihe United Stales is imported. Therefore. the 

smooth flow of trade in and out of the United Slates is essential. 

HOVI'I)\'<!r, new legislation and new federal rcgulationso\"cr the last few}'<!ars ha,'<! 

created signif>eant new import obligations for U.S. apparel and footwear firms 

that ""ere o;!.",-elopcd and implemented \\ilh limited industry«lnsultation or 

.... -~ ... - -.- -"",~"""" 

"""" .. ... _ 1 ... ,,1> 

(]ool.",~,t .. www __ .... 
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without full IVnsideralion of the measures' '-"COnomie implications. f urther, some groupS unsatisfied 

wilh Ihe pace of globalization continue 10 ask Congress to impose new documentation burdens and 

IVsts on industry Or require new targeting Or enforcement doctrines thai are frankly duplicati'" of 

currently mandated obligations. Some of these IVncepts are embodied in pending legislation titled the 

"Textile Enforcement and Se.:urity Act (TESA)." 

la)"ring on new requirements. increasing penalties, singling out "textiles" for priority targeting or 

making it more costly to import should not be embraced as the solution to better enforcement. Already, 

CliP has more staff devoted to the commcrcial enforcement of "textiles" than for commercial 

enforcement o(virtually all other industries - combined. 

Instead, the Subcommittee should dewlop legislation thai will improve and expand the.@readysolid 

partnership between e RP and the importing community - a principle already embedded in m,merous 

doctrines such as informed complianee and reasonable care, and which has prown vita! 10 the success 

of many programuuch a!i the C-TPA T program. ~ 

This testimony outlines manyoftheconcemsof MFA members as well asoutlines rJoposals that could 

address these concerns as well as other issues important to MfA members. We respectfully urge the 

Subcommittee to consider the folloll~ng concerns and suggestions as the Subcommittee de,·clop" 

legislation to reauthorize and reform CliP and its operations. 6 

CBr pocmnenlaljQII Requiremc olli - A Major Obstacle 10 Ihe Su(;ttss of ETAs 

MFA believes that the tremendous risks and significant bu~en5 of CliP's current paperwork and 

documentation requirements for app.1rel and textile goods under free trade agreements (FTAs) (or 

prefenmtial trade programs) represent the biggest single i~in,ent to grolling the apparel and textile 

trade under the FTAs. These requirements also repTeSl!n\':a g60d example of the issues described in the 

previous section. 

"'hen making claims for preferential tari reatment of textiles and apparel under an A (or 

preferential trade program), impoliers are ~uired to provide origin conferring documentation upon 

request to U.S. Customs and Border Protection (CRP). The paperwork burden for preferential claims is 

tremenoous, in most ca.5CS requiring~he range of '00 unique documents for each gormem $ryle (or 

sku ) contained in the entry. These exce!lSi.vc documentation and papenwrk requirements appear to be 

unique only to apparel and textile.goOas importers and not to impoliers of other oonsumer goods. 

These documents must be ableJo dearly demonstrate that each garment style qualifies for preferential 

treatment, or Ihe importer~sks denial of the preferenee claim (including potentially all prior claims 

pn."\iously made, and all ~ture claims for that ITA). All submitted documents must demonstrate a 

direct correlation qf,}he m'ateriaLs Or components to the finished garment by way of style numbers, 

fabric type and-tOHStmctibn. Documents are required to be in English. or accompanied lIith an English 

translation. regardless' of the origin of the documents, and paper copies must be stored in two 

locations-at th~rseas factory and with the importer. If there is an error in the documentation. eRr 

may consider the entry to be a case of transshipment. 

Re<:a\l$!' e potential impact to U.S. importers, significant time and resources must be allocated to 

preparing the documents. Due to the sheer \'<Jlume of the documents that must be provided, a 

'·erification for one entry can in\'<Jlve numerous back and forth discussions that last several months. 

Appendix A contains a sample list of the ,,,rious documents required verify a preferenee claim for 

apparel and textiles under most FfAs and preferential trade programs. 

This process is dcri,-ed from the guidance CliP has provided to the trade on submissions of apparel and 

textile goods under '"arious FTAs and trade preferenee programs. Appendix 8 contains an example of 

that guidanee (forCAFTA-DR in this case). 

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Regrettably, even this painstaking. time-ronsuming, and burdensome process does not prmide any 

guarnntt-es that an importer's shipme nts w{)n't be held Or subject to CI'-2& Of audits. To the contrary. 

apparel and textile goods shipments under FTAs and preferential trade programs are subject to a 

si&nificanUy higher fisk ofel'-2& and other inspcctiQRS than apparel and texlil e good shipments from 

any Qlh"r l'I!giQn Qfthe world. 

The dQCl1mcntatiQn and paperwork burden required fQr these veriflCati')IIs can Qnly be dcso:ribcd as 

QneroUS. Appendix e contains pictures from two different angles of an example of the paperwork 

required in response to one such CRPverificalion. Please note that these pictures don't e,-en include the 

timecards or tickets that arealso required for these ,·erifications. This volume of paperwork is t~rm, 

and nQt Ihe exccption. 

MOI'e<»""r. each CBP p<>rt addresses the CI'-28 response differenlly aoo passing review in OIle port docs 

not mean the same shipment "ith the same documentation would pass verification in another eRP 

port. Indeed, some portsrontradict Ihe others. "" ' 

And this d()CUmenlation 010= has very real, and ""ry devastating. ro~ucnces fQf apparel and 

textile goods importers. eBP considers an error in the documentation a ease "'transshipment. As such. 

any documentation error in the documentation for apparel and textile" g6qds shipments under CArrADR is subject to stronger penalties than olher entry errors. "I\!.,OJ"aoo i..tluding banning an imp<>rter 

from participation in the ITA program. " 

Moving from One rous Do9,!mentalilln to W lluot Management 

O:>re tQ the issues described aoo"" is that eRP manages its enrQl"I.'ement of this trade Qn a shipment by 

shipment basis rather than through aerount manag"lIlent. The absence Qf the aerount persp<'d.ivc 

means that extcnsi,-edocumentation is required for each shipment rather Ihan the trade pattern. posing 

burdensQn the U.s. exporter, the producer, the U.S. importer. the regulatQl)' agencies, and the ports. 

111is is rt'meularly troubling given that many appa!"!!l companies, particularly thone Qperating in the 

CAP:J'~R regiQn, !"!!ly up<>n a !;Upply chain that has consistent suppliers and a predictive pattern nf 

trade, If Ihis !;Upply chain cycle was go-.-emed by an aerount structUl"e, CRP and the trade rould 

harmonize those pn:dicti"" abilities to encourage U.S. exp<>rts and not burden the trade. 

Moreover. existing paperwork requirements a!"!! not "-eU-suited 10 address fraud issues, which is the 

stated pu'l)()6C oflhese burdensome documentation requ'!"!!ments. In fact, one of the most well-knQwn 

fraud cases associated with CAFTA·DR deals with a presumed supplierrompany. Yet the e nfOl"l.'ement 

tools that eRP uses, as expressed through eBP's documentation requi!"!!menlS, are focU$ed on a 

different part of the supply chain enti!"!!ly - the importer. This focus often gi,-es eBP only an indirect 

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ability to address the real problems with fraud while saddling potential enfo=ment partners of eBP -

the infonned importN exercising due care - "ith extra and unnecessary costs. 

One Way 10 Mow; t-no nml - ADPilN;1 & FOoJwei![ Should Ix: Ih.· Nest e Rp O:nlcn of 

E. ce!l nce~ 

By requiring that eBP make apparel and footwear their next "Centers ofExcellencc," the Subrommitt.,., 

can enSure that eBP makes signifw.mt strides in addrt'SSillll manyof theconeems raised in th~rcvious 

sections- transparency. education, consistent enfo=ment. and cooperation with the trade - that are 

enabled by the holistic approach and the aCCQunt management style of operatious that are Ihe rore 

tenets of the Centers. The Centers of Excellence will make eBP more effe(:ti,·e in both commereial and 

criminal enforcement by enabling CI:IP to focus its limited resourees on targeting bad actors, il~tead of 

wastillll critical resourees on the assumption that all entries. regardless of who mak~ thb:se entries, 

rould be potentially bad. This, in tum would hopefully begin to mOve CBP away from the wrrent focus 

on documentation and paperwork 1"«Iuirements. 

Protecting Intellectual Property Rights OPR) 

Counterfeiting is a major problem for the u.s. apparel and footwear industry. Footwear, apparel, and 

fashion accessories rousistently rank among the top 5 rountcrfcit goodsa .cd by eBP e,·e!), )·car. 

Not only do fake goods pose a significant threat to public health ~ safety, these fakes steal jobs from 

hardworking American families, rob U.S. apparel and footwcarcompanil;softhcirbrand reputation and 

deprive the U.S. govcrnment o(valid lax ",,·cnues. 

eBP stands at thc front line of this war against rouTlterfciU. 

Therefore, we urge the subcommittee to mal<e..pennanent a p""ision appro''Cd by Congress at the end 

of last year that authorizes and cnables CRP. to share infomlation with rightsholders regardillll 

suspected counterfeit produd imports. 

The Use of&cu rity Data fo[COmmercial Targeting 

As you know. the Trade Act of 2oo~stablished a firewall betwcen commercial and security data. 

SpecifICally, the act provides that security data is to be used exclusively for ensuring cargo safety and 

security. Some ha''eadvocated o~o,·al ofthis firewall, particularly in light ofCBp·s implementation 

of the Importer Security FilingOSF), otherwise known as"lQ + 2." 

The trade community iWvOCated strongly for the firewall in 2002. as there are many differcnces 

between SCCU)ity data and oommercial data induding timing. potential for change in terms of sale in 

transit, identity of the filing entity and the standard of care. 

Further. as not~ t rcvioUSly, the MFA fears that, "ithout a dear firewall. seeurity data oould be used 

(or 'com'meftial en(orcemcnt" to help protect, or increase, the ",,·cnue generated from the high import 

tariffs imposed on our industry. The MFA is ooncerned that CBP officials in certain ports could 

compare lSFs and entry forms and then fine companies for simplc and unintended crrOrs or 

discrepancies between thc two selSof documents in what essentially could be a gameof"Cotcha!" E,·en 

worse. the discrepancies could be used as a reason to hold shipments for "further im'eStigation," 

something Our industry already experiences On a much higher than a'-eragc basis due to our industry's revenue implications. 

HowC\-·er, the U.S. apparel and footwear industries recognize the ,-alne in usillll this security data for 

enhanced targeting in certain specific areas. Further. modificalion o( Ihe firewall should nol be an 

impediment 10 implementing other priorities such as creating apparel and (ootwear Centers of 

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Excellence Or offering tangible benefits fOT security in,'estments like C-TPAT so long as the enforcement 

firewall remains in place. 

If it is dctem'inoo that the infom'atkln could enhance commercial targeting in cerlain an:a.s, like 

intellectual property rights OPR) or product safety, ... e could support adding, throUl,h B so-called 

"positi,'e list" approach, the use of security data for specifie commercial targeting nNds instead of 

remO\;ng the firewall as a whole, For ex.ample, if the use of ISF data is deemed crucial to improving 

CBP's IPR enforcement capabilities, an issue important to AAFA member.;;, the fircwall could be 

modified to allow CBP to U5C ISF data specifICally for IPR enforcement purposes, 

aintaining the enfon:ement fin: ... all ... hile pem'itting the use of LO+2 data for specirLc commercial 

targeting purposes \\'Quid honor Iheagreement made to manufacturers in 2002 and would allow CRP 10 

imprm'C its commercial targcting capabl!ities in cerlain, specific al'CBS when necessary. 

Informa l EniD' ) 

We urge the Subcommittee to make pern,an"nt CRP's recent proposal h,crease Ihe value of Ihe 

shil'n'ent allowed under infonnal enlry and 10 n:mO\'e Ihe restrictkln on Ihe a!)l!iIY to use infonnal 

entry for apparel, fOOlwear, tnm~1 goods, and other fashion aceessori("-

The proposed rolemaking would benefit appal'Cland footwearwmpanie8-bf all sizes, parlicularly small 

and medium-sized (SM P.) apparel and footwear finns. Jn ~ng the value and all",,;ng appan:l, 

footwear, and fashion accessories to benefit from informal ""lQ; will simplify entry requirements and 

reduce transaction costs for apparel and footwear companies. particularly SMEs. making them more 

compeli!i"e in the global economy, 

Furlher, "'C urge the suheomminee to elCJllol'C t, .,Q,t of a mechanism that would automatically 

raise the limit under informal entry in respon5C toehalWng market conditions. 

Conclusio n 1 

Again, \\'C hope thm the subeommitt6! tftkeS into account the important concerns and views of the 

AAFA and its members ... heu it de,~ legislation to refonn and n:authoriow cap. 

'''ankyou for your time nsideration in this malter, 

Please contact Nate Henna n at.703-m-9062 or bye-mail at nbcrmao@wewea,r,Qrg if )'Ou have any 

questions or would like adilitional information. 

A11'ACHM~~'TS 

- Appendix ~ eBP Documentation Requil'Cments 

Appendi~ n - CIlP GuidanCO! on CAnA-DR Documentation 

Appendix C - Pictures of Actual Sct of Documents Required for a eRP CAFTA-DR Verification 

5 
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Auoondi"A 

OOCUMI<;NTS NJ.;C .. :.ssARYTO VI<;RJI<'\' A PREI<'ER£NCE CLAIM 

UNDER AN FTA OR PREFERENTlAL TRADE PROGRAM 

Please find below is a sample list (from CA~TA-DR) of the documentation that is ne<:<!SSaI)' to ''erify a 

prdcrencec1aim under an ~T oTprefcrenti al trade progrnm. There are LOO unique documents 

required forroch garment style (or sl.:u)contained in an entry. 

I'.Dl O' IJooJmeDis 

Entry Document (750') 

Te"'ile Certificate of Origin 

Multiple CountryTe"W. O"daration (if ", .. ilable/applicable) Purchase orders ( for merchandise) 

Invoices (for merchandise) 

Proof of Payment 

8ill of Lading 

P""king Ust 

ylm Argujsjtjoa 

Purchase Ord"", (fur raw materials induding fibel"$, threads, }'ams and fabril:$) 

Im..,ices (raw materials induding fiber$, threads, .'111m. and fabril:$) 

ProofofPa}ment 

Shil'Ping Documentation. induding bills oflading. del",,!), rettipts. parking lists for raw materials and romponents. 

Afflda,its fo. Yams from the Manufacture. 

AffKla,;t. for Yams from the Supplier 

Kn itting O ... ratiolll 

l'ur<h .... Order for fabric In,..,ice for Fabric 

ProofofPa}ment 

Shil'Ping Documental;.>!!. induding bill. oflading. deli,..,')· rettipts, J>Ocking lists for raw malerials and romponents. 

Knitting Records 

~:mplo)'ee Time Cards 

I::mploy"" Payment R"""rds 

Affld.vit. for fabric from the Manufacl urer 

Affldavits for Fabric from the Supplier 

tuning Operations Cutting rerords and/or production summaries (induding ,,,,r\: perfonned by subcontractors) 

EnlPIo)'ee Time Cards 

Emplo),,,,, Pa}m""t Records 

Sg\o.ios OperaIions 

Se>o.ing rerords 

Enlp!oj''''' Time Cards 

EnlPIoyee Parmenl Records 

Fjnjllbjng OPerat jons 

Dany Hniwing Records 

Empl"l""" Time cards 

Enlploy"" Pa}ment Remrds 

Inspection Bgpons 

In·line illlpection repo1"'\s 

Pinal inspection repol1s 

FactOJ)" [ofonnation 

Pactol)' Profile 

Product lofoqpatjon 

8ill of Male rial. forth. Gannent 

Fabric Consumption (this is oot so common an)""",re, but we"" had to produ,," this in the past) 

AffKla,;t$ fQr thread from the Manufacturer 

Afflda,its (o,thread from the Supplier 

Proof of Payment 

Shil'Ping Documentation, induding bills oflading, del;"e!)' rettipts. pack.ing IjIlts for raw materials and ro"'poneD\< 
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Appendix B 

October 10, 2007 

CMP-l OT:TPP:TE NM 

MEMORANDUM FOR: DIRECTORS, FIELD OPERATIONS 

OFFICE OF FIELD OPERATIONS 

FROM: Executive Director, Trade Policy and Programs 

Office of International Trade 

SUBJECT: TBT-07-019 Documents Used to Verify Free Trade 

Agreement and Legislated Trade Program Claims for 

Textiles and Wearing Apparel 

BACKGROUND: 

Customs and Border Protection (CBP) is tasked with the enforcement of Free 

Trade Agreements (FTAs) and legislated trade programs that govern the 

importation of textiles and wearing apparel into the United States. Upon the 

request of CBP, importers who make trade preference claims for textiles and 

wearing apparel must provide sufficient records to substantiate their claims that 

goods meet the preference rule of origin for a country that has a FTA or 

legislated trade program. 

Whether an agreement requires the use of yarn or fabric originattng in the United 

States or in the region or country of the agreement, or U.S. cut or knit-to-shape 

components, determines the types of records importers must submit to 

substantiate a claim. When requested by CSP, the primary documents importers 

must submit to confirm each raw material source are indicated below. 

The following requirements hold whether U.S. materials or regional materials are 

used: 

1. An affidavit completed by a party having direct knowledge of the yarn or fabric 

formation is necessary to substantiate the origin claim. 

a. Such an affidavit (or declaration) should identify the factory that produced 

the yarn or fabric, giving the full name and address. 

• The address of the actual production facility, not a corporate office 

or post office box number, is required, 

• Someone at that location must make the declaration. 

• The contact person's name, phone number, and fax number must 

be legibly printed on the affidavil. 
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b. Affidavits claiming the yarn was produced in the United States will not be 

accepted if the party that produced the fabric in question did not also 

produce the yarn. The yarn producer must complete the affidavit. 

c. Affidavits will not be accepted from converters or dyers who are not 

responsible for the actual production of the yarn or fabric. 

2. The affidavit should have a desctiption of the goods, such as fiber content, 

yarn count and fabric type, as well as some identifying characteristics, such as 

an invoice or order number. 

a. If the importer purchased the yarn or fabric, he should provide a 

commercial invoice for the material. 

b. If the fabric is a U.S. product. the importer should provide the bill of lading 

showing its movement from the United States to the beneficiary country. 

3. A blanket certificate of origin should contain a description of the product, and 

the fabric description must nol vary among the orders covered by the blanket 

certificate reference or contract number. 

Documents to Support Claims Involving Agreements/Groupings Requiring U.S. 

Yarn or Fabric 

1. Records demonstrating that the imported merchandise was produced using 

U.S. formed yarn or fabric, or U.S. cut or knit-to-shape components. Such 

records include certificates of origin, purchase orders, invoices, delivery notices, 

and, in some cases, records of yarn , fabric, or panel formation from the actual 

producer of a component. 

2. Transportation and export records (e.g., bills of lading). 

3. Entry documents showing movement of the inputs into the regional country of 

final production. 

Documents to Support Claims Involving Agreements/Groupings Requiring 

Regional Yarn or Fabric 

1 Records demonstrating thai a party to the transaction sourced regionally 

formed yarn, fabric, or cut or knit-Io-shape components clearly dedicated 10 the 

final imported merchandise. Such records include purchase orders, invoices, 

delivery notices, etc. These documents should demonstrate a direct correlation 

of the materials or components to the finished good by way of style numbers, 

fabric type and construction, or other means. 

2. Transportation and export records (e.g., bills of lading) from the regional 

country of origin of the yarn or fabric to the regional country of final production. 

3. Entry documents showing movement of the inputs into the regional country of 

final production. 

4. Documents showing movement and delivery of inputs within the regional 

country of final production. 

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ACTION: 

When making claims for preferential tariff treatment of textiles and wearing 

apparel under a FTA or legislated trade program, upon the request of CBP, 

importers must provide documents as indicated above. These documents must 

demonstrate that the goods qualify for the preferential treatment. If documents 

cannot be presented to substantiate the claim. the preference claim will be 

denied and all prior claims may be reviewed for sufficiency. 

Please pass this memorandum to Port Directors, Assistant Port Directors, Import 

Specialists, CBP Officers, Entry Specialists, Brokers, Importers and other 

interested parties. 

INFORMATION: 

For additional information, please contact Ms, Nancy Mondich at 202-863-6524, 

Ms. Jacqueline Sprungle at 202-863-6517, Ms. Susan Thomas at 202-863-6516, 

or Mr. Robert Abels at 202-863-6503. 

/,/ 

Brenda B. Smith 

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Appendix C 
143 

Statement of AAEI 


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AMERICAN ASSOCiATION OF EXPORTERS AND IMPORTERS 

1050 17,}, S=~! . N.W'!., Suite 810 

WashinglOo, DC 20036 

Comments of the American Association of Exporters and Importers on 

"Supporting Economic Growth and Job Creation through Customs Trade Modernization, 

Facilitation, and Enforcement" 

before the House Ways and Means Committee, Subcommittee on Trade 

May 17, 2012 

A. Introduction and Overview 

ME! appre.::lates the opportunity to offer these comments on today·s hearing on ' Supporting 

Economic Growth and Job Creation through Customs Trade Modernization, Facilitation, and 

Enforcement", held by the House Ways and Means Committee, Subcommittee on Trade. 

ME! has been a national voice for the International trade community In the United States since 

1921. ME! represents the entire spectrum of the International trade community across all 

industry sectors. Our members include manufacturers, Importers, exporters, wholesalers, 

retailers and service providers to the industry, which Is comprised of brokers, freight 

forwarders, trade advisors, Insurers, se<:urity providers, transportation interests and ports. 

Many of these enterprises are small businesses seeking to export to foreign markets. MEl 

promotes fair and open trade policy. we advocate for companies engaged in International trade, 

supply chain se.::urlty, export controls, non-tariff barriers, Import safety and (ustoms and border 

protection issues. MEl is the premier trade organization representing those immediately 

engaged In and directly impacted by developments pertaining to International trade. We are 

recognized as the technical experts regarding the day-to-day facilitation of trade. 

B. Modernizing ACE and lIDS 

for the past several years, MEl has testified before this Subcommittee about the need for the 

successful Implementation of the Automated Commercial Environment (ACE) and the 

International Trade Data System (fTDS). Since MEl last testified before this Subcommittee on 

May 20, 2010, the International trade community's need for U.S. Customs and Border 

Prot e<:tion (CSP) to complete these data systems has be<:ome u~ent for the reasons cited 

below. 

MEl has worked with CBP on a number of initiatives (e.g., Centers for Excellence and 

Expertise, Simplified Entry) to move "trusted traders" (I.e., companies with good Internal 

controls and a history of compliance) into account-based management programs designed to 

regulate the company, rather than transactions. Regardless of the conceptual and operational 

progress that we make In developing these programs, the single most significant stumbling 

block to progress Is the current state of the ACE. At the end of the day, all Import operations 

are dependent on the quality of the data that CBP (and other government agencies) has 

available to make either admissibility de<:lslons on a transaction or an account basis. 

Conversations between CBP and the International trade community about making fundamental 

changes on import operations that would truly modernize U.S. customs practices (within the 

constraints of the current statute) end up as an exercise In figuring out what Is possible with 

the current data system or postponed as a future project under the banner "when ACE is 

complete." 
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MEl urges Congress to exercise strict o~erslght o~er the ACE program In two ways: 1) the cost 

of "operation and maintenance" contracts for the current system; and 2) the procurement 

proposal for "car90 release" (which will be the foundation of the ACE system) and other 

programming required to pro~lde needed ACE functionality. The sooner that cargo release and 

the other needed functionality Is completed, the sooner the old system "ACS' may be turned off 

- we understand that maintaining the current 'old" system (I.e., Automated Commercial System 

or ACS) costs $ 140 million per year. We expect those costs to continue unless Congress 

quickly addresses the funds appropriated for new functionality in ACE. The sooner we can 

make the transition, the lower costs should be as a result of retiring the old ACS system. It is 

our understanding that no infonnation technology company will bid on any proposal for less 

than $30 million. Due to the high costs of cu,",nt operation and maintenance, the 

Appropriations Committee has not allocated enough funds to enable CBP to mo~e forward with 

procurement for "cargo release." 

MEl"s highest legls at l~e priority Is enactment of Drawback Simplification. The drawback 

program was Intended to Increase U.S. Jobs and manufacturing by Increasing exports. That 

Intent Is e~en more Important today with a sluggish economy and the Admlnstratlon·s goal to 

Increase exports. Further de~e opment of ACE Is absolutely essential for CBP to do the 

necessary programming for ACE to handle drawback claims that fulf.1I the goals of streamlining 

and simplifying drawback: 1) expanding the pool of U.S. companies filing drawback claims on 

finished exported goods; and 2) pro~idlng CBP with the Internal controls necessary for the 

drawback program to pass muster with the General Accountability Office. We are keenly aware 

that CBP and the international trade community has lost precious time o~er the last 5 years 

without ha~ ng the statutory framework in place for Drawback Simplification, and we fear 

further delays will erode the political support necess.ary for this important customs 

modernization effort. In short, there Is no substitute for Congressional leadership In this 

matter. 

Finally, we remind the Subcommittee that MEl Importer members pay the Merchandise 

Processing Fee (MPF), a user fee of 0.3463% (raised from 0.21%) assessed on the ~alue of 

Imported merchandise. While the fee Is used for "customs modernization" which Includes (and 

Is not clusl~ely for) ACE, we belie~e that the MPF generates an enormous amount of re~enue 

which Is simply funneled Into the general re~enue fund of taxes collected and subject to 

authorization and appropriations. This process has proven to be cumbersome and defeats the 

original purpose of the MPF, which in part, was to provide a continuous re~enue stream that 

would enable CBP to procure, deliver and manage such a large and complex information 

technology project. Unfortunately, the MPF has become hostage to the political issue of the day 

- offsetting budget deficits in the 1990's, providing homeland security infrastnJcture after 9/11 , 

and now, being used as a source of cash in the absence of a federal budget. We would be 

remiss If we did not advise Congress that our members are weary of paying additional uSer fees 

for services (and systems) that the federal government does not deliver to the International 

trade community. 0.= 

In our testimony In 2010 to this Subcommittee, we stated the follows: 

The choice for Congress Is stark - either fund completion of ACE and iTDS or 

prepare to spend multiple times that sum on infonnation technology for each 

federal agency which has respons ibility for rl'jJulating Imported or exported 

goods. Multiple infonnation technology systems which are not Interoperable 

and require independent data submissions create gaps in intelligence, 

targeting, and risk profiles for agencies who are now working together at 

operations centers. Cleariy, COngress, CBP and the International trade 

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community must work together over the next year to get ACE and ITDS back 

on track . 

CBP has developed the ITDS data set and reached out to various government agencies. 

Although some progress has been made, we are concerned that the United States, once a 

leader In customs modernization and trade data systems, has fal len behind many developing 

countries which have state·of-the-art systems making them more competitive In the cost of 

doing business and lower transaction costs for International trade. 

While we recognize that participating Government Agencies (PGAs) fall Into the Jurisdiction of 

other Congressional Committees, AAEllmplores the Congress to demand that the U.S. Treasury 

Department make quick progress In the roll out of ITDS to PGAs. Since the passage of Se.:tlon 

405 of the Security and Accountability for Every (SAFE) Port Act of 2006, P.L. 109-347, 120 

Stat. 1929 (October 13, 2006), codified at 19 U.S.C. § 1411, requiring federal agencies to 

partiCipate in ITDS and the OMB Memorandum on " Requiring Agency Use of t he International 

Trade System" (M-07-23) dated September 10, 2007, there are no longer any acceptable 

excuses as to why further progress on ITDS has not been made. 

C. Streamlining the flgw gf l egitimate T@de through a Risk-Based Apprpach 

AAEI has long advocated for CBP to deploy account-bilsed programs to distinguish between 

low-risk and high-risk Importers. We believe that CBP has made significant progress In 

"thinking out of the box· In this regard by developing two new pilot programs. 

first, CBP has developed Centers for Excellence and Expertise (CEE) to create virtual teams to 

process the entries of Imports in nine industry categories, agriculture and prepared products; 

automotive and aerospace; base metals and machinery; COnSumer products; industrial and 

manufactured materials; Information technology and consumer electronics; jli!troleum, natural 

gas and minerals; pharmaceuticals, health and chemicals; textile, wearing apparel and 

footwear. We believe these Industry categories make sense by redeploying CBP assets (I.e., its 

Industry knowledge base) to better manage risk while providing more uniformity In t he 

treatment of Imported goods. AAEI is proud to have worked on the Initial CEE pilot for 

pharmaceuticals with CBP. 

Second, CBP has launched a pilot for Simplified Entry whereby a "trusted trader"' could obtain 

release of t he cargo from C6P earl ier in the supply chain and filing a single monthly entry 

summary for all the shipments during the month . AAEI believes that this approach holds great 

promise to reduce transactional data and paperwork on repeat shipments by importers who are 

designated as low risk. CBP is to be commended for cOmmencing a pilot to test this idea 

Quickly from which we hOjli! to learn whether it Is a viable program later this year. 

Additionally, we applaud CBP for moving forward with a Mutual Recognition Decision with the 

European Union (EU) to facilitate trade among "trusted traders" who are members of the 

Customs-Trade partnership Against Terrorism (C-TPAT) and Authorized Economic Op.erator 

(AEO) programs. We hope that C6P shares with the Subcommittee and t he International trade 

community progress on it s pilot fOr exporters to be covered by C-TPAT to ensure that U.S. 

exporters receive the benefits of mutual recognition from the EU . 

It Is our sincere hope that the Sub<:ommittee will be supportive of CBP's efforts In this area and 

provide any necessary statutory authority required to allow CBP further eXjli!rimentatlon with 

these programs and to roll them out to wider segments of the International trade community. 

D. T@de Enforcement 

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MEl supports CBP's recent enforcement efforts regarding Intellectual property rights (IPR). 

CBP has worked with rights holders "11th respect to seizures of suspected counterfeit goods, and 

we believe this Is a good development toward reducing the now of violative goods while 

protecting American brands. 

Additionally, we hope that the Subcommltt~ understands that progress on ACE and ITDS not 

only fac;litates legitimate, but will reap benefits for trade enforcement as well. Without timely 

and accurat e data about importers' Internal controls and the merchandise Imported into the 

united States, CBP will be unable to Se<;lment Importers into different risk categories and 

redeploy its resources to high-risk shipments. 

Finally, MEl believes that It is important that the Subcomm tt~ not Ignore the Important trade 

enforcement and oversight provided by the U.S. Court of International Trade (CIT) for both the 

government and Importers. We suggest that the Subcommitt~ Incorporate the " United States 

Court of International Trade Modernization and Trade Facilitation Act- (not IntroduceCI) Into any 

Customs Reauthorization legislation that the House Ways and Means Committee plans to 

release In the 112'" Congress. Since the CIT has exclusive Jurisdiction over trade-related cases, 

indudlng the provisions of this Act into a Customs Reauthorization bill would fulnll the 

Subcommittee's goal of enhancing trade facilitation and trade enforcement by: 

fixing a number of anomalies which exists in the current jurisdiction and powers of the 

CIT that have come to light In case law since the Customs Courts Act of 1980, P.L. 96-

417,94 Stat. 1727 (OCtober 10, 1980); 

aligning the Court's jurisdiction more closely wit h current agency procedures, notably 

Induding the CBp·s widespread use of post-entry customs audits; and 

expanding the Court's Jurisdiction to include mOre U.S. customs and Internat ional trade 

statutes. 

It is Important for the CIT's Jurisdiction to reflect modern customs practices and chan9es In the 

law enacted by Congress. Therefore, we hope the Subcommittee will consider the Important 

judicial role of the CIT In trade modernization, facil itation, and enforcement. 

E. Conclusjon 

In conclusion, we appredate the opportunity to submit these comments and hope that the 

House Ways and Means Commltt~, Subcommitt~ on Trade carefully considers enacting a new 

customs law providing a legal framework with expected outcomes that t he Congress expects 

from CBP to achieve t hese gO<lls. We hope t hese comments help to reaffinn the Importance 

and impact that customs modernization can have on U.S. companies to generate economic 

9rowth for the benefit of American workers in creating and protecting U.S. Jobs. MEl looks 

forward to working "11th the Subcommittee on this important Issue. 

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Statement of RILA 


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..... Ed 

~RILA ....... _-- ,n_.~ ..... d_ .... 

M~y 17.2012 

11>< Honorable Ke\"iD Brndy 

Chairman 

SubcQmmin"" on Trade 

Commilleeon Ways and Me.n. 

W,..hingtOll. I)C 20S IS 

DcarCh.innan Brady ond Kanking Momt... Mcl><:rm(Ju: 

,,.,. .. ,,,,, .. _,, .... 

---

n.c lIonorablc Jim McDermott 

Kanking Mcmrer 

Sub<ommill"""" Trade 

Commiu"" on Ways and Mean, 

W.,hing"''', OC 2051S 

Tho Rotaill"d"S11')' uodcrs Associ.l;"" (R1LA)appreci.,eslhc opportunity I"submi! "Tilte" 

' .. 'imooy '" \he ",I:>commilt"" "'Prding <""om, trade modemi"" ..,.." f""ilila''''' .nd 

."f"",ernen!. RILA '''''''gly ... ppons .... push by U,S. Custom. and BMkr Protection (CliP) '" 

ref""" and motkmilC its proc=.nd di.manll. 3Il1iqlllllcd S)'SlOms. and com""",d, the hard 

w,,",.Dd "'.d"rship of Acting Commi .. ione< !)"'id Aguilar and Fl)l'Tller C"",mi .. i.,...". Ala" 

IkrSin. We are <"""""'ged by CUP", conti"""" "wessi,'c OUlITaoh and m:ngino",ed uad< 

prootS ..... and look ("", .. rd '" <uslom' ... authorization I.gi.,.,ioo Ihal willen ... ", C1W hast"" 

""""", .. 10 <"",inu. ito progress. A, the """,m;lte. c.,.,.iokrs important i, ..... '" i""lude in 

cu",om, I"gi.lo,i"". RILA u'l!'" con.iJ .... 'i"" or rou, iss ..... , "u,horillUi"" rOf rull runding of 

'h¢ ""'''''''lod C"",m=i.1 En,·il'<)rlmen'. Con, .... of 1i • ..., I1""". and E.peniK. , implir.od on'ry. 

and a I",wis;"" to ad"ant<: rros~i,'e ......-...n"n" of a.tiJ umpi.g and """ ......... iling dulin. 

RILA i, the trade . """iati"" "rthe "'Ofld', IlI'l!CSI and m<>$I i""",'.,i,'c mail com!""'i .... RILA 

members i""lude more than 200 ",t.ilers. produ« n",nufact"refS.. and ..,["\"k. '''l'Pli ..... whkh 

togcthcr~' fOf more than $105 trillioo in annual $3ln. mill i""'of Am<ri<anjob< and more 

than 100,000 s"""'s. ""'nur"",uring (""ilitin and dis.ttibu,i"" «'Itte" <lomCSlioally and abroad. 

Modem iLalion nr AU10molod Com ,< l E., ironm~nl nd Intomo,ional Tr.d. I).,. S)'>t.m i. Crudal and Should II< Full)' Fundod 

Thc modernization of CliP', Au«>mated Comm"",i,1 En"ironment (ACE) and Inlemational 

Trade Data Sy",cm (ITDS) is critical '0 promote tI1e effleien, proc<'<Sing oflIadc in light of 

in<rc.scd import "olume. Full funding i,,,,senl ial [or completing ACE. rms and lhe full 

adoption of. "'si ngle ,,'in<iow* for import processing, 111= elTon, will .ssiSl "'her gm'emmCnt 
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agencies (OGAs) in identifying. documenting, and executing their plan to leverage ACE to 

improve business operations and further agency missions. 

Recent CBP Inilialin's OtTer a Significa nt Opporlllnily to Streamline the Flow or Trad e 

Cell/as afExcellence and £rpl'rlise 

The Centers ofExecllcnee and Expertise (CEEs) initiative represents a significant opportunity 10 

facilitate trade. manage risk. and increase efficiency. in particular for large importers who 

operate across multiple ports. Retailers sec significant benefits in this initiative. particularly if 

othcr government agencies are involvcd. Retailers' diverse product range means that retailers' 

imports arc regulated by a variety of other government agencies. including the Food and Drug 

Administration. Consumcr Produet Safety Commission. U.S. Department of Agriculture. Animal 

and I'lam Health Inspection Service. and Environmental Prok~tion Agency. Given the breadth of 

consumer products, ;t is likely Ihatthe CEE would need to communicate regularly with OGAs to 

addTe ~. the full r.:mge ofOGA ",quirement~ facing a ma~S retait~r. and OGA engagement with 

the CEE will be critical. 

A shift to management by account willhkcly rc<Juire significant changes within CDP. but will 

have benelits in both trade facilitation and risk segmmtalion. CEEs will bring consistcncy, 

uniformity. and predictability to thc import process. which will translate to time and money 

saved for retailers and other importers of a 11 sizes. 

Simplified Entry 

Retailers are also very interested in the development ofa simplified entry program and its 

potential for allowing improved targeting, streamlined and expedited filing, and transaction 

savings. The simplified entry pilot has been helpful in answering many questions about the 

program. and we appreciate and commend CDP's hard work in acting quickly to implement this 

groundbreaking program. 

l3e<:ause the simplified entry initiative holds such great promise. we urge CI3P 10 open the 

program 10 additional participants and additional modes. The value of simplified entry for 

retailers lies mostly in the ocean mode. and we are very interested in seeing the pilot extended 10 

include this form of transportation. Simplified entry has tremendous pote11lialto streamline retail 

supply chains. and it is therefore ,"cry important that the program continue to receive appropriate 

resources and that CI3P continue to test simplified entry as quickly as is reasonably possible. 

NOIl-Residenllmporlers Cllrrel1lly Ulloble /0 Take Adl"{lnlage of These Opporllmilies 

Some of RILA's members are headquartered outside of the United States and are conside!\.'(\ 

non-resident importeTS. They also have a substantial presence in the United States, import a large 

volume of goods into the United States. and employ thousands of US. workers. As non-resident 

importers, these companies arc currently ineligible for Customs-Trade Partnership Against 

Terrorism (C-TPA T), Importer Self-Assessment (ISA). and other initiatives mentioned abo,-c. 

such as simplified entry and Centers for Excellence and Expertise. 

, 
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We hope tl1m CBP changes this requirement or creates a new definition of a non-resident 

importer so that importers that have a substantial presence in the United States are giwn the 

option to participate in these important programs. 

Congress Should Adopt a Prospeetil'e System to Assess Antidumping and Counten'ailing 

llutics 

R1LA recognizes the importance of provisions to combat unfair trade practices. At thc same 

time. predictable and reliable global sourcing is fundamental to maintaining American economic 

competitiwness. and U.S. trade remedy laws should be updated!O reneet this modem reality. 

Specifically. RILA beli cves that Congress should codify the recommendation made by the 

Advisory Committ~-e on Commereial Operations of Customs and Border Protcrtion (COAC) and 

the Government Accountability Office to implement a prospective system to assess U.S. 

antidumping and countervailing (AD/CY) duties. RILA believes that a prospective system would 

impro"e duty eollct:tions and enforcement. reduce administrative burdens. dcrrease supply chain 

uncertainty. and enhance Amcrican competitiveness. 

Bcrausc the Department of Commerce docs not determine final ADICY liability until years after 

goods enter the United States. CBP is required to maintain a separate and unique duty collection 

system for ADley duties and must routinely collcrtthose duties long after the goods have 

entered the country. CBP leadership has repeatedly commented that the retrospective collection 

of ADICY duties is fundamentally Oawed and undcrmines enforcement and colk-ction efforts_ 

In o..'Cember 2011. the COAC formally recommended that the United States adopt a prospective 

system to assess antidumping and countervailing duties. COAC rt'Commended that CBP work 

with the U.S. Department of Treasury and the Department of Commerce to jointly design a 

prospective ADICY duty assessment and colk'Ction system. and that the agencies consult with 

the appropriate Congressional committees of jurisdiction so thai the legislation could be drafted 

to implement this system. 

U.s. companies are willing to pay fairly traded prices. bUlthey need to know whmthey are so 

that they can make informed businesses decisions. Under a "prospective nonnal va lue" system. 

Commerce would determine a fair trade price (i.e. "normal value") and CI3P would apply those 

results prospectively on a transaction-by-transaetion basis. Thus, if subjcrt merchandise werc 

imported at a price below the normal value (i.e. at a "dumped price"). CI3 P would. at the time of 

import. immediately collect final AD duties equal to the amount of the price difference (the 

dumping margin). Zero duties would be assessed on non-dumped imports. The same system 

would apply for calculating and assessing CY duties. 

Under such a system. therefore. injurious dumping or subsidization would be remedied 

immediately upon importation. and U.S, eompllnies would know in ~dvance what the actual 

fairly trad~-d cOSt associated with each potcntial souree is to make infornlcd decisions regarding 

competitive strategies and sourcing. 
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Conclusion 

RILA belicves thaI CBP has madc significant progress toward modernization under 

Commissioncrs Bcrsin and Aguilar. Rccc11l initiativcs such as thc drivc toward full 

implementation of the Automated Commercial Environment. the Ccnters for Excellence and 

Ex)X'rtise and Simplified Entry have vast potential to facilitate trade. and it is esscntialthat CBP 

continues to have the resources to develop these and other game changing programs. RILA also 

believes that Congress should eodify repeated recommendations by COAC and GAO to switch 

to a prospective system 10 assess 3111idumping and countervailing duties. 

Thank you for the opportunity to offer these comments. 

Sincerely, 

~~~ 

Stephanie Lester 

Vice President. International Trade 

, 
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Statement of NTEU 


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NTEU 

STATEMENT OF COLLEEN 1\1. KELLEY 

NATIONAL PRESIDENT 

NATIONAL TREASURY EMPLOYEES UNION 

ON 

SUPPORTING ECONOM IC GROWTH AND JOB 

CREATION THROUGH CUSTOMS TRADE MODERNIZATION, 

FACILITATION AND ENFORCEMENT 

BEFORE THE 

SUBCOMM ITTEE ON TRADE 

COMM ITTEE ON \VA VS AND MEANS 

UNITED STATES HOUSE OF REPRESENTATIVES 

MA Y 17, 20 12 

750 H Street, N.W. · Washington, D.C. 20006 · (202) 572-550 
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Chainnan Brady. Ranking Membcr Mc[)ennou. distinguished mcmbcrs of the 

Subcommittee. thank you for the opponunity to providc this testimony. As President of the 

National Treasury Employees Union (NTEU). [ ha"e the honor of leading a union that represents 

over 24.000 Customs and Border Protection (CBP) OfIicers. Agriculture Specialists and trade 

enforcement and compliance spt'Cialists who arc stationed at 331 land. sea and air ports of entry 

across the United States. 

Customs and Border Protection Entry Specialists. Import Specialists. Paralegal 

Specialists that detcnnine fines. penalties and forfeitures. Customs Auditors and Allomcys and 

other trade compliance personnel are the frontline of defense against illegal imports and 

contraband. These employees enforce over 400 U.S. trade and tariff laws and regulations in 

ordl'T to ensure a fair and competitive trade environment pursuant to existing international 

agreements and treaties. Thcy also stcm the now of illegal impons. such as pirated intcllc<:tual 

propcny and counterfeit goods. and c011lraband such as child pornography. illegal arms. weapons 

of n13S5 destruction and laundered money. CUP is also a re'"enne collection agcncy--colleeting 

538 billion in duties and fees on imports valued at more than S2.3triUion in 2011. 

TRA[)E ENFORCEMENT AN I) COMI'UANCE STAFFING 

When CBP was created. it was given a dnal mission of not only safeguarding our nation's 

bordcrs and ports from terrorist allacks. but also the mission ofreguJating and facilitating 

international trade. CBP is responsible for collecting impon duties and ensuring importers fully 

comply with applicable laws. regulations. quotas. Free Trade Agreeme11l (FTA) requirements. 

and intclleetual property provisions. Along with facilitating legitimate trade and enforeing trade 

and s,:curity laws. CBP trade personnel are responsible for stopping illegal transshipments. goods 

with falsified country of origin. goods that are misclassificd and for collecting antidumping and 

countervailing duties. 

Customs TCVenues are the SI.'Cond largest souree of federal revCl1ues eollect~..J by the U.S. 

GO"emmC1ll after tax re'-enues. This revcnue funds other federal priority programs. NTEU is 

deeply concerned with the lack ofresourccs. both in dollars and manpower. devot~-d to CBP's 

trade functions 

Lack ofsuflieient focus and resources costs the U.S. Treasury in tenns of customs duties 

and revenue loss and costs American companies in terms of lost business to unlawful 

imports. According to CBP. "the preliminary revenue gap (estimated uncollected duties duc to 

noncompliance with tradc laws) was measured as 0.9 percent of all collections. and totaled 5331 

million. the highcst since fiscal year 2008."' (Sec CI3P's Fiscal Year 2011 Import Trade Trends.) 

Because of continuing stalling shortages. inequitable compensation. and lack ofmiss;on 

focus. experienced CI3P commercial operations professionals at allle,·cls. who long have made 

the system work. arc leaving or have left the agency. Twenty-five percent ofCBP Import 

Specialists will retire or be eligible 10 retire within the ncxt few years. 
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When Congress creatcd thc Department ofHomciand Security. thc House Ways and 

Means and Senate Finance Commil1ees included S~~tion 412(b) in the 110m eland Security Act 

(HSA) of2002 (P.L. 107-296). This section mandatl'S that "the Secrctary [of Homeland 

Security] may not consolidate. discominue. or diminish those functions ... perfonncd by the 

United States Customs Service ... on or after the cfTecth'e date of this Act. reduce the staffing 

le\'el. or reduce the resources attributable to such functions. and the Secretary shall ensure that an 

appropriate management structure is implemented to carry out such functions." 

In October 2006. CongfCSs enaetl.'llthe Security and Accountability For EI'ery (SAFE) 

Port Act (P.L. 109-347.) SCClion 401(b)(4) of the SAFE Pon Act dircctedthe DHS Secretary to 

ensure that r<."<juirements of section 41 2(b) of the liSA (6 U.S.c. 212(b» are fully satisfied. 

c m' satisfied this statutory requirement by freezing the number of maintenance of 

revenue function positions at the le\'eI in df~~t on the date of creation of the agency. In March 

of2003 when CBP stood up, there were 984 Import Specialists on-board. That number was 265 

Import Specialist positions less than the tOial number of Import Specialists in 1998 because a 

significant reduction in the number of revenue maintenance function positions had occum.'ll at 

the U.S. Customs Service between 9/ 11 and March 2003 when CIlP stood up. Section 412{b) of 

the SA reflected Congress' eoneem regarding this diminishment in the number of customs 

revenue function positions versus customs security function positions at the U.S. Customs 

Service and fear that it would continue and be exacerbated by its merger into CBP. 

Even though Cilp complied with the leuer of Section 401 (b)(4) oflhe SAFE Pon Act. it 

appears to NTEU that CIlP views the "Mareh lOY 2003 StafTOn-Board" numbers ofre\'cnue 

maintenance function positions, including such vital trade facilitation and enforccment positions 

as Entry and Impon Specialists. as a ceiling rather than a 1100r. 

Jl" ~ Resource Optimization Model 

In Mareh 2012. CIlP released its 2011 Resource Optimization Model (ROM) that 

propoSl..'S even grc~ter reductions in the numbers of on-board CBP Entry and Import Sp<..'(:ialists. 

A provision of the SAFE Port Act. S~'(:tion 403. required CBP to complete a Resource Allocation 

Model (RAM). by June 2007. and every 2 ye~rs thereafter. to detennine optimal staffing for 

commercial and revenue functions. It dirttt~'(i that the model must comply with the 

rC<Juircments of Section 412(b) of the I~ SA of2002. The CBP positions eOI'ercd by Section 

412(b) include Entry Specialists. Import Specialists. Drawback Specialists. National Import 

Sp<..'(:ialists, Fin~'S and Penalty Spc<:ialists. AlIomeys at the Office of Regulations and Rulings, 

Customs Auditors. International Trade Specialists. and Financial Systems Specialists. 

The mtionale for this provision arose from a Government Accountability Office (GAO) 

report (GAO-05-663) that stated. "as of June 2003. CDP has not increased staffing Ic\'els [at the 

POEsr and "CIlP does nOi systematically assess the number of stafTrequired 10 accomplish its 

mission at ports and airports nationwide ... .. Further, GAO obscr\'~'llthat .. not identifying 

optimal staffing le"els prcl'ents CDP from performing workforce gap analyses. " 'hich could be 

used to justify budget ~nd staffing requests." 
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The first Section 403 RAM . dated July 6. 2007. stated that "CDP has over 8.200 

employees that are involved in commeKial trade operations. The Model suggests that to carry 

outthcsc commercial operations and to ad~'<Iuatdy stafTthc needs for priority trade funClions, the 

oplimalle"el of staff in FY 2008 would be OVCT 10.000 employees" (page 12 ofCDP Report 10 

Congress on Trade ResouKe Allocalion Modd) According 10 the 2007 RAM. 1,100 Import 

SJ'I.'Cialists would be needed for optimal perforn13nce in FY 2010. an increase of 116 ovcr Ihe 

HSA Floor. 

In 2009, CDP renamed Ihe Seetion 403 SAFE Port ACI mandaled Repon to Congress. 

Now called the Resource Oplimi1.alion Model or ROM, the FY 2009 ROM n:duced the FY 201 0 

optimal slafling levcls for somc revenue maintenance funclion positions, spceifically the Entry 

and Impon Spceialist positions. For cxample. thc FY 2009 ROM puts thc number of Impon 

Specialist positions needed in FY 201 0 at the liSA floor number of984, rather Ihan 1.100 as 

stalcd in the FY 2007 RAM. 

The I'Y 20tt ROM, released nearly Oil<: year after ils CQngre,,;onaliy mandated due date. 

SlateS Ihallo carry OUI commcKial operalions and 10 adequately smfflhe projceled needs for 

priority tradc functions. the optima lle"el of Entry li t sta ff for FY 20 13 through 20 19 

is in the rangeof27S·279, 134 positions less tha n the number established by the HSA or 409 

positions and the optimal lHe! of Import Specialist sta fTfor FY 20 13 through 20 19 is in thl" 

ra nge of 672-750, 234 positions less than the number established by the USA of984 

positions. 

NTEU fmds these proposed reductions in Entry and Impon Specialists staffing numbers 

problematic because both these positions pcrfonn critical suppon work for 412(b) positions 

proposed 10 be significamly increased by CBr in the 2011 ROM. 

For example, the 2011 ROM projects future need in the range of268 to 301 for 

International Trade Specialists {ITS)--an increase of 194 positions above the IlSA threshold of 

74. It is the job of the ITS 10 target anomalies in trude patterns. but it is the job of the Emry 

Specialists to process targeted entries and Impon Spccialists act on ITS·identified targds, i.e., 

gather cntrics. TCview, and conduct imponcr interviews. It makes liule sense to increase the 

number of employees who target trade anomalies while at the same time dcereasing the number 

of those employces Ihat process and investigate the targcted anomalies. 

Anothcr example is the proposal to increase Fines. Penalties & Forfeiture (Fr&F) 

Specialists 10 549 positions, 346 posilions over the liSA threshold of 203, but Impon Specialists 

write up the J'I.'nalty cases that Fr&F Sp!....;ialists are responsible for resolving. How will the 

reduction of Impon Specialists affect the refcrral of penalty cases to Fr& F Spceialists for 

adjudication? 

In 2011, CBr established its first two Centers of Excellence and Expenise (CEEs) that 

ultimately will be responsible for all aspects of cargo processing, from assessment and 

segmentation of risk, through decisions on admissibility and release. to the liquidation of entries 
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and handling of protests. Currently, ther e are 50 ports of entr)' staffed with commooit)" 

tea ms that process all types of enTries a nd all Ty pes of commodities " i" the Harmonilcd 

Tariff Schedule. In othcr words. each ofthcse 50 trade ports has full tariff coverage (sec 

Auachmellt 1 for list of SO CUP trade ports and CUlTelll allocation of Import Specialists]X .. port.) 

CHI' proposes to establish a total of ninc C EEs. commooity-specific offices where 

CBP "will begin processing entry summaries and subsequent activities (e.g .. post-entry 

a",cnd",e"t~. prolests) fur trusted lrad"rs ... Wilhin Ihr~" years. the Cenlers will t... rc.ponsil>lc fur 

handling all aspects of the import process for their industry seClOr ... E'-enlUally, all CUP carg<>-

related activities from manifcst review through liquidation and protest, will be handled by the 

Center for all traders. The exception will b<: the conduct of non· intrusive inSpI.'Ctions and 

physical cargo examinations. which will cominue to take place in the Port where the shipment is 

physically located ... With the in itial focus on trusted trader transactions, only a limited number of 

Import Specialists and Entry Specialists will be required in the Centers. BowC\"er, as the Centers 

are stood lip. all of these positions will. over time. be removed from the Ports and transferred 10 

the Center.; as well ," (Sec CHI" Centers of Excellence and Expertise: Initial Concept of 

Operations. Version I. dated August 29. 2011.) 

LaSt October. CHI" established the New York CEE that handles pharmaceuticals and 

chemicals and the Long Beach CEE that is in chargc of electronics imports and last "'l-ek CDI' 

announced the establishment oft"'o new CEEs in Detroit and Houston. The Detroit CEE will be 

a center for the automobile and aerospace industries. and the Iiouston CEE will be a center for 

petroleum. natural gas and minerals. The final five CEEs will be located in Miami (Agriculture 

and l'rcpaT\:d Products). Chicago (Consumer I'rodu~ts). Atlanta (Textiles. Wearing Apparel and 

Footwear). Buffalo (Industrial and Manufacturing Materials). and Lar~-do (Base Metals and 

MachinCT)'.) 

In 2007. Section 402 of the SAFE Port Act established the Office of International Trade. 

The "assets. functions and personnel of the Office of Strategic Trade" were transferred to the 

Office of International Trad~ and the Office of Strategic Trade was abolished. Under the new 

CEE structure. CDI' proposes to transfer National Import Specialists. International Trade 

Specialists. and National Account Managers from "organizations within"the Oflice of 

International Tradc to the Office ofField Operations and ha"c them "placed in the Centers as 

they are stood up. Their current organizations will. over time. be disbanded. with the totality of 

these employe~'$ cwntually reporting to their assigned Centc .. " (Sec CDI' Centers of 

Excellence and Expertise: Initial Concept ofOpcrations. Version I. dated August 29. 2011.) 

NTEU has expressed concern about the independence of National Import Specialists. the 

regulatory audit division and the Office of Regulations and Rulings and urge that they remain in 

the Office of International Tradc. 

NTEU supports the goals of standing up CEEs for known trusted traders slIch as national 

unity in decisions. nationwide enforcement efforts and reduction of the number of import 

transactions CUrTcntly scallen.-oJ across various pons of emry. NTEU. howcver. is not c'mvinc~-d 

that it is reasonable to assume that there will be adequate efficiencies in operations to justify a 

n.-duction in worit foree , Rather. thl .. c may be a need for an increase in the worit force as the 

CEEs free up trade enforceme111 personncito focus on higher·risk small and mid·sized trader.; 
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and undiseovered violations for which enforcemcnt action should be taken. CBP trade personnel 

arc rcsponsible for stopping illcgaltransshipments, goods with falsilicd country of origin, goods 

that are miselassified and for collecting antidumping and countervailing duties. These are not the 

type oftranS<lctions expected from low-risk trusted traders who,e transactions will be 

consolidated at the CEEs. 

No delinitive melrics have yet been developed to ensure that the establishment ofCEEs 

will ~ignifieanlly enhance currenl levels of trade enforcemem, a~ it will trade r.~eilitmion, so it 

may be premature to usc the CEE as an argument to justify reductions in cenain trade operations 

personnel. 

NTEU also has eonecms about trade compliance personnel having to conduct "virtual" 

inspections of imported goods for several reasons. It is difficult to recognize details of suspect 

goods (such as the warp and weave in textiles). hidden trademarks and other counterfeit clues 

without literally tearing apart the sample. Comments noted by CBP Offices after cargo exam are 

not viewable in the new Automated Commercial Environment (ACE) system by the Import 

Specialist reviewing the exam. And. in that the CEE structure is dependent on "virtual" cargo 

examination and clearance. local CBP port management's ongoing rcsistance to granting nonunifomlcd trade employees' tclework n:quests to work "vinually". docs not bode well for the 

CEE vinual inspection model. 

Finally, there has I,,:en no study of the localized economic impact of transferring all nonunifomled trade employees, ineluding all Impon and Entry Specialists. cum:ntly assigned to 50 

trade pons to nine CEE locations. 41 Pons of Entry w,lllose trade operations jobs and 

associated private Sl'etor businesses that may leave their current locations to increase prol<,mity 

to one of the nine cOlllmodity-spccilic CEE locations. Also, it is unclear how much additional 

travel costs will be incurred by commodity-slJ<.'eific employees needing to potentially cross the 

country to visit showrooms to c!<amine lincs ofmerehandise or conduct imponer imerviews and 

compliance reviews. For example. Los Angeles and New York pons are the largest volume 

ports for imported te-xtiles. wearing apparel and footwear, but the CEE will be located in Atlanta. 

(See CBP Centers of El<cellence and E.~pertise: Initial Concept of Operations, Version I, dated 

August 29,201 I.) 

CBP Ca ree r Ladder Pay In(ruse 

NTEU commends the Depanment for increasing the journeyman pay for CBP Officers 

and Agriculture Specialists. Many deserving CBP trade and s('{;urity positions, however, were 

lell out of this pay increase, which has significantly damagL'<l morale. 

NTEU strongly suppons extending this same career ladder increase to additional CBP 

positions. including CBP trade operations specialists and CBP Seized Propeny Specialists. The 

journeyman pay level for thc COP Technicians who perfonn important commercial trade and 

administration dUlies should also be increaS<.'<l from GS-7 to GS-9. These upgrades are long 

overdue and would show CBP trade personnel that Congress recognizes the high level of 

expertise that these employees possess. 
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Study of Dedicated Funding 

In 2011. the total value of all impons imothe U.S. was more than S2.3 trillion. 

Processing thcse impons meant handling 23 million cntry summaries by CBP Entry Specialists. 

Impon Specialists and suppon stafT. In addition to its security and tradc missions. CBp works 

with ovcr 40 federal agencics to hclp enforce a wide range of laws from consumer product and 

food safety. to environmental protcrtion. It is clear that additional CBp commercial operations 

staffing and training funds arc needed. Multiple proposals to increase customs fees arc currently 

being promoted 10 support a great variety of proposed programs. Security needs. along with 

important national trade policy goals. r(:quire a()()itional financial resources. NTEU encourages 

the Commitl~ .... 10 request a study of the selling. colb:lion an() utilization of these customs and 

user fees. This study should detennine the relationship between current fees and monies 

allocated for CBP services and assess the need for additional fees. 

Condusion 

CuSIOms revenues arc the SC(:ond largest source of federal revenues thaI arc collecled by 

the U.S. Government. Congress depen()s on this revenue source to fund priority programs. 

NTEU commends the Comminee lor conducting this hcaring to review trade compliance and 

enforcement operations at CEP. 

The more than 24.000 CEP employees represented by the NTEU are proud of their pan 

in keeping our country free from lerrorism, our neighborhoods safe from drugs and our economy 

safe from illegaltrnde. 

Thank you for the opponunity to submit this t<,stimony on their behalf. 
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Attachment 2 

[umpll'S of Virtua l \·s. Ph,.sica l [nminalion of Merchandise Challeng("S 

Assigning a tariff number: Cenain handbags that an: coatcd/covcr<..'d wilh plastic carry duty 

rat.-s from 16.7 to 20"10. l)etennining wh.-Ih.-r a handbag is ooatedlcov~'J"Cd with plastic can be 

done only by examining and touching thc bag. Many imponers Iry to cntc·r the bags at a lower 

ratc of duty by claiming the bags arc not eoated/covcred with plastic. RL'Ccntly Congress passed 

speciallcgislation making eenain textile shopping bags free of duty. Impon Spedalists an: 

finding a significant number ofimponers claiming that their te ~tilc bags an: eligible for this free 

duty rate. Howevcr. upon physical examination of the bags, Impon Sp<..'Cialisls find thaI th.-y arc 

coat<'dlcovcn.:d wilh plastic and are not eligible for thc free duty rate. 

Exclusion Orders: There is currently an exclusion order on plastic containers from China that is 

based on the construction of the container and how the lid interlocks with the bollom bowl of the 

comainer. An examiner has to view the actual sample to S« this. In most cases. the comainer has 

to be cut in half so one can see if then.: is any spac.- between the lid and the bowl when: it 

interlocks to sec of it is subjL'Ctto the exclusion order. 

lntellNtual Properl,. Rights Violalions: 

Odow are some examples of physical examination of goods resulting in the seiling of items thaI 

were dl'\'med to be counterfeit: 

Tory Burch: lmpon Spedalists examined an unmarked bag and by removing some textile 

material found a counterfeit Tory Burch trademark. 

Timberland : Impon Specialists examined a pair oflx>ots. Nonnally. the Timberland mark is on 

the sole. By Culling Out a piL'C\: of plastic, a counterfeit Timberland mark was found underneath. 

C hane l: the Chane! mark is interlocking Cs. Imponcrs bring in bags wilh interlocking Os. By 

carefully ~amining the bag. we see where they will be able to remove pan or the 0 and it then 

bt:comcs a bag with interlocking Cs -- a violation of the Chanel ntark. 

Nikc sneakers: Impon Specialists through training from the mark holders and ex)'Crimce ar<: 

able to detennine an item to be counterfeit by cxamining the retail box and the packaging 

matcrial for the sneakers. lmpon Specialists have discovered counterfeits for Air Jordan·s this 

way. Impon Specialists also discovcred other counterfeit Jordan sneakers by knowi ng where to 

cut the sneaker and find the offending mark. Many times you can find counterfeits by smelling 

the item becausc Ihey uSC cheap glue and substandard packaging materials. This must be done by 

physically examining the item and cannot be detennined by viewing photographs. 

Oller cell phone cases: Impon Specialists have becn able to detennine counterfeits by 

examining the packaging. Nonnally the quality is poor and tllat can't be dctcnnincd by a pielllre. 
160 

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