U.S. CONSUMER PRODUCT SAFETY COMMISSION

CPSC Staff Workshop on

Electronic Filing of Certificates

as Included in Proposed Rule

on Certificates of Compliance

AUDIO TRANSCRIPTION

Thursday, September 18, 2014

CPSC Headquarters

4330 East West Highway

Bethesda, Maryland

Diversified Reporting Services, Inc.

(202) 467-9200
2

STAFF:

PATRICIA ADAIR, CPSC

JOHN BLACHERE, CPSC, 

JACQUELINE CAMPBELL, CPSC 

CAROL CAVE, CPSC

JIM JOHOLSKE, CPSC

ELLIOTT KAYE, CPSC

JOHN MULLEN, CPSC

BONNIE NOVAK, CPSC

MARY TORO, CPSC

PANELISTS:

BOB BERCZIK, Food Safety and Inspection Service

ROY CHAUDET, Environmental Protection Agency

ANN COMSTOCK, UPS Supply Chain Solutions

JONATHAN GOLD, Vice President, Supply Chain and Customs 

Policy, National Retail Federation.

ERIKA JONES, Bicycle Products Suppliers Association

ALAN KAUFMAN, Toy Industry Association

MIKE LAHAR, National Customs Brokers and Forwarders 

Association

NANCY MACPHERSON, Lego
3

PANELISTS (Continued):

KATHLEEN MCGUIGAN, Senior Vice President for Legal and 

Regulatory Affairs, Retail Industries Association

MICHAEL MULLEN, Express Association of America

SEAN MURRAY, National Association of Foreign Trade 

Zones

MARK SHACKLETTE, Director, Customs Brokerage 

Compliance, UPS

BRENDA SMITH, U.S. Customs and Border Protection

PARTICIPANTS:

QUIN DODD, independent product safety attorney

HAILEY MANN, American Plastic Toys

SHEILA MILLARD, Keller and Heckman

FRED MILLS-WINKLER, SGS Consumer Testing Labs

TIM SAYLOR, Baby Jogger Company

CHRIS SMITH, IKEA
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C O N T E N T S

ITEM PAGE

I. OPENING REMARKS 5

II. INTRODUCTIONS 9

III. PANEL SESSION 9

JACQUELINE CAMPBELL 10

NANCY MACPHERSON 25

KATHLEEN MCGUIGAN AND JONATHAN GOLD 35

SEAN MURRAY 55

MARK SHACKLETTE 69

ALAN KAUFMAN 78

MIKE LAHAR 87

ERIKA JONES 94

MICHAEL MULLEN 101

IV. QUESTIONS & ANSWERS FOR MORNING SESSION 109

V. OVERVIEW OF CPSC'S RISK ASSESSMENT

 METHODOLOGY 166

VI. AUTOMATED COMMERCIAL ENVIRONMENT (ACE)

FILING REQUIREMENTS AND AGENCY PILOTS PANEL 181

BOB BERZET 203

ROY CHAUDET 214

MIKE LAHAR 227

MARY ANN COMSTOCK 234

VII. QUESTIONS AND ANSWERS FOR AFTERNOON SESSION 244

VIII. CLOSING REMARKS 269
5

1 P R O C E E D I N G

2 I. OPENING REMARKS

3 MS. CAVE: Good morning, everyone, and welcome 

4 to the CPSC Staff Workshop on the Electronic Filing of 

5 Certificates. For those of you who don't know me, my 

6 name is Carol Cave. I'm the Assistant Executive 

7 Director here at the CPSC for the Office of Import 

8 Surveillance.

9 Thank you very much for coming today to this 

10 public workshop on such an important issue. We're 

11 very, very excited to have you all here. Before we get 

12 started, I'd just like to address a few housekeeping 

13 issues. If you can, please take note of the emergency 

14 exits around you in the event we need to exit 

15 expeditiously. If you can, please silence your cell 

16 phones. We have several people on the web, so we don't 

17 want that disturbing their ability to hear and see 

18 what's going on.

19 The restrooms, for those of you who don't 

20 know, are actually located on this floor. They're just 

21 on the other side of the elevators. If you only exit 

22 to use the restrooms or to use your phone in the lobby 
6

1 area, you don't really need to go back through security 

2 when you come back in here. But, if you do leave for 

3 lunch, when you go out, you will need to come back 

4 through security when you return to the Hearing Room.

5 As for lunch, there's several places around 

6 this building to grab something to eat. There's maps 

7 on the tables just outside the hearing room near the 

8 guard's desk, if you're looking for places. We will be 

9 starting promptly at 1:30 after lunch today, so if you 

10 can make your lunch quick to get back through security, 

11 that would be great.

12 As for the workshop itself, we have over 200 

13 participants watching on the web and potentially 150 

14 people in person in this room. The workshop will be 

15 recorded, and Webcast is part of the public record. We 

16 encourage all interested parties to submit relevant 

17 comments through regulations.gov. Written comments on 

18 this must be received by Friday, October 31st of this 

19 year. We will be taking questions from folks on the 

20 webinar and asking those questions as time permits 

21 during the day today.

22 The e-mail for sending those questions is 
7

1 actually on this slide here. It's the e-filing web 

2 address that you see here. The transcript for today's 

3 workshop will be added to the docket at regulations.gov 

4 under the docket number you see here, CPSC-2013-0017. 

5 The PowerPoint presentations will also be available to 

6 everyone on www.slideshare.net/USCPSC.

7 So, why are we all here today? The U.S. 

8 Consumer Product Safety Commission in May of 2013 

9 proposed to require the electronic filing of 

10 certificates for regulated imported consumer products 

11 with U.S. Customs and Border Protection at the time of 

12 filing the CBP entry, otherwise known as the 3661, or 

13 the time of filing the entry or the entry summary, the 

14 7501, if both are filed together.

15 Based on the comments received, staff felt it 

16 was extremely important to host a public workshop that 

17 focused on this specific aspect of the proposed rule. 

18 Shortly after the Commission issued an NPR on May 13th, 

19 President Obama issued an Executive Order, 13659, 

20 streamlining the export/import process for America's 

21 businesses, which require certain federal agencies to 

22 significantly enhance their use of technology to 
8

1 modernize and simplify the trade processing 

2 infrastructure.

3 Specifically, the EO requires applicable 

4 government agencies to use CBP's international trade 

5 data system, or Automated Commercial Environment, 

6 otherwise known as ACE, to create a single window 

7 through which businesses will electronically submit 

8 import-related data for clearance. Participating 

9 agencies have until December of 2016 to establish such 

10 systems, such as ACE, as the primary means of receiving 

11 standardized import data.

12 We are here today to encourage stakeholders to 

13 find common ground to advance CPSC's surveillance 

14 efforts at the ports of entry. The inclusion of any 

15 panelist, product, technology, or data should not be 

16 interpreted as endorsement or the approval of the views 

17 contained by either the Commission or the staff. CPSC 

18 are not answering questions today but here to listen.

19 This workshop is about new developments and 

20 new information. The workshop is about developing 

21 dialogue to move forward and not stay behind. We will 

22 speak to each other and not at each other, and we will 
9

1 keep an open mind while being respectful to each other.

2 II. INTRODUCTIONS

3 Special thanks goes to the CPSC team, 

4 specifically Celestine Kish, Mary House, Jacqueline 

5 Campbell, among many others who have made today 

6 possible. Thank you to our partners at CBP, 

7 specifically Brenda Smith, and the other participating 

8 government agencies, Roy Chaudet from EPA, Mary 

9 Stanley, and Bob Berczik from FSIS, who agreed to take 

10 time out of their extremely busy schedules to further 

11 the vision of the one U.S. government at the border. 

12 Last, but not least, a special shout out to our 

13 stakeholders who volunteered to participate in this 

14 valuable workshop today.

15 III. PANEL SESSION

16 Our first speaker this morning is Jacqueline 

17 Campbell, the project manager for the 1110 rule. She 

18 will give a quick overview of the current testing and 

19 certification requirements, and then we will jump right 

20 in to public comments and concerns.

21 At the end of each session, staff will ask 

22 panelists questions, and folks in the audience can step 
10

1 to the microphone, which is located on your left of the 

2 conference room, to ask questions. We do ask that 

3 those of you who do come to the microphone, please 

4 identify your name and your company.

5 I look forward to hearing our speakers today 

6 and hope to gain a better understanding of the 

7 challenges that certifiers encounter. Thank you.

8 Jacqueline, I welcome you to the podium.

9 PRESENTER: JACQUELINE CAMPBELL

10 MS. CAMPBELL: Thank you, Carol. Can everyone 

11 hear me okay? Yes? Okay, great.

12 Good morning. As Carol mentioned, my name is 

13 Jacqueline Campbell. I'm a member of the CPSC staff 

14 and serve as the project manager for the update to the 

15 certificate rule, codified at 16 CFR part 1110. Now, I 

16 will say this is a lot of dry information.

17 I'm going to be providing an overview of the 

18 requirements for certificates of compliance. I want to 

19 make sure that we all have this information to have 

20 kind of a baseline understanding of what the 

21 requirements are so that that can inform our discussion 

22 for the rest of the day.
11

1 Before I get started, I do want to point out 

2 -- I guess I should get my slides first. Before I 

3 want to get started, I do want to point out, as Carol 

4 did, this is a CPSC staff presentation and has not been 

5 reviewed or approved by and may not reflect the views 

6 of the Commission.

7 During my presentation this morning, three 

8 main topics will be covered. We'll review the 

9 statutory requirements regarding certificates. 

10 Basically, the what, when, who, and how of certificates 

11 that are dictated by Congress. Next, we will cover the 

12 regulatory requirements for certificate, both in the 

13 existing 1110 rule and some of the proposed amendments 

14 to the rule that relate to our workshop today. 

15 Finally, we will discuss considerations related to 

16 electronic filing of certificates.

17 Section 14(a) of the CPSA, as amended by the 

18 CPSIA, states that all regulated consumer products must 

19 be tested and certified as compliant with any 

20 applicable consumer product safety rule under the CPSA 

21 or similar rule, ban, standard, or regulation under any 

22 other law enforced by the Commission.
12

1 The authority covers requirements for testing 

2 and certification for regulated non-children's and 

3 children's products. Furthermore, section 3 of the 

4 CPSIA grants the Commission the authority to implement 

5 the requirements of the Consumer Product Safety 

6 Improvement Act of 2008. The statute defines what a 

7 certificate is, when it is needed, and who issues it.

8 A certificate certifies two things; one, that 

9 a regulated consumer product has been tested and two, 

10 based on the results of that testing, the product 

11 complies with any applicable rules, bans, and 

12 standards. There are different requirements for 

13 certification for children's versus non-children's 

14 products which will be discussed at a later slide.

15 The CPSA requires two types of certificates, 

16 General Conformity Certificates, or GCCs, for 

17 non-children's products and Children's Product 

18 Certificates, or CPCs, for children's products based on 

19 third party testing. The Commission created a third 

20 type of certificate through the 1109 rule, a component 

21 part certificate, which is not required and will be 

22 discussed in more detail later in the presentation.
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1 One of two types of certificates is 

2 statutorily required for regulated consumer products, 

3 based on the product and the age of its intended user. 

4 A GCC is required for any non-children's regulated 

5 consumer product. It is based on a test of each 

6 product or a reasonable testing program, sometimes 

7 referred to as an RTP. Testing can be performed by a 

8 first party or in-house testing laboratory.

9 Additionally, the requirements of a reasonable 

10 testing program are not very prescriptive and can be 

11 designed to best accommodate a product or process 

12 unless it's otherwise specified in a regulation. This 

13 requirement is laid out in section 14(a)(1) of the 

14 CPSA.

15 A CPC is required for any regulated consumer 

16 product intended primarily for children 12 years old or 

17 younger. It is based on testing performed by a 

18 CPSC-accepted third party laboratory. This requirement 

19 is laid out in section 14(a)(2) of the CPSA.

20 Additionally, periodic testing and material 

21 change testing is required for these products and may 

22 require issuance of a new certificate. Both 
14

1 certificate types must comply with the certificate 

2 requirements in 16 CFR part 1110.

3 Now that we have covered what a certificate is 

4 and the types of certificates available, let's discuss 

5 specifically what products require certificates. Not 

6 all consumer products require a certificate. Only 

7 regulated consumer products that are imported for 

8 consumption, or warehousing, or that are distributed in 

9 commerce require certificates.

10 A regulated consumer product is defined as a 

11 product subject to a consumer product safety rule under 

12 the CPSA or similar rule, ban, standard, or regulation 

13 under any other law enforced by the Commission. While 

14 our topic today is based on imports, this requirement 

15 also includes domestically manufactured products.

16 There are a number of cases where certificates 

17 are not required for consumer products. Certificates 

18 are not required for products that are not subject to a 

19 consumer product safety rule. If there is no rule, 

20 standard, or ban to which a product is subject, the 

21 product does not require a certificate.

22 Certificates are not required for products
15

1 subject to a rule under section 15(j), because the 

2 Commission has determined that these rules are not 

3 consumer product safety rules that require testing and 

4 certification to the voluntary standards.

5 The Commission has issued two rules under 

6 section 15(j), drawstrings in children's upper 

7 outerwear and immersion protection on hair dryers. 

8 These products are required to conform to the voluntary 

9 standard, but they do not need to be certified. 

10 However, note that there may be other rules to which 

11 these products may need to be certified. For example, 

12 for children's upper outerwear, you'd likely need to 

13 certify that product to the general wearing apparel 

14 rule, 16 CFR part 1610.

15 As stated in the previous slide, products 

16 imported for consumption, warehousing, or distribution 

17 in commerce require a certificate. If a product is 

18 imported for reasons other than immediate or future 

19 consumption, a certificate is not required. For 

20 example, component parts intended to be integrated into 

21 or assembled with a finished product do not require a 

22 certificate if they will not be sold individually.
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1 The certificate is required for the finished 

2 product. However, just because a certificate is not 

3 required does not mean that compliance is not required. 

4 If a product is a component part of a children's 

5 product, a plastic toy, for example, it still must 

6 comply with any applicable rules such as lead or 

7 phthalate content. If these products are introduced 

8 into commerce later, a certificate would be required at 

9 that time.

10 Who is responsible for issuing a certificate, 

11 and when do they do it? The statute requires that 

12 manufacturers, importers, and private labelers are 

13 responsible for issuing certificates for finished 

14 products. Certificates need to be issued before 

15 products are imported or distributed in commerce.

16 Certificates have a number of statutory 

17 requirements in terms of content, form, and 

18 availability. The statute states that minimum 

19 certificate content requirements -- Congress requires 

20 that a certificate include some way to identify the 

21 product, a list of all rules to which the product is 

22 subject, the identity of the entity issuing the 
17

1 certificate, and the laboratory that performed 

2 testing -- in the case of a children's product, this 

3 would be a CPSC-accepted third party laboratory -- the 

4 dates when and location where the product was 

5 manufactured and tested, each party's name, full 

6 mailing address, and telephone number, and finally, the 

7 contact information for the individual responsible for 

8 maintaining the records of test results. The statute 

9 requires certificate content to be legible and in 

10 English. The certificate may have the same content in 

11 another language.

12 Congress included three requirements for 

13 certificate availability in the statute. Certificates 

14 must accompany the product or shipment of products 

15 covered by the certificate, be furnished to each 

16 distributor or retailer of the product, and be 

17 furnished by the issuer to the Commission upon request.

18 Finally, the statute allows the Commission to 

19 work with Customs and Border Protection to implement 

20 electronic filing of certificates up to 24 hours before 

21 a product arrives at the port.

22 That concludes the statutory requirements 
18

1 dictated by congress for certification. Now, we'll 

2 discuss the existing and proposed rule for

3 certificates, 16 CFR part 1110.

4 After the CPSIA was enacted, the Commission 

5 issued a direct final rule on certificates of 

6 compliance in November of 2008. The existing rule 

7 essentially codifies the minimum statutory requirements 

8 for certificates but limits who is required to certify 

9 a product to importers for products manufactured 

10 outside the U.S. and manufacturers for domestically 

11 manufactured products, unless otherwise specified in a 

12 rule. Additionally, it allows for electronic 

13 certificates.

14 In addition to the 1110 rule for certificates, 

15 the Commission has issued two other rules concerning 

16 testing and certification, 16 CFR parts 1107 and 1109. 

17 Both rules were issued in November 2011, but 1107 was 

18 not effective until February 2013.

19 1107 is the testing and certification rule. 

20 This rule codifies certification, material change, and 

21 periodic testing requirements for children's products. 

22 The 1109 rule, also known as the component part rule, 
19

1 allows for the testing or certification of component 

2 parts that can be used as the basis for certifying a 

3 finished product.

4 Importantly, the 1109 rule also allows a 

5 certifier to rely on another party's testing or 

6 certification to issue a certificate, as long as the 

7 certifier exercises due care. This means, for example, 

8 that an importer can rely on the testing or 

9 certification issued by another entity, such as a 

10 manufacturer or retailer, to issue their own 

11 certificate as long as the importer exercises due care.

12 Component part certificates were created by 

13 the 1109 rule. Any party can issue this type of 

14 certificate as long as it meets the requirements of 16 

15 CFR part 1109. For example, a paint manufacturer can 

16 issue a certificate for its paints that can then be 

17 used as the basis for a GCC or a CPC for a finished 

18 product.

19 Additionally, a foreign manufacturer may issue 

20 a component part certificate on a finished product that 

21 can be used by an importer or private labeler as the 

22 basis for a GCC or a CPC. In all cases, the certifier 
20

1 must exercise due care when using a component part 

2 certificate as the basis for a GCC or a CPC.

3 The NPR to amend 1110 would require that 

4 component part certificates meet the form, content, and 

5 availability requirements set out in part 1110. While 

6 these certificates would serve as supporting documents 

7 for a GCC or CPC, they would not need to be filed with 

8 Customs.

9 As noted earlier in the presentation, the 

10 existing certificate rule was finalized in 2008. As we 

11 have discussed, other CPSIA-related rules have been 

12 promulgated since that time. These rules influence the 

13 certificate rule because they introduce new terms and 

14 requirements that were not in place at the time that 

15 1110 was first published, such as the creation of 

16 component part certificates.

17 In response, the Commission published a notice 

18 of proposed rule-making in May 2013 to amend the 1110 

19 rule in light of the related rules for testing and 

20 certification, by defining new terms such as finished 

21 product, finished product certifier, and component part 

22 certificate, as well as to implement section 14(g)(4) 
21

1 of the CPSA, which allows the Commission to implement 

2 electronic filing of certificates.

3 Under the CPSA, a certificate must be issued 

4 by a manufacturer, importer, or private labeler. Since 

5 the existing 1110 rule was issued in 2008, the CPSC has 

6 required the importer to certify imported consumer 

7 products. The NPR would continue to require that the 

8 importer certify imported products. The NPR defines an 

9 importer as the importer of record but does not alter 

10 the requirement that the importer certify an imported 

11 product.

12 To meet the statutory requirements that 

13 certificates accompany applicable products or shipments 

14 of products, the existing 1110 rule provides for paper 

15 or electronic certificates. Compliant shipments 

16 typically place the certificate in the shipping carton 

17 or have a clearly marked URL where the certificate 

18 information can be viewed.

19 The NPR would require that to meet the 

20 accompany requirement, certificates be filed 

21 electronically with CBP at the time of filing the CBP 

22 entry or at the time of filing the entry and entry 
22

1 summary, if both are filed at the same time. For all 

2 other purposes, such as providing certificates to 

3 retailers or distributors, the certifier can continue 

4 to use either paper or electronic certificates such as 

5 a URL.

6 The issue of electronic filing is one of 

7 efficiency for both the agency and stakeholders. With 

8 electronic filing of certificates for imported consumer 

9 products through CBP's Automated Commercial Environment

10 interface, or ACE, CPSC can pull data into our risk 

11 assessment system, which my colleague, John Blachere, 

12 will tell you more about this afternoon.

13 CPSC can use the data to expedite clearance of 

14 shipments, identify high risk cargo for port 

15 inspections, conduct enforcement actions of imported 

16 products more effectively, use data to assess risk and 

17 set agency goals, and finally, to meet the objectives 

18 of Executive Order 13659 to simplify the process of 

19 exporting and importing goods into the United States.

20 The NPR discussed two data types, portable 

21 document files, or PDFs, and data elements. The 

22 Commission prefers data elements so that the 
23

1 information can be loaded seamlessly into our database 

2 system and used to perform analysis.

3 PDF files are not a substantial improvement 

4 over paper certificates because the data cannot be 

5 aggregated and summarized and used beyond each 

6 individual shipment. Based on the comments we received 

7 on the NPR, it appears that most stakeholders who 

8 discussed this issue agreed that data elements are 

9 preferable.

10 The agency recognizes that this process will 

11 not take place overnight. Electronic filing will 

12 require a phased implementation and software upgrades 

13 on the part of the agency and its stakeholders. 

14 Additionally, because this effort is a partnership with 

15 CBP, CPSC will work closely with CBP making use of 

16 their technology and experience in implementing 

17 electronic filing with other government agencies.

18 In summary, we reviewed the statutory 

19 requirements for certificates which are the minimum 

20 conditions set forth by congress in section 14 of the 

21 CPSA. We discussed proposed amendments in the NPR for 

22 16 CFR part 1110, including electronic filing of 
24

1 certificates with CBP. And finally, we highlighted 

2 some specific issues related to electronic filing about 

3 which we hope to gain more knowledge during our 

4 workshop today.

5 In closing, I invite you to submit any 

6 comments you have on this topic to regulations.gov, and 

7 we'll give you the docket number multiple times over 

8 the day. It's also on your agenda. Now, I'm going to 

9 hand over the presentation to Patty Adair who will be 

10 moderating the next session of stakeholder 

11 presentations. Thank you very much.

12 (Applause)

13 MS. ADAIR: Thank you, Jacqueline, for that 

14 really excellent presentation. My name is Patty Adair. 

15 I'm on the CPSC staff. Good morning, everyone. I'm 

16 going to moderate this session. This morning's session 

17 is the stakeholder's presentations. One thing I want 

18 to say right away is we really appreciate the 

19 stakeholders being here and taking time to give these 

20 really very excellent presentations.

21 I'm just going to do a little quick 

22 housekeeping. Each presentation should last about 10 
25

1 minutes. We want to keep to the time. I'm going to 

2 give everybody, when we get to about two minutes left, 

3 I'll give everybody a two-minute warning. It's not a 

4 peace sign; it's two minutes.

5 Then, after the third presentation, we're 

6 going to take about a five-minute break. With the 

7 number of people in the room, it's not enough, really, 

8 to do a whole lot other than just get up and stretch. 

9 But, hopefully, that will be worth it for everyone to 

10 have a five-minute break.

11 Then we'll go into the next five 

12 presentations. This will allow us time to have a good 

13 question and answer session at the end. We'll go 

14 through the protocol of asking questions at that point.

15 So, our first presenter, and let me get your 

16 presentation up here, I want to welcome our first 

17 presenter, Nancy MacPherson with Lego. Thank you, 

18 Nancy.

19 PRESENTER: NANCY MACPHERSON

20 MS. MacPHERSON: Good morning, everyone. I'm 

21 very happy to be here. I think one of the reasons why 

22 we wanted to present some information today is we know 
26

1 how important it is for the staff to get some facts and 

2 figures. The part about this is that we've been living 

3 in this space for six years, so we're able to put 

4 together some information, which is why we have some 

5 concerns about some of the proposals.

6 You'll see that I'm the Director of External 

7 Relations, but the reality is for most of my crew at 

8 Lego, I was the Director of Quality and Compliance. 

9 So, I lived and breathed every aspect of CPSIA, every 

10 FAQ, every e-mail. So, those are the kinds of things 

11 that both I and Lego bring to this.

12 To simplify things, I'll tell you that we are 

13 the brand owner, we are the manufacturer, we are the 

14 importer, and we are the distributor. That is probably 

15 not the case for most people. But that gives us, like 

16 everyone else who has a supply chain, a unique set of 

17 processes that they have to accommodate as we go 

18 forward here.

19 So, I'm going to start with -- CPSC had asked 

20 if we would address our current procedures and how we 

21 do certificates, how our certificate accompanies the 

22 product, and also the challenges that providing 
27

1 information 24 hours ahead of time might propose or 

2 might pose for us.

3 So, I've put four concerns here. I want to 

4 talk, really, about three of them. The fourth one we 

5 just sort of address because it was part of the ask, 

6 but I don't have really a lot more to say than is 

7 written here.

8 I think the three things that we are really 

9 concerned about are some of the assumptions that are 

10 used in terms of the burden that this would propose. 

11 I'll show some numbers. The other piece is we do 

12 utilize a Foreign Trade Zone as part of our import 

13 process, and we have some concerns about the fact that 

14 that's not addressed about times of import, things like 

15 that.

16 Then, as I was saying, the process 

17 flexibility, there is no single supply chain or import 

18 process. We've had this kind of discussion through 

19 many of the aspects of CPSIA. Hopefully, we can show 

20 that there are different ways to provide both CPSC and 

21 CBP the information that you need.

22 So, with Lego, it's always facts and numbers, 
28

1 how many bricks we make and all that. But I think this 

2 hopefully will help to tell the story. Ninety percent 

3 of what we sell in the U.S. we produce at our own 

4 factory in Mexico, in Monterrey. We move it across the 

5 border in Texas into a distribution center outside of 

6 Dallas, which is an FTZ.

7 The 2013 activity and 2014, which is good for 

8 us, it's higher, is that every week we ship a million 

9 and a half finished goods from the factory. We use 80 

10 to 160 trucks per week, depending upon the season and 

11 how much we're producing.

12 When we get to the DC and our order management 

13 people process orders, we ship out 100 to 150 trucks, 

14 which is from an FTZ, our point of import. We have 

15 1,150 SKUs in an average season, in high season about 

16 1,500 SKUs. Of course, each of those would have its 

17 own certificate.

18 So, this is what concerns us. When we look at 

19 some of the assumptions that are used in the proposed 

20 rule, it's talking about very small volumes of 

21 shipments, it's talking about very small volumes of 

22 certificates. If you look at what we would do in a 
29

1 high season week, we are importing 1,500 products per 

2 week. That's 1,500 certificates. That's 15,000 data 

3 elements. Then, the next week, we're going to ship 

4 some other variation of those 1,500.

5 Is the responsibility going to be there to 

6 continually have to provide this information 24 hours 

7 in advance? Also recognize that we're shipping it out 

8 of an FTZ. So, that's typically how we react at a toy 

9 company, but things do get better.

10 I'm not going to go through this in great 

11 detail because certainly the time, but there's three 

12 points I want to make here. This is our little flow of 

13 goods, and our little trucks, and little CPSC 

14 inspectors, and all of that. If you've got to put a 

15 presentation together, you've got to have a little fun 

16 with it.

17 The accompany part, and I'm going to get into 

18 our certificate process in just a minute, but our 

19 products are accompanied by the certificate from the 

20 moment that they come off the production line, but it 

21 happens even sooner. This is the complexity.

22 We've all figured out how to integrate 
30

1 certification in all of the testing into our processes. 

2 When we create that master data on that item, the 

3 virtual item is created a year before we produce it. 

4 At that time, we created a unique certificate number 

5 and the URL for that.

6 So, that follows it through the system from 

7 the moment the item is created until the retailer opens 

8 the box at the end. The reason we've had to do that is 

9 because of the numbers that I've shown you. How else 

10 could we ensure that the certificate would accompany?

11 So, that's the first part. The second part is 

12 it crosses the border. The FTZ status is important to 

13 us, and here's why. Fifty percent of our product turns 

14 over every year. It's new. So, the first time we run 

15 that item, we're producing it in the factory. It comes 

16 off the end of the line. Remember, we're running 

17 multiple lines.

18 The quality folks do all our checks, check it 

19 out, make sure it's good. At the same time, they 

20 sample the finished goods to go to the third party lab. 

21 To continue the process flow, those go on trucks. 

22 Those go across the border physically. They go into 
31

1 the FTZ.

2 They go into the FTZ on QA status hold so they 

3 cannot ship. And they cannot ship until the test 

4 report comes in, and our quality team goes into the 

5 system, says the certificate can now be released, you 

6 know, the URL is there. It's now released, and it 

7 verifies that the item comes off hold and that the 

8 certificate is available. That's the point at which 

9 we, as the importer, certify it.

10 So, the FTZ is important to us. Now, when 

11 that item runs again, the certificate will be live. 

12 But the thought of having to create racks, and trucks, 

13 and things to literally hold that in the country, when 

14 we have the FTZ, that's why the other guy looked like 

15 he looked.

16 Then, the last piece is really making sure 

17 that the understanding of the point of import is well 

18 defined, because, as I said earlier, we are sending a 

19 lot of trucks out every week with a variety of 

20 products. I know that there's a gentleman -- I think 

21 you must be him because you're smiling. You're the FTZ 

22 association. So, I just wanted you to know that.
32

1 So, our process, we believe, certainly the 

2 certificate accompanies. We also believe that it can 

3 be available to CBP and accessed 24 hours ahead of 

4 time. I will show you why. Here's the visual. This 

5 is the master carton which has the certificate on it on 

6 that little label. This is what the label looks like. 

7 If you look at the top of the label, you will see the 

8 e-cert number. I'll blow it up over here. But there's 

9 the number. There's the production.

10 We actually give you the web site. If this 

11 was hooked to the network, I would go in, but I didn't 

12 know if it would be. We actually do our certificate 

13 literally right off of our home page. So, it brings up 

14 this sheet right here. You can enter a UPC, you can 

15 enter an item, you can enter a little princess, or 

16 whatever the set is, and then that will bring you to 

17 the certificate. That's how we do it.

18 But we do it that way -- and I know there are 

19 concerns. We are the factory. We don't have a problem 

20 putting our name on our certificate. We don't have a 

21 problem not having a password. But that's us, and 

22 that's because of our process.
33

1 So, this information is here. So, if that web 

2 site is available, then you can simply go in and you 

3 can bring the certificate up. The data elements are 

4 there. So, I guess the point is, if you had another 99 

5 companies up here in addition to me, you would hear 99 

6 different stories. I think every aspect of CPSIA, as 

7 we've tried to implement it, I think we have asked for 

8 and in many cases have been very happy to get some 

9 flexibility in how we do this. But I wanted to be real 

10 clear on the numbers involved here. This is the kind 

11 of thing that in our supply chain would really concern 

12 us about some of the current proposals.

13 So, at this point here, we actually also offer 

14 to CPSC and CBP and our retailers, if they want the 

15 test reports, they can actually go in. I will tell you 

16 that I haven't looked in about three months, but since 

17 this system went live, which is probably five years 

18 ago, we've had thousands of people, we don't know who, 

19 have gone in and looked at our certificates. So, it 

20 seems as if people who want to see them are able to see 

21 them. So, that's really, again, in respect for the 

22 time, I just wanted to put that information out.
34

1 So, our recommendations, really, are two. We 

2 will likely submit more detailed comments for October. 

3 But it's really providing flexibility. I think what I 

4 pull out of the proposed rule is that CPSC, again, as 

5 someone who has read every line of CPSIA at least 100 

6 times, I find lines that I like. This one I like. 

7 CPSC is considering allowing but not requiring the 

8 certificates to be filed in advance.

9 So, we certainly hope for that level of 

10 flexibility. Also, very important is that the FTZ 

11 process is including when an item is imported, are 

12 recognized, and integrated into any of the rule 

13 changes.

14 With that, I thank you very much.

15 (Applause)

16 MS. ADAIR: Thank you, Nancy.

17 Next up we're going to have Kathleen McGuigan 

18 and Jonathan Gold. We're going to do a joint 

19 presentation of the Retail Industry Leader's 

20 Association and the National Retail Federation. Let me 

21 get your presentation up here.

22 MR. GOLD: Good morning. We're going to be 
35

1 going back and forth, so this might be a little bit 

2 awkward at times, but we're both up here.

3 MS. McGUIGAN: I didn't anticipate standing at 

4 the podium, so we're improvising.

5 PRESENTERS: KATHLEEN MCGUIGAN AND JONATHAN GOLD

6 MR. GOLD: Again, good morning. My name is 

7 Jonathan Gold, and I'm the Vice President, Supply Chain 

8 and Customs Policy from the National Retail Federation. 

9 NRF is the world's largest retail trade association, 

10 representing all formats of retail from the United 

11 States and more than 45 countries.

12 Retail is the nation's largest private sector 

13 employment, supporting one in four U.S. jobs. That's 

14 42 million working Americans contributing $2.5 trillion 

15 annually to the GDP. Retail is a daily barometer for 

16 the nation's economy.

17 MS. McGUIGAN: And I'm Kathleen McGuigan, 

18 Senior Vice President for Legal and Regulatory Affairs 

19 for the Retail Industries Association. Our members 

20 include the fastest and most complex companies within 

21 the retail industry, including retailers, product 

22 manufacturers, and service providers, which together 
36

1 account for $1.5 trillion in annual sales. RILA and 

2 NRF members combined import a substantial and growing 

3 number of the consumer products that are sold to U.S. 

4 customers today.

5 I want to thank the Commission and CPSC staff 

6 for holding this important workshop and for 

7 reconsidering the initial proposal to amend the 1110 

8 rule in the interim. We share the CPSC's goal of 

9 ensuring the safety of all consumer products sold to 

10 U.S. consumers.

11 Today, we hope to engage in constructive 

12 discussion of the retail industry's concerns and 

13 suggestions for moving forward, and we hope to hear 

14 some few clarifications from the CPSC regarding the 

15 proposed rule. We offer our comments from the 

16 perspective of our members who have demonstrated a 

17 track record that product safety is of the utmost 

18 importance to industry.

19 Our presentation will cover four areas. We 

20 will highlight some of our concerns for the proposed 

21 rule, discuss the current and expected future import 

22 processes, detail retailers current certification and 
37

1 recordkeeping practices and the cost burden of the 

2 proposed electronic filing, and provide the CPSC with 

3 specific recommendations for moving forward.

4 MR. GOLD: While we wholeheartedly and fully 

5 support CPSC's mission of product safety, we do not 

6 believe the proposed rule will efficiently and 

7 effectively enhance the agency's risk targeting 

8 efforts. We anticipate the proposed rule will impose 

9 significant burdens and cause confusion among both the 

10 trade and relevant federal agencies with regard to the 

11 rule's integration into the increasingly complex and 

12 evolving U.S. import regulatory system.

13 The proposed rule is unclear as to the exact 

14 issues or problems the agency is trying to correct, the 

15 objectives it is trying to achieve, and the specific 

16 means by which it can achieve them. Given the 

17 potentially wide-ranging impact of the proposal on 

18 CPSC, CBP, and the industry at large, retailers believe 

19 there is insufficient justification for complete 

20 rewrite of the existing on-demand certification system 

21 that has generally worked well for the past six years.

22 MS. McGUIGAN: Retailers have very strong 
38

1 concerns about the operability of the proposed new 

2 certification rule, especially the proposal to mandate 

3 affirmative filing certificates with CBP as part of a 

4 condition of entry for consumer products subject to one 

5 or more of the CPSC's mandatory rules.

6 Given the difficulty with which federal 

7 agencies have struggled with implementing recent 

8 congressional mandates regarding imports, retailers are 

9 understandably concerned whether CPSC, CBP, and the 

10 import system overall can handle and achieve 

11 demonstrable safety advances from the receipt and 

12 processing of potentially millions of product 

13 certificates or data fields annually.

14 MR. GOLD: In addition, it's unclear whether 

15 CPSC possesses or is likely to possess the resources 

16 and personnel necessary to develop and implement the 

17 complex IT systems that would be required. If the 

18 approach contemplated by the proposal is reliant or 

19 contingent upon congressional authority to implement 

20 import user fees or other new funding sources, the 

21 agency should refrain from moving forward unless and 

22 until those new resources are approved and received.
39

1 I also want to note that while the notice for 

2 this workshop indicated that CPSC's risk assessment 

3 methodology and proposed import user fee are not part 

4 of today's discussion, we believe that CPSC must engage 

5 with stakeholders to discuss these issues in the 

6 context of the objectives of the proposed rule and 

7 means to achieve those objectives. These issues are 

8 all interrelated and need to be discussed as such.

9 MS. McGUIGAN: Retailers’ business models rely 

10 upon efficient and predictable global supply chains. 

11 Electronic filing of import documentation is more 

12 efficient and cost effective than the filing of paper 

13 entries, which is why CBP and companies are moving 

14 towards a paperless environment.

15 For a majority of our members, over 95 percent 

16 of their import entry documents are filed manually 

17 through CBPs Automated Commercial Environment, or ACE, 

18 system. For a few of our members, 100 percent of their 

19 Customs entries are paperless entries. The timely 

20 clearance of cargo is critical for retailers and other 

21 importers in order to meet their just-in-time 

22 strategies.
40

1 Air cargo Customs entries can be filed once 

2 wheels are up at the point of origin. Truck and rail 

3 cargo entries can be filed shortly before crossing the 

4 border. For ocean carriers, importers can, but are not 

5 required, to file Customs entries up to five days prior 

6 to arrival at the port. As a result, CBP is often able 

7 to process the entry and clear the shipment in advance 

8 of the good's arrival at the port.

9 Retailers and other importers have made 

10 significant investments in developing IT systems to 

11 support these electronic filings and have worked 

12 closely with CBP to ensure that the process is as 

13 streamlined as possible.

14 If the CPSC moves forward with its proposal, 

15 it should work within the existing framework and time 

16 lines for the filing of entry-related information and 

17 not develop inconsistent and potentially incompatible 

18 requirements.

19 MR. GOLD: This position is fully supported by 

20 the Executive Order which was issued by President Obama 

21 earlier this year, which we strongly support. The 

22 Executive Order establishes a single window at the 
41

1 border and requires that all entry- and export-related 

2 documentation, including documentation required by the 

3 CPSC, be filed through the international trade data 

4 system, or ITDS.

5 The single window will allow agencies to 

6 target high risk merchandise through the collection of 

7 key data elements and improve enforcement of safety 

8 regulations at the ports while facilitating the timely 

9 entry and clearance of legitimate trade. It is 

10 critical that the CPSC take a leadership role on the 

11 execution of the Executive Order.

12 In order to do so, CPSC must first answer 

13 several important questions. First, does the proposed 

14 rule align with the risk management objectives of the 

15 Executive Order? As currently drafted, we do not 

16 believe that it does so in an efficient and effective 

17 manner.

18 The proposed rule could require the filing of 

19 the certificates of conformity initially in PDF format 

20 and then ultimately through the filing of electronic 

21 data fields through the use of the ACE PGA messaging 

22 sets. This will require importers to file or input 
42

1 information, such as the name of the importer and 

2 manufacturer, which is already available to the CPSC as 

3 part of the current Customs entry file.

4 The CPSC is currently working with other 

5 agencies as part of the Border Interagency Executive 

6 Committee, the BIEC, which is charged with 

7 implementation of the Executive Order. We encourage 

8 the CPSC to work with the BIEC subcommittee on risk 

9 management to ensure that risk assessment methodology 

10 is aligned with the risk principles to be established 

11 by the subcommittee. The CPSC will then be able to 

12 determine what data, if any, it needs from certificates 

13 of conformity to enhance its RAM.

14 MS. McGUIGAN: The Commission also needs to 

15 detail specifically how its proposal will work with and 

16 be integrated into the single window. How will the 

17 electronic filing of certificates be accomplished? The 

18 retail industry strongly opposes a requirement to 

19 electronically file PDF certificates and as an interim 

20 step prior to filing electronic data fields.

21 As John previously discussed, we believe that 

22 the CPSC should strategically target and only require 
43

1 importers to file those specific data fields that are 

2 necessary for CPSC's risk management methodology. We 

3 do not feel that the CPSC can make effective use of 

4 potentially millions of PDF certificates presumably 

5 submitted via CBP's document imaging system. These 

6 documents are not searchable efficiently and therefore 

7 cannot be effectively used in a way to meaningfully 

8 enhance risk-based targeting.

9 In addition, moving to an interim system and 

10 method of filing of certificate and then eventually 

11 moving to a second method of electronic filing of data 

12 elements at a later time would only double the burden 

13 and cost associated with these new requirements on both 

14 the agency and effective industries.

15 Because the proposed requirement for PDF 

16 certificates would place significant burdens on 

17 retailers with little or no benefit to the agency, the 

18 CPSC should not move forward in that direction.

19 MR. GOLD: If electronic filing of the CPSC 

20 certificates is to go forward via data elements filing 

21 process, then only those data elements that are truly 

22 necessary to enhance risk assessment and product safety 
44

1 should be required, and only after the agency has ruled 

2 out other less burdensome ways to obtain the 

3 information. It is critical that the agency work 

4 closely with the trade on development and 

5 implementation of such a rule.

6 Such a partnership, of which this workshop is 

7 only the first step, will help CPSC better understand 

8 the conflicts of a global supply chain that retailers 

9 and other importers deal with on a daily basis.

10 MS. McGUIGAN: Now, I'd like to turn to 

11 providing some information regarding retailer's current 

12 certification processes, and recordkeeping practices, 

13 and the cost for another proposed electronic filing. A 

14 survey of our joint membership has revealed that 

15 retailers use a variety of methods to issue and 

16 maintain certificates for imported products.

17 Let me just provide just two examples. The 

18 vast majority of retailers use third party testing labs 

19 to conduct product safety testing of children's and 

20 general use products. The retailer or the third party

21 testing lab on behalf of the retailer will issue a 

22 certificate of conformity based on a passing test 
45

1 report.

2 In one scenario, the lab notifies the foreign 

3 supplier of the passing test results and maintains 

4 copies of the test reports and certificates of 

5 conformity in the lab's IT system. The foreign 

6 supplier includes the test report number on the 

7 contracting invoice which in turn becomes part of the 

8 support documentation for the entry for one or more 

9 shipments. So, this test report can be supporting 

10 documentation for multiple shipments.

11 Under this scenario, the certificate of 

12 conformity is not tied to a specific entry. Instead, 

13 upon demand, the importer can produce the certificate 

14 of conformity by referencing the test report number on 

15 the invoice and retrieving it from the lab's IT 

16 systems.

17 A few importers require that a copy of the COC 

18 in paper or PDF format be part of the custom's entry 

19 support documentation. The CPSC has access to copies 

20 of these certificates that are part of paper entries. 

21 However, as we discussed earlier, the vast majority of 

22 our members file Customs entries electronically and, 
46

1 therefore, only file the required data fields. If the 

2 CBP or CPSC has questions about a paperless entry, the 

3 importer provides the additional documentation, 

4 including certificates, upon request.

5 Retailers also use multiple methods to 

6 maintain their certificates. Over 50 percent of our 

7 members maintain certificates on an internal IT system. 

8 Between 30 and 40 percent of our members use third 

9 party service providers, such as testing labs, to store 

10 and maintain their certificates on their behalf. A 

11 small percentage maintain paper copies of their 

12 certificates.

13 It's critical to note, however, that the 

14 certificates that are currently being maintained either 

15 in paper or PDF format, and they are not being 

16 maintained in data field format that can be transmitted 

17 electronically. Additionally, for the majority of our 

18 members, their certificate or COC storage systems are 

19 separate and distinct from their IT system's use for 

20 Customs entries. Most critically, only two members out 

21 of our total combined membership indicated that their 

22 COC storage systems currently have the capacity to 
47

1 interface with and transformation to their import entry 

2 IT systems.

3 MR. GOLD: The burden and cost of developing 

4 and implementing new IT systems to transform specific 

5 components of the certificates into data fields and tie 

6 those data fields to import entry systems would be 

7 substantial. To understand the magnitude of the 

8 burden, we believe it would be helpful to provide the 

9 CPSC with information regarding the volume of retail 

10 imports.

11 In a joint survey of our members company's 

12 total annual import FOB value ranged from $300,000 to 

13 over $10 billion per year. The number of Customs 

14 entries filed annually ranged from 1,500 to 270,000. 

15 Over 60 percent of our members file consolidated 

16 entries where one customs entry covers multiple 

17 shipments.

18 The number of entry lines or individual 

19 products listed on an entry ranged from 1 line to over 

20 1,000 lines. The total percentage of imports to CPSC's 

21 requirements range from a low of 10 percent to a high 

22 of close to 90 percent. Our members issue an average 
48

1 of 10,000 certificates of compliance annually in 

2 connection with imported merchandise.

3 The overwhelming majority of our members 

4 currently do not have a process in place to connect or 

5 attach certificates to individual Customs entries. 

6 Your processes will need to be developed to comply with 

7 any at-entry filing requirement.

8 Their survey also revealed that the cost 

9 estimates for initial implementation of the proposed 

10 electronic filing will average over $300,000 per 

11 company and range from a low estimate of about $50,000 

12 to a high estimate of $2 to $3 million. These 

13 estimates only include the internal IT training and 

14 salary cost. They do not include costs for annual 

15 maintenance and compliance or any additional charges 

16 from custom's brokers, express carriers, or other 

17 entities within the supply chain.

18 Using the average of $300,000 per company, the 

19 combined total cost of initial implementation for the 

20 entire retail industry will be staggering. Not all 

21 retailers and importers have the same level of 

22 resources to invest in new technologies and systems.
49

1 With the diversity of importer's practices for 

2 issuing and retaining certificates and the significant 

3 financial burden incurred by industry implementing the 

4 proposal, it is critical that the CPSC work closely 

5 with the regulated community to develop a final rule 

6 that achieves the CPSC's product safety goals with 

7 minimally burdensome requirements and reasonable time 

8 line for implementation.

9 MS. McGUIGAN: We'd now like to spend the rest 

10 of our remaining time talking about our recommendation 

11 to the CPSC about how to move forward. We have three 

12 specific recommendations. The first recommendation is 

13 that the CPSC should suspend the current rule-making 

14 process and repropose a new rule only after it is 

15 actively engaged with stakeholders and relevant 

16 government agencies.

17 The proposed 1110 rule has generated 

18 significant interest and concern amongst stakeholders. 

19 In light of the numerous issues that still need to be 

20 addressed and the devastating impact that a poorly 

21 crafted rule would have on our industry and the agency, 

22 we recommend that the CPSC not move forward to a final 
50

1 rule based on the initial proposal.

2 Instead, the CPSC should take this opportunity 

3 to essentially take a timeout to collaboratively engage 

4 with stakeholders and CBP. This time will allow CPSC 

5 to become more informed about the complexities of 

6 global trade and international supply chains, 

7 coordinate risk management strategies within the BIEC, 

8 and understand the system requirements and limitations 

9 of PGA messaging set data.

10 If, after significant coordination with other 

11 government agencies and external stakeholders, the CPSC 

12 determines that additional data is required to enhance 

13 its risk assessment methodology, the CPSC should then 

14 repropose the rule and seek comments on the new 

15 proposal.

16 As part of this process, many trade 

17 associations, including RILA and NRF, have strongly and 

18 repeatedly urged the CPSC to establish a stakeholder 

19 engagement group of whatever title or nature where 

20 discussions like this can be undertaken regularly and 

21 without unnecessarily restrict constrictive limits. 

22 Many federal agencies, including CBP, engaged with 
51

1 stakeholder groups before undertaking bold new 

2 proposals and mandates such as those set forth in this 

3 proposal.

4 We understand that the Commission has concerns 

5 that a CPSC stakeholder working group could trigger 

6 potential administrative burdens under the Federal 

7 Advisory Committee Act. One potential solution could 

8 be to set up a CPSC subcommittee under the current CBP 

9 Customs and Oversight Advisory Committee, or COAC, 

10 which could address these kinds of entry-related 

11 issues. COAC has been able to do this with other 

12 agencies in coordination with CBP.

13 MR. GOLD: Recommendation number 2, the CPSC 

14 should follow the CBP's example regarding the use of 

15 pilot programs and phase-in time lines with 

16 implementing new entry-related requirements.

17 Again, we fully support the concept of 

18 risk-based targeting and think CPSC can use the key 

19 data elements to achieve this. However, the agency 

20 needs to first determine what data elements it really 

21 needs to make a risk-based determination.

22 While risk-based targeting of imports is 
52

1 somewhat new to the agency, through its partnership 

2 with CBP, CPSC has an excellent opportunity to learn 

3 from CBP's example. The CPSC only needs to look at how 

4 CBP developed both its 24-hour rule and its import 

5 security filing programs to find good examples of 

6 robust, risk-based targeting systems that were 

7 developed in partnership with the trade.

8 CBP partnered with the trade from the outset 

9 by providing straw man proposals for public comments 

10 before NPRMs were even proposed. The agency then 

11 closely collaborated through the entire process, 

12 provided for pilot programs before a final rule was 

13 published with a long phase-in for enforcement.

14 CBP also conducted extensive outreach and 

15 education with the importing community even after the 

16 final rule was published. Throughout the entire 

17 process, CBP took care to ensure that legitimate trade 

18 was not stopped at the ports. We believe this is a 

19 good model for CPSC to follow.

20 Our final recommendation is that CPSC should 

21 establish a strong public-private product safety 

22 partnership program with industry. Our collective 
53

1 members strongly support the different public private 

2 partnership programs which have been developed, 

3 including the Customs Trade Partnership Against 

4 Terrorism, the Importer Self-Assessment Product Safety, 

5 the Centers for Excellence and Expertise, and CBP's new 

6 Trusted Trader program.

7 Under these programs, importers take on 

8 additional responsibilities annual reporting 

9 obligations in return for being accorded a variety of 

10 benefits, including expedited clearance, fewer 

11 detentions and inspections, and consideration of 

12 participation in partnership programs as a mitigating 

13 factor in CBP penalty actions.

14 Under ISA-PS, a company allows CPSC and CBP to 

15 review and vet its product safety and import compliance 

16 program as well as provide substantial reporting to the 

17 agency. While we don't believe the certificates should 

18 be required to be filed as a condition of entry, we 

19 recommend that ISA-PS participants should be exempt if 

20 this is in fact required by the final rule.

21 These importers should be allowed to continue 

22 with the current on-demand system exempting ISA-PS 
54

1 members or allow the CPSC to focus its limited 

2 resources on high-risk importers, provide a significant 

3 benefit to importers, and spur an increase in 

4 participation in ISAPS.

5 MS. McGUIGAN: We want to conclude by thanking 

6 the CPSC for the opportunity to participate in today's 

7 workshop and to provide the views of retail industry on 

8 the proposed rule. As we noted at the beginning of our 

9 presentation, our combined membership imports a 

10 substantial percentage of the consumer products sold in 

11 the United States andas a result, will be significantly 

12 impacted by the CPSC's actions on this issue.

13 While our members fully support the mission, 

14 goals, and programs of the agency, we believe the 

15 initial proposal to amend the 1110 rule needs to be 

16 reworked to achieve the stated goal of improving 

17 product safety.

18 MR. GOLD: Our members welcome and appreciate 

19 the opportunity to continue working with the Commission 

20 on developing a rule that would not only improve CPSC's 

21 risk-based targeting, but will do so in a manner that 

22 will not unduly burden the trade or the Commission. 
55

1 With dwindling resources for all, it is important that 

2 this initiative be conducted through a full partnership 

3 that will benefit everyone involved.

4 Thank you, and we're happy to answer any 

5 questions.

6 (Applause)

7 MS. ADAIR: Thank you so much, John and 

8 Kathleen.

9 Now, it's my pleasure to welcome Sean Murray 

10 with the National Association of Foreign Trade Zones. 

11 Let me get your presentation up here.

12 PRESENTER: SEAN MURRAY

13 MR. MURRAY: Thank you very much, and good 

14 morning. On behalf of the National Association of 

15 Foreign Trade Zones, we really appreciate the 

16 opportunity to be here. And I also appreciate Nancy's 

17 comments in warming you up for what I'm about to say. 

18 We did not coordinate that. But my comments are going 

19 to echo a lot of what she says but provide, I think, 

20 greater depth and texture reflecting the variance in 

21 the membership in the NAFTZ.

22 The NAFTZ is a really unique organization in 
56

1 that it represents the Foreign Trade Zone community in 

2 the United States. But it also represents both public 

3 entities and private entities because we have public 

4 grants of authority that go out to grantees in the 

5 various ports around the country and their members.

6 We also have the big multi-national companies 

7 who are doing manufacturing, distribution operations in 

8 Foreign Trade Zones. And then we have the small users, 

9 who may people have never heard of, who just happen to 

10 be located in little ports and places all around the 

11 country who happen to do international trade activity. 

12 The proposed rule impacts all of these types of people, 

13 and it's important to understand that it does impact a 

14 great variety of different types of businesses.

15 Foreign Trade Zone activity, I'm going to 

16 focus on these things in a fair amount of detail here. 

17 But Foreign Trade Zone activity is a significant 

18 percentage of import and export activity in and out of 

19 the United States. It's something that many people are 

20 not very familiar with at all, but as it shows here, 

21 12.4 percent of import activity, that was 2012 

22 statistics, it went up slightly for 2013, and you can 
57

1 see from the billions in activity of domestic and 

2 foreign merchandise passing through zones and exports 

3 going out of zones.

4 At the bottom, it shows over 3,000 different 

5 firms that were active in zone activity last year. As 

6 I said, some of these firms are very big firms everyone 

7 would be familiar with. Many of them are very small 

8 firms, small companies, small distribution operations 

9 that really do not have a lot of resources outside of 

10 the locality that they're located in.

11 FTZs have a very unique function within the 

12 trade world. That's part of what makes them very 

13 useful to a lot of companies, such as Lego, as we 

14 heard. They are used to store and stage merchandise 

15 outside of the U.S. Customs territory. It allows 

16 people to bring merchandise into the United States 

17 without going through the Customs entry process on the 

18 front end. Instead, you do something called an 

19 admission. I'll try to avoid Foreign Trade Zone jargon 

20 here. It's confusing even for people who use them.

21 In addition to simply moving merchandise 

22 through a zone on its way into the Customs territory, 
58

1 you can, of course, also directly export things out 

2 that never come into the U.S. commerce. You can also, 

3 with U.S. Foreign Trade Zone's board approval, do 

4 production activity in the zone.

5 So, an awful lot of companies are bringing 

6 parts in to U.S.-located production facilities and 

7 conducting manufacturing operations. And only when 

8 they've concluded the manufacturing operation, are they 

9 filing a Customs entry into the United States. As you 

10 can imagine, this says you're bringing something into 

11 the country, but it's different from what is entered 

12 into the Customs territory. We're gong to talk about 

13 some of the challenges that that poses.

14 As a result of the unique nature of Foreign 

15 Trade Zones, we have our own Foreign Trade Zone board 

16 regulations. We have a separate section in the Customs 

17 regulations that applies to Foreign Trade Zones. And 

18 there's a lot of specialized practice that's built up 

19 over the years.

20 We very much appreciate the Commission 

21 recognizing both in its presentation and the proposed 

22 rule the existence of Foreign Trade Zones. In my role 
59

1 as general counsel to the National Association of 

2 Foreign Trade Zones and as simply a member of the 

3 Association over the years, one of the things I've been 

4 tasked to do an awful lot is work with other government 

5 agencies in order to get them to clarify their 

6 practices towards Foreign Trade Zones. It's, honestly, 

7 a very, very big challenge to do so. Simply getting 

8 many of them to acknowledge that Foreign Trade Zones 

9 exist is a very difficult thing. So, we appreciate the 

10 official recognition.

11 One of the concerns that we have is that 

12 there's no written recognition in the proposed rule. 

13 In our experience, and this would apply to many, many 

14 agencies, not specific to any one, is that when you 

15 actually put operations into practice, and this is 

16 pushed out around the country, a lot of people at local 

17 levels, Customs personnel at local levels, but also 

18 agency personnel, when they don't have specific written 

19 guidance that they can go see, and regulations, they're 

20 left questioning.

21 We can say, oh, it's back in a Power Point 

22 that we saw this one time, it's in a proposed rule, but 
60

1 they're not familiar with it. So, we really are 

2 pushing, and so is here, for some specific 

3 acknowledgment in the regulations of the unique nature 

4 of Foreign Trade Zone activity.

5 Some specific things that we would like to 

6 see. I noted earlier, merchandise comes into Foreign 

7 Trade Zones through something called an admission 

8 process but lack a recognition that admission is not 

9 entry, that your requirements are applying to the 

10 Customs entry side of the operation.

11 We also would be bringing things out of zones. 

12 So, as I said, many people bring component parts into 

13 Foreign Trade Zones, manufacture something else out of 

14 them, and then file a Customs entry, recognizing that 

15 you're focusing on what's entered into the Customs 

16 territory is important to us.

17 We're going to see, two slides from now,

18 discussion of inventory control methodologies. This is 

19 something I'll save for that, but that poses, I think, 

20 a difficulty for the Commission. But it's something 

21 that Foreign Trade Zone operators and users are using 

22 every single day, inventory control methodologies to 
61

1 track products moving through zones.

2 The CPSC documentation will only be required 

3 to be filed with the Customs entry summary. I know 

4 there's some discussion about entry versus entry 

5 summary. I'm not sure how it would be here about the 

6 distinction between the 3461 document and the 7501. 

7 It's a big deal for Foreign Trade Zones which one we're 

8 focusing on. We prefer the entry summary, certainly, 

9 and making also clear that we don't get into any issues 

10 when we are exporting merchandise from a Foreign Trade 

11 Zone out of the United States.

12 A few of the challenges that we want to 

13 specifically bring up. The first one is this concept 

14 called weekly entry. This is something that Nancy 

15 mentioned. It's a big, big benefit, something that 

16 many Foreign Trade Zone operators really, really love 

17 about the program. It has statutory authority. I 

18 included the site here.

19 But it's a process whereas many of these 

20 Foreign Trade Zone operations are shipping 24/7 out of 

21 the door. Since the merchandise hasn't been entered 

22 into the Customs territory, when it leaves the zone, 
62

1 you'd be filing Customs entries 24/7. It poses great 

2 difficulties.

3 So, many years ago now a statute was passed, 

4 1484(I), that authorizes something called weekly entry, 

5 which allows you to file a weekly entry on what's 

6 leaving the zone. The process allows for Customs to 

7 receive an estimate -- I'm kind of going over this kind 

8 of quickly here, but what happens is the Foreign Trade 

9 Zone operator files an estimate with Customs of what 

10 they will ship for the week. Then, after the end of 

11 the shipping week, then they file the actual data of 

12 what was actually shipped out of the zone.

13 So, Customs is aware of what's going to be 

14 leaving on an estimated basis. But what actually left 

15 the zone is then reported to them after the fact. A 

16 large number of companies use this, and it is critical 

17 to the success of their operations.

18 Filing certificates at the time of entry or at 

19 the time of entry summary is problematic under weekly 

20 entry. For some other agencies, we've had to develop 

21 specialized programs to deal with the weekly entry 

22 process in a parallel way to the Customs process.
63

1 The next thing I want to talk about is FTZ 

2 inventory control systems. You have to obviously track 

3 your merchandise as it moves through the zone to 

4 satisfy Customs requirements that nothing is getting 

5 into the Customs territory without their approval.

6 There are a couple of ways that companies 

7 choose to do this. One way is a lot tracking 

8 methodology. Another way is a unique identifying 

9 number, UIN system. There's no one way to do things. 

10 Certain companies it just worked better to do one more 

11 than the other. Most companies do use this UIN system, 

12 a record identity.

13 The challenges that it poses is that you're 

14 not tracking things. In a lot environment, you're 

15 designating a lot and you're tracking that specific lot 

16 into the zone and out of the zone. That works well in 

17 something like pharmaceutical operations, metals, and 

18 things like that where you look at a lot and you see 

19 the lot move.

20 In other operations, it doesn't work so well. 

21 So, people use things like UIN methodologies, FIFO. 

22 And so, what is actually tracked through the zone are 
64

1 layers of zone inventory. And what you're reporting on 

2 the entry is not necessarily what went out, actually. 

3 You're decrementing the layer out of what's moving out 

4 of your zone inventory control records. It's all 

5 tracked. It's all controlled. Customs comes in. They 

6 inspect it. They know it's there versus what you've 

7 shipped. But you're handling it by zone inventory 

8 methodology.

9 Something else we'd also appreciate that would 

10 be recognized is the idea that you can use zones as a 

11 place to bring merchandise into compliance. I think 

12 some people take this for granted, but it would be 

13 helpful if people would actually recognize this as a 

14 source of solutions.

15 In fact, for many people they identify issues 

16 as the merchandise is coming to the United States. 

17 It's on the water coming in and they say “What do I do 

18 about it?”. I'm going to run into the issue. You put 

19 it into the zone. You fix the compliance issue. Then 

20 you file the Customs entry. It would be great if that 

21 could be recognized in some form by the Commission.

22 Finally, just some general comments. This is 
65

1 and will be burdensome on the industry as proposed. 

2 I'm going to hit a couple different points since I'm 

3 going quickly here. The uploading process would be a 

4 significant burden, we think, to many importers to 

5 upload documentation. The cost burden we think in the 

6 proposed rule undervalues the difficulty of doing this 

7 for many, many companies.

8 There are also concerns about keeping 

9 information private. Nancy talked about how in their 

10 situation they're just going back to their own 

11 factories. But, in many cases, you have people who 

12 have multiple suppliers, multiple factories, and 

13 they're competing with people, and they don't want 

14 people to see exactly who they're using. That's a big 

15 challenge.

16 I just left a trade show yesterday to come 

17 here. At that trade show, many of the exhibitors are 

18 companies that go all around the world sucking up trade 

19 documentation, processing it, and selling it to other 

20 people. That's exactly what they do for a living. So, 

21 that kind of data being available is something that 

22 people can grab onto and want to use for sales purposes 
66

1 to people's competitors.

2 And then, not on the slides, but I thought I 

3 should probably address the things that you 

4 specifically noted in your workshop you're looking for 

5 information on. Just very quickly, e-certificates, we 

6 would support data elements as opposed to PDFs being 

7 uploaded. We think that's a much better process, much 

8 more efficient, ultimately.

9 The question about using ABI to transfer 

10 certificate data to CBP, something that other people 

11 might pick up on and talk about today but we think is 

12 important is to note that some companies are 

13 self-filers, even in the zone environment. They do 

14 have direct access into ABI.

15 The majority of people use Customs brokers. 

16 So, they're a step removed from the process. I think 

17 some people practically think the broker is really just 

18 this extension of the right hand of the companies, but 

19 there's a lot of gaps in communications that can occur. 

20 So, it's not a seamless process when you have to give 

21 information to a broker to submit through ABI.

22 Matching certificates to the products, that's 
67

1 a big difficulty for an awful lot of people. I 

2 analogize this to other work I do with clients working 

3 on things like NAFTA certificates of origin. There is 

4 an art and there's a science to this. It's very hard 

5 to do a lot of the time.

6 But one of the things that Customs puts on 

7 people as their burden is it's your burden as the 

8 importer to be able to demonstrate the link. They 

9 don't define it very specifically how you tie that 

10 NAFTA certificate to your imports; they let you do it 

11 on your own. They require you to prove it on your own. 

12 So, ultimately, that burden is placed back on the 

13 importer's shoulders.

14 With regard to a phased-in approach, one thing 

15 we would suggest is that you wait until ITDS and ACE 

16 implementation so we don't go through two steps of 

17 implementation. A big concern would be that we do 

18 something in the next year and then a year after that 

19 we're changing it all again. So, we wouldn't want to 

20 do that. One step implementation would be certainly 

21 better.

22 You suggested measures like by tariff 
68

1 classification, by port, or by entry type. We don't 

2 think that entry type would be a very good way to do 

3 this because we think when you say type 01 entries, 

4 that's gong to cover the vast majority of the entries. 

5 We are type 06 entries, for example, coming out of 

6 Foreign Trade Zones. That would be a much smaller 

7 percentage.

8 By port, that's hard because a lot of our 

9 users are all over the country. They're not 

10 necessarily doing things by port, until you try to 

11 force them to do it that way. By HTS, there is 

12 precedent for that. The Lacy Act implementation by 

13 APHIS, they did it by HTS. It seemed to work okay, so 

14 that's something we'd be interested in. And in talking 

15 to people within the Association, they're big fans with 

16 the idea of the CPSC issuing a list by HTS of regulated 

17 products. That would be very helpful to the industry.

18 With that, I think I'll conclude. Thank you 

19 very much for your time. We appreciate the opportunity 

20 to contribute.

21 (Applause)

22 MS. ADAIR: Thank you, Sean, and to everybody 
69

1 who has already presented. We've gotten a lot of great 

2 information. It seems like it might be a good time 

3 also to remind people about the docket. We can always 

4 get information submitted that way.

5 We are due for a break. We're a little bit 

6 ahead, so we thought we'd go for a 10-minute break 

7 instead of 5. So, I'm going to call everybody back at 

8 10:25 a.m. Thank you.

9 (Brief recess.)

10 MS. ADAIR: I'd like to welcome our next 

11 presenter. Our next presenter is Mark Shacklette from 

12 UPS. Take it away, Mark.

13 PRESENTER: MARK SHACKLETTE

14 MR. SHACKLETTE: All right, great. Thank you 

15 very much. Thank you to the CPSC for organizing the 

16 forum today and bringing us all together. We certainly 

17 appreciate the interest shown by CPSC and the 

18 opportunity for all of us in the trade to provide 

19 comments.

20 So, my name is Mark Shacklette. I'm the 

21 Director of Customs Brokerage Compliance at UPS. I'm 

22 going to focus on a couple of main things today. I'm 
70

1 going to talk about the role of the Customs broker, as 

2 you can see here, since that's what I oversee at UPS. 

3 I'm also going to talk about the impact the proposed 

4 rule would have on an express consignment operation, 

5 such as UPS.

6 So, just talking about the Customs broker 

7 here, our role is that of a trade facilitator. We 

8 don't have any financial interest in the goods. I 

9 think it's important that we talk about, you know, the 

10 definitions of the importer, the importer of record, 

11 because in the NPRM, it's stated that it would require 

12 importers to certify that the products comply with all 

13 CPSC rules, bans, et cetera.

14 But then, as we heard this morning already, it 

15 defines the importer as being the importer of record, 

16 which can include the purchaser, the owner of the 

17 merchandise, and it can also include a validly licensed 

18 Customs broker who serves as the importer of record. I 

19 think it's very important to note here that many 

20 Customs brokers serve as the importer of record. So, 

21 this would hold us basically responsible for these 

22 shipments.
71

1 So, in the express consignment world, there's 

2 a high percentage of the goods where the Customs broker 

3 serves as the IOR, or the importer of record. And also 

4 you see it quite a bit on the northern border for 

5 shipments from Canada where the broker is serving in 

6 that role.

7 So, we feel that the definition of the 

8 importer and the importer of record really needs to be 

9 limited to parties that, you know, have real knowledge 

10 about the shipment, because brokers are certainly not 

11 well suited for the responsibility of issuing safety 

12 certificates. We lack the knowledge about the product 

13 details.

14 I think the Lego presentation was great. All 

15 those details that you talked about, we certainly don't 

16 know that and we don't have access to that information. 

17 We don't know about the manufacturing process. We 

18 certainly don't fully understand all the rules, and 

19 regulations, and standards that apply to all the 

20 different products that we handle on a daily basis. We 

21 certainly don't take title to the goods, so we're not 

22 able to test the goods or certify them through a third 
72

1 party. We don't have any of that information.

2 One thing, too, that this could create would 

3 be that shifting the burden to a Customs broker could 

4 actually create like a compliance loophole. So, if 

5 you've got some unscrupulous shippers or importers who 

6 want to avoid conforming, they would want to have the 

7 Customs broker serve as the importer so they themselves 

8 could avoid some of the penalties that they could face. 

9 So, it really could create a loophole which I think 

10 none of us want to see.

11 As we go on to the next slide here, we'll just 

12 talk about some of the challenges. A lot has been 

13 mentioned already this morning about reporting and the 

14 extensive amount of data that would need to be reported 

15 and how it would be reported. So, there's a tremendous 

16 amount of data. Certainly, we're concerned about how 

17 it would be reported and the costs of that, especially 

18 the small- and medium-sized businesses. We heard 

19 earlier an entry that has a thousand lines in it. Just 

20 think about all of the data that would be required to 

21 be submitted.

22 In the NPRM, it talked about how the costs 
73

1 that would be assessed by, like, a Customs broker for 

2 reporting this information would be minimal. But if 

3 you've got 1,000 lines and you've got to report 

4 information for 1,000 lines, it's not going to be a 

5 minimal cost, because it's going to cost me, as a 

6 Customs broker, a significant amount of time to report 

7 all of that information if I had to provide it all 

8 electronically, if I had to go into my system and do 

9 some type of key entry.

10 Also, you can say, well, you can automate the 

11 process with your importers and it would be fine for 

12 large importers, and we could do it, but the costs of 

13 integrating our systems is obviously significant. But 

14 then, once again, small- and medium-sized enterprises, 

15 they're not going to be able to do something like that, 

16 typically, with their Customs brokers. So, you have a 

17 lot of additional costs that will be added well beyond 

18 what is stated in the NPRM.

19 We've talked about what we would do at time of 

20 entry versus time of summary. Even if it were done at 

21 time of summary, I think my opinion is that a lot of 

22 brokers would not want to wait until time of summary 
74

1 for fear that they could never collect the information 

2 that they need to report.

3 So, brokers are held to standards by Customs. 

4 We could be penalized as a broker for not fulfilling 

5 our obligations as a Customs broker. If we feel like 

6 we're not going to be able to get the information, you 

7 know, 10 days later at time of entry summary when 

8 payment is made, we might elect to say, hey, we're not 

9 comfortable submitting the entry because we don't have 

10 the information we need right now, and we're going to 

11 hold the shipment up. So, then you come up with not 

12 only costs for all of the data and all of the fees that 

13 we would pass along because of all the time it takes 

14 for us to do this work, but then also the fees that 

15 you'd have for, like, warehousing costs, because the 

16 shipments are going to be held up, and they'll be held 

17 as long as it takes for us to receive that information.

18 On the next slide, continuing on, but I'm 

19 going to shift my focus here over to really talk about 

20 the express consignment side of the UPS business. So, 

21 we really have two sides of our business. As a Customs 

22 broker, we handle all the volume that comes in through 
75

1 our small pack import service. Then we serve as a 

2 Customs broker too for truck freight and rail freight 

3 and ocean and all that stuff as well.

4 But on the express side of our business, we 

5 are frequently the importer of record and most, I would 

6 say all, all of us in the express consignment world 

7 serve as the importer of record for a significant 

8 amount of the shipments that we handle. We do this in 

9 order to streamline the process so we don't have to go 

10 out and collect a power of attorney from everybody who 

11 ships with us, or a Customs bond.

12 So, it's done for convenience and it's done 

13 importantly for just-in-time inventory. It really 

14 helps to move the process. We have shipments from 

15 pickup to delivery, international shipments, that would 

16 take less than 24 hours.

17 So, there's a lot of things, a lot of 

18 processing that occurs in the middle of the night. It 

19 would be impossible to get ahold of anybody if we had 

20 to go out and collect a POA or a Customs bond at that 

21 time of night.

22 So, this would have a devastating impact on 
76

1 our business, because what it would do is if we're held 

2 legally responsible for issuing the certificates and 

3 legally responsible for the correctness of them and 

4 that they're all done properly, we would have to say we 

5 can no longer serve in this role as the importer of 

6 record because the risk that we have today has just 

7 manifested itself tenfold. So, we'd no longer be able 

8 to do that.

9 So, we would be forced to go out and collect 

10 powers of attorney for every shipment that came in. We 

11 would be then forced to go out and obtain Customs bonds 

12 for all those shipments. So, I'm looking at what my 

13 staffing would be if I had to do that. My staffing 

14 requirements would be increased by I couldn't even 

15 estimate, but it would be a significant amount. So, we 

16 would have to do that.

17 This would also overwhelm our facilities, too, 

18 because our facilities are made to handle, like, our 

19 peak season volume and to warehouse volume at that time 

20 of year. Well, this would go way beyond any peak 

21 season type volume that we have. We would run out of 

22 warehouse space pretty quickly, and we'd also need a 
77

1 lot more people, once again, to staff those warehouses. 

2 Ultimately, all these costs are going to be passed 

3 along to the consumer.

4 So, if we sum it all up here at the end, you 

5 know, I think there are a lot of opportunities here to 

6 make improvements to the NPRM. Some things we would 

7 like to suggest, of course, is that we would want to 

8 modify the language to exempt brokers who serve as the 

9 IOR, just to state that a Customs broker never 

10 qualifies as an importer.

11 We would like to take a look at adding a de 

12 minimis rule for products of a low value, such as 

13 Customs has, the de minimis section 321, as Customs 

14 refers to it, shipments under $200, to look at some 

15 type of a de minimis rule for this.

16 We certainly are in favor of a Trusted Trader 

17 Program. There's a lot of very, very good importers 

18 out there. We've already heard from some today, and 

19 we've already heard about some today. So, certainly a 

20 Trusted Trader Program would be terrific. To have some 

21 type of a blanket certificate program would also be a 

22 very good step.
78

1 So, those are some of the things that we feel 

2 like, you know, would add a lot of value to the NPRM. 

3 We certainly appreciate the opportunity to get up here 

4 and speak today. Thanks, everybody, for your 

5 attention. Appreciate it.

6 (Applause)

7 MS. ADAIR: Thank you so much, Mark.

8 Let me bring to the podium, welcome to the 

9 podium, Alan Kaufman from the Toy Industry Association. 

10 Let me get your presentation up here.

11 PRESENTER: ALAN KAUFMAN

12 MR. KAUFMAN: Good morning, everyone. First 

13 of all, TIA would like to thank the CPSC for providing 

14 the opportunity for us to present today and to share 

15 our comments.

16 First of all, before I launch into the 

17 presentation, we want to say at the outset that we 

18 certainly recognize that the CPSC has legitimate goals 

19 here, that they're trying to improve targeting and make 

20 sure that they're going after a product which is high 

21 risk or potentially violative, and I think also to 

22 confirm compliance with the testing and certification 
79

1 rule. So, certainly we recognize that what the 

2 Commission is trying to do here makes a lot of sense.

3 In the interest of time, I'm going to go 

4 through the first couple of slides fairly quickly here, 

5 but I wanted to focus on a couple of things. About 

6 TIA, I think the focus here is we have about 750 

7 members. Our members represent about 85 percent of the 

8 U.S. toy market by sales volume. About 75 percent of 

9 those 750 members are small and medium enterprises. 

10 So, we're very sensitive to administrative burdens that 

11 might be created by some of these regulatory 

12 requirements.

13 A few of our members, some of them I'm sure 

14 you recognize, some you may not. Just a real quick 

15 snapshot of what the industry looks like. The one 

16 thing I'd like you to focus on here is the fact that 

17 there are about three billion units sold in the U.S. 

18 every year. About 85 percent of those are imported. 

19 So, that's what we're going to be dealing with here.

20 Here's our viewpoint. The current 1110 rule 

21 and current toy importer practices, there was a lot of 

22 flexibility that was allowed. I think those of you who 
80

1 sort of lived through the implementation of CPSIA would 

2 agree that there were a lot of hoops that everybody had 

3 to jump through in a fairly short period of time. 

4 There was a lot of, you know, near panic, I think, 

5 among importers trying to figure out exactly how to 

6 comply with some of these new requirements. But each 

7 importer developed systems that were best suited to 

8 their operations and their supply chains.

9 At this point, there haven't been any issues 

10 raised by CPSC to date with the current systems the 

11 companies have in place. We haven't heard that CPSC is 

12 not getting what they need. So, certainly we would say 

13 that the current systems adequately meet the needs of 

14 the CPSC and importers, and everybody has kind of 

15 adapted. Importers have adapted to the current level 

16 of administrative burden.

17 Our issues with the proposed changes to the 

18 1110 rule, first of all, there's no evidence that those 

19 proposed changes would improve safety. We also feel 

20 that it would add significant costs for our industry. 

21 We also have noticed, we've worked very closely with 

22 the commercial targeting and analysis center.
81

1 We feel that the current targeting methodology 

2 seems to adequately identify higher risk imports. It 

3 seems to be pretty good at focusing in on them. In 

4 fact, what we find is that more goods are being 

5 targeted than can be efficiently inspected. So, the 

6 limiting factor seems to be port staffing and 

7 expertise, in our view. There's no evidence that 

8 electronic submission of COCs would improve targeting 

9 efficiency or the safety of imported product, which is 

10 the ultimate goal.

11 The benefits of the current on-demand system, 

12 it allows for certificates to be produced on request so 

13 that CPSC isn't inundated with a number of certificates 

14 that they're not necessarily going to look at. I think 

15 Nancy referred to it as just creating a bigger haystack 

16 to look for the needle in.

17 It meets the needs of CPSC and CBP while it 

18 minimizes importer burden. A very important point is, 

19 and I think some of the proposals that were made by 

20 CPSC, it would work very well for someone who is sort 

21 of a very narrow slice of the importing world. Someone 

22 who imports very large volumes of a small number of 
82

1 SKUs by ocean in full container loads probably wouldn't 

2 be a huge burden.

3 Unfortunately, our industry looks very 

4 different from that. I know that that's true for a lot 

5 of other industries that import. So, due to those 

6 varying supply chain management systems, that sort of a 

7 one-size-fits-all system is probably not workable for 

8 the vast majority of importers.

9 Costly changes to the current requirements, I 

10 think that there's been a significant underestimation 

11 of what the costs would be to industry. The 

12 requirement of certificates to be filed at entry would 

13 be costly for the toy industry, again, because we have 

14 a number of very small importers. Most of them would 

15 probably have to do it by PDF. That's not efficiently 

16 searchable. We think that would create a burden not 

17 only for our industry but also for CPSC to try and look 

18 at those certificates in a timely manner.

19 A lot of our goods come in in consolidated 

20 freight. What that means is that very often retailers 

21 will take possession of goods in the Far East. They 

22 will consolidate those goods from multiple 
83

1 manufacturers into a single container. In some cases, 

2 for very small manufacturers, you actually have 

3 multiple importers in a single container. So, what 

4 happens is if you target product from one of those 

5 importers, you actually end up holding goods from 

6 non-target importers who just happen to be co-loaded in 

7 that same container.

8 Again, systems have worked pretty well since 

9 2008. We would need to revamp them. Every importer 

10 would have to take a look at what they were doing and 

11 make, we feel, significant and potentially expensive 

12 changes. Again, we don't see the benefit of making 

13 those changes.

14 The Regulatory Flexibility Act analysis 

15 contemplated a typical shipping system. As I said, I 

16 think it would work pretty well for those people who 

17 fall into that typical bucket. But it dramatically 

18 underestimates the number of shipments, at least for 

19 our industry, and the certificates the companies would 

20 be responsible for maintaining and submitting.

21 Also, our industry is very seasonal. We have 

22 a huge shipping peak as we come into the holiday 
84

1 season. So, what happens is during part of the year, 

2 shipment volume is low, but it peaks in the fourth 

3 quarter of the year. So, the average really doesn't 

4 tell us. If you look at the average over the year, it 

5 really doesn't tell you what you need to know.

6 The RFA estimate was that importers ship fewer 

7 than 12 shipments annually. We have a number of 

8 importers who do more than 12 a day. So, that figure 

9 would be applicable only to the smallest importers. As 

10 I said, some of our major members are far in excess of 

11 12 a day during peak shipping season.

12 Consolidated cargo co-loads from multiple 

13 importers, it will further complicate certificate 

14 submission. You'd have to make release of all cargo, 

15 depending on all importers timely submitting 

16 certificates. So, again, through no fault of your own, 

17 you could have your product held up because someone 

18 else who was co-loaded with you hadn't submitted what 

19 they needed to submit.

20 Regardless of the number of shipments, each 

21 container might have a number of different products 

22 together. If you think about how many certificates 
85

1 might be required if you have, let's say, 50 or 100 

2 lines, that's 50 or 100 certificates that have to be 

3 submitted for that single container. Then, when you 

4 add in the fact that some people are taking advantage 

5 of the component testing rule, you would have component 

6 certificates backing that up.

7 So, you might have several hundred 

8 certificates that would have to be submitted for a 

9 single container, all of them electronically as PDFs. 

10 So, the RFA estimate needs to be revised exponentially 

11 upward, in our view, and we think the costs associated 

12 with filing entries will likewise increase many fold.

13 Methods of importation vary. Again, this 

14 seems to work really well for ocean freight, but we 

15 have a lot of manufacturers who manufacture in Mexico 

16 and bring product in by rail or by truck. We have FTZ 

17 users. I won't belabor that because I think it's been 

18 covered adequately by prior speakers.

19 You could have a situation where trailers are, 

20 you know, at a factory. The product gets loaded into 

21 the trailer. When the trailer is full, it goes. So, 

22 you have multiple products in that trailer. You would 
86

1 have to make sure that you had the certificates for the 

2 particular product that was in that container, and you 

3 would have to submit that electronically while that 

4 trailer was in transit to the border.

5 On top of that, CBP isn't yet able to handle 

6 the influx of data that's been proposed. So, in other 

7 words, to a certain extent, we're putting the cart 

8 before the horse. We're proposing costly requirements 

9 with a large administrative burden on industry when CBP 

10 currently isn't able to take those data and we're not 

11 sure when or if they will be. So, I think it's 

12 premature for CPSC to require submission of that data 

13 when the agency that's controlling the data portal 

14 isn't ready for it.

15 Several others have talked about the idea of a 

16 multi-stakeholder group that includes industry, CBP, 

17 CPSC. I think hearing from import specialists, Customs 

18 brokers, and logistics companies I think would be key 

19 here because they know exactly how the nuts and bolts 

20 of all of the various importers that they deal with, 

21 how their systems work. I think their input would be 

22 valuable.
87

1 I think we have to resolve a few issues. Does 

2 CBP have the bandwidth to handle the volume of data 

3 that will be generated? When will the ACE system be 

4 ready to handle those data? What's the time line for 

5 implementation of the single-window system that was 

6 contemplated by the Executive Order?

7 For the RAM pilot, we're supportive of the RAM 

8 program. We would urge CPSC to expand the program 

9 beyond the pilot. Again, we think that electronic 

10 submission of certificates probably doesn't improve --

11 we think the targeting system works pretty well now. 

12 We don't see the incremental benefit of electronic 

13 submission of certificates to that targeting process.

14 Thank you very much.

15 (Applause)

16 MS. ADAIR: Thank you, Alan.

17 Let me welcome Mike Lahar from the National 

18 Customs Brokers and Forwarders Association to the 

19 podium. Let me get your presentation up here.

20 PRESENTER: MIKE LAHAR

21 MR. LAHAR: Thank you. I would like to thank 

22 the CPSC for this opportunity to present some comments 
88

1 from the NCBFAA. I work for A.N. Deringer as a member 

2 of the NCBFAA, but the organization actually represents 

3 almost 1,000 member firms across the United States with 

4 tens of thousands of jobs at stake.

5 The NPRM proposed changes to 16 CFR 

6 1110-3(b)(13) that places the burden on the importer of 

7 record to provide the compliance certificate for 

8 finished products manufactured outside the United 

9 States that are not being delivered directly to a 

10 consumer in the U.S. is an issue for us.

11 The proposed change would define the importer 

12 as the importer of record as defined under the Tariff 

13 Act of 1930. Pursuant to the Tariff Act, the importer 

14 of record is either the owner or purchaser of the 

15 merchandise or, when appropriately designated, may be a 

16 person holding a valid Customs broker's permit or 

17 license or brokerage firm.

18 In the first instance, the proposed rule must 

19 be modified to eliminate any reference to Customs 

20 brokers. A Customs broker is licensed by U.S. Customs 

21 to transact Customs business on behalf of third 

22 parties.
89

1 Customs business is defined as those 

2 transactions with the Customs service involving the 

3 entry and admissibility of merchandise. Customs 

4 brokers do not have any particular knowledge regarding 

5 product safety requirements and are not in a position 

6 to certify compliance of any particular product.

7 Our involvement in the international supply 

8 chain should not require us to assume additional 

9 responsibility and liability for issues that we have no 

10 control over. We respectfully submit that assigning 

11 this responsibility to a class of persons that do not 

12 have the requisite product knowledge to certify

13 compliance with the CPSIA requirements does not further 

14 goals of the Commission. Reference to Customs brokers 

15 as a class of persons who could potentially be 

16 responsible to provide for product compliance 

17 information is inappropriate and should be removed from 

18 the final rule.

19 We also submit that the term importer, as 

20 defined in the proposed rule, is overly broad and does 

21 not consider that many importers are actually service 

22 providers who are not in a position to certify 
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1 compliance of an imported product.

2 The proposed rule should be modified to 

3 clarify that the certification obligation belongs to 

4 the beneficial party of interest who has knowledge 

5 about the imported product. The beneficial party of 

6 interest should be defined as a party with a financial 

7 interest in the imported goods, such as the owner, 

8 purchaser, or distributor of the merchandise.

9 Failure to make these changes could result in 

10 some brokers refusing to allow importers with CPSC 

11 goods to use their Customs bond. This would restrict 

12 trade and have an unfair impact on small or 

13 inexperienced importers who historically tend not to 

14 have their own Customs bond.

15 The proposed section contemplates requiring 

16 that certificates of compliance for imported products 

17 be filed with CBP at time of entry. This is a 

18 substantial change from the current rule which requires 

19 that certificates be available when the product itself 

20 is made available for inspection and furnished upon 

21 request. Unless the Commission mandates that 

22 certificates of compliance must be generated 
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1 electronically in a uniform format, this requirement 

2 will impose a huge burden on the Customs brokerage 

3 community.

4 First, there are substantial programming 

5 challenges to be overcome by both the government and 

6 private industry before this can become a reality. As 

7 the Commission is well aware, CBP is in the midst of 

8 developing a programming for the ITDS system as well as 

9 in the final stretch of programming for the ACE system. 

10 It is imperative that CPSC coordinate with CBP so that 

11 the certificate of compliance data can be managed 

12 through ACE.

13 In this regard, we note that there's currently 

14 no programming being developed in ACE to flag those 

15 items which require certificates of compliance. 

16 Without such system edits, it is highly unlikely that 

17 most Customs brokers will be able to discern the 

18 products which may require a certificate. It is 

19 equally unclear how CBP will enforce the requirements 

20 without these system edits.

21 Unless the Commission mandates that certifying 

22 parties transmit their data electronically, directly to 
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1 CBP or via a web posting, the reality is most of these 

2 certificates will be generated in hard copy, and 

3 Customs brokers will be required to reformat, 

4 transcribe, and transmit the data to Customs prior to 

5 entry.

6 Given the uniqueness of the information set 

7 forth in the certificates of compliance, these 

8 documents will be subject to very little overlap with 

9 other data elements required to make entry. This will 

10 require a large amount of independent data input and 

11 will increase the cost of clearing imported 

12 merchandise.

13 Further, the import community will be required 

14 to transmit this data before the merchandise arrives in 

15 the United States. The Commission must consider the 

16 complexity of the supply chain and recognize that many 

17 shipments will require multiple certificates of 

18 compliance and in some cases be issued by multiple 

19 parties of interest.

20 Under the proposed rule, this information 

21 would have to be received and transmitted to Customs 

22 prior to the arrival of the merchandise in order to 
93

1 avoid delays. The 24-hour rule suggested in the NPRM 

2 does not recognize routine contingencies of divergence 

3 in the international supply chain.

4 We strongly believe the certificate of 

5 compliance should not be an entry requirement, as this 

6 will greatly impede the flow of goods into the country 

7 without yielding the corresponding compliance benefit. 

8 We believe that the current standard of requiring the 

9 certificate of compliance to be available at the time 

10 the merchandise is presented to Customs is a workable 

11 solution.

12 The plain reality is that neither the 

13 Commission, Customs, nor the trade is prepared at this 

14 point to manage the consequences of requiring the 

15 transmission of compliance certificate data as a 

16 condition of entry.

17 Thank you.

18 (Applause)

19 MS. ADAIR: Thank you very much, Mike.

20 I'd like to welcome to the podium Erika Jones 

21 with the Bicycle Products Suppliers Association. 

22 Erika, let me get your presentation up. Thank you so 
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1 much.

2 PRESENTER: ERIKA JONES

3 MS. JONES: Thank you for the chance to be 

4 here today and to share some concerns about the aspect 

5 of the proposed rule that addresses electronic filing 

6 of certificates. Alan and I did not coordinate, but 

7 our presentations are very similar. So, you're going 

8 to hear an echo in the room on many of the themes that 

9 Alan raised, as well as Nancy on a number of the 

10 concerns that the Bicycle Industry has are also 

11 previewed by Nancy's presentation this morning.

12 A little bit of background. The Bicycle 

13 Product Suppliers Association represents more than 70 

14 manufacturers, importers, and suppliers of bicycle 

15 parts, accessories, and services who serve the 

16 specialty bicycle retailer. So, I want to underscore 

17 that from the get-go, that this is not the mass market 

18 bike market; this is the specialty bikes. They're both 

19 children's products and adult products, but they are in 

20 the specialty market.

21 BPSA members are interested in this rule 

22 because they manufacture import and sell three 
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1 categories of regulated products that are required to 

2 have Certificates of Compliance, bicycles under part 

3 1512, bicycle helmets, and aspects of clothing that are 

4 subject to standards. Some of them diversify into 

5 other areas, but these three are common to the BPSA 

6 membership. In addition, the proposal contemplated the 

7 possibility of expanding the certificate requirement to 

8 replacement parts, which would exponentially increase 

9 the burden of the proposed rule.

10 Our position is that the CPSC has 

11 underestimated the costs of compliance for the 

12 industry, that the proposed tracking requirements would 

13 be difficult to manage, and that it's premature to 

14 require mandatory electronic filing. You've heard this 

15 from several people today.

16 One of the themes that I think there may be 

17 some confusion among some of us in the room is the 

18 difference between an electronic filing and a manual 

19 upload of an electronic document. The concern that we 

20 have, and you've heard it echoed from others today, is 

21 that it's one thing to electronically file a PDF 

22 document, which would be uploaded electronically but 
96

1 that still requires a manual entry sitting at a 

2 computer by a human to push that up to through the 

3 internet to the system.

4 We understand that this is the requirement 

5 that would go into effect, if it were to go into effect 

6 now, that CBP is just not equipped to take a data field 

7 entry. It would have to be uploaded through the system 

8 I just described by a person at a computer for every 

9 single shipment. This is extremely labor intensive.

10 It also introduces the potential for human 

11 error, that the wrong certificate will be associated 

12 with the wrong box, which right now, as both Alan and 

13 Nancy have suggested, there's been a lot of investment

14 up front in complying with 1110 in ways that work for 

15 the individual members of the Association, and 

16 precisely to try to work out systems that are not going 

17 to have that potential for error.

18 So, the certificate is assigned at the time 

19 the package is created or the product is packaged, and 

20 that certificate then stays with that shipment all the 

21 way through to the retailer as required by the rule. 

22 But if, instead, we have to now upload a PDF for every 
97

1 one of those boxes and we've lost that control 

2 mechanism of having that bar code, or that electronic 

3 certificate, or that paper certificate, if that's the 

4 way it's done, staying with that product is an 

5 opportunity for human error that is going to 

6 potentially degrade rather than improve the system. 

7 Then, if replacement parts are included, there are 

8 tremendous additional practicability problems.

9 Specifically, for the bicycle industry, the 

10 NPRM estimated that there were 1,900 bicycle models 

11 sold annually, and the NPR acknowledged that this was 

12 based on an extrapolation of the estimate of children's 

13 bicycle models.

14 But as the industry explained some years ago 

15 when the lead content and other rules were coming into 

16 effect for children's bicycle models, the number of 

17 children's bicycle models was decreased significantly 

18 in order, really, to manage the certification 

19 requirements for children's products. But the adult 

20 bicycle models didn't have the same effect.

21 The BPSA membership estimates 7,170 bicycle 

22 models are being sold right now in 2014 through the 
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1 independent distributor channel. These would be 

2 specialty bicycle retailers. And this has increased 

3 since we filed our comments in 2013 when the number was 

4 in the 6,000 range.

5 It's gone up this year, thanks to the 

6 healthier economy, but that also means that the number 

7 estimated in the NPR is that much more off of the 

8 reality. It's important to note that this is just the 

9 specialty bicycle channel. This does not include mass 

10 market channels. There's a lot more that are sold that 

11 way.

12 The NPR also estimated that a certificate of 

13 compliance would be issued once a year. Pausing on 

14 that for a moment, because I'm going to explain why 

15 that's not the right estimate, but if it were correct 

16 that it would only be a once-a-year job, using the 

17 7,170 estimate, the incremental cost would exceed 

18 $450,000 a year, not the much smaller number estimated 

19 in the NPR, and far more when mass market bicycles, 

20 helmets, and clothing are included.

21 But that is on the assumption that this is a 

22 once-a-year task. It's not, as explained by Nancy and 
99

1 Alan and others today. It's an everyday task, and 

2 there was no estimate of the time and effort that would 

3 be required to upload manually into the electronic 

4 system these PDFs that would have to accompany each 

5 shipment. There was no estimate given to that.

6 And then, it's also the case that many bicycle 

7 models will have to have a new certificate more than 

8 once a year if they change a component or they change a 

9 supplier, or there may be other reasons why that 

10 certificate has to be changed. So, the one-year 

11 estimate is too low, once a year, and the idea that we 

12 would only have to engage in this labor once a year is 

13 erroneous because the proposal would require it to be 

14 done for each shipment.

15 There are also tracking requirements in the 

16 proposal that if we understand them correctly, go way 

17 beyond the current requirement to identify the month 

18 and year of the manufacturer. As we read the proposal, 

19 there would be a requirement to identify the scope of 

20 finished goods by the start date, the start and end

21 date, the lot number, starting serial number or serial 

22 number range. This goes way beyond what we're 
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1 currently doing, way beyond what we think is really 

2 required by the law.

3 We're not certain what the value would be 

4 added by these requirements, but it would be extremely 

5 difficult to add this to the current certificate of 

6 compliance that's being generated. And it would be 

7 complicated further if it's extended to components and 

8 after-market parts, which are rarely date coded or 

9 serialized now. The bicycle industry supply chain is 

10 just simply not equipped to do this.

11 As others have mentioned, it is our 

12 understanding that the CBP's ACE system is not ready to 

13 take data elements yet. As others have mentioned, we 

14 believe the only process to file these would be the 

15 labor-intensive manual upload of PDFs. It's not clear 

16 to us that CBP would even accept PDF attachments. This 

17 is something we look forward to hearing this afternoon 

18 from the other speakers. But, in any event, it would 

19 impose great costs and introduce the potential for 

20 human error, and there would be no commensurate 

21 improvement in consumer product safety.

22 So, our conclusion, we don't believe that 
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1 electronic filing of GCCs with the CBP should be 

2 required. We think the current system is working well. 

3 We don't believe that true electronic filing is ready 

4 yet, that labor intensive manual uploads would be 

5 required.

6 We think the current system of making the GCCs 

7 available on request is working well. We're not aware 

8 of issues or problems in the bicycle industry. The 

9 additional costs, which have been greatly 

10 underestimated, have not been justified and certainly 

11 don't show that they will produce an improvement in 

12 safety.

13 Thank you very much.

14 (Applause)

15 MS. ADAIR: Thank you, Erika.

16 Let me bring up our final presenter this 

17 morning, Michael Mullen from the Express Association of 

18 America.

19 PRESENTER: MICHAEL MULLEN

20 MR. MULLEN: Well, thanks very much. I also 

21 want to thank CPSC for holding this event. I mean, in 

22 our view, it's always been an agency that's been, you 
102

1 know, more than ready and willing to sit down with the 

2 trade and talk things over. This is another great 

3 example of your ability to take that approach.

4 Of course, the disadvantage of going last is 

5 that absolutely everything I was going to say has 

6 already been said. But the advantage of going last is 

7 that absolutely everything I'm going to say has already 

8 been said. So, I could go real quickly through this. 

9 Knowing these slides are all that's standing between 

10 you and lunch will maybe be an additional plus.

11 So, the Express Association of America has 

12 four members who are the largest express carriers in 

13 the world and together account for around 70 percent of 

14 the air cargo that's coming into the United States on 

15 any given day. This is just a little bit about 

16 collectively what these companies comprise in the way 

17 of resources and revenues. Thirty million shipments a 

18 day are up there in the air somewhere in one part of 

19 the supply chain or another. There's virtually no 

20 place on earth that isn't serviced by one of these 

21 companies.

22 I just wanted to spend a minute sort of going 
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1 through the express package operational chain. I'm not 

2 going to go through every aspect of this, but you could 

3 take this and apply it to any two countries on earth. 

4 Put one country at one end and another country at the 

5 other end, and this is still basically the way the 

6 process works.

7 I'm going to talk about it for a product 

8 coming from overseas into the United States. But it 

9 starts at some overseas customer location where the 

10 product is submitted into the system. That is where 

11 the shipper has his interface with this system. In 

12 other words, the person with the most knowledge about 

13 this product is back there at the very front end of it.

14 Information in the form of documents, either 

15 on paper or more often electronically, is captured at 

16 that point. It's entered into the express company's 

17 proprietary systems. Those blue boxes across the top 

18 are the physical movement of the shipment. The rest of 

19 it is the way the data is managed. So, after it's been 

20 turned in, we start putting together the manifest.

21 Of course, for those of you who are familiar 

22 with it, a new wrinkle on this started a couple years 
104

1 ago, the requirement for air cargo advanced screening 

2 information which is a subset of seven data elements 

3 that are provided purely for CBP and TSA to conduct a 

4 security review of the shipment to identify any risks 

5 to the safety of aviation.

6 So, the manifest is submitted in accordance 

7 with the Trade Act, which is four hours before the 

8 flight arrives in the United States. In the meantime, 

9 the broker's side of the house has been putting 

10 together the information for entry, which is this box 

11 down here.

12 I would say -- colleagues, correct me if I'm 

13 wrong -- that that's the first time that somebody with 

14 a knowledge of this requirement for something like a 

15 Certificate of Safety, it actually starts intervening 

16 in the process of looking at the data and saying what 

17 do we know about this product. You're essentially at 

18 the arrival point at that point.

19 So, the shipment arrives. It's scanned. I 

20 would say each of these orange boxes is a place where 

21 the shipment is scanned by the express company's 

22 proprietary system. By that time, CBP has done their 
105

1 targeting on the manifest information. A certain 

2 percentage are selected. They're inspected. If it's 

3 going to be a problem with it, it gets caged. The 

4 great majority move into the domestic where it gets 

5 delivered.

6 So, the point I want to make about this is the 

7 box at the bottom. This is a very tight circle. 

8 Everything I've shown you here has to be completed 

9 within 24 hours. And anything that causes a 

10 disruption, any sort of additional requirement that 

11 causes this cycle to be thrown off, can result very 

12 easily in a mis-delivery, because the demands of this 

13 are really stringent. So, that's the concern in the 

14 express industry.

15 So, some of the key issues -- this, again, has 

16 been gone over pretty well -- the Trade Act requires 

17 the party with the best knowledge of the information on 

18 a shipment as being the one who should be responsible 

19 for providing it. And for product safety issues, it's 

20 been -- the point's been made many times, that party 

21 with the best information is the importer, or the owner 

22 of the goods.
106

1 And the importer record concept has been 

2 explained. It's a kind of a matter of convenience to 

3 allow the financial aspects of the transaction to be 

4 completed.

5 For products being sold online, the seller 

6 should be the responsible party. And as been made 

7 (sic) by some real experts here, the brokers cannot be 

8 in a position to have to certify the product as in

9 compliance.

10 And another point is that I don't think a lot 

11 of big importers like -- maybe Lego is a good example 

12 -- really want carriers and sort of third party

13 brokers being in the position of representing them on 

14 safety issues. That goes to a company's brand, and 

15 they want to be in charge of making sure that those 

16 requirements are met.

17 So, just a couple of ideas. Again, some of 

18 this has been said. It really would be helpful to 

19 start with CPSC providing a list of the products that 

20 are going to have Rule 1110 applied to them, and by HTS 

21 number. The issue of submitting the certificates 

22 electronically has been pretty well gone over. I have 
107

1 learned a lot today about the difficulties of 

2 submitting them in pdf, so I'm not sure -- I think that 

3 issue needs a lot more discussion. CBP's document 

4 imaging system is going to be the part of ITDS and ACE 

5 that has the capability to do that. CBP -- maybe we'll 

6 hear this afternoon -- says that it can search on data 

7 elements. So we need to find out a little bit more 

8 about that.

9 But providing the certificate of release -- of 

10 certification post-release, as we do now, I think is 

11 obviously the way that we all feel is best to continue. 

12 And if the IOR has to get in the position of holding 

13 the goods, pending receipt of the certificate, if the 

14 cost in time delays are really going to increase (sic).

15 But I would say whatever is decided on this in 

16 the final analysis -- and hopefully any revision of the 

17 rules should make this perfectly clear, that it has to 

18 apply 100 percent equally to the U.S. Post Office as it 

19 does to everyone else. So -- and I'm a little 

20 surprised, actually, that they're not here today, 

21 because they have huge equities in this. But they are 

22 a carrier, like everyone else, and volume-wise, I 
108

1 wouldn't be surprised if they're the largest for a lot 

2 of these shipments that you're worried about. And this 

3 has to apply to them 100 percent.

4 So, looking a little longer-term, I think 

5 that, really, if you look at CPSIA, what it means, 

6 essentially, is that CPSC has a trade facilitation 

7 mission now, because if you have a responsibility to 

8 stop non-complying products, I think that inherently 

9 means you have a responsibility to clear 

10 highly-compliant products, and the agency has to look 

11 at it that way.

12 The private sector can't be in the -- put in 

13 the position of doing what are essentially enforcement 

14 actions. They could be helpful, they could provide 

15 data, they could do a lot of things, but they can't be 

16 the ultimate enforcer out there. And this issue of 

17 establishing an ongoing dialogue on these issues is 

18 really important.

19 And another speaker mentioned the idea 

20 that -- maybe it was John -- that it's not a difficult 

21 thing now to create a working group that would be 

22 effective for this under the auspices of the COAC. I 
109

1 am a member of such a group right now that was created 

2 to look at data quality issues with FDA, and it's 

3 working very well, and it's under FACA auspices, it's 

4 fully legal, and it's a way to bring in any expert from 

5 the private sector that you need to sit at the table.

6 In the end, CPSC has to identify what the 

7 information is they really need for risk targeting. 

8 And the overriding factor of the executive order on

9 ITDS is that government has to develop a common 

10 approach to risk management, one that works for all the 

11 agencies with any kind of border clearance 

12 responsibility. And there is a discussion going on on 

13 that process, but it's going to be a critical step in

14 seeing -- in making sure that the President's order on 

15 this really succeeds. And, obviously, a Trusted Trader 

16 program that provides some meaningful benefits is going 

17 to be an important part of that.

18 So, thanks very much.

19 (Applause.)

20 IV. QUESTIONS & ANSWERS FOR MORNING SESSION

21 MS. ADAIR: Okay, I want to thank all our 

22 presenters this morning for some really excellent 
110

1 information, presentations, and it undoubtedly has 

2 raised a lot of questions in people's minds.

3 I also want to remind everybody that we need 

4 to ask questions from the mic. If there are folks in 

5 the room who have questions, they need to queue up at 

6 the microphone, which is here, where John is standing. 

7 If you're at the table and you're going to ask a 

8 question, you need to turn on your mic for the 

9 question. You need to identify yourself and your 

10 affiliation.

11 And so, I think we can get started with 

12 questions. And I believe we have some questions from 

13 CPSC staff. So I recognize Carol Cave.

14 MS. CAVE: Great. Thanks, Patty. So I do 

15 have a couple of follow-up questions, based on some of 

16 the comments we've heard today. And, first of all, I 

17 do thank you all for your input, because it is very 

18 informative. And, you know, we don't know all the 

19 rules of the land, so -- but we do have some clarifying 

20 questions, I guess, that I would like to ask.

21 Many of you have talked about this issue of 

22 burden and the data entry piece on your side of the 
111

1 house. So, I guess what I was looking to have a better 

2 understanding of is when today a shipment from any of 

3 your members is stopped, A, if you could quickly talk 

4 through that process of how that is provided to CBP or 

5 CPSC when that commodity is stopped at entry; and, if 

6 you could, also talk about both time delay and money 

7 delay or cost to your industries as a result of that 

8 delay when having to ask.

9 MR. GOLD: I guess I'll start, Jonathan Gold, 

10 National Retail Federation.

11 I guess it really depends on why the product

12 is stopped, who is stopping it, is there resources at 

13 the port where the shipment has been stopped. If you 

14 have an agency who is stopping a product that isn't at 

15 the port, it takes time for them to get there and do 

16 the inspection. If it's an FDA product -- and Mike can 

17 talk about the FDA stops that the air cargo industry is 

18 seeing.

19 But any time a product is stopped and causes 

20 delay, you've got the expense of not getting the 

21 product to where it needs to be on time, you've got the 

22 storage costs it's going to cost to hold that product. 
112

1 You've got the inspection cost to do the inspection on 

2 the product. So, all of that adds up at the end of the 

3 day.

4 I think the importers want to get the 

5 information as quickly as possible to the agency who 

6 has stopped the import, whether it's for trade 

7 compliance or something else. So they'll work with 

8 their broker to make sure that, as quickly as they can, 

9 they'll get the data, whatever the data that's 

10 required, to the agency that needs to do the 

11 inspection.

12 So, I know, with the, you know, certificates, 

13 it's, you know, upon demand. I think it's within 24 

14 hours they have to get the certificate, if there is an 

15 issue.

16 And I would turn it back, you know, to CPSC, 

17 is that, you know, part of the issues that we haven't 

18 heard that there have been any issues with CPSC being 

19 able to get the certificates. So I guess one of the 

20 questions I think we all have is are there issues that 

21 CPSC has seen with obtaining the certificates. If 

22 there are, are there other ways we can look at helping 
113

1 the agency get those certificates quicker than they're 

2 currently receiving them?

3 MR. KAUFMAN: And if I could comment on that 

4 as well, I think, you know, certainly providing a 

5 certificate or a group -- a small group of certificates 

6 on demand is not creating a huge burden. On the other 

7 hand, having to preemptively or proactively submit 

8 hundreds, potentially, of these same documents per day 

9 would create a huge administrative burden.

10 As far as the costs go, certainly a lot of our 

11 members sell to retailers, and retailers, in order to 

12 try to maintain something approximating just in time, 

13 and to try to minimize the amount of time that they're 

14 holding inventory, have very tight ship windows on when 

15 that product can be delivered. So it's very common for 

16 retailers to say, "You must deliver this product to our 

17 warehouse between this date and this date," and that 

18 window can be as short as two weeks.

19 So, even a few days delay at the port can 

20 result in either a monetary penalty from the retailer, 

21 or, if you miss that ship window, the retailer has the 

22 option of canceling the order. And the importer is 
114

1 stuck with goods that they can't sell, which can be 

2 very significant, in terms of cost, particularly for a 

3 small or medium enterprise.

4 MS. ADAIR: Just a general reminder -- this is 

5 Patty Adair -- please identify yourself and your 

6 affiliation. And it just helps with the transcript and 

7 people who are watching over the web.

8 MR. KAUFMAN: Sorry, Al Kaufman, Toy Industry 

9 Association.

10 MS. MCGUIGAN: This is Kathleen McGuigan with 

11 the Retail Industry Association. Additional costs 

12 could also be that, you know, depending on how long the 

13 delay is to meet that ship window, rather than going 

14 through normal supply chain processes, the importer 

15 then will have to then do express shipment, or do some 

16 kind of enhance, because it needs to be in the stores, 

17 because the retailer has already advertised it, it's in 

18 their big Friday flyer, or it's -- you know, heaven 

19 forbid, it's for Black Friday, and it needs to be 

20 there. So, all of those costs would have to be 

21 considered as part of the total cost.

22 MR. LAHAR: I would just like to echo a 
115

1 comment that John made about resources at the ports. 

2 There are not CPSC officers at every port in the world. 

3 I live in Champlain, New York, we don't have a CPSC 

4 officer; the closest officer is in Buffalo.

5 And along the Canadian border we operate 24 

6 hours a day, 7 days a week. In fact, the bulk of the 

7 merchandise that we deal with comes through in the 

8 evening, and into the early hours of the morning. And 

9 if we don't have access to officers, or we don't have a 

10 system that can automatically provide a release along 

11 the lines of what FDA has, it could be a huge burden 

12 and slow down trade coming through the border, and that 

13 could result in shipments being held up and additional 

14 costs in storage and transportation.

15 MS. ADAIR: Thank you, Mike Lahar, with the 

16 National Customs Brokers.

17 (Laughter.)

18 MS. ADAIR: And Forwarders Association. I 

19 know it feels awkward, but it just is helpful. Thank 

20 you.

21 MR. KAUFMAN: Hi. Al Kaufman with the Toy 

22 Industry Association. Just to add on to what Michael 
116

1 said, that issue is not limited to minor ports where 

2 CPSC doesn't have, necessarily, personnel assigned. We 

3 found that even at major ports like Chicago and the 

4 Port of New York, some of our members have reported 

5 having product held for five days and then released 

6 because the inspector couldn't get to it.

7 So, clearly, staffing levels are the limiting 

8 factor here.

9 MR. MURRAY: Sean Murray with the National 

10 Association of Foreign Trade Zones. And something that 

11 comes to mind for me is the importance of understanding 

12 the need for some flexibility in the process.

13 With customs, most of the things they are 

14 doing -- they are going to grant a release, and then 

15 there is going to be follow-up with import specialists 

16 or others asking questions, because the primary 

17 concerns are, typically, "Are they getting the revenues 

18 and accurate declarations they need?" But things will 

19 be released.

20 With certain other agencies, there is the 

21 release issue. And so you will have -- I will use the 

22 FDA as an example -- you will have shipments held, and 
117

1 it is very -- it's unclear what needs to be done to 

2 bring the shipment into compliance to get the release.

3 And when there is manual; people in the 

4 process, that raises other issues, because then it 

5 becomes contact issues: How do you actually get a hold 

6 of the person? There is personnel training issues; 

7 they don't really know what they're asking for, in some 

8 cases. And sometimes you have things as simple as 

9 vacation issues, where the person asking the question 

10 leaves, and no one feels comfortable issuing a release 

11 until they come back two, three weeks from then.

12 And so, we'll see in manufacturing 

13 environments you will have -- customs will recognize, 

14 hey, if a line is going down, we don't want to shut 

15 your factory down. If we are going to work with you, 

16 we will clear things, we might have a prior disclosure 

17 to fix this afterwards, but we don't want lines to go 

18 down. That's not our job, to shut your business down. 

19 You don't have that with some of the other agencies, 

20 and that's a real difficulty. You just can't get your 

21 product and you can't use it without creating more 

22 problems for yourself.
118

1 MS. CAVE: Thanks. I have another question, 

2 actually, mainly for Mark. And you mentioned in your 

3 presentation this issue of a blanket certificate. Can 

4 you talk a little bit more about how that works in 

5 another environment, and what exactly that means?

6 MR. SHACKLETTE: I guess a good example would 

7 be the NAFTA Certificates of Origin, which are valid 

8 for a year, which we would rely on, you know, for our 

9 frequent importers. And that's certainly a good 

10 process. We don't have to go and collect data on a 

11 shipment-by-shipment basis. So that obviously saves a 

12 lot of time and cost for the broker and the importer, 

13 as well. So that would be a much more efficient 

14 process.

15 MR. JOHOLSKE: This is Jim Joholske from CPSC. 

16 A follow-up for the express carrier folks.

17 So, there are a number of different government 

18 agencies that have certification licensing 

19 requirements. In situations when you serve as the 

20 importer of record, how are you involved in satisfying 

21 those requirements, or transmitting those documents?

22 MR. SHACKLETTE: When we serve as the IOR, I 
119

1 mean, really, our process with customs is exactly the 

2 same as when the importer is the importer of record. 

3 It does put some burdens back on us, there are some 

4 things that -- where we could be held responsible for, 

5 compared to a shipment where we were not the importer 

6 of record. But in no way are we, you know, subject to 

7 the type of penalties, I guess, for lack of a better 

8 word, that we would be subject to under this proposal 

9 from CPSC, where, you know, we're held legally 

10 responsible, we have to certify, and if it wasn't done 

11 right, we would be held liable as though we were the 

12 actual purchaser-owner. So the other ones do not go to 

13 that extent.

14 And certainly customs understands that when we 

15 serve as the importer of record, there is this other 

16 party out there who is the ultimate consignee who is 

17 the party, who is the actual purchaser, sold-to party, 

18 who shares a responsibility in that shipment, as well. 

19 And they will also, you know, pursue them, and then 

20 there certainly would be a lot of times where they 

21 would leave us out of the equation, because they 

22 understand it was done for the purposes -- just for 
120

1 streamlining trade, and -- as a convenience matter.

2 MS. CAMPBELL: Jacqueline Campbell, CPSC. One 

3 of the rules we discussed earlier was the component 

4 part rule, 1109. And for the brokers, you know, were 

5 you familiar with this rule? And do you think that it 

6 would give you a way to take a component part 

7 certificate for a finished product, and then issue the 

8 certificate?

9 Oh, I'm sorry. Jacqueline Campbell. Can 

10 everyone hear me now? Okay, terrific. Thank you.

11 This is a question mostly for the brokers. 

12 And I was asking about 16CFR Part 1109, which is the 

13 component part rule, and -- whereby someone could issue 

14 a finished -- or a component part certificate for a 

15 finished product, essentially. Could you -- as 

16 brokers, do you see that as a means of issuing a 

17 certificate?

18 And if -- were you familiar with the rule? 

19 That's another question that we had. And we'd like to 

20 hear your comments on that.

21 MR. LAHAR: I did read about. There -- in our 

22 industry there is always -- I'm sorry, Mike Lahar with 
121

1 the NCBFAA.

2 (Laughter.)

3 MS. ADAIR: Sorry.

4 MR. LAHAR: There is always somebody in our 

5 industry that is willing to take on those roles. So 

6 I'll bet there is somebody out there right now who 

7 probably is putting together a plan on how they could 

8 probably capitalize on that.

9 But understand that our core business is not 

10 certifying products for CPSC. And for the vast 

11 majority of the industry, I would say that we would 

12 probably be interested in acting as a transmitter of 

13 data, but not as a submitter of data. And actually 

14 doing the certification, in my opinion, would be a 

15 submitter. And then we get back to the liability that 

16 would be incurred by the party that is submitting the 

17 information to CPSC, and making that certification.

18 Who is going to back it up? That is my big 

19 concern.

20 MR. KAUFMAN: Jacqueline -- Al Kaufman with 

21 the Toy Industry Association -- just to add a little 

22 bit to that, you know, certainly it's reasonable for 
122

1 certifiers to rely on the certifications of others in 

2 order to make that certification. I think, in response 

3 to your question, I think the stumbling block would 

4 probably be for a broker who doesn't have intimate 

5 knowledge of the product, how would they know that they 

6 were receiving all of the necessary component 

7 certificates in order to issue a finished product 

8 certificate, because they would be receiving a batch of 

9 certificates, but without that product knowledge they 

10 don't know whether they have a complete picture or not.

11 MR. SHACKLETTE: Mark Shacklette, UPS. And 

12 just to add on to those guys, yeah, I mean, it 

13 wouldn't -- it would be very risky for us to do that, 

14 and I don't see us taking on that risk, and I don't see 

15 why we would want to take on that risk. Because I 

16 think the risk is certainly much greater than the 

17 reward.

18 MR. MULLEN: One thing on this, too -- I'm 

19 Mike Mullen from the Express Association of 

20 America -- a lot of other federal agencies that require 

21 someone to submit some type of certificate or 

22 verification, that requirement is a part of a 
123

1 registration that that importer or that manufacturer 

2 has to actually come in and register themselves with 

3 that agency. And you know, the certificates that are 

4 required sort of result out of that process.

5 So, it's a case where you're dealing with 

6 companies that have huge compliance staffs that ensure 

7 that those kind of -- that kind of documentation 

8 of -- goes along with all their shipments coming in, 

9 and it's -- they don't -- in fact, they would 

10 vehemently object to trying to impose those kind of 

11 requirements on a carrier.

12 MS. CAMPBELL: Thank you.

13 MS. CAVE: Carol Cave, CPSC. Another 

14 question -- and mainly for anybody -- but do you all 

15 know if there are any other federal agencies out there 

16 that you are aware of that have defined "importer" any 

17 differently than, say, us, FDA, or CBP in the terms 

18 that you're -- you had described earlier, in terms of 

19 changes?

20 [No response from panelists.]

21 MR. JOHOLSKE: This is Jim Joholske from CPSC 

22 again.
124

1 Nancy, quick question for you. You were kind

2 enough to kind of delve into your process of generating 

3 certificates. On your website, when you generate a 

4 certificate, are you able to associate that to a 

5 specific entry that comes into the U.S.?

6 MS. MACPHERSON: No, you're associating that 

7 to an item number, a SKU number, the free text of that 

8 item. Yeah, the --

9 MR. JOHOLSKE: Okay.

10 MS. MACPHERSON: Because of it -- from what I 

11 showed, simply the number of transactions and the way 

12 the process flows, you know, all combined trailers in, 

13 all combined trailers out, it is directly linked to the 

14 item --

15 MR. JOHOLSKE: Okay.

16 MS. MACPHERSON: -- and not a shipment.

17 MR. JOHOLSKE: Thank you. And I guess just a 

18 general question for anybody that would like to jump 

19 in.

20 Generally speaking, when you're working with 

21 your customs broker, or working with a customs broker 

22 to file entry, the information that they use to then 
125

1 file the entry through ABI with CBP, how is that 

2 information generally provided? Is it by phone, fax, 

3 email, some sort of data elements, a variation of all 

4 of them? Just trying to get a little background on how 

5 that information goes from the importer to the broker.

6 MR. GOLD: Jon Gold, National Retail 

7 Federation. I guess I can start, but would love the 

8 brokers to chime in, as well.

9 I think it really depends on the company, the 

10 level of sophistication within the company, large 

11 importer versus small importer. I think, for the 

12 larger importers, who have very complex systems, it 

13 will be through an IT means that will get there, 

14 whether it's email or direct, you know, linkage of 

15 information. For others, smaller guys, you're going to 

16 see probably faxes that are coming in.

17 So, it really depends on the company, their 

18 level of expertise, as far as how they're getting their 

19 information. But there is no common kind of universal 

20 system for how that information is transmitted to the 

21 brokers. A lot of it is, you know, depending on the 

22 brokers, their relationship with the importer, the 
126

1 systems they have in place, and they're all worked out, 

2 but it really depends on that level of expertise and 

3 resources within those companies.

4 And for the smaller guys, this could be more 

5 and more of a paper trail than it will be on the 

6 electronic side. So it's going to be even more complex 

7 for those guys to get that data forward.

8 MS. MCGUIGAN: Kathleen McGuigan with RILA. 

9 So, as Jon mentioned, large importers have close 

10 working relationships with their brokers, partners, and 

11 so they have developed systems where they can transmit, 

12 essentially, data fields. It's a field that they 

13 transmit to their brokers, who, in turn, can transmit 

14 that as part of their customs entry.

15 But again, that's IT resource-intensive, and 

16 it requires very close and continuing partnership with 

17 particular brokers on an ongoing basis.

18 MR. LAHAR: Mike Lahar with the NCBFAA. I 

19 think we have to keep in mind it's not just the 

20 exporters and the importers who are providing the 

21 information to the broker. In many cases, it depends 

22 on the broker themselves. Our membership has brokers 
127

1 that run the gamut, from a few people in an office, in 

2 an airport, or a seaport, to fairly substantial 

3 companies that have offices across the United States 

4 and would have an IT department that would be available 

5 to develop the type of software that would allow that 

6 type of integration.

7 And then, we have the express carriers, who 

8 are very large. But even those, I would dare say, have 

9 a limited amount of IT people to work on these types of 

10 issues.

11 MR. SHACKLETTE: And Mark Shacklette at UPS. 

12 Yeah, even in -- at UPS, we run the full gamut. So we 

13 have the very large importers who we're totally 

14 integrated with, and then we go to the other end of the 

15 spectrum through, like, our small package service, 

16 where it's a first-time importer who is asking, "Why do 

17 you need my tax number?" "What do I have to do?" "I 

18 don't have" -- you know, they don't have a clue.

19 So, we're having to provide, you know, a lot 

20 of hand-holding to them, and it's all completely 

21 manual. It's phone, it's fax, it's emails, it's all of 

22 those, all of the above.
128

1 MR. KAUFMAN: Al Kaufman with the TIA, and 

2 that's certainly true for our membership. There -- it 

3 runs the gamut from very large, very sophisticated 

4 companies that have an electronic data interchange with 

5 their broker, or may even have in-house brokers, all 

6 the way to very small enterprises that rely very 

7 heavily on an outside broker, and simply just say, "I 

8 don't know anything about this, I'm depending on my 

9 broker to make sure that I'm compliant, in terms of the 

10 entry, and I'll -- you know, I'll send it to you by, 

11 you know, fax, or phone, or carrier pigeon," or however 

12 it happens to work. So --

13 MR. MURRAY: Sean Murray with NAFTZ. I'm 

14 sorry I'm going to jump backwards to a question that 

15 Carol had asked, but it threw me when you first asked 

16 it. You asked about the definition of importer, and 

17 whether other agencies might define it differently.

18 I can't think of any on the import side, but 

19 on the export side the Census Bureau and Department of 

20 Commerce redefined exporter in the late 1990s to really 

21 address the same problem I think you guys might be 

22 considering, and they redefined it to the principal 
129

1 party and interest, which was a broader concept, 

2 because they realized the problems with really defining 

3 that specific exporter was not necessarily the party 

4 that had the interest in the merchandise. So that 

5 might be a place to look.

6 MS. CAVE: So, many of you know that CPSC 

7 staff have been working very closely with CBP and, you 

8 know, through the BIEC, and everything else, and we 

9 actually put in the notice for this meeting the fact 

10 that staff have been discussing the possibility of a 

11 pilot system that we would do with CBP. Many of you 

12 mentioned it today and recommended that, as well, to 

13 the Commission.

14 I guess I'd just like to see, from my 

15 counterparts at other agencies, when they enter into a 

16 pilot situation there is somewhat of a lack of a 

17 response to engage and make it work and be successful. 

18 If I could just kind of see, from those who are here 

19 at the table, what kind of level of commitment you 

20 would be willing to do, should the staff engage in that 

21 kind of an effort.

22 MR. LAHAR: Mike Lahar with the NCBFAA. I 
130

1 serve as a co-chair of the RAC Committee within the 

2 NCBFAA. Our focus is on participating government 

3 agencies, such as the FDA and the CPSC. We just had 

4 our national meeting earlier this week, and I had 

5 people lined up to get on the committee because of 

6 ITDS. It is very much in the foresight of the 

7 organization, and my committee in particular, and I bet 

8 I can gather up a bunch of people who would want to 

9 participate in that. Just say the word.

10 MR. GOLD: Jon Gold with the National Retail 

11 Federation. While I, you know, can't commit that 

12 members will participate, we will obviously work very 

13 closely with them, and encourage them to participate. 

14 You know, the retailers have been some of the ones who 

15 have stepped out further on some of these projects. We 

16 look at C-TPAT, ISF, and those kinds of initiatives, 

17 you know our members have really kind of been front of 

18 line to try and participate and work with the 

19 government agencies. They know how important this is, 

20 and they want to make sure it's done right.

21 So, from that aspect, I think we would have 

22 several members who would be interested in working with 
131

1 the agency, looking at the -- you know, the parameters 

2 of the pilot and how that would work, but I think they 

3 would be very interested to work with you, showing from 

4 small, medium, and large, how this works, what it would 

5 take to move forward on kind of a data element-type 

6 submission.

7 MS. MCGUIGAN: I'm Kathleen McGuigan with 

8 RILA, and I would echo what Jon says. I mean our 

9 members have been lead partners with CBP on C-TPAT, 

10 product safety. Our members were some of the first 

11 members of that partnership program.

12 So, again, they look forward to participating. 

13 This will significantly impact their business. So 

14 getting it done, and getting it done right is critical. 

15 We've had multiple -- numerous phone call conversations 

16 about best ways to educate and provide information to 

17 the CPSC about supply chains. So I have no doubt that 

18 our members will also be eagerly anticipating.

19 MR. KAUFMAN: Al Kaufman with TIA, and I would 

20 echo that, as well. You know, certainly we can't make 

21 a commitment on behalf of our individual members, but I 

22 know there is great interest in this, this subject, 
132

1 among our members. We would certainly encourage them 

2 to participate. And, frankly, I would be very 

3 surprised if you didn't have more candidates than you 

4 could take. So --

5 MS. JONES: Erika Jones for the Bicycle 

6 Product Suppliers. Again, I can't commit the members; 

7 we would definitely raise it to them. But one issue 

8 they will have is what exactly the pilot would be. If 

9 it's a pilot of uploading pdf's, I can tell you now I 

10 don't think anybody is going to want to do that. But 

11 if it's a pilot of the data elements or a pilot to try 

12 to take it to that generation, they may well be 

13 interested in helping with that.

14 MR. MURRAY: Sean Murray with the NAFTZ. Two 

15 comments. First of all, many of the companies that 

16 will jump into a pilot will be the companies that are 

17 already highly skilled, have good compliance programs, 

18 highly automated. So, if you are contemplating issues 

19 with the small or medium-sized importers who face the 

20 issues, they are less likely, I think, to be in pilots, 

21 because, frankly, they don't know about it, they don't 

22 have the resources.
133

1 The second thing would be even participants in 

2 pilots, sometimes they do it because they want to do 

3 it, because they think it's a good idea just to do it, 

4 to play ball. But I've been working with some 

5 companies and other agencies, supply chain pilot 

6 program right now, and the results are it's slowing 

7 things down, it's taking longer, it's more data 

8 elements, it's not actually helping.

9 And so, you want to convey that there will be 

10 some benefits to participating in the pilot to 

11 encourage people to be in the pilot.

12 Ms. MCGUIGAN: So this is Kathleen McGuigan 

13 again with RILA. So I would encourage you, as you're 

14 considering putting together your pilot program, lots 

15 of pilot programs sort of run in tandem with the 

16 existing customs entry process. So that way, just as 

17 Sean mentioned, that the entry actually goes through, 

18 but the pilot program is sort of an additional layer, 

19 but the entry can continue to clear in a timely 

20 fashion, that you can get your information that you 

21 need, and you can understand the timelines for doing 

22 that, and you can work back and forth, but the cargo is 
134

1 not going to be stopped at the ports.

2 MR. LAHAR: Mike Lahar with the NCBFAA. Mike 

3 Mullen had been so kind earlier to mention COAC. I 

4 think the forum that you're having today, if you 

5 consider -- continue to have these open meetings, and 

6 consider participating in COAC, that you're going to 

7 get a lot more participation in your pilot.

8 MR. GOLD: Jon Gold, with National Retail 

9 Federation, just to echo Michael as well, as you're 

10 looking to develop the pilot, I would do it under the 

11 construct of the COAC, and work with industry on 

12 developing the pilot itself, as opposed to the agency 

13 just kind of putting its own thoughts together on a 

14 pilot. I think working with industry to develop the 

15 pilot and determine what the objectives and the goals 

16 are I think will get you a lot further than just the 

17 agency putting it together on its own.

18 MR. JOHOLSKE: Jim Joholske from CPSC. A 

19 couple of you have touched on modes of transportation 

20 and some of the challenges that come up. Those are 

21 issues we deal with in our world, in targeting, as 

22 well.
135

1 I was just wondering if anyone would like to 

2 expand on that a little bit, I guess a chance to give 

3 us a little more background on what you see the 

4 challenges may be in filing certificates 

5 electronically, as proposed under the rule, in the 

6 various modes of transportation.

7 MR. LAHAR: Mike Lahar with the NCBFAA. Sorry 

8 to be a mic hog.

9 One of the things to consider -- there are a 

10 lot of different modes of transportation, you're right. 

11 And there are different types of ports: air, vessel, 

12 northern border, southern border. And they're all 

13 different animals. In my world, I work and live 45 

14 minutes due south of Montreal. But we have exporters 

15 in Montreal who are putting things on their truck at 

16 4:00 in the afternoon, and they're down at U.S. Customs 

17 in queue to clear by suppertime.

18 The 24-hour rule is a real onerous requirement 

19 for us. We already work with one hour for CBP, two 

20 hours for FDA, but 24 hours for northern-border brokers 

21 who have immediate proximity to exporters. And I 

22 daresay as well, for the express carriers, who have to 
136

1 have that very small time frame to get the goods in, 

2 that's a real problem for us. It's going to be a real 

3 challenge, it's going to require a different way about 

4 thinking for those shipments that are subject to CPSC, 

5 and could delay the entry of the goods into the United 

6 States.

7 MR. JOHOLSKE: Let me just follow up on that 

8 point. So the proposed rule, it talked about the 

9 requirement being at entry or entry summary, if filed 

10 simultaneously.

11 So, how does that factor in? If we're not 

12 looking at 24 hours in advance, but at the time of 

13 entry, what type of issues, say at a border crossing, 

14 northern border, would you envision and having to 

15 provide certificate data, along with all the other data 

16 that would be needed at entry?

17 MR. LAHAR: Along the northern border we 

18 consider entry to be the time when the merchandise gets 

19 to U.S. Customs and is cleared, for most shipments. 

20 And then, we have 10 business days within which to file 

21 the perfected entry summary with U.S. Customs.

22 So, if you were to accept data at entry 
137

1 summary, the goods will be long gone from the border, 

2 be in a warehouse, and could even be at your local 

3 big-box store. So there is a big difference between 

4 entry and entry summary along the northern border. 

5 That may not be quite so true for vessel ports, because 

6 they operate under a different set of constraints.

7 MR. KAUFMAN: Al Kaufman with TIA, and I would 

8 say that that -- what Michael has outlined for the 

9 northern border certainly would apply at the southern 

10 border, as well. We have a number of members who 

11 manufacture, say, within 20 minutes of the border in 

12 Mexico. And when a truck is full, it heads for the 

13 border, 20 minutes later it's being entered.

14 So, the requirement to submit certificate data 

15 electronically just adds another layer of 

16 administrative burden to trying to get that 

17 documentation together, and get it submitted in that 

18 short period of time.

19 MS. MACPHERSON: This is Nancy MacPherson from 

20 Lego. If I can just build on that, I think the thing 

21 that we see is that, as I mentioned, you would be 

22 submitting the documents for those items and then, 
138

1 literally, you would be repeating it over and over, 

2 because those items just continue to flow. It's not 

3 like we ship all of one item, you know, even in a week. 

4 Over 52 weeks you would be shipping any combination of 

5 the same items, and just, literally, repeating the same 

6 certificate data elements.

7 MR. SHACKLETTE: Yeah, and -- Mark Shacklette, 

8 UPS -- I'm just thinking of, like, our -- the volume we 

9 handle from -- express volume from Canada and Mexico. 

10 They might pick something up in Vancouver, for example, 

11 4:00 p.m. their time, which might -- is 7:00 p.m. my 

12 time. It's going to come into Louisville that night, 

13 it's going to clear customs that night. If I had 

14 to -- if the information for this is missing, the 

15 shipment is then held.

16 So, something that would have gotten delivered 

17 that next morning, you know, and the money that people 

18 pay for that expedited service is now, you know, going 

19 to be lost.

20 MR. GOLD: Jon Gold with the National Retail 

21 Federation. Just to -- you know, Michael referenced 

22 the 24-hour rule. Just as kind of an example of when 
139

1 customs looked at doing the 24-hour rule, where it was 

2 getting the advanced information to do their targeting, 

3 they recognized that not every mode was the same, and 

4 you couldn't do 24 hours because of that.

5 So, what we did is we broke out into different 

6 subgroups with each mode represented, to talk about how 

7 they do it, their difficulties, and the challenges. So 

8 we ended up with different time frames for when -- for 

9 each mode when that 24-hour rule was to take effect.

10 So, I would encourage, as you're looking at 

11 this, talk to the different modes specifically, look at 

12 their timing and their supply chains, because they're 

13 all very different. Even within the modes, there is 

14 some difference there. So I would encourage you to 

15 take a look at that, as well.

16 PARTICIPANT: We're going to take a question 

17 from the audience here.

18 (Laughter.)

19 MR. Kaye: Hi, Elliott Kaye with CPSC. First 

20 of all, thank you very much. We really are listening. 

21 We want you to know we're listening, and we're going 

22 to continue to listen. We do want to get this right; 
140

1 it's very important for us to get this right.

2 There obviously is an executive order that is 

3 in effect that is supposed to come online by December 

4 of 2016. We think that this is a big part of it. But 

5 part of us understanding it is understanding the 

6 aspects of the executive order that might be separate 

7 from 1110 and its impact, and so I direct this to Mr. 

8 Gold, Ms. McGuigan, Mr. Kaufman, and anyone else who 

9 wants to jump in, but probably them, in particular.

10 Can you tell us, if we were to do nothing on 

11 1110 and it were to stay as it is, what would your 

12 members have to do procedurally, IT-wise, cost-wise, to 

13 comply with the executive order, so that we can get a 

14 better understanding of how much you're going to have 

15 to do, if anything, that's different that might not be 

16 related to 1110?

17 MR. GOLD: Jon Gold, National Retail 

18 Federation. I think part of this is we're still trying 

19 to figure out what that cost is going to be, especially 

20 with all the other agencies coming online and moving 

21 towards the electronic environment.

22 So, our hope is, through the executive order 
141

1 and through the BIEC, as we identify what those 

2 challenges are, one of the issues that we know the BIEC 

3 is looking at is looking at all the different 

4 regulations from the agencies that will be -- could be 

5 impacted, and how industry could be impacted.

6 You know, our hope at the end of the day is it 

7 streamlines costs, if you only have to file data once, 

8 as opposed to with 47 different agencies, where that's 

9 a cost. So we have long supported ACE and ITDS as 

10 always being that kind of front-end system to collect 

11 data one time and one time only, where the other 

12 agencies could then pull it and then use it for what 

13 they need.

14 So, at the end of the day, it could be a cost 

15 savings, if done correctly. But I think we have to 

16 make sure we get there, and it's done the right way. 

17 Through that, also, is this external engagement that we 

18 have discussed. I think, from industry's perspective, 

19 we need to hear more from the BIEC itself and the other 

20 agencies what the process is moving forwards, how those 

21 changes are going to be made, what we need to provide 

22 to the agencies to help push that forward, as well, I 
142

1 think is critical.

2 MS. MCGUIGAN: It's Kathleen McGuigan with 

3 RILA, and I would echo what Jon says. I think our 

4 members are working very closely with COAC and within 

5 the existing working groups to ensure that 

6 whatever -- with -- what other agencies need is as 

7 streamlined as possible, so whatever data fields they 

8 have to file will be as limited.

9 And that's the same kind of relationship that 

10 we'd like to have with the CPSC is, right now, the 

11 proposal asks for the entire certificate. There is 

12 clearly repetitive information, there is clearly 

13 information on there such as who has -- you know, who 

14 has the records for the testing that is really not 

15 needed for your import risk targeting purposes.

16 And so, what do you need for your import risk 

17 targeting purposes? How can we streamline it as much 

18 as possible? What are you already getting? How could 

19 we marry that together to ensure that whatever is 

20 ultimately decided on, that they're the minimal number 

21 of data fields, going forward?

22 So, yes, our members, everybody, will incur a 
143

1 cost. But whatever cost that would be would be 

2 minimal, compared to the large number of data fields 

3 that would be required for the entire certificate of 

4 conformity.

5 MR. SHACKLETTE: And -- Mark Shacklette at 

6 UPS -- just to add on to what you guys said, as far as 

7 ITDS goes, we've seen with some of the agencies that 

8 we've started to sit down and talk with, it has become 

9 a Christmas wish list of data that they would like to 

10 see, and us and the import community are certainly 

11 pushing back on that, because the costs could be 

12 substantial to us if they were able to make us require 

13 all this data.

14 So that's something to take a very careful 

15 look at, and we would appreciate that.

16 MR. KAUFMAN: Al Kaufman with TIA, and I would 

17 certainly echo those comments. If done correctly, it 

18 has the -- you know, there certainly is going to be 

19 some up-front costs. We're still trying to figure out 

20 what that's going to look like. But, clearly, there is 

21 a potential benefit, you know, in the long run.

22 And you know, I would say that certainly part 
144

1 of that is making sure that the requests for data are 

2 tightly constrained and have a very direct impact on 

3 what it is that you're trying to accomplish, whether 

4 it's better targeting or, you know, evaluation of 

5 compliance.

6 I think also, you know, we -- the elephant in 

7 the room is I think there is significant skepticism in 

8 the business community that that 2016 date is going to 

9 hold. So --

10 MR. Kaye: And thank you for that. If I can 

11 just ask a quick follow-up -- again, Elliott Kaye with 

12 CPSC. And so, let's say the PGA message set does not 

13 change. It's the current PGA message set. It's data 

14 elements.

15 Can any of you talk at least to what you 

16 anticipate as the burden on your industries, just to 

17 comply with the EO itself?

18 MS. MCGUIGAN: I hate to be wishy-washy, but 

19 I'm going to be a little bit equivocal, because the 

20 executive order talks about what other agencies are 

21 going to require. So, until you know what other 

22 agencies are requiring, and what data fields are going 
145

1 to be required, it's hard for us to give you a cost 

2 estimate.

3 I mean certainly our members, both -- and any 

4 importer -- already has some administrative burdens. 

5 Anyone who files electronically has administrative 

6 burdens that they've already invested in the process, 

7 and continue to invest to maintain those processes and 

8 systems.

9 So, again, I think it depends on what agencies 

10 are asking for. Individual agencies are coming on 

11 board. If they're asking for a Christmas list, that's 

12 why there is significant pushback as to -- because 

13 every data field or data set that you do is an 

14 additional IT cost, not only for the broker, someone 

15 who is a self-filer, the importer, and also for your 

16 overseas suppliers, as well.

17 MR. MURRAY: This is Sean Murray with the 

18 NAFTZ, and I think everybody wants to go on record on 

19 behalf of their company or association as saying they 

20 support ACE and ITDS development, and we do, too.

21 One of the concerns -- and pointing towards 

22 the additional costs that are out there that we've 
146

1 seen -- the FDA implemented its Predict system of 

2 screening roughly two to four years ago, they've rolled 

3 it out across the country. And one of the issues that 

4 we've seen there is, while it's great from -- it's 

5 automating a process that was otherwise manual within 

6 the agency -- what you're seeing is that when things 

7 have been automated, and data elements are there, and 

8 it matches or it doesn't match, you find out that 

9 people, over the years, have been fudging things. You 

10 know, they understand that this company -- they might 

11 have submitted this code, but we all know they mean 

12 this code, and so they were letting things go.

13 And so, when we saw Predict being rolled out 

14 to the various ports or FDA districts around the 

15 country, you saw delays that people couldn't explain. 

16 And it was a real cost, a real concern, and we still 

17 see those things rippling through with the various 

18 companies.

19 MR. MULLEN: This is Mike Mullen from the 

20 Express Agency, and I want to follow up on what Sean 

21 said there.

22 ACE, and the implementation of ITDS, really, 
147

1 if you stand back and look at it, is the automation of 

2 a process, much of which is automated now, but much of 

3 which is not, much of which is still on paper.

4 So, theoretically, there shouldn't be more 

5 data elements; it's just a question of getting them 

6 into a different process. But, of course, it's not 

7 that simple. And when -- as has been indicated a few 

8 times -- when people stand back and start looking at 

9 this, they start picking out others they'd like to 

10 have.

11 The PGA message data set, you know, was worked 

12 out very carefully over several years now, 

13 so -- supposed to include that whole universe. So, the 

14 example Sean used of what happened with Predict is a 

15 good example of what happened.

16 People were submitting a lot of this on paper. 

17 And you can say they were fudging, but people could 

18 look at that piece of paper who had a lot of experience 

19 with it, and say, "I know what he means," you know? 

20 And, "This is okay." Well, an automated system can't 

21 do that as well. So that's where the growing pains are 

22 going to be.
148

1 But, essentially, again, from the trades' 

2 point of view, this is -- this system is going to be 

3 one place to submit the data that is being submitted in 

4 several different ways now. And once we get the whole 

5 thing set up and working, it should be better.

6 The major changes have to be on the government 

7 side. This -- for a lot of government agencies, this 

8 is going to be a radically different way than the way 

9 they've received information in the past. And I think, 

10 in terms of both the IT programming and the staff 

11 resources and other things, that the major costs are 

12 going to be on the government side.

13 MS. JONES: Erika Jones from the Bicycle 

14 Suppliers, and I will commit to talking to our members 

15 to see if we can get you some answer to that question 

16 in our written comments. But I echo what my colleagues 

17 have said, that the EO is not the actual driver of 

18 compliance costs, it's the implementation of it by the 

19 affected agencies. And so we are not going to know, 

20 really, what the executive order compliance costs are 

21 until those data elements are refined. It's somewhat 

22 of a chicken and an egg, but we will strive to get you 
149

1 some -- an answer in our written submission in the end 

2 of the month.

3 MR. Kaye: Great. Thank you, everybody, and I 

4 do want to reiterate something that Carol said about 

5 the pilot. Should we go ahead and do the pilot, which 

6 I anticipate we might very well do, we are hopeful that 

7 we will get a good spectrum of participants, because 

8 that's going to be very important. Thank you.

9 MS. ADAIR: Recognize another member of the 

10 audience with a question.

11 MR. SMITH: Chris Smith with IKEA. I just 

12 wanted to make a comment around the question around 

13 electronic submission of the certificates. Even in the 

14 current development of ACE, and with the ability to 

15 upload electronic documents, you would have to have an 

16 entry in place already. So being able to file that or 

17 match that to an entry 24 hours ahead of time is pretty 

18 much physically impossible.

19 Then you add to it a company of IKEA's size, 

20 where during peak we're doing 200 entries a day, 

21 ranging in size from 5 entry lines to 200, of which, 

22 according to some of the statistics shown this morning, 
150

1 75 percent would have certificates of 1, 2, who knows 

2 how many, associated with those line items, to be able 

3 to match that and manually upload those 24 hours ahead 

4 of time is almost impossible to do.

5 MR. KAUFMAN: Al Kaufman with the Toy Industry 

6 Association. I actually have a question for the CPSC 

7 staff, and it's kind of occurred to me as we're sitting 

8 here.

9 Given the fact that some of these data 

10 elements are arguably, you know, maybe not directly 

11 related to the goal of the changes to the -- proposed 

12 changes to the 1110 rule, it seems that this might be 

13 considered a technical barrier to trade. Is there an 

14 intention to report this to the WTO when we get a final 

15 rule?

16 MS. CAVE: I think we have to take it under 

17 advisement when and if that ever happens, but --

18 MR. KAUFMAN: Okay.

19 MS. CAVE: But I'm assuming we would --

20 MR. KAUFMAN: Thank you.

21 MR. SHACKLETTE: And -- Mark Shacklette, UPS 

22 -- just to add on to your question, and when we 
151

1 submitted our comments last July, we did bring up 

2 several WTO concerns in that document. So you could 

3 refer to that that we worked with our legal counsel on.

4 MS. ADAIR: We have another question from the 

5 audience?

6 MR. SANDERS: Yeah. My name is Walt Sanders, 

7 I'm with Van Fleet Associates, and I have a number of 

8 companies I represent, but I'm asking this question on 

9 behalf of Zippo Manufacturing Company.

10 As a lot of folks in the audience know, as the 

11 source of products, the manufacturing source of 

12 products, is a trade secret for a number of reasons. A 

13 manufacturer, third party manufacturer, for Zippo 

14 Lighter in China might be totally different than the 

15 manufacturer of Joe's Tobacco Shop and the cheaper 

16 alternative.

17 Well, my question is for Carol or the CPSC 

18 staff. Is -- what measures will the CPSC staff do to 

19 protect that proprietary information from foreign or 

20 domestic competitors?

21 MS. CAVE: It's no different than how it's 

22 handled today. It's filed with customs.
152

1 MR. SANDERS: Yeah.

2 MS. CAVE: Right? Or given to CBP at time of 

3 entry.

4 MR. SANDERS: There is a lot more information 

5 that --

6 MS. CAVE: -- would be filed today.

7 MR. SANDERS: There is a lot more information 

8 that's going to be uploaded and available. And I would 

9 recommend that the CPSC use extraordinary measures to 

10 protect that information. And I just wanted to get the 

11 assurance that you would do that. Great. Thank you.

12 MR. MULLEN: This is Mike Mullen from the 

13 Express Agency. And if we're -- if we've shifted over 

14 to the mode where we're asking you questions now --

15 (Laughter.)

16 MR. MULLEN: I guess you've exhausted all 

17 your --

18 MS. CAVE: See, that's the beauty of an open 

19 rulemaking. It's only one way today.

20 (Laughter.)

21 MR. MULLEN: But you've heard the 

22 recommendations several times today, that the existing 
153

1 system seems to be working okay, providing the 

2 certificate on demand. Is -- do you guys have a 

3 fundamentally different view from that, or do you -- or 

4 not?

5 MR. JOHOLSKE: I mean I would say this, that 

6 there is a lot of unknowns. A lot of the 

7 non-compliance that we are finding in import now, the 

8 shipments that are being stopped are not certified. 

9 So, you can extend that to what are we not looking at, 

10 and how much of that is not certified.

11 I mean we are seeing that products that are 

12 stopped at import, that are failing for a lead issue, a 

13 phthalates issue, small parts issue, are not certified. 

14 So, I mean, I guess that's about the most that I could 

15 say to it at this point.

16 MR. MULLEN: That is really the basis of 

17 where, if we can get this small group together with the 

18 right experts around the table, that's the kind of 

19 discussion that I think would really be useful to have, 

20 you know. What are the unknowns you're dealing with, 

21 and what is it you're really trying to achieve, in 

22 terms of your ability to target that sort of thing 
154

1 better?

2 You know, I think that would be a very 

3 fruitful area for an ongoing discussion.

4 MR. KAUFMAN: Al Kaufman with the Toy Industry 

5 Association. Yeah, just as you said, Jim, it kind of 

6 occurred to me. If you go back and look at the port 

7 reports, despite the fact that CPSC is targeting and 

8 holding only, presumably, the riskiest products, and so 

9 you've got a sort of a preselected population that 

10 you're looking at, your hit rate, in terms of 

11 non-compliance, is only about seven percent.

12 So, I guess my question would be, does it make 

13 sense to impose these huge administrative burdens, you 

14 know, on the other 93 percent of the population that 

15 presumably is compliant, you know, is testing, is 

16 certifying, does have compliant product, in order to 

17 try and capture this small part of the population?

18 MS. CAVE: I mean that's a very good point, 

19 and that's exactly why we want to hear from you on 

20 these issues about possible solutions and things that 

21 may be recommended to the Commission on, you know, what 

22 is the right approach to handling some of these things.
155

1 MS. ADAIR: We have a question from the 

2 audience.

3 MR. SAYLOR: Yeah, I just really have a 

4 comment, I mean, really, kind of following on Al and 

5 Mike's comments.

6 MS. ADAIR: Your name and affiliation, please?

7 MR. SAYLOR: Oh, I'm Tim Saylor with Baby 

8 Jogger Company. Albeit we're talking about children's 

9 product certificates, and general certificates of 

10 conformity, they're essentially self-declarations based 

11 on certified testing. That is mandated by CPSC rules.

12 So, if it isn't currently identifying 

13 manufacturers who aren't self -- or certifying their 

14 products before import, then I don't understand if it 

15 would, with this new proposed rule change, 

16 identify -- further identify manufacturers that aren't 

17 certifying the products that are, you know, mandated to 

18 be certified prior to import.

19 Is it -- would it be an improvement to 

20 identify those manufacturers? Because I would imagine, 

21 if they were asked to provide a document at this point, 

22 perhaps they would provide one and not have certifying 
156

1 documents to support those.

2 MS. ADAIR: We are going to get to some of 

3 that in the afternoon, as well, so we -- maybe a more 

4 fulsome response in the afternoon.

5 We have other questions? We are getting close 

6 to our lunch, but not quite.

7 MR. JOHOLSKE: Jim Joholske from CPSC. One 

8 final question I had.

9 Kathleen, I believe you made a 

10 statement -- you can correct me if I'm wrong -- that 

11 the majority of the certificates from your members are 

12 basically in paper, paper form. Was that not correct?

13 MS. MCGUIGAN: No. If I made that 

14 misstatement, that is incorrect.

15 MR. JOHOLSKE: Okay.

16 MS. MCGUIGAN: So, essentially, our 

17 members -- what I said was a few of our members 

18 maintain them in paper form. So we have -- the 

19 majority are kept on IT systems. Whether or not 

20 they're internal or external IT systems, they're going 

21 to be in pdf format.

22 And my point was that they're -- none of them, 
157

1 you know, regardless of where they're held, either in 

2 paper form in a file folder, or in an internal-external

3 IT system, none of them are in data fields right now 

4 that in any way can be transmitted electronically. And 

5 most of them, as we talked about in my presentation, 

6 the systems for maintaining those records are separate 

7 and distinct from the systems that companies currently 

8 use to -- for their customs entry information.

9 And often those two systems don’t talk to one 

10 another, at least currently. So, there would have to 

11 be some way to actually get them to talk to -- first of 

12 all, put it into data fields, get them to talk to one 

13 another, align it, and then transmit it.

14 MR. JOHOLSKE: Okay, great, thanks.

15 MS. ADAIR: Additional questions?

16 MS. JONES: Could I just -- Erika Jones for 

17 Bicycle Products -- follow up on Kathleen's comment? I 

18 think that, again, goes to perhaps a vocabulary 

19 difference between "paper" versus "electronic" versus 

20 "data fields."

21 I think most companies now have an electronic 

22 way of keeping what might be an Excel spreadsheet, it 
158

1 might be -- but the data itself is in pdf form. It's 

2 not manipulatible data entry that can just be uploaded 

3 with the push of a button. So it's electronic, rather 

4 than paper in many cases, but it isn't the kind of data 

5 storage that lends itself to the data entry that 

6 you're -- that we're contemplating.

7 So, again, I think we want to make sure that 

8 we are using the vocabulary consistently. It may be 

9 electronic and still not manipulatible into a data 

10 entry format.

11 MS. CAMPBELL: This is Jacqueline Campbell, 

12 CPSC.

13 Along those lines, in terms of how the data 

14 can be accessed, so a pdf is generated. How is that 

15 pdf generated? Where did the data come from?

16 And maybe Lego has a system there where you 

17 could -- is it fed from a database and then --?

18 MS. MACPHERSON: Actually, our whole system is 

19 integrated into our SAP system, and our Enterprise 

20 Warehouse system, and we've actually gone in and had 

21 data fields through SAP created.

22 When I talk about the types of processes that 
159

1 you have to put in place, that's the complexity of it, 

2 because we wanted it to not be complex, so we wanted to 

3 make sure that this just became integrated into our 

4 traditional supply chain. So we worked it into all of 

5 the systems that we use for our traditional supply 

6 chain.

7 MS. CAMPBELL: So, just to follow up, if pdf's 

8 are being created, is it possible to export another 

9 file type?

10 MS. MACPHERSON: This is Nancy, again, from 

11 Lego.

12 You know, when I hear about the data elements 

13 and what's on the certificate, I'll be quite honest. 

14 Nobody, to be honest, really cares what's on our 

15 certificates. They care what's in our test reports. 

16 And that's why that's where the meat of it is. The 

17 certificate is a piece of paper that states that these 

18 are the things that we comply with.

19 And I know we're not talking about other 

20 things in the proposed rule, but things like the 

21 attestation and -- and it was brought up here earlier 

22 that the majority, the vast majority, of people are 
160

1 doing this. And if you change this rule, the vast 

2 majority of people are going to figure out a way to do 

3 that, but does that address you finding the violative 

4 products and the folks that are at most risk?

5 So I think that's the fundamental question. 

6 You know, I kind of used a little, you know, facetious 

7 comment there on my thing about the executive order, 

8 but I am concerned that you just make the haystack 

9 bigger, you put more data into the system, but it only 

10 confuses it, because now there is more for you to 

11 process and CBP to process, and it's -- the data is in 

12 the system from the players who are playing the game 

13 correctly.

14 So, fundamentally, there may just be another 

15 way -- and I don't have the answer today -- to say, 

16 "Okay, what are you" -- because I think everyone has 

17 said today, "We haven't heard of any problems." I have 

18 never been talked to once in six years about, "Hey, 

19 somebody couldn't access your certificate."

20 Went online, saw, as I said earlier, thousands 

21 of people have looked at it. You know, maybe my -- you 

22 know my brother is, I don't know.
161

1 (Laughter.)

2 MS. MACPHERSON: But -- I told him to look 

3 2,000 times so it would look really good -- but the 

4 real problem is that the people who don't play the game 

5 right, we don't have a good way to find them yet. And, 

6 I mean, this sounds like a cop show, but that's the 

7 problem.

8 And I think, sitting here as a manufacturer 

9 and an importer who tries to do the right thing, it is 

10 a frustration level when a new proposal comes out, and 

11 you look at it, and you say, "Oh, come on," you know, 

12 because we know that you are trying to get to a problem 

13 that you absolutely have, but we just are really 

14 challenged by the means. And I think the real 

15 challenge here today is, "Is there a better way to do 

16 it?"

17 So, that's where we are. Thank you.

18 MR. KAUFMAN: Yeah, Al Kaufman with the TIA, 

19 and I would certainly echo what Nancy said. I think 

20 that -- you know, and I said at the outset -- recognize 

21 that there is a legitimate concern, that there is a 

22 legitimate goal that the staff is trying to achieve. 
162

1 It's -- I think where we get lost is the significant 

2 burden and the, I guess, collateral damage that goes 

3 along with what's been proposed.

4 MS. ADAIR: We have a question from the 

5 audience.

6 MS. MANN: I kind of have a comment to 

7 Jacqueline's question. This is Hailey Mann from 

8 American Plastic Toys.

9 As far as information provided to us in a pdf 

10 format, we're completely on the opposite side of the 

11 spectrum from Lego. So I send our product out to a 

12 third party lab. That information is sent to me via 

13 email, the test report and the children's product 

14 certificate, in a pdf format. So it would take 

15 somebody on our team -- which would be me -- to type, 

16 then, all that information into whatever type of fields 

17 that would have to be translated by some means into a 

18 database.

19 PARTICIPANT: However --

20 MS. MACPHERSON: This is Nancy. Again, if I 

21 can just add to that -- and, Hailey, despite all of our 

22 great integration, we would have to do the same thing.
163

1 MS. MANN: Okay.

2 MS. MACPHERSON: A pdf is a pdf.

3 MS. MANN: Right.

4 MS. MACPHERSON: That's when we end up with. 

5 It goes through the system in kind of neat ways, but at 

6 the end of the day we have a pdf file, and we would 

7 still have to do data entry.

8 MR. KAUFMAN: Yeah, and I would add that 

9 that's -- what Hailey has described is extremely common 

10 in our industry. What happens, both for, let's say, 

11 retailer importers and also for manufacturers, because 

12 they have to do third party testing at a CPSC-listed 

13 laboratory, what they will often do is, when they get a 

14 pdf of the test report, they simply have the lab 

15 generate the certificate on their behalf.

16 They're still the certifier, they're still 

17 listed on the certificate as the certifying party, but 

18 the lab just -- they sort of outsource the generation 

19 of that pdf file to the lab.

20 MS. ADAIR: Jacqueline, I'm going to give you 

21 the last word.

22 MS. CAMPBELL: Okay. Last word.
164

1 MS. ADAIR: For right now.

2 MS. CAMPBELL: So, just along those lines, 

3 then, the lab is generating a pdf. It's entirely 

4 possible they could generate a different file type, 

5 correct?

6 MS. MANN: No, they generate a pdf so it's not 

7 modifiable. I mean it -- Rick, why don't you come up 

8 here?

9 MS. ADAIR: Okay, we're at time. And we will 

10 have another question session later in the afternoon.

11 Before everybody gets up and goes to lunch, I 

12 just want to say thank you to the presenters this 

13 morning, and for all the really valuable information 

14 you gave, and your willingness to talk and exchange 

15 information, and to everyone who asked questions.

16 And also, remind everyone, when you leave for 

17 lunch, if you leave you have to come back through 

18 security. So just allow time for that.

19 And we'll see everybody back here at 1:30. 

20 Thank you.

21 (A lunch break was taken.)

22
165

123
166

1 A F T E R N O O N S E S S I O N

2 V. OVERVIEW OF CPSC'S RISK ASSESSMENT METHODOLOGY

3 MR. BLACHERE: Hello and good afternoon. I'd 

4 like to get the afternoon session started off on time, 

5 or a couple minutes late. Give a moment for people to 

6 find some seats, and for me to find my presentation. 

7 No -- one thing I'm good at.

8 All right. Hello. My name is John Blachere, 

9 and I work for the Commission as an international trade 

10 specialist here at the Consumer Product Safety 

11 Commission. This staff presentation has not been 

12 reviewed or approved by the Commission, and may not 

13 reflect its views.

14 I, as well as several others in my office, 

15 collaborate continually with the U.S. Customs and 

16 Border Protection to develop a functional and 

17 continually improving risk assessment methodology at 

18 the border for consumer products. As an agency, and as 

19 a participant in the one U.S. Government strategy at 

20 the border, I can safely say that the Commission has 

21 made great strides since the CPSIA was passed six years 

22 ago.
167

1 I'd like to provide a high-level review of the 

2 RAM, and present how the electronic filing component of 

3 1110 will be a benefit to us all.

4 A few acronyms to get us started. You will 

5 see these in my presentation, as well as in 

6 presentations this afternoon, so I thought I would just 

7 put them out there.

8 The Harmonized Tariff Schedule of the United 

9 States, or HTSUS, is the coding scheme specific to the 

10 United States that CBP uses to classify product coming 

11 into the country, used to identify the tariff needed at 

12 the time of entry.

13 The ITDS, or the International Trade Data 

14 System, is actually not a system. It is an advisory 

15 board of federal agencies that are involved in the 

16 import or export process.

17 This advisory board provides guidance to CBP, 

18 as they continue to modernize their Automated Customs 

19 Environment, or ACE, system.

20 And then CBP is U.S. Customs and Border 

21 Protection.

22 While Jacqueline reviewed the specific 
168

1 requirements for certificates this morning, I wanted to 

2 highlight that CPSC's import-related statutes under 

3 Section 17 also speaks to the requirement to refuse 

4 admission for regulated products not accompanied by a 

5 certificate.

6 Also mentioned this morning, the existing 1110 

7 rule on certificates allows for both paper and 

8 electronic certificates. Typically, compliant 

9 importers are placing a certificate in the shipping 

10 container, or providing a URL for their certificate in 

11 a prominent location, such as on the shipping 

12 container, on the product, or on the invoice. The 

13 current 1110 rule requires certificates to be created 

14 before importation and be available to CPSC and CBP as 

15 soon as the shipment is available for inspection.

16 Currently in practice, certificates are not 

17 always in the box or available electronically. But we 

18 have been allowing importers to recondition this by 

19 providing the certificate when we request it, instead 

20 of refusing admission. This is a cumbersome and 

21 time-consuming process for our port staff, who must 

22 take additional steps to try and locate the 
169

1 certificates, and it adds time and cost for the 

2 importer, as well.

3 Also, this is an ineffective method for 

4 evaluating compliance with certificates, as we can 

5 neither review certificate compliance for all incoming 

6 products, nor can we systematically analyze any of the 

7 information provided.

8 We have the statutory authority under Section 

9 14(g)(4) to require electronic filing of certificates 

10 with CBP. The proposed amendments to the 1110 rule 

11 would require that, to meet the accompanyment

12 requirement, certificates for imported products be 

13 filed electronically with CBP at the time of filing of 

14 the entry.

15 The U.S. Government is moving to a paperless, 

16 electronic-based trade environment, as emphasized by 

17 Executive Order 13659. These efforts will have 

18 efficiencies and benefits to government and industry 

19 over time. Entering the data elements electronically 

20 allows the system to review and provide the information 

21 to port inspectors in a very short time frame. This 

22 will redirect exams to higher-risk shipments, 
170

1 facilitate the release of complying shipments into 

2 commerce, and allow the Commission to measure 

3 certificate filing requirements systematically.

4 Section 17 of the CPSA describes how the 

5 Commission is to address imported products. Section 

6 17(h)(1) requires the CPSC to establish and maintain a 

7 permanent product surveillance program, in cooperation 

8 with other federal agencies to carry out the 

9 Commission's responsibilities, and to prevent the entry 

10 of unsafe consumer products into the commerce of the 

11 United States.

12 Additionally, a provision of the Improvement 

13 Act of 2008 requires CPSC to develop a Risk Assessment 

14 Methodology, or RAM, to support this function. In 

15 developing the methodology, the Commission was tasked 

16 with using CBP's portion of their trade modernization 

17 effort that supported other agency work at the border, 

18 and participate in the ITDS. The CPSC is also 

19 modernizing legacy information systems, so we were to 

20 include this as part of our information technology 

21 modernization plan.

22 To best understand how to implement this, we 
171

1 continually work with CBP and other federal health and 

2 safety agencies of -- a few of which you're going to 

3 hear from this afternoon, to evaluate the best 

4 applicable processes for the Commission.

5 Holistically, the ultimate goal of this effort 

6 is a type of total risk management at import under this 

7 program to identify, isolate, and control risks 

8 whenever possible. Many CPSC-regulated product areas 

9 are almost exclusively imported, such as toys, 

10 fireworks, and ATVs.

11 By maintaining a continuous monitoring process 

12 over imports for product areas considered to be a 

13 potential risk of non-compliance because of a mandatory 

14 standard or defect determination, the Commission can 

15 feel confident that risk is being managed at our 

16 country's borders. Monitoring imports by product type, 

17 entity, and region, and matching known sources of risk 

18 at the same level, CPSC can understand the breadth and 

19 depth of factors involving importation of the product 

20 areas.

21 The addition of certificate data provided 

22 electronically can vastly improve the shipment 
172

1 information available to us. I use two product groups 

2 to demonstrate the extremes of this risk approach.

3 ATVs are a small product volume area entering 

4 into the country using two product codes, or HTSUS 

5 codes, at entry. They are being brought in and are 

6 manufactured by a very limited number of companies. 

7 Monitoring the compliance of a short list of companies 

8 allows the Commission to have a higher level of 

9 assurance that safety laws are being followed.

10 On the other hand, there is a huge volume of 

11 toys entering our country, primarily through five 

12 Harmonized Tariff Schedule Codes. There may be other 

13 codes that contain what we would term "toys" as well, 

14 but the HTSUS requires they be coded with other 

15 classically non-toy products, such as games or 

16 miscellaneous product plastic items.

17 Toys are being brought in and manufactured by 

18 a wide array of companies. Monitoring is more limited, 

19 with the goal being to interdict dangerous products 

20 where possible, without significantly impacting trade 

21 flows. The data provided on certificates would make 

22 this effort much more precise.
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1 The following major components have been 

2 developed in the Office of Import Surveillance to 

3 support existing functions the Commission has been 

4 performing prior to the Improvement Act.

5 Intergovernment MOU and agreements are a set 

6 of rules of the road, and forms cooperation with other 

7 agencies. Collocating staff at ports of entry and 

8 aligning processes to perform screenings and 

9 examinations of targeted shipments is critical to 

10 enforcement and effectiveness at the border.

11 Aligning information technology to optimize 

12 the selection of shipments and coordination of 

13 government agencies at the border facilitates the 

14 movement of legitimate cargo, and improves overall 

15 processing times.

16 And supporting all of this is the need to 

17 continually improve Commission processes through 

18 project work. One example is our effort to better 

19 identify products at import, to monitor active risks as 

20 identified within the agency. The proper 

21 classification of products to more precisely intercede 

22 on shipments of risky products, and differentiate from 
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1 other safer products, will add additional efficiencies 

2 to CPSC's work at the border.

3 The Commission has several MOUs with CBP that 

4 we use to share data and cooperate in enforcement 

5 activities. One of our agreements allows CPSC staff to 

6 be collocated with CBP at the ports and at CBP 

7 headquarters.

8 Staff target and screen shipments and examine 

9 product at ports of entry. This work consists of many 

10 possible activities, depending on the product being 

11 evaluated. Investigators perform chemical and physical 

12 analysis, as well as documentary verification of 

13 products within shipments. Some shipments may have a 

14 large number of different product models to evaluate. 

15 These tests and checks take time to perform, and 

16 shipments are held by CBP until they are complete. At 

17 the end of the examination, CPSC consults with CBP to 

18 either release the shipment, or to detain under our 

19 authority.

20 As presented earlier as part of the 

21 Improvement Act, the Commission was tasked with trying 

22 to figure out how best to coordinate with CBP and other 
175

1 federal agencies at the border. A large part of this 

2 is the efficient and effective exchange of information 

3 to support agency missions.

4 CPSC staff sought to effectively integrate as 

5 much data as possible to model and support our 

6 enforcement strategy involving product hazards at 

7 importation into a pilot targeting and workflow 

8 tracking system. It is effectively -- it is 

9 affectionately known as the ITDS RAM to those of us who 

10 have taken part since the beginning.

11 Potential data sources supporting this effort 

12 are grouped into five basic areas.

13 Shipment-specific detail provided by CBP 

14 through their modernization effort. CPSC was the first 

15 agency to test and implement the integrated web 

16 service. Since that time the Commission has been 

17 receiving entry and entry summary data necessary to 

18 test the usefulness of the ITDS RAM pilot.

19 Case history, enforcement history being done 

20 by CPSC, and possibly other agencies, also provide good 

21 risk information.

22 Examination history. These are exams that 
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1 provide us the early indication of non-compliance or 

2 presence of product risk that's available to us.

3 Injury and death data informs the RAM of the 

4 priority or product groups as the Commission becomes 

5 aware of changes to U.S. injury and death trends.

6 And commercial information. We are hopeful 

7 that third party trade data may be able to provide 

8 additional details that may be useful to 

9 differentiating risk.

10 There are several major functions that are 

11 being performed by the ITDS RAM pilot system to date, 

12 and we have -- I'm focusing here on four of them.

13 Statistical modeling of data coming from the 

14 pilot system is being used to understand factors that 

15 may indicate a higher probability of a violation or 

16 defect in a shipment. This analysis has resulted in 

17 changes to some of our targeting and risk-scoring 

18 rules.

19 Product level standard reporting, provides 

20 experts with information to develop novel approaches to 

21 compliance monitoring.

22 Pushing the shipment details to our collocated 
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1 Commission staff at ports of entry through a graphical 

2 user interface allows for much better local 

3 coordination.

4 And the system scoring of risks of 

5 non-compliance for each shipment as it posts to CPSC 

6 systems allows staff an additional indicator with which 

7 they can differentiate shipments available for 

8 examination at the port.

9 The diagrams that I am going to show 

10 here -- well, this main diagram, I'm sorry -- provides 

11 a simplified schematic of the entry process with the 

12 ITDS RAM running. After the broker enters the data, 

13 it's reviewed by CBP systems, and it's shared with CPSC 

14 where appropriate. Any additional data elements or 

15 requirements for electronic filing could be implemented 

16 here under CBP's well-defined framework.

17 CPSC, CBP, and other federal agencies would 

18 process the information. Risk-scored shipments are 

19 then pushed out to the port staff to use in selecting 

20 shipments to screen and examine. CBP port staff 

21 receives similar information specific to their needs in 

22 their systems.
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1 CPSC collocated staff coordinates any 

2 screening and examination activities on the shipment 

3 with information and risk scores in hand.

4 The Commission only stops what can be 

5 examined. This process remains constrained by 

6 resources.

7 As the Commission analyzes the best way to 

8 act, in coordination with CBP at the border, other 

9 efforts are necessary to effectively differentiate 

10 non-compliant shipments from compliant, and streamline 

11 our interaction with importers at the border.

12 One such effort is the Harmonized Tariff 

13 Schedule Code breakouts that we have requested to date. 

14 Often times, the HTSUS lumps products of interest to 

15 the Commission at import with others that are of little 

16 risk or are not within CPSC jurisdiction. In these 

17 instances, we have tried to identify them and propose 

18 code changes to the U.S. International Trade Commission 

19 to cleanly segment products of interest. The added 

20 precision limits the number of stops within a focus 

21 area that are not considered a risk to the public by 

22 the Commission.
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1 In 2011, the CPSC proposed and successfully 

2 altered the codes for toys, ATVs, many children's 

3 durable products, and drywall. We have a second set of 

4 proposed changes currently in front of the U.S. ITC.

5 In summary, we believe that moving certificate 

6 data collection to electronic filing of data elements 

7 will reduce the number of shipments reviewed that are 

8 compliant or out of scope; reduce the time spent per 

9 shipment to verify compliance with our laws; improve 

10 the rate of discovery of hazardous or violative 

11 products per staff month; provide a single reliable 

12 store of certificate data.

13 This ends my presentation on how electronic 

14 filing of data elements are a major component to 

15 improving the RAM and the work being done at the U.S. 

16 border.

17 (Applause.)

18 Now, I would like to introduce Bonnie Novak, a 

19 new member to the CPSC team. She is Director of Human 

20 Factors, and she will be moderating the rest of today's 

21 activities.

22 MS. NOVAK: Good afternoon. Thank you all for 
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1 your attendance, and welcome to the afternoon session. 

2 We are presenting here this afternoon with our federal 

3 agencies on the workshop on electronic filing of 

4 certificates.

5 Want to give a reminder to everyone that the 

6 workshop is being recorded and webcast, and part of the 

7 public record. We encourage all interested parties to 

8 submit relevant comments through regulations.gov. 

9 Written comments must be received by Friday, October 

10 31, 2014.

11 We will be taking questions from folks on the 

12 webinar, and asking those, as time permits, at the end 

13 of the session. The email address for those questions 

14 and those attending online is efiling@cpsc.gov.

15 The transcript for today's workshop will be 

16 added to the docket at www.regulations.gov, docket 

17 number CPSC2013-0017. You'll see that on the bottom of 

18 your agenda, and hear it many times today.

19 The Power Point presentations will also be 

20 uploaded and available at www.slideshare.net/uscpsc.

21 So, thank you again. Thank you, John, for 

22 your overview of the CPSC's risk assessment 
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1 methodology, and thank you to all the stakeholders who 

2 presented this morning, and for everyone in attendance 

3 today.

4 This afternoon's session we will be hearing 

5 from our federal partner agencies. We have five folks 

6 presenting in this afternoon's session, so we can allow 

7 for about 15 minutes apiece for presentations. As 

8 Patty did this morning, I'll give you the two-minute 

9 peace sign, just to give you a heads up when it's time 

10 to start transitioning.

11 Question and answers will be held at the end 

12 of the session.

13 And please speak clearly -- just a reminder to 

14 please speak clearly into the microphone and don't 

15 stray from the podium too much, if you can help it.

16 VI. AUTOMATED COMMERCIAL ENVIRONMENT (ACE)

17 FILING REQUIREMENTS AND AGENCY PILOTS PANEL

18 MS. NOVAK: All right. So, our first 

19 presenter this afternoon is Ms. Brenda Smith, the 

20 Executive Director of the ACE business office from 

21 Customs and Border Protection. So I'll pull up your 

22 presentation for you.
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1 MS. SMITH: Good afternoon, everyone, and I 

2 want to thank my colleagues from CPSC for including 

3 Customs and Border Protection in this discussion. It's 

4 one that we are both very involved in, but also very 

5 interested in, as a major player at the border, and one 

6 who -- which has been charged with both protecting the 

7 United States and its citizens, but also driving 

8 economic prosperity through facilitating trade.

9 So, I think John did a terrific job of 

10 outlining, really, the operational approach to how CPSC 

11 does their work. And for those of you that are 

12 familiar with most of us operating at the border, this 

13 is not so different. The models are very similar, and 

14 I think that is a function of not only the fact that we 

15 have similar missions and similar tools, but also that 

16 we work very closely together, and have really shared 

17 our best practices and our lessons learned.

18 What I'd like to do this afternoon is to give 

19 a more technical overview of the automated tools that 

20 we have available to us. Many of you are familiar with 

21 the single-window concept. John referred to it as the 

22 International Trade Data System. But I'd like 
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1 to -- for those of you that are not familiar, I'd like 

2 to walk you through exactly what the system is, what 

3 our vision is, and how we, as one U.S. Government, will 

4 use the capabilities provided by the single window to 

5 help facilitate trade and enforce the law.

6 The slide -- the opening slide, a little 

7 difficult to read unless you have your distance glasses 

8 on. What this basically says is this -- we envision, 

9 from a government perspective, that the single window 

10 will really be the hub, the main tool through which we

11 assess risk and process cargo.

12 There are 47 different government agencies 

13 with equities at the border that are interested in 

14 either gathering information about shipments coming in 

15 to or going out of the United States, or are just 

16 interested in analyzing, either for commercial reasons 

17 or for an assessment of risk.

18 In 2006, the Safe Port Act required that CBP, 

19 as it was modernizing its own commercial system, also 

20 build the single window, and that when the ACE, or the 

21 Automated Commercial Environment, was complete, that 

22 the single window would be complete at exactly the same 
184

1 time.

2 And so, as we've proceeded with our 

3 modernization effort, we have worked very closely 

4 through the ITDS Board of Directors, and with our 

5 partners at the 47 government agencies, to -- not only 

6 to build a system, identify requirements and build a 

7 system, but also to try to get a better understanding 

8 of how we really can, together, and working with the 

9 private sector, can really make sure that we are not 

10 just paving the cow path, that in fact we are taking 

11 advantage of the opportunities to become more 

12 efficient, more effective, and do our job better.

13 So, John did mention that we have a great deal 

14 of support in the Administration. Many of you know 

15 that, in February, President Obama signed an executive 

16 order which mandated that the Department of Homeland 

17 Security, the Department of Treasury, and our partners 

18 in most of the other departments that make up the 

19 Federal Government, work together to streamline export 

20 and import processes.

21 There really are two pieces to that executive 

22 order. The first one is a mandate and a schedule to 
185

1 finish ACE in the single window by 2016. That's really 

2 important. It's really important, not only because it 

3 lights a bit of a fire under us to work together to get 

4 the automation correct and get it out the door, but it 

5 also requires us to work together to really take 

6 advantage of that opportunity to work on our business 

7 processes. And it also directs us not only to work 

8 internally on our business processes, but to work 

9 together to try to adhere to international standards so 

10 that we start to achieve some global harmonization.

11 But it also -- and this is really 

12 critical -- it requires us to engage with the private 

13 sector to try to understand, again, what opportunities 

14 are available to us, and what the best approach is, 

15 from a business perspective, to accomplishing our 

16 mission.

17 We have a lot of governance. We have the ITDS 

18 Board of Directors, chaired by Timothy Skud, at the 

19 Department of Treasury, who gives the executive 

20 leadership, really, on tactical issues. This is 

21 really, for us, in trying to build a system, is where 

22 the rubber meets the road.
186

1 We also internally have a great deal of 

2 governance from the Department of Homeland Security, 

3 Treasury, as well as within CBP. The ACE executive 

4 steering committee, chaired by our Deputy Commissioner, 

5 Kevin McAleenan, meets once a month to make sure that 

6 they understand not only what the schedule is, whether 

7 we're on schedule and on budget, but also to try to 

8 understand what the risks and issues are, and to help 

9 us address those risks and issues.

10 I probably don't have to tell you all too much 

11 about why the single window is important. But on this 

12 slide -- and I hope you'll take a closer look at 

13 it -- it essentially says that we have an opportunity, 

14 a tremendous opportunity, to increase security and 

15 address those issues associated with cargo crossing our 

16 borders, but also to play a huge role and be a driver, 

17 really, of U.S. economic competitiveness.

18 So let's talk about what the single window 

19 actually is. For those of you that have a more 

20 technical bent, this will probably be familiar to you. 

21 There are really three capabilities that the single 

22 window is built on within ACE.
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1 The first one is the participating government 

2 agency message set. And all this is is a harmonized 

3 set of data that we have agreed, as a government, 

4 reflect our regulatory requirements, but don't repeat 

5 if another agency is already collecting.

6 So, for those of you that work with the trade 

7 process, you know that CBP collects a huge amount of 

8 data, things like, for example, an importer's name and 

9 address. If you look at most of the forms that other 

10 agencies require as part of the import process, you 

11 will also see that they ask for the importer's name and 

12 address. We don't need to collect that twice in an 

13 automated environment. So that the PG -- we call it 

14 the PG message set -- gives us that one data set with 

15 all the data elements, import and export, that are 

16 required to complete an import or export transaction.

17 Those data elements are sent from the ACE

18 system, from CBP, to our partner government agency 

19 through an interoperability web service. And John 

20 noted that CPSC was the first federal agency to start 

21 receiving data from CBP through IWS. It is simply the 

22 pipeline. And it's a pipeline not only for CBP to send 
188

1 data to other agencies, but it's also a pipeline for 

2 those other agencies to send messaging back to CBP, so 

3 that we can transmit it to the trade.

4 What are those messages about? About the 

5 disposition of your cargo. Are you missing 

6 information? Are you missing a data element or a piece 

7 of documentation, like an invoice, that we might want 

8 to see, as a government?

9 It also says, "Your cargo can move on down the 

10 road." So those messages are really critical. Every 

11 time the status of cargo changes, that messaging goes 

12 back through an EDI link to the private sector, to the 

13 filer, to make sure that you know exactly where your 

14 cargo is.

15 We are working within ACE, within the 

16 modernization, to make sure that messaging is as clear 

17 as possible, and it gives as much information as 

18 possible about the reason your cargo may be held up.

19 The final key capability that we have built as 

20 part of the single window is the document image system.

21 This allows us to collect pictures of forms, pdf's, 

22 things like that, where, because of either 
189

1 international requirements or statutory requirements, 

2 we may have to actually look at a form, because there 

3 may be a foreign government stamp that was collected at 

4 the time of export on its way here to the United 

5 States, or something along those lines.

6 We consider this a transitional step, and our 

7 goal is to move from collecting paper forms, or an 

8 electronic picture of a paper form, into actual data 

9 elements. And the reason for that is really related to 

10 the risk management that John talked about. You can't 

11 target off a form. And we don't want to collect so 

12 many metadata elements -- so the umbrella data elements 

13 that are associated with the forms -- that we are not 

14 facilitating trade.

15 So much easier to target and assess risk off 

16 data elements. But for a number of agencies, this is 

17 the right way to go for the time being.

18 So, those are the three technical 

19 capabilities. I wanted to give you a sense of where we 

20 are with implementing those capabilities.

21 So we've talked about 47 government agencies. 

22 The PG message set is really the core of this. We 
190

1 have completed or are in the process of completing 

2 building that PG message set for six agencies. We have 

3 11 to go. For those of you that are interested in a 

4 precise schedule, if you go to CBP.gov to the trade and 

5 then ACE page, the "Development and Deployment 

6 Schedule" lay out all of not only the build and 

7 roll-out schedule for ACE, but also what the 

8 capabilities are we will be building for each agency, 

9 and when that will be available.

10 The document image system, we have 17 agencies 

11 that we expect to use the capability; we have completed 

12 9. And interoperability web service, which is the 

13 pipeline for transmitting the data, we have 9 that are 

14 already using it, 10 in process, and 9 more to go. In 

15 some cases, the agency is not asking for additional 

16 data through the interoperability web service -- I'm 

17 sorry, through the PG message set. All they want is 

18 what CBP collects. So that's a pretty easy thing to 

19 do. So, lots of benefits around the PG message set.

20 And I'd actually like to talk a little bit 

21 more about the data that we collect. CBP has been 

22 collecting automated trade data since the mid-1980s. 
191

1 For those of you that have been around that long, you 

2 know that our commissioner at the time talked about 

3 "automate or perish." He believed that U.S. business 

4 needed to, in order to remain competitive, have an 

5 electronic trade process, and you needed to invest in 

6 computers, you needed to invest in systems that would 

7 give us electronic data, and allow us all to manage it 

8 in a more facilitated fashion.

9 That gave us great power. But with that great 

10 power comes great responsibility. We have had many 

11 discussions about what data to ask for, when. It would 

12 be very easy to ask for the world. Frankly, we'd 

13 probably choke on it if we got a tremendous amount of 

14 data.

15 And so, when we ask for new data elements, we 

16 are very careful to make sure that the data that we are 

17 collecting, that particular data element, not only will 

18 help us make a good risk-based decision, but also that 

19 we're asking for the right data at the right time from 

20 the right party. That is absolutely critical, to get 

21 those three elements in place. If we don't, we have 

22 the ability to add significant costs into the 
192

1 management of the supply chain.

2 The model that we really use is focusing on 

3 advanced data, getting it as early as possible in the 

4 process, in order to make admissibility decisions. 

5 Admissibility decisions are very much focused on 

6 security, as well as public health and safety.

7 Generally, if we have a straight compliance 

8 decision, or a decision that results in the collection 

9 of revenue, that data we are able to collect after the 

10 goods have been released from the government's either 

11 physical custody, or on behalf of the government. So, 

12 what we collect in advance we want as early as 

13 possible, so we can make a decision as early as 

14 possible. But what isn't used in making an 

15 admissibility decision can wait.

16 We also have used a number of different ways 

17 of asking for that data. We talked a lot a few minutes 

18 ago about collecting data electronically. But we have 

19 also used a number of different options for the how and 

20 the when and the who.

21 We have used things like blanket certificates. 

22 So, instead of asking for data on every single 
193

1 transaction, we have asked for information that covers 

2 a range of shipments, whether it's a year, or perhaps 

3 it's for a particular commodity, and it's good until 

4 you change the combination of 

5 commodity-importer-shipper. Blanket certificates seem 

6 to save a lot of cost on the part of the trade, but 

7 also give us the information that we need.

8 We also, instead of collecting an actual 

9 certificate, will often just ask for a number, knowing 

10 that that gives us the traceability that, when we need 

11 to go back and ask for -- so, first, it allows us to 

12 check that, in fact, a certificate exists. But, 

13 second, it allows us that traceability to go back and 

14 ask for information about a specific shipment.

15 We also have tried a pre-vetting approach, 

16 where we will go in and, through, in most cases, our 

17 partnership programs, will check the compliance systems 

18 that normally would be used to provide the information 

19 to us. And if we go in, and through, generally, an 

20 audit capability, are able to satisfy ourselves that a 

21 broker -- usually an importer or an exporter with a 

22 broker acting on their behalf -- is able to provide 
194

1 consistently compliant, reliable data, we may say, "We 

2 don't need to see that data every single time," so that 

3 pre-vetting partnership aspect is another opportunity.

4 The final opportunity that we have used in the 

5 advanced data space is really to ask for that data only 

6 when we need it. So it's an upon-request approach. 

7 That has worked for CBP. There is some risk with it 

8 if, in fact, the data is not kept transaction by 

9 transaction.

10 But in many cases, we have made the decision 

11 that we put that information on what we call -- and 

12 it's just because of our regulatory structure -- the 

13 A1A list. And so, it's a long list of documents that 

14 importers/exporters are required to have, and that they 

15 must make available if asked. But it -- frankly, it 

16 saves the paper, the transmission, the logistics costs 

17 by only asking for that information when we absolutely 

18 require it.

19 So, I think that what we're -- I really want 

20 to stress is that that idea of asking for the right 

21 data at the right time, and being very careful to match 

22 when you ask for that data -- is it far in advance, is 
195

1 it just before release, is it post-release? What data 

2 are you asking for? Do you absolutely need a 

3 particular data element?

4 And then, finally, who are you asking for this 

5 data? We have a situation that we've been able to 

6 address over the last couple of years where we were 

7 asking for transportation data from the carrier and 

8 from the broker. We spent an inordinate amount of time 

9 reconciling that same data that we received from two 

10 different parties. There was no value that we saw to 

11 that reconciliation activity, but it took us a 

12 tremendous amount of personnel resources to do that 

13 reconciliation.

14 The other thing that it did was to keep a 

15 broker from filing their entry until the last minute, 

16 because they didn't have the data available.

17 The other concept that we've been able to work 

18 through the last couple of years is we are asking now 

19 for best-available data. We are not requiring 

20 perfection; we recognize that there is a risk around 

21 that. But the best-available data gets us data in as 

22 early as possible, let's us make a preliminary release 
196

1 or risk decision, and then we are able to look at the 

2 final data as the cargo actually arrives. And we do 

3 targeting at each point that new data is submitted.

4 How much time do I have? We're close? I have 

5 a half-an-hour, apparently, so I'll keep talking.

6 (Laughter.)

7 MS. SMITH: Great, okay. That's good, that's 

8 good.

9 So, anyway, we are very careful about asking 

10 for new data. Many of you are veterans of the 10+2, or 

11 importer security filing process that we went through a 

12 number of years ago. We spent three or four years 

13 talking about the right data elements, and we ended up 

14 with a couple of new data elements that were of 

15 significant value to CBP and the government, and were 

16 able to, with some investment on the part of the 

17 private sector, could be provided to us and added to 

18 the facilitation of the supply chain.

19 Using those types of data elements in the PG 

20 message set, and having those conversations, which we 

21 do, both through COAC -- and I know that Mary Ann will 

22 talk about that -- and through the trade support 
197

1 network which CBP finds of great value, in terms of 

2 supporting the collaboration between the private sector 

3 and the government, is really critical in helping us 

4 understand what the impact of the government's 

5 requirements are.

6 So far, we've done, I think, a pretty good job 

7 of making sure that the data that we really need we can 

8 collect, and, in fact, can put in the participating 

9 government agency message set. Lots of benefits around 

10 the PG message set -- I'm actually not going to go 

11 through those -- near real-time decision-making, 

12 available to agencies more quickly to allow them to 

13 make decisions fairly quickly, and I think 

14 easier -- makes it easier, instead of filing 5 forms, 

15 10 forms with a particular transaction, you send 1 

16 message in, and the data is parsed out.

17 One of the other COAC members has talked about 

18 "submit once, use many times," and that really is the 

19 goal that we're looking for with the participating 

20 agency message set.

21 Just a little bit of detail about how we do 

22 work with the other agencies to come on board. It is 
198

1 not simply turning a switch. And I know that Bob and 

2 Roy will talk a little bit more about this this 

3 afternoon, so let me just kind of give you the basics, 

4 and lay out some of the critical points that we are 

5 looking at.

6 From a process perspective, the first thing we 

7 do is make sure that we all understand how and why 

8 we're going to protect the data. The business 

9 confidential data that's provided to us, protected 

10 both -- either by the Privacy Act or the Trade Secrets 

11 Act, carries a lot of responsibility. We want to make 

12 sure that, as 47 agencies have access to that data, 

13 that we all understand what our responsibilities are.

14 We identify what the requirements are, how 

15 we're going to share data, whether it's going to be 

16 through the IWS pipeline, or where agencies will come 

17 in through the ACE portal and actually do their work in 

18 the ACE system.

19 After we identify how it's going to go back 

20 and forth, we also take the opportunity to sit down 

21 with the policy and the operational folks to make sure 

22 we all understand what the needs are, and also ask the 
199

1 question, "Is there a way that we can do this better?" 

2 And I will tell you we've been having a lot of 

3 conversations around the, "Is this the right way to do 

4 business," or, "Is there a way that we can make it more 

5 efficient?" A lot of those conversations also have 

6 been held through the COAC and through the trade 

7 support network.

8 We also, at the time that we are defining 

9 requirements built on a modern business vision, are 

10 also working on the legal side of things: the Federal 

11 Register notices, perhaps the regulatory change, the 

12 operational guidance, so that our folks in the field 

13 understand what it is we're looking to do, and what 

14 their authorities are.

15 Then we build. Building is actually the easy 

16 part. We roll along, we are using an agile development 

17 process, which I hope is good news to all of you, 

18 because it really means that those of you that actually 

19 use the system are at the table when the system gets 

20 developed.

21 We then -- after it's finished developing, we 

22 do a tremendous amount of testing. We do testing in 
200

1 the -- in a certification environment, so before it 

2 goes live we do testing. I will make a pitch for those 

3 of you that are actual filers, that you get in with us 

4 early and test this capability. It's absolutely 

5 critical that we get it right.

6 I think the advantage of being an early 

7 adopter is that you get to tell us what's wrong, and 

8 you have our commitment to fix it fast. And, as you 

9 know, what doesn't work for you may be working for 

10 somebody else. So don't rely on other people to test 

11 the system for you. We need early adopters, we want to 

12 make sure we get this right. So please come in and 

13 test with us, either in the certification environment, 

14 or when we roll this out for production use, actual use 

15 of the new capability. We need people to use it in a 

16 live environment, and we do this in a very controlled 

17 fashion, so we don't crash everything. We do this in a 

18 live environment, but we need people to work with us to 

19 do that.

20 And I do want to call out my colleagues, Mike 

21 and Mary Ann, at the table. We've had a lot of very 

22 supportive members of the private sector. And so, for 
201

1 those of you that haven't been able to test with us 

2 yet, please, I would encourage you to talk to our 

3 representatives from Deringer and UPS about how they 

4 work with CBP and the other agencies to get this right.

5 Where is CPSC now? As John mentioned, first 

6 one in line on IWS, they are currently receiving 

7 production data from CBP, so entry and entry summary 

8 data, which is -- feeds right into their risk 

9 assessment model. We have done a couple of upgrades, 

10 and we are working on how to capture CPSC's 

11 requirements in the document image system.

12 We should have all of those capabilities 

13 available in the -- on the ACE platform no later than 

14 July of 2015. We have been putting out quarterly 

15 releases and, in some cases, we are earlier than we 

16 expected. So please keep an eye on that development 

17 and deployment schedule.

18 One of the things that you'd need to be aware 

19 of: If you think this is going to go away, it's not. 

20 We do have mandatory transition into the ACE 

21 environment. Right now we are using two systems: the 

22 Automated Commercial System and the Automated 
202

1 Commercial Environment. We have heard a great deal 

2 about how expensive it is to maintain two systems. But 

3 I will tell you we've got a lot of great new capability 

4 in ACE. And the time to move to ACE is now, because we 

5 are requiring that if you file electronic manifest data 

6 on import or export transactions, that must be done in 

7 ACE in May -- not very far away.

8 If you file entry data, that must be done in 

9 ACE by November. Again, just less than 14 months away. 

10 That is going to be a pretty heavy lift. So, if you 

11 are an importer, if you are a broker, if you are a 

12 software vendor -- probably not too many of those 

13 here -- you need to have a plan if you're not already 

14 filing in ACE.

15 So, I'm happy to answer questions on this, but 

16 the key date here is we will be requiring the use of 

17 ACE by November 1, 2015.

18 Questions? Questions at the end. Okay. 

19 Thank you very much for the opportunity.

20 (Applause.)

21 MS. NOVAK: Thank you so much, Brenda, for 

22 your very informative presentation.
203

1 Next up today in our session we have Bob 

2 Berczik, who is going to talk to us today about Food 

3 Safety and Inspection Services.

4 PRESENTER: BOB BERCZIK

5 MR. BERCZIK: Is everybody awake? How many 

6 folks had a nice, I don't know, chicken, turkey --

7 can't wander away from the podium, sorry -- ham 

8 sandwich, cheeseburger, maybe. Show of hands? Yeah. 

9 Okay.

10 How many folks know that the Food Safety and 

11 Inspection Service is the agency that regulates meat, 

12 poultry, and processed egg products? Oh, I'm so 

13 impressed. You are the best audience I've ever had. 

14 Okay.

15 I could stand up here and talk for a long 

16 time. I would especially give a lot of credit to my 

17 CBP colleagues and the amount of work that goes into 

18 attempting to create and utilize this single window.

19 I've been involved in ACE ITDS now for about 

20 10 years. And for many, many years, a lot of my 

21 audiences got tired of hearing me say, "Well, when we 

22 get there with ACE, when we get there with ITDS, when 
204

1 we get all these things developed that we can process 

2 this data electronically, and stop shoving pieces of 

3 paper around."

4 FSIS is one of the agencies that is piloting 

5 the PGA message set. It's here. You can see it, it's 

6 alive. And so we have a lot of work to do? Yes, we 

7 do. Will we have a lot of growing pains, as we move 

8 along? Yes, we will. But the benefits, I think, at 

9 the end product will so far outweigh the archaic 

10 processes that we have in place now.

11 So, for a quick instance, FSIS requires a 

12 form. It's called FSIS Form 9540-1. It's an import 

13 application. That piece of paper is filled out by 

14 hand. It's a mix of entry data that CBP currently 

15 collects and has collected for many years. It's also a 

16 portion of inspection certificate data which FSIS 

17 requires for every shipment of meat, poultry, and 

18 processed egg products from the foreign government, and 

19 some data that the trade provides to us as far as when 

20 is this shipment going to arrive, and where is it going 

21 to be reinspected at.

22 So, let me just go through with my slides a 
205

1 little bit.

2 (Slide presentation.)

3 MR. BERCZIK: Okay. I talked to you about 

4 FSIS already. Our authority comes from the Federal 

5 Meat Inspection Act, the Agriculture Marketing Act, 

6 Poultry Productions Inspection Act, Humane Methods of 

7 Slaughter Act, and the Egg Products Inspection Act.

8 Public Health Information System is the 

9 interface that FSIS utilizes. When we first started 

10 developing the PHIS, we took into account the 

11 functionalities of ACE, at least from the import 

12 perspective and the export perspective, and we built 

13 those functionalities into our development process.

14 Our main goal, at the end of the process, was 

15 to try to figure out a way to streamline the customs 

16 process, and transition away from that paper-based 

17 application that I talked about.

18 When we launched the import portion of PHIS in 

19 May of 2012, we were connected with ACE, as well, 

20 through the interoperability web services. But that 

21 initial connection only gave us a very small piece of 

22 the data elements that we required for our import 
206

1 application.

2 Why we still utilize that small subset of 

3 data, it was still a burden on the trade to continue to 

4 fill out the piece of paper, send it in to the FSIS 

5 inspector, at which point the FSIS inspector would sit 

6 at the PHIS system and key in this data, which, I'm 

7 sure you can see, is probably not a good use of 

8 resources.

9 All the data elements that we're using, and 

10 the tables that we use, and even so much as far as the 

11 certificate data, we're very conscious of international 

12 standards. The schemas are UN/CEFACT-compliant, as 

13 well as World Customs Organization-compliant.

14 To your right is just a little picture of what 

15 that 9540-1 piece of paper looks like. I talked about 

16 that importers are required to apply for inspection 

17 prior to the cargo coming in to the U.S. An entry or 

18 entry summary certified for cargo release in ACE, 

19 combined with that message set, eliminates the need for 

20 that piece of paper. And, obviously, I think it goes 

21 without saying that you can see the benefits and the 

22 expedition -- if I can use that word -- of the process,
207

1 if all this data is collected electronically.

2 Shot to the right shows an importer applicant 

3 tab that actually exists in the PHIS system right now. 

4 Just to pick up on the point that Brenda made earlier 

5 about agencies utilizing data that's already collected 

6 by customs, and not asking for the same data over and 

7 over again, for FSIS, when it comes to broker 

8 information, importer information, and consignee 

9 information, we take the organization, the addresses, 

10 city, state, province codes or postal codes. We take 

11 that information from the header level entry, meaning 

12 when the broker uses their filer code, ACE sees that, 

13 and ACE populates those data fields for us 

14 automatically.

15 Now, for FSIS purposes, and what we asked for 

16 in the message set was, well, that's great. I know how 

17 to get to A.N. Deringer's corporate headquarters. But 

18 at the end of the day, I've got a shipment here. I've 

19 either got a data problem, I've got a refused entry 

20 problem, whatever my issue is, and I need to know 

21 directly who I can get to that knows about this entry 

22 that we can resolve these issues.
208

1 So, FSIS and the message set asked for an 

2 individual's first and last name, a phone number, and 

3 an email address.

4 PHIS is also designed to where, if a refused 

5 entry, failures to present, those types of issues come 

6 about, the import inspector -- it's a button in PHIS 

7 which generates an automatic email to the email address 

8 that's been provided to FSIS in that application. So 

9 the benefits of having that quick connection and that 

10 ability to not have to go hunt somebody down, if you 

11 will, is a huge improvement.

12 Okay. For IT folks, these are the good old 

13 dot matrix schemes -- I believe that's the proper term. 

14 And when you get into the -- it's going to tell you, 

15 "Okay, I need this specific data element on this 

16 specific line, and this many characters over," and it 

17 accommodates this many characters. It looks scary. 

18 The first time I started digging in to all that stuff, 

19 I was so overwhelmed, I was like, "Wow, I've really got 

20 this project on my plate? How did I go from a meat 

21 inspector to a database guy?" Okay?

22 But, actually, once you take the plunge, and 
209

1 you really start to work through it, it's not quite as 

2 complex as -- well, it's complicated, but it will sink 

3 in. If I can get it, everybody can get it. Trust me.

4 Okay, FSIS had a few specific -- I will call 

5 them issues. So, in working with the software 

6 developers that we have currently involved in our 

7 pilot, and with our colleagues in the trade that we 

8 currently have in the pilot -- and I keep pointing over 

9 to Mr. Lahar there, because Deringer is one of our 

10 pilot participants in our message set -- a couple 

11 things came to light.

12 We had many inspection certificates that could 

13 come in within an entry, and then we have many lots 

14 that can be associated with a certificate. So, we took 

15 steps, and we worked with our CBP colleagues to say, 

16 "How are we going to get around this?"

17 So, working very closely together, we came up 

18 with a grouping methodology that now exists in this 

19 message set. So now you have the ability to group 

20 particular pieces of data which have a relationship to 

21 a hierarchy data element.

22 So, therefore, when the system reads it 
210

1 through the extendible markup language documents that 

2 flow back and forth through the IWS, the system 

3 automatically recognizes that I have three or four 

4 certificate numbers here, they're all associated to 

5 this particular certificate provider -- foreign 

6 country, in FSIS's case -- and then maps those data 

7 elements appropriately into the end interface, which is 

8 the Public Health Information System.

9 Talked about the certificates already in the 

10 first bullet. Talked about the import application, the 

11 combination of the certificate information, the trade 

12 information, the entry information.

13 Okay, so for FSIS, we also have a 

14 government-to-government data exchange, in addition to 

15 the business-to-government exchange. 

16 Government-to-government exchange is called eCert, 

17 electronic certification. So, currently, FSIS is in a 

18 live environment with Australia, New Zealand, and The 

19 Netherlands.

20 Hopefully, if you're working with any foreign 

21 governments in this type of business scenario, you'll 

22 already know that this is a huge incentive, there are 
211

1 many international groups, international standards. 

2 The push to get electronic certificate information has 

3 gone leaps and bounds in just the last year or two.

4 So, at the end of the day, what happens is the 

5 trade submits the message set. They only need to give 

6 me a certificate number within that message set record. 

7 Then the PHIS reads that certificate number through 

8 the XML, goes out to the electronic systems that are 

9 currently up and running with those three foreign 

10 governments that I just talked about, and then pulls 

11 all that certificate information into that application, 

12 which provides a complete application.

13 Filers for FSIS that are using the message set 

14 do not have to provide the paper form. I think I 

15 already stated that. In addition, if you're filing for 

16 a country that also has the electronic certification, 

17 we no longer will require that paper certificate, 

18 either, which would put FSIS, basically, in a paperless 

19 environment.

20 We are obviously working very hard with all 

21 the other foreign governments. Mexico is very 

22 interested, we have met with them several times 
212

1 already. Canada is extremely interested in getting 

2 their electronic interface up and running. APEC, there 

3 is a lot of work going on within the APEC community to 

4 get that off the ground there, as well.

5 So, just a quick read-out on where we are with 

6 our pilot to this point. We started the pilot on April 

7 the 27th, so we're roughly talking 4 months. We 

8 started with A.N. Deringer, and we started with OHL. 

9 We started with three pilot ports: Champlain, 

10 Philadelphia, and Houston, Texas. To date -- well, not 

11 to date; September 4th is the last time I pulled the 

12 information -- we've got 109 entries that have been 

13 filed using the PGA message set, representing 4.5 

14 million pounds of product under FSIS jurisdiction.

15 Our countries that we have so far are Canada, 

16 Australia, and New Zealand. Eighty-seven percent of 

17 the entries that have come through so far have had no 

18 issues, no identified issues, whatsoever. And I know, 

19 because I've asked the pilot participants to email me 

20 separately on the side whenever they process one. I go 

21 in and I look at it, I make sure that it's -- data is 

22 where it's supposed to be, formatted the way it's 
213

1 supposed to be. And so, again, 87 percent we have had 

2 no issues, whatsoever.

3 On the 13 percent that we have had issues, 

4 there have been nothing come up to slow the 

5 reinspection or the movement of the shipment. They've 

6 all been conflicts with coding, or a data element 

7 didn't map correctly, or what I will consider 

8 insignificant incidents.

9 Trying to think if there is -- well, and some 

10 our validations -- and I'm going to try, because I got 

11 the peace sign -- pick up on -- I think Brenda made 

12 this point just a minute ago, as well. Get into the 

13 cert environment, get in with Customs and Border 

14 Protection, start working with your agency. Because 

15 that testing that you do before it moves into a 

16 production is extremely critical. I can't emphasize 

17 that enough.

18 Validations have been the multiple inspection 

19 certificates. That issue that I described earlier, 

20 that's been identified, it works properly in

21 production. The automation of the PG-14 record, which 

22 is the certificate number for the eCert, and our 
214

1 increased capabilities to monitor any shipments for 

2 failures to present.

3 Just a couple of references on the websites. 

4 We do have a compliance guideline that's posted on both 

5 FSIS and CBP website, and there is a lot more 

6 information on the PHIS import component that's 

7 available on the FSIS website. And just some contact 

8 numbers.

9 (Applause.)

10 MS. NOVAK: Thank you, Bob. We'll have one 

11 more presentation from one of our agency partners, and 

12 then we'll take a break at that point -- hopefully 5 to 

13 10 minutes -- and then we'll hear from our pilot 

14 participants.

15 So, next up is Roy, Roy Chaudet, from the 

16 Environmental Protection Agency.

17 PRESENTER: ROY CHAUDET

18 MR. CHAUDET: Thank you. Thank you very much. 

19 Thank you, CPSC -- Carol, in particular -- for 

20 inviting me.

21 (Slide presentation.)

22 As you can see from the title, I'm going to 
215

1 talk about our pilot programs. But this is also a 

2 shameless plug and request -- I'm looking in the 

3 audience -- for volunteers. Importers, brokers, any 

4 software developers, I want to talk to you if you 

5 import or export any of the commodities we regulate.

6 The other thing I want to tell you is this is 

7 not vaporware. We worked very hard with Customs in the 

8 last several years, and we have built an operating 

9 system that's operating at the ports, and we're 

10 building on it even as we speak. We're adding even 

11 more functionality. So it's a tremendous step forward 

12 for our agency. We think it's a tremendous step 

13 forward for the trade community, as well as working 

14 with the port officers, as well.

15 Let me tell you just a little bit about EPA. 

16 We're a small agency, but we regulate nasty stuff: 

17 poisons, toxic chemicals, hazardous waste, not really 

18 good things. So we need to make sure that those 

19 commodities that are being imported or exported are in 

20 compliance with our regulations.

21 We do have hold authority. We're one of the 

22 handful of agencies that do have hold authority, so we 
216

1 can stop those shipments from either coming in to the 

2 country or leaving the country where we have authority. 

3 We do not have port presence. We do, for some of our 

4 programs, have a regional office that can be at a port 

5 within a certain time period. But some of our programs 

6 have enforcement staff that manage out of Washington, 

7 D.C., and headquarters. So, that's a little bit about 

8 EPA.

9 So, what do I want to talk about? What do we 

10 regulate? What are we doing with ACE/ITDS? What trade 

11 can expect, just touch on what pilots we're doing now, 

12 which pilots we plan to kick off very soon, and then 

13 get down to the main message of this talk, which is we 

14 need your participation. And what's involved with 

15 getting started. And then, just like Bob threw up 

16 his -- he called it his dot matrix chart -- I'll throw 

17 you up what one -- what a filing might look like, and 

18 then we'll wrap it up from there.

19 So, EPA regulates six commodities: 

20 ozone-depleting substances, refrigerants, vehicles and 

21 engine -- and that includes on-road vehicles, off-road 

22 vehicles, and engines and generators, and basically, 
217

1 anything that emits into the atmosphere. They have to 

2 be certified before they get brought in to the country, 

3 unless it's a prototype car that somebody is going to 

4 show off somewhere. But we still need to file that, as 

5 well. We regulate fuels, as well, that need to meet 

6 certain standards. Toxic chemicals -- and that, by far 

7 is a very big, big commodity that we regulate. And 

8 then pesticides and hazardous waste. And hazardous 

9 waste, we only have authority to regulate exports. The 

10 rest we regulate on import.

11 The boxes that are highlighted and -- with a 

12 dark border, those are the ones that we actually are 

13 working on for pilots right now with the system. So 

14 that's just a brief introduction of what we regulate.

15 So, what are we doing? Well, we're taking 

16 these paper forms and we're making them available to be 

17 made -- to file electronically, using the PGA message 

18 set. And then, what we do is, when those forms are 

19 filed, we've taken data out of our agency systems, 

20 moved it using IWS, Interoperable Web Services, to 

21 Customs, and then we actually check what you filed. Is 

22 that the correct registration number? Is that the 
218

1 correct producer establishment number?

2 And if it doesn't match, then we're going to 

3 send you an error message. And, in some cases, if you 

4 didn't provide it, we're going to send you a reject up 

5 front so you do provide it. But at least you know, 

6 when you file, where you stand with EPA in meeting our 

7 reporting requirements. If you do file the correct 

8 information, as far as EPA is concerned, initially 

9 you've met our reporting requirements. And so, that is 

10 huge for us.

11 And let me just give you an example of the 

12 current paper process of our pesticides program. The 

13 pesticides notice of arrival right now is a paper 

14 form -- they are 3540-1 -- that an importer fills out 

15 or broker fills out, and sends it Federal Express to 

16 our regional office where the port is that they're 

17 going to bring it into the country.

18 So you've got the time and the cost of sending 

19 that to the regional office. They have, typically, 

20 about 48 hours just to review it. If they find 

21 something, you may have to provide additional 

22 information or resend it to them. And once they sign 
219

1 off on it, they send it back to you via courier to 

2 provide with the shipment.

3 That process alone can take anywhere from two 

4 to three weeks for a paper process. This new 

5 electronic process we're talking about is two to three 

6 minutes. So it's a dramatic improvement. And so, 

7 this, as I like to refer to it, is one of our poster 

8 childs (sic).

9 So, that really takes the essence of what 

10 we're doing, where we file electronically, we do these 

11 automatic reviews, instead of manual reviews, and then 

12 we give you a message back that says, "Hey, you've met 

13 the requirements," or, "No, you haven't," but it gives 

14 you a chance to update and correct it before you arrive 

15 at the port.

16 So, I'm going to stretch a little bit here. 

17 And at the bottom I have a goal, but it's really more 

18 of a challenge. And I know, for the express industry, 

19 that's probably less realistic than others, but you 

20 know, the sooner something could be filed, the sooner 

21 everyone is going to know if it's met our reporting 

22 requirements. And we realize that for foreign trade 
220

1 zones, in particular, and others filing, you may not 

2 know the exact quantity. But if you're reporting the 

3 commodity you're sending with the appropriate 

4 information, and an estimate of the quantity -- a 

5 maximum estimate -- then that's going to be -- we think 

6 right now that that's going to be good to meet our 

7 reporting requirements.

8 Now, on entry summary, if you bring in more 

9 than that maximum that you estimated, you're going to 

10 be on our bad list. But what we're trying to do is 

11 facilitate advanced early filing, as early as possible. 

12 And then, if you could stretch it even further, if you 

13 could report early enough, we'll tell you before you 

14 load it if you've met our reporting requirements.

15 So, that, to me -- if it's possible, if trade 

16 can actually file that early, that could be a big time 

17 saver. So if rail cars -- and we're mainly -- we're 

18 starting off slow, where there is lead time, on ocean 

19 and the rail environment. But those two modes seem to 

20 be ripe for improvement.

21 So, what does that mean? That means that you 

22 can expect shortened review and processing time. This 
221

1 process we're applying nationwide not only with EPA, 

2 but working with Customs, nationwide, at all the ports. 

3 So, right now, I'll be honest. Depending on which 

4 region you're filing to, you're going to get 

5 variability on how that's processed. So we expect this 

6 to standardize things, nationwide. So that, I think, 

7 is a big, big improvement.

8 We expect to eliminate duplicate reporting of 

9 certain data elements to both EPA and CBP. We're 

10 leveraging Customs data elements. Bob talked about the 

11 header information. We're pulling as much as we can 

12 out of that header information, and not asking for that 

13 in the PGA message set. Courier fees, gone. And 

14 that's not a trivial cost. We've done a little bit of 

15 estimating on that; that's a big, big deal. And then 

16 you get these error responses, and your ability to 

17 update and correct.

18 So, what are we doing? What pilots? Well, as 

19 of April 30th, working with CBP we actually have two 

20 pilots up and running: those on depleting substances 

21 and vehicles and engines. And we started at the Ports 

22 of Long Beach and Newark. And as we get more filings, 
222

1 we're going to look at rolling that out, nationwide.

2 This fall/winter -- we're in the heat right 

3 now of testing with Customs. We've already built it, 

4 but we're testing with Customs the notice of arrival 

5 for pesticides, the poster child I just mentioned, as 

6 well as exports of hazardous wastes. And so, those are 

7 coming up, as well. We've worked with OFO, the field 

8 operations. We've defined the starting points. And, 

9 again, we're looking at rail and ocean for these 

10 commodities -- well, actually, for the pesticides. And 

11 we're looking at truck for haz waste exports.

12 So, those that participate, what do you need 

13 to do? You need to create message sets, submit test 

14 filings in the certification environment. Brenda 

15 recommended that you get involved now. So the sooner 

16 you can do that, the better.

17 And then, as you file, you'll start receiving 

18 notifications and feedback. We work with you 

19 one-on-one. We look at what you file. We say, "Yes, 

20 you've done it right," or, "You've missed a couple data 

21 elements," and it's really quick turnaround. We're 

22 talking to you either same day or within a day of your 
223

1 filing, at the latest.

2 And then, once you're done in 

3 certification -- and, by the way, this certifies you to 

4 file for our commodities when you test and cert -- you 

5 can then file in production. And our pilots are being 

6 conducted under the National Customs Automation 

7 Program, which waives the requirement for the paper 

8 filing. So, when you test you get added benefit of 

9 getting certified and doing it electronically in 

10 production.

11 So what do you need to file? Let me just give 

12 you a taste of sort of the big data elements. 

13 Ozone-depleting substances, we know who the importers 

14 are that are approved to bring that in. So when you 

15 bring -- so when they file to bring that in using the 

16 message set, and we use CBP's import of record 

17 number -- but we have a special quantity that we ask 

18 for that -- we'll check. And if you're on the list, 

19 we'll tell you you're good to go, you've met the 

20 reporting requirement. If you're not, we're going to 

21 tell you.

22 Vehicles and engines, they've got to be 
224

1 certified. We've got a certification number. If you 

2 provide that right number, we're going to tell you. If 

3 you don't, we're going to tell you.

4 Pesticides notice of arrival, registration, 

5 producer establishment numbers, we have both of those 

6 numbers that we've given to CBP, and they're going to 

7 check those for every one of those filings.

8 And then, for hazardous waste -- I'll just 

9 mention this real quick -- Bob talked about country 

10 to -- government-to-government exchanges. We have an 

11 exchange with Canada and Mexico, where our countries 

12 actually have to give consent for shipments of 

13 hazardous waste to go between our countries. And when 

14 we do that, we get a consent between the countries, and 

15 then we tell the exporter from the U.S., "Here is your 

16 consent number," it comes in a letter. And instead of 

17 providing that on paper, when you file your export you 

18 provide that consent number. And we -- again, we check 

19 it. So it's very powerful.

20 We're using computers, what they're designed 

21 to do, which is routine, manual review. But I did hear 

22 a concern earlier today about, in the paper process, 
225

1 people may look at it and if it's not a black or white 

2 situation they can make a judgment call. What happens, 

3 in working with Customs on this, if something fails, 

4 one of these checks, not only do we let you know that 

5 it's not correct, we get eyes on that filing. So if 

6 there is a judgment call, we tell you, as the message 

7 that comes back to you, whether it's wrong and we're 

8 letting it go, or it's wrong and we're not going to let 

9 it go.

10 So, that's the key thing, is to know that 

11 EPA's enforcement staff has eyes on every one of these 

12 things that failed validations.

13 So, if you want to get started, are you an ACE 

14 filer? Are you filing the -- those commodities at 

15 these ports? If you're interested, contact me. There 

16 will be a Federal Register notice, one that's already 

17 gone out for the first two pilots, there is one for 

18 pesticides that's coming out this fall. And I would 

19 say work with your software developers.

20 Two minutes? Okay. So here is an eye chart 

21 strain, but this is not as bad as it looks. That's a 

22 pesticide notice of arrival. That's our most 
226

1 complicated filing. It's really not that bad.

2 So, in summary, we're testing, we need you 

3 guys to test with us. And we think there is a 

4 tremendous benefit. So, thanks.

5 (Applause.)

6 MS. NOVAK: Many thanks, Roy. And to the 

7 other federal agency participants this afternoon.

8 Let's take a break. I think we've been good 

9 on time, so let's take 10 minutes, and then we'll hear 

10 from our pilot participants for the second half of the 

11 session, and then questions. So, please be back here 

12 at 3:00, and we'll start at 3:00.

13 (A brief recess was taken.)

14 MS. NOVAK: Hi, all, thank you. We'll pick up 

15 with the second half of our session here, if you can 

16 grab your seats.

17 We'll hear from two more presenters this 

18 afternoon, two pilot participants who will give us a 

19 briefing on their experiences. And then we'll open up 

20 for questions and answers at that point.

21 A reminder to those on the webcast: you can 

22 submit your questions at efiling@cpsc.gov.
227

1 Okay, so I'd like to introduce Mike Lahar from 

2 the FSIS, pilot trade volunteer from Deringer.

3 PRESENTER: MICHAEL LAHAR

4 MR. LAHAR: So, having heard about dot matrix, 

5 I can't pass up this opportunity. Does anybody know 

6 who Dot Matrix is?

7 (No response.)

8 MR. LAHAR: She's Farmer Matrix's wife.

9 (Laughter.)

10 MR. LAHAR: I'd like to have a little fun with 

11 you this afternoon and ask you to give me a little 

12 latitude. I have children, a daughter who is 12 and 

13 two boys, 5 and 2, so I am used to telling bedtime 

14 stories. So, what I'd like to tell you about this 

15 afternoon are the adventures of a small steak who goes 

16 by the name of Sir Loin.

17 (Slide presentation.)

18 MR. LAHAR: Now, Mr. Loin resides in a factory 

19 in Canada very close to the U.S. border. And your 

20 local steak restaurant may have made a phone call to 

21 Acme Meat Company saying, "We need some steaks." And 

22 what happens at this point is Acme Meat Company will 
228

1 take the proper paperwork that's required to get Mr. 

2 Loin across the border, and call up the local trucking 

3 company, and they swing by, pick up the steak and the 

4 paperwork.

5 Now, the current process that we go through is 

6 the trucking company will go back to their facility, 

7 and either continue down to the border after they drop 

8 the paperwork off at the dispatch, or they may drop the 

9 trailer, and another driver pick it up and bring it 

10 down. But they will send the paperwork to the broker, 

11 and fax the meat paperwork -- the 9540 and the health 

12 certificates that are required to get meat into the 

13 United States -- down to the inspection facility, the 

14 I-House, as we call them.

15 And currently, the broker will independently 

16 key the data into our system and transmit it over to 

17 U.S. Customs -- excuse me, Customs and Border 

18 Protection. I'm an old broker, I've been in the 

19 business for 28 years; I can't stop, I can't help 

20 myself. So pardon me, Brenda. And we will key in the 

21 data and get it over there to get the customs release 

22 when the goods get to the border.
229

1 Now, the folks over at the inspection house 

2 will take the paperwork that's faxed to them and bring 

3 it over to the FSIS inspector, who has to manually key 

4 that into the system. So it kind of slows trade down, 

5 because for that guy to get out there and inspect that 

6 trailer, it's dependant upon him, before he goes out, 

7 to key all the data in.

8 The new model that we're looking at, and that 

9 we've been participating in the pilot, is all the 

10 paperwork comes to the broker. And we key our normal 

11 customs data in, and we also key the data necessary for 

12 FSIS inspection in. So when that truck shows up at the 

13 I-House after it's been released by U.S. Customs, now 

14 he can back into the door, and that inspector no longer 

15 has the responsibility of just inspecting it, in 

16 addition to keying the data. So when the trucks get to 

17 our facility, it very much expedites the release of the 

18 cargo, and speeds the inspection process up.

19 So, just a little background on how things 

20 kind of happen -- but I want to drive home one point. 

21 And, Brenda, this is going to go along with what you've 

22 been talking about with ACE and ITDS. And ACE equals 
230

1 -- or ITDS equals ACE. So, I'm hoping that the folks 

2 in the room picked up on that.

3 We can't transmit ITDS information for all 

4 these agencies unless we're transmitting ACE data to 

5 Customs. So it's very important. The brokerage 

6 community has been rallying recently. There has been a 

7 lot more brokers transmitting ACE data to Customs. I 

8 think the last statistic I heard this week was 47 

9 percent -- 45 percent of all entry information being 

10 transmitted to Customs currently is going through ACE.

11 The brokerage community, we have to do a 

12 little bit better job, and we're getting there. I 

13 think it's been increasing at the rate of about five 

14 percent a month. So I pay attention at these meetings, 

15 I really do.

16 So, the key is, if you're going to participate 

17 in any of these ITDS pilots, the broker has to be on 

18 ACE. Otherwise, it can't be done.

19 Now, from our perspective, we are in the 

20 middle of a conversion currently to change our 

21 software, to upgrade our software, so that worked -- we 

22 will be able to fully take advantage of all of the 
231

1 little bennies that ACE gives brokers and importers. 

2 But in order to participate in the FSIS pilot, we 

3 chose, as a company, to put the brakes on things for 

4 about three months. And the reason I mention that is 

5 to give people an idea: This isn't something that 

6 happens overnight, so you need to plan ahead.

7 We're really getting close to full 

8 implementation of ACE, and then we have about a year 

9 afterwards for President Obama's deadline for ITDS. So 

10 we've got to hurry up and start dealing with some of 

11 this stuff.

12 The software development, as I said, took 

13 three months. And, actually, it took quite a bit of 

14 capital from the company to get the programming done. 

15 And the testing has gone fairly well. In preparation 

16 for today's meeting, being in compliance, I don't key 

17 entries on a daily basis. So I went out and decided I 

18 was going to key an entry with FSIS data.

19 Now, my first stab at it, it took me an hour 

20 to key an entry. My second step, I got it down to 

21 about a half an hour. I wasn't shuffling back and 

22 forth through so much paperwork. I think, over time, 
232

1 our employees are going to get it down to probably 

2 about 10 minutes an entry, which is interesting, 

3 because if you read the NPRM, there are some statistics 

4 buried in the back that CPSC went out and got from 

5 another broker that said they thought it would take 

6 about 10 minutes per line to key the CPSC data.

7 And they also felt that an average entry that 

8 had CPSC requirements would have maybe three lines on 

9 it, and the projected cost would be about $56 million. 

10 So there is a cost to this. There is a cost 

11 associated. And, of course, we're all being squeezed.

12 So, I guess my lessons learned, and what I 

13 really want to drive home, is this isn't a static 

14 process. I've heard multiple people talk about -- here 

15 and also in the NCBFAA meetings that we had in 

16 Washington this week -- about continuing to develop 

17 better methods for doing this.

18 So, from my personal perspective, looking at 

19 the way that the data we were inputting into the system 

20 for FSIS, I'm definitely taking that home when these 

21 meetings are over, and going back to the drawing board, 

22 and telling our IT guys, "We got to find a better way 
233

1 to do it." The key is going to be -- and I think, 

2 Carol, you said there are six data elements that you're 

3 really interested in.

4 MS. CAVE: Seven.

5 MR. LAHAR: Okay. The big thing is going to 

6 be preventing data creep, and really focusing on those 

7 particular items that you've got to have. Because if 

8 we can contain the amount of data that we have to key 

9 in that is particular to one agency, versus what we can 

10 pull out of Customs' system, that is going to make our 

11 job as brokers a lot easier.

12 And I can live with six data elements. And, 

13 actually, I say "data elements" -- six pieces of 

14 information. It may encompass a few more data 

15 elements, but I can live with six data elements, 

16 myself. I'm speaking for my firm, Deringer, 

17 versus -- I'm not representing the NCBFAA right now, 

18 so -- but if that blows up, it's going to be 

19 exponential, because it's not just CPSC. It's CPSC, 

20 it's FDA, it's Lacey, it's all of these 47 agencies 

21 that want some information.

22 So, if we can just focus on what is absolutely 
234

1 necessary for you to do your job, it's going to make 

2 our job a lot easier.

3 And I will call it there, so we can spend more 

4 time with questions.

5 (Applause.)

6 MS. NOVAK: Thank you, Mike. Next up is Mary 

7 Ann Comstock -- I would like to invite you up -- and 

8 she is from our COAC for CBP.

9 PRESENTER: MARY ANN COMSTOCK

10 MS. COMSTOCK: Thank you very much. I'm Mary Ann 

11 Comstock. I actually do have a day job. I work for 

12 UPS Supply Chain Solutions. I've been a customs broker 

13 for over 35 years. And I do want to mention that I am 

14 a member of the advisory committee on commercial 

15 operations of Customs and Border Protection, but 

16 I'm -- as a member of COAC, these are my personal 

17 observations from my COAC work. And any reference to 

18 COAC recommendations or the information that I make is 

19 already out on CBP.gov and the website. So please keep 

20 that in mind.

21 I do also want to say a special thank you to 

22 Carol Cave, because she has been my -- one of the 
235

1 government co-chairs of the One U.S. Government at the 

2 Border, and I really appreciate all the work she's 

3 done. And, hopefully, we'll be able to provide some 

4 good information for you.

5 (Slide presentation.)

6 MS. COMSTOCK: So, the 13th term of COAC is 

7 the period of time that we're in. And we have been 

8 working in the One U.S. Government at the Border 

9 subcommittee, and doing a lot of different activities. 

10 One of the activities that we went through was an EPA 

11 working group. And I had the pleasure of working with 

12 Roy Chaudet, and we managed to come to a mutual 

13 understanding, and have been collaborating ever since. 

14 And now we are working with FDA, and there is also an 

15 import mapping working group in progress.

16 So, one of the things that I want to point out 

17 is there is an awful lot of recommendations that were

18 made in November of 2013, and I would encourage you to 

19 go look at CBP's website under the COAC. At that 

20 November meeting you will find a lot of 

21 recommendations, and you're going to hear a lot of the 

22 same buzz words you've probably heard here.
236

1 One of the things that we definitely encourage 

2 is a unified filing of information. We want to be able 

3 to have one large data set going in, and we want to 

4 file it early. Up to 30 days early is what the 

5 recommendation says. Now, it's not always going to be 

6 available, but we're certainly going to try and give 

7 Customs what the trade has available when it's 

8 available.

9 We want the partner government agencies to 

10 review the data for admissibility well in advance of 

11 cargo arrival, allowing the partner government agencies 

12 to have much more time to perform their risk 

13 assessments, review who the importer is, figure out 

14 whether you know who they are, whether the product 

15 complies -- at least on paper or in data -- and then 

16 make admissibility decisions while effectively managing 

17 resources.

18 We also want the partner government agency 

19 message sets that are coming back through CBP to the 

20 trade to be very clear and defined, and we want them to 

21 be PGA by PGA, line by line. And I'm not really sure 

22 that we've had this good discussion with CBP yet about 
237

1 those message sets coming back, but I have a feeling 

2 it's imminent.

3 We want to have sound risk assessment 

4 occurring on data, not documents. So the data should 

5 be the preferred method. And, occasionally, the 

6 document imaging system is a useful tool.

7 One of the things that we talked about in our 

8 recommendations from COAC is the Trusted Trader 

9 program: expedited clearance for those known 

10 importers; leveraging CBP and the trades' investment in 

11 programs like CTPAT, ISA, and FS or FSMA, FDA volunteer 

12 qualified volunteer program, also known as VQVP. Those 

13 are important investments that the trade community is 

14 willing to make to partner with the government agencies 

15 so that you know them, and they will be able to provide 

16 you with what you need as an agency.

17 One of the things I'd encourage is the use of 

18 blanket declarations, if at all possible, particularly 

19 for repetitive shipments.

20 There are single-window efficiencies. Collect 

21 only the data that's required. I'd also like to say 

22 that it should be collect only the commercial data 
238

1 that's required. Don't ask me for something very 

2 obscure that there is no way I, as a Customs broker, or 

3 the importer, or the exporter, could even give you. So 

4 collect the data that's required. Hopefully it is 

5 commercially-available data.

6 Utilize the data collected for various 

7 purposes. As Mike said, collect the data once, use it 

8 many times. Consider other alternative methods for 

9 identifying importers, exporters, foreign food 

10 facilities. Instead of me putting in a complete name 

11 and address, city, state, zip, email address, postal 

12 code, whatever it is, use a DUNS number, if it's 

13 applicable. A number is much easier to utilize in risk 

14 assessment screening, instead of relying on that full 

15 name and address, or even a MID number, which we -- I 

16 personally hope they go away, and they might.

17 Risk assessment methodology. I know that CPSC 

18 has been working on RAM, and I trust the system is 

19 robust. Recognizing compliant importers, stopping 

20 high-priority targets, that's what they should do.

21 Now let's talk about some of the challenges. 

22 The ability for us, as customs brokers, to timely find 
239

1 the data that we need to submit. Have the right data, 

2 well in advance of cargo arrival, is going to be a 

3 challenge. But I believe that we can do it, 

4 particularly with our repetitive customers. The 

5 challenge really is when it's new players in the 

6 international supply chain, and they occur daily.

7 I think I heard Customs say that they get 

8 30,000 new IRS numbers for importers every single 

9 month. It's just a lot.

10 So, key entry errors. I know they happen. 

11 They will occur. And so the more data that's required, 

12 and the more free-form data -- not table-driven -- the 

13 greater the chance for key entry errors. So, somehow, 

14 if we can have the data to be clear and concise, that's 

15 very, very helpful.

16 And, you know, I've certainly seen issues 

17 where we transmit data for FDA, and we may be giving 

18 them a MID number, which is an identifier for a name 

19 and an address, but it matches to a different MID in 

20 CBP's system. Therefore, FDA thinks I'm talking about 

21 a completely different person. So, somehow, we have to 

22 make sure that we have a clear way of understanding 
240

1 what the data is.

2 We want to implement this, in my opinion, in a 

3 managed approach, similar to what maybe APHIS did with 

4 the Lacey Act, so we don't have to have all the data 

5 for all the potential HS numbers on day one. I'd like 

6 to see a good roll-out, if you will. Take the more 

7 risky items first, if at all possible.

8 And then, when data anomalies occur, that 

9 feedback that you give to the filer is very critical. 

10 And don't just tell me it's wrong. Tell me what's 

11 wrong. I'm not a mind reader, and neither are my 

12 peers. So we need to have good messages so we 

13 understand what you don't understand from the message 

14 that we sent to you.

15 I do know that the management of all of that 

16 data across all 47 government agencies is going to be a 

17 challenge for both the importer and the entry filer. 

18 And -- to make sure that we're submitting the right 

19 information on the right line, identifying the right 

20 PGA. And we've said it before, I'll say it again. 

21 Data creep is a real concern of the trade community.

22 So, let's talk about the business needs, and 
241

1 what I guess I would call some of the realities. The 

2 global supply chain is evolving daily. Legitimate 

3 trades should be managed as efficiently as possible. 

4 We are seeing, more and more, non-resident importers of 

5 record becoming very common. Business consumer 

6 shipments are increasing.

7 Trade moves 24/7; we need the PGAs to make 

8 admissibility decisions well in advance of arrival, 

9 just to keep the goods flowing across the border. I 

10 would like to suggest high versus medium versus 

11 low-risk priorities.

12 Performing post-entry audits is going to give 

13 you, the partner government agency, good information. 

14 I believe that if you're doing a post-entry audit, and 

15 you have an error, or you have an issue, holding the 

16 customs broker as the potential importer of record 

17 responsible doesn't make any sense, because the goods 

18 have moved beyond their control. And it should be the 

19 responsibility of the actual importer, the person that 

20 has the financial interest in the goods, to respond to 

21 any CPSC inquiries.

22 I've already mentioned the staged 
242

1 implementation. And I'd also like to mention that the 

2 trade is very concerned about the cost to delay and 

3 hold cargo. The added expense increases every 

4 importer's cost, which is ultimately passed on to the 

5 American consumer in some fashion. And while the trade 

6 is not asking our partner government agencies to 

7 release cargo that's unsafe, we have to somehow achieve 

8 a balance.

9 I'd also like to mention that the COAC is 

10 currently in the process of reviewing the 2014 trade 

11 survey information. And I'm hopeful that the next COAC 

12 public meeting, which will be October the 7th, that 

13 we'll see the results of that, and it will give you 

14 more information about costs and holds.

15 So, keys to success -- I said this a couple 

16 days ago. The more you test, the more you learn about 

17 the system, and the process, and the data requirements. 

18 And so, the more efficient the trade will be in 

19 managing the process. So we know that we need trade 

20 participation on all of these PGA pilots. And we 

21 really have to do a good job.

22 I know, personally, from my company, we are 
243

1 filing a significant number in ACE. We are not able to 

2 participate yet in any of the partner government agency 

3 tests. But hopefully, by early next year, mid-next 

4 year, we will. And so we'll probably feel some of the 

5 same pain that Michael may have felt before.

6 We also wanted to mention that mutual 

7 understanding of the data requirements -- if you tell 

8 me it's a widget, and I think it's a whatsamajig, we 

9 have a little problem here. We've got to make sure 

10 that we understand the data and the commercial 

11 availability of the data. So the pilot is a very 

12 important exercise to make sure that we can produce the 

13 data efficiently, and the government agency has the 

14 legislative mandate to require it. I'm not too worried 

15 about that piece, because I'm -- our friend at the ITDS 

16 board, Mr. Timothy Skud, has been making very sure that 

17 everybody knows who needs to perform -- or to provide 

18 what.

19 So, I will quote something that Ms. Smith's 

20 colleague, Cynthia Wittenburg, said at a COAC meeting: 

21 "We would like to have one U.S. efficient government 

22 at the border as our goal." So, thank you.
244

1 (Applause.)

2 MS. NOVAK: Thank you, Mary Ann. And thank 

3 you, again, to all of our presenters, from both this 

4 morning's session and this afternoon's session. We 

5 appreciate everybody being here and taking the time.

6 So, we will open the floor to some questions 

7 at this point. A couple reminders for our folks on the 

8 webcast: you can submit questions at this time to 

9 efiling@cpsc.gov.

10 VII. QUESTIONS AND ANSWERS FOR AFTERNOON SESSION

11 MS. NOVAK: Carol?

12 MS. CAVE: Hi. Carol Cave, CPSC. This is 

13 actually a question for Bob and for Brenda.

14 You mentioned that, currently, when you're 

15 able to take a certificate number, and then that 

16 number, I'm assuming, is actually mapped or checked 

17 against a reference file within FSIS -- I would 

18 assume -- and then it autopopulates that document.

19 My question really, Brenda, is for you, and 

20 that is, is that data field, given that you've already 

21 built it for FSIS, flexible enough to where other 

22 agencies who may require a certificate could also use 
245

1 that mechanism to check and validate certificates?

2 MR. BERCZIK: So, just let me make sure that I 

3 was very clear -- and maybe, obviously, I was 

4 not -- the certificate data that FSIS receives comes 

5 from the foreign government. It does not come from the 

6 trade community. Okay? So that is the connection 

7 that's different, or in addition to, the connection 

8 that we have with the trade data coming through for the 

9 application.

10 MS. SMITH: However, there are other agencies 

11 that accept certificates. I would have to check 

12 specifically to see if there is one that is flexible 

13 enough. Usually, though, there is. And so, if that's 

14 a CPSC requirement, we would be happy to work with you 

15 on it.

16 MR. CHAUDET: So, if you look at the PGA 

17 message sets, there is a LPCO number. That's where you 

18 could put a certificate number, just like our 

19 registration number for pesticides.

20 MR. BERCZIK: And that's where we utilize that 

21 certificate number from the trade, is in that record 

22 group.
246

1 MR. LAHAR: Bob, if I'm not mistaken, the 

2 certificate data that you have is on your computer 

3 system, not housed within Customs.

4 MR. BERCZIK: That's correct.

5 MS. CAVE: Okay. I have one clarification. 

6 Brenda actually had on her slide earlier that, I guess, 

7 the CPSC was actually working on DIS. And, just to 

8 clarify, that is not happening, so don't anybody flip 

9 out.

10 MR. JOHOLSKE: Yeah, I had a question for Bob. 

11 You had gone over some stats on your pilot. I think 

12 you had mentioned processed 109 entries, 4.5 million 

13 pounds, and for 87 percent of them there have been no 

14 issues.

15 I was just wondering if you could talk to any 

16 benefits that you have seen, from a trade facilitation 

17 perspective, in running your pilot. In other words, 

18 have you seen those shipments been able to enter the 

19 country quicker because you've had this electronic 

20 exchange?

21 MR. BERCZIK: Well, if I may, I think I 

22 would -- I think Mike kind of discussed that, and the 
247

1 benefits, at least as far as from the FSIS reinspection 

2 process. So --

3 MR. LAHAR: Yeah. I mean the current process 

4 requires the inspector to input the data. And that's 

5 only going to happen as quickly as the certificates and 

6 the 9540s get over to the I-House, and only as quickly 

7 as the inspector can put it in.

8 Now, we usually -- in Champlain, anyways -- we 

9 usually start seeing trucks run about 3:00, 4:00 in the 

10 afternoon. So the inspectors come in and, you know, 

11 they start keying right away, but if they're out 

12 inspecting a truck, they can't be back in the office, 

13 inputting data into the system.

14 So, as far as gaining efficiencies for getting 

15 trucks across the border quicker, eliminating the need 

16 for the inspector to key that data is a big boom in the 

17 I-House. Now, from a broker's perspective, of course, 

18 that's shifting labor over onto our side, which we're 

19 trying to address.

20 And one thing -- and I really felt badly when 

21 I sat down and I realized that I didn't mention -- you 

22 mentioned New Zealand, Australia, and The Netherlands 
248

1 as being countries that currently participate in the 

2 eCert program. I mean -- Bob and I were talking 

3 beforehand -- and Canada is, you know, queuing up to be 

4 the next one online. And when that information is able 

5 to flow into the FSIS system, the data elements that 

6 the brokers would have to transmit are very much 

7 minimized.

8 So, when we get to that point, our life is 

9 going to get a lot easier. Obviously, the FSIS 

10 inspectors that are getting these test shipments are 

11 already reaping the benefits, and those particular 

12 shipments are expedited through the system. So, yes, 

13 when we get there, I do believe that there is going to 

14 be great time savings.

15 MR. BERCZIK: So I would add, from a regulator 

16 perspective, when that data comes through, and it's 

17 pre-populating that application, so a lot of the 

18 built-in -- and I'll use this term loosely -- "risk 

19 assessments" that are built into our system anyway are 

20 activated, can be utilized.

21 In addition, there has also been some 

22 development, programming development, that we have done
249

1 with our interface that allows us to monitor for any 

2 potential shipments that would skip the process. We 

3 call those failures to present. So, you know, our 

4 resources are much more focused. And with the message 

5 set data, you know, the programming allows us to do a 

6 better job of targeting, if you will. Again, I use 

7 that word very loosely, but same thing.

8 MR. LAHAR: One thing to clarify, as well, is 

9 FSIS does not have hold authority at the border. So, 

10 by the time the trucks -- you do -- okay. By the time 

11 we see the trucks, they've already been cleared by U.S. 

12 Customs. And a lot of energy is spent by FSIS trying 

13 to track these trucks down that don't report to the 

14 I-House for inspection.

15 MS. CAVE: Sorry, another question, mainly for 

16 Mary Ann and Mike.

17 So, today, in the broker world, for any 

18 government agency where they require specific 

19 documentation, what is it that you see on your side 

20 that signals to you that some kind of 

21 information -- and how is that signaled to you, about 

22 additional information might be required for filing?
250

1 MS. COMSTOCK: Okay, so this is Mary Ann. 

2 Generally speaking, particularly with the current ACE

3 system, where we're transmitting PGA data for FDA, DOT, 

4 FCC -- and we actually have in our own system a flag 

5 for TSCA, believe it or not -- we're looking for a 

6 Harmonized Tariff Schedule flag to indicate to us that 

7 we have a partner government agency who is interested 

8 in that product.

9 You know, the customs broker, as the trade 

10 facilitator, really need to have that aid to make sure 

11 that we get it right. We're not mind readers. We 

12 really would like to see PGA flags, in my personal 

13 opinion. I'm trusting that my broker colleagues would 

14 agree.

15 And then, generally speaking, for those that 

16 we don't have any data that we transmit today -- for 

17 example, Fish and Wildlife -- my staffer is supposed to 

18 be able to identify, just from experience, that if I've 

19 got a deer hide from a hunt in Canada, that it's going 

20 to require reporting to Fish and Wildlife. Now, Fish 

21 and Wildlife does happen to be at some ports of entry. 

22 Therefore, they're also involved in that clearance.
251

1 But that's the challenge that we face, is 

2 knowing when something comes in, especially if it's an 

3 obscure government agency -- my office in Sweet Grass, 

4 Montana, actually does clear articles that are subject 

5 to the U.S. Nuclear Regulatory Commission licensing 

6 requirements. And so I have copies of licenses on file 

7 for my customers in Sweet Grass. But that doesn't 

8 happen everywhere.

9 So, it's really the broker's experience. I 

10 really think that the PGA message set is going to 

11 improve the government's work, because they will get 

12 more data than they have ever seen.

13 MR. JOHOLSKE: Question for Brenda. This 

14 morning a few people expressed concern about 

15 limitations that CBP has in being able, and for CPSC, 

16 at least, being able to accept volume -- large volumes 

17 of certificate data, and processing it, and sending it 

18 to us.

19 Your slides, I think, went through nicely kind 

20 of the time frame for implementation of ACE. I guess, 

21 just sort of for clarification purposes, could you 

22 just, I guess, reiterate, I guess, the ability of CBP 
252

1 to accept that PG message set data on behalf of CPSC, 

2 and push that to us?

3 MS. SMITH: So one of the things that CBP does 

4 very well is to intake and manage large amounts of 

5 data.

6 If you think about the commercial travel and 

7 trade that the U.S. experiences every year, inbound and 

8 outbound, and you think about all of the information 

9 that is collected on travelers and cargo that go in and 

10 out of the country, and the messaging, the event 

11 messaging that goes back and forth. It's a huge volume 

12 of data.

13 CBP's infrastructure is set up to support the 

14 fast turnarounds of the messaging back to the trade. 

15 We do have redundancy built into the system. But we 

16 also believe that the need to test is critical. And 

17 so, our testing protocols involve not only the ability 

18 to transmit data from a technical perspective, but can 

19 we handle the increased volume?

20 So, while I am very confident in our ability 

21 to handle millions of transactions a day, I think that 

22 what we do want -- the earlier we can test that 
253

1 capability, further test that capability, the happier 

2 we'll be.

3 MS. CAMPBELL: Hi, this is Jacqueline Campbell 

4 from the CPSC, and this question is for Bob and Roy.

5 Do you have any rulemaking activities 

6 associated with eFiling going on? And, if so, are you 

7 using your pilot to inform that rulemaking activity?

8 MR. CHAUDET: This is Roy from EPA. Yes.

9 (Laughter.)

10 MS. CAMPBELL: Is that yes and yes, or --

11 MR. CHAUDET: Yes and yes. We have two 

12 regulatory programs: our pesticide programs -- the 

13 acronym is FIFRA. The notice of arrival is actually 

14 implemented through Customs regulation 19 CFR. And so, 

15 we are in the process of getting together a regulatory 

16 package to hand over to Customs, hopefully, this 

17 winter. And so, we've been working at it, actually, 

18 for several years now, trying to scope this out. But 

19 we are looking at the public comment period and the 

20 pilot to help inform that rule as it's being developed 

21 over the next few years.

22 We also have a TSCA rulemaking effort 
254

1 underway, as well, and it's probably a month or so 

2 behind the FIFRA rulemaking. And TSCA stands -- or 

3 it's for toxic chemicals. And, again, that is also 

4 implemented under 19 CFR, so we hope to either have the 

5 reg package about the same time, or shortly thereafter, 

6 going to Customs.

7 That program right now is not looking to do a 

8 pilot, that we know of. But I think it remains open. 

9 I do have to probably get them to commit, one way or 

10 the other, very soon. So that's where we are on both 

11 of those fronts.

12 MR. BERCZIK: So FSIS amended 9 CFR 327, 381, 

13 and 590, which are the meat, poultry, and processing 

14 product regulations. That proposed rule has been out 

15 in the proposed phase. We already did the comments. 

16 Went back for clearance.

17 I could tell you the date that it's going to 

18 come out, but I'll just say, for right now, that its 

19 publication of the final rule is imminent.

20 MS. CAMPBELL: And do you feel like your pilot 

21 has informed any of that rule-making?

22 MR. BERCZIK: Yes, absolutely.
255

1 MS. CAMPBELL: Thank you, both of you.

2 MS. NOVAK: Any questions from the audience? 

3 We do have a microphone set up, as earlier, off to the 

4 center left in the room.

5 From staff? Oh, great, a question from the 

6 audience. Can you state your name and affiliation, 

7 please?

8 MS. MILLARD: Hi, I'm Sheila Millard with 

9 Keller and Heckman. I want to thank everybody for the 

10 informative presentation.

11 I had a question for Roy and Bob about the 

12 data that you require. So, for pesticides and for ODS 

13 chemicals, I'm guessing you're gearing it to your 

14 registered databases, your registered pesticide, your 

15 ODS import allowances, consumption allowances. Is 

16 there any -- and at FSIS, it's the foreign government 

17 testing, so you have independent tracking numbers that 

18 you're looking to. Is there anything analogous to 

19 third party testing that's incorporated in your data 

20 sets, or your PGAs that you're looking at?

21 (No response.)

22 MS. MILLARD: So, for -- what we heard this 
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1 morning is that what CPSC requires in the 1110 rule is 

2 third party testing using an accredited laboratory. 

3 And certificates have to include information like the 

4 name of the laboratory, where -- the individual 

5 regulations that the specific product must meet.

6 It seems to me that your programs are much 

7 more narrow, and much more defined, to a very specific 

8 regulatory program that applies to a category of 

9 products than what CPSC is proposing. I'm just asking 

10 the question, if that assumption is true, and if there 

11 is anything like third party testing that you are 

12 tracking through the ACE system with your interaction 

13 with CBP.

14 MR. BERCZIK: So I would think that the 

15 laboratory-type issues with CPSC might have some kind 

16 of a relationship, or maybe you could parallel to what 

17 FSIS does with the electronic certifications that we 

18 get from the foreign governments. I wouldn't think 

19 that it's in the scope of what's going on with the data 

20 transfer from CBP.

21 But I would like to be clear that the data 

22 that we require from the trade is all based on that 
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1 import inspection application. So that's where our 

2 data elements come from, and that's what, you know, we 

3 have the authority to collect, and that's what we've 

4 asked to collect.

5 Then it becomes an exercise, at least in my

6 opinion, of, okay, so for FSIS purposes we can collect 

7 a portion of that data that we require on that form 

8 from our foreign government certifications. Then we 

9 require the rest of that data to come in from the trade 

10 through the message set.

11 I don't know if that answers your question or 

12 not. Okay.

13 MR. CHAUDET: So this is Roy from EPA. The 

14 answer is yes.

15 (Laughter.)

16 PARTICIPANT: It's always yes.

17 MR. CHAUDET: So, again, I'm an IT guy. But 

18 our programs actually have a separate collection that 

19 they have the authority to do that's directly between 

20 the manufacturer to register their pesticide directly 

21 with our agency that does not -- and then, what we do 

22 is we take that registration number that's already been 
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1 assigned to that product, and we give it to Customs to 

2 check for that product when you file your import filing 

3 for the NOA.

4 So, again, it's a separate licensing process 

5 directly with our agency. It does not involve Customs 

6 at all. Similar with our allowance holders for ODS, as 

7 well.

8 MS. MILLARD: But it's linked to a 

9 government-issued ID, right?

10 MR. CHAUDET: Correct.

11 MS. MILLARD: Yeah, thank you.

12 MR. MULLEN: I was going to make a comment, 

13 which is --

14 MS. NOVAK: Please state your name and --

15 MR. MULLEN: Yes, Gib Mullan from CPSC. I was 

16 going to make a comment which is related to, I think, 

17 something that Carol was thinking about, and also this 

18 morning's discussion. And Al, I see, is behind me in 

19 line, so maybe he is interested in this, too.

20 If you have -- probably the most valuable 

21 single piece of information from a certificate, or 

22 about a certificate is, is there a certificate. And I 
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1 don't know if this is as obvious to everybody in the 

2 audience as it is to us, inside CPSC, but you don't 

3 really want to have to ask for a certificate in every 

4 single entry to find out if there is a certificate. 

5 So, the number one thing you want to know is, is there 

6 -- do you have a certificate.

7 This morning, when you were talking about, 

8 like, what are you going to use it for -- so the most 

9 simple and valuable use of the system would be to find 

10 out do you have a certificate, not any information on 

11 it. Everything else is secondary.

12 So, this morning I was thinking, well, you 

13 could just have a box where you check, yes, we have a 

14 certificate. And then it took me -- about two seconds 

15 later I realized, well, everybody will cheat on that, 

16 you know?

17 (Laughter.)

18 MR. MULLEN: Everybody is going to check that 

19 box. But if you have -- now -- so now we start 

20 talking -- Brenda, you raised the idea of a certificate 

21 number, and the beauty of that slowly sunk in.

22 If you had a certificate number, and that 
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1 populated on the PGA message set, now you can target, 

2 just based on whether there is a certificate or there 

3 isn't a certificate. Later on, there are

4 things -- there are elements on the certificate, of 

5 course, that we could target even better with, and 

6 things like which plant made the -- you know, where was 

7 the plant that made the toy? If they're making bad 

8 toys for these people, they might be making bad toys 

9 for other people, et cetera.

10 And even -- not to throw a chill into the 

11 atmosphere for the test labs, but even -- you know, you 

12 could, over time, determine whether, like, are there 

13 test labs that are much more often issuing certificates 

14 that are not consistent with the actual compliance as 

15 we test. So you could start to have a lot richer 

16 information.

17 But those are much more subtle points than 

18 just the simple thing of whether there is a certificate 

19 or not.

20 One problem I see is I don't think our rules 

21 currently require there to be a certificate number. My 

22 guess is that the test labs, particularly third party
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1 testing, there always would be a certificate number. 

2 So we could make this an option. But that, itself, 

3 would be a huge advance, just to allow in the PGA 

4 message set a space where a certificate number could be 

5 required, if nothing else.

6 MR. LAHAR: If I may interject -- this is Mike 

7 with A.N. Deringer -- have you investigated the Food 

8 and Drug Administration's PNSI system? Because 

9 it -- while it's not a perfect analog, it does provide 

10 importers the ability to submit information specific to 

11 the FDA directly to their servers. And then they're 

12 able to provide that number that they receive, a 

13 confirmation number, back to the broker, who is then 

14 able to transmit that, along with some other 

15 information, to U.S. Customs, who feeds it back to FDA. 

16 So it's just -- it's something you might want to look 

17 at.

18 MR. MULLEN: This is Gib Mullan again. Mike, 

19 this is not responsive to what you're saying, although 

20 that sounds like a great idea.

21 I forgot one point. Relating to what Nancy 

22 MacPherson was saying, there are at least some 
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1 manufacturers who have a system which that one number 

2 would allow you to hook into also. So, like, we could 

3 access your certificates, if you just put that one data 

4 element into the system. We wouldn't have to ask you. 

5 There may be -- you know, that's probably more rare 

6 than -- it's more the exception than the rule, but in 

7 some cases that would even allow us to go a lot further 

8 and get more information.

9 MS. NOVAK: Thank you, Gib. Another question 

10 from the audience?

11 MR. KAUFMAN: Yes, hi. This is Al Kaufman 

12 with the Toy Industry Association. This question is 

13 actually for Brenda. Just a follow-up question to one 

14 that you responded to from Jim a little earlier.

15 You'd expressed confidence that Customs could 

16 handle very large amounts of data. I wanted to 

17 clarify. I'm assuming that means that you would be 

18 receiving it in the form of a data set. Do you feel 

19 just as confident if you received that volume of pdf's 

20 through the imaging system?

21 MS. SMITH: Slightly --

22 MS. NOVAK: Brenda, don't forget your mic.
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1 MS. SMITH: Thanks, thank you. Slightly 

2 different issue. And if I was more technologically 

3 inclined, I would be able to give a better explanation.

4 What I would say is the PG message set, and 

5 the entry/entry summary data that we receive, is 

6 essentially every transaction. The pdf's, much larger 

7 in size, we do not anticipate receiving with every 

8 transaction. In fact, the -- not only the 

9 recommendation made by COAC, but as a government, we 

10 are seeing the transmission of pdf files as not the 

11 optimal way to communicate with the government.

12 So, it's a capability, but we are looking more 

13 for the transmission of data elements.

14 MR. KAUFMAN: Understand. Yeah, and 

15 obviously, that's the Holy Grail --

16 MS. SMITH: But the short answer -- and sorry 

17 to steal a line from Roy -- is yes.

18 (Laughter.)

19 MR. KAUFMAN: Okay. Yeah. No, just in light 

20 of the conversation this morning, when we were talking 

21 about each entry may be involving, you know, hundreds 

22 of pdf's, I mean, that was -- that seems like it would 
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1 be a Herculean task.

2 MS. SMITH: We would certainly have to have 

3 that discussion.

4 MR. KAUFMAN: Thank you.

5 MR. MILLS-WINKLER: Fred Mills-Winkler from 

6 SGS Consumer Testing Labs. I am having blue sky 

7 thoughts, and some of it relates to what Gib was 

8 saying. And this is not really a question, it's just a 

9 thought that popped into my head.

10 When I drive any one of my cars into a 

11 Valvoline, Jiffy Lube Service, pit place at the 

12 dealership, they scan the VIN number, and they pull up 

13 all the details on that vehicle: the engine size, the 

14 oil capacity, gas capacity. All manufacturers that I'm 

15 aware of use UPC codes on their products.

16 I mean, it seems like if the UPC code is 

17 already there, and it's a unique identifier, there 

18 should be a simple way of adding additional data into 

19 that UPC code, because it already tells the 

20 manufacturer what the product is that -- you know, the 

21 product number, and various other pieces of information 

22 possibly even linked to the bill of materials or 
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1 anything else. It would seem that there is a system 

2 there that could be translated in simple terms to 

3 simply scanning a UPC code and filling the data fields 

4 that way.

5 MR. BLACHERE: This is John Blachere with 

6 CPSC. Within the PG message set, and within the 1110 

7 elements, there is a place for the UPC or GTIN to be 

8 provided, or a code to be provided with the set of 

9 information. And it has been contemplated by the staff 

10 to possibly utilize that type of a feed, where we could 

11 actually work with the cloud and possibly get the 

12 additional information. We've not explored all the 

13 data elements that would be available through the cloud 

14 through that type of an instance, but it is part of our 

15 thought process.

16 MR. MILLS-WINKLER: Okay, thanks.

17 MR. BLACHERE: Thank you.

18 MS. NOVAK: Another question?

19 MR. BERCZIK: I just want to add to -- Bob 

20 Berczik, FSIS. We too are exploring possibilities of 

21 utilizing the business-to-government connections, and 

22 the data that's available through global trade 
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1 identification numbers.

2 It's also a very big topic that's 

3 conversational at ITDS, and so we are certainly all 

4 looking at utilizing, you know -- it's available.

5 MR. CHAUDET: And this is Roy from EPA. I 

6 just want to jump in as a third here.

7 Actually, the government agencies through ITDS 

8 actually has a product code work group that's been 

9 working for several years. They've actually gone to 

10 the World Customs Organization to talk about sort of 

11 use of standard product codes. And I'll be frank. 

12 From the EPA perspective, we're very interested because 

13 HTS codes do not define our commodities very well at 

14 all.

15 And so, unfortunately, the ones that we've 

16 seen for the chemical industry are not mature yet. But 

17 for other products they are fairly well mature. And we 

18 have Doug Bailey of USDA as a sort of -- heading that 

19 effort up. So this is something that -- it's a long 

20 haul to get there, but it is an active discussion 

21 that's been going on for a couple of years.

22 MR. DODD: Quin Dodd, independent product 
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1 safety attorney. And since this is the time of the 

2 program when you're inviting simplistic solutions to 

3 complex problems --

4 (Laughter.)

5 MR. DODD: But I think Gib actually, as is 

6 typical for him, had the answer.

7 But here is an even simpler answer. How 

8 about, for those -- if the object, or if the key -- if 

9 the key object is to encourage people to, in fact, 

10 produce certificates that they're legally required to 

11 do, how about -- and I know compliance isn't 

12 necessarily here, but how about throwing the book at 

13 those who willfully disregard that mandate, and then 

14 leave the other 99.5 percent of companies alone? Food 

15 for thought. Thank you.

16 MS. NOVAK: Thank you. We have about five 

17 minutes left, if there is any final questions from the 

18 audience or the staff.

19 Yes, sir?

20 MR. MURRAY: Hi. Sean Murray from the NAFTZ, 

21 and I'm kind of bringing this back around, since I was 

22 one of the original presenters this morning. But the 
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1 comment earlier about finding a unique identification 

2 number for certificates, I like the idea. But I also 

3 want to point out one of the hazards. And maybe this 

4 will be a comment for you, Brenda.

5 With foreign trade zone users and operators we

6 talked about earlier this morning, high volume entries, 

7 many, many lines. And one of the things they're 

8 excited about with ACE is currently there is a 999-line 

9 cut-off. And it's going away, and they're very 

10 excited, because they can make bigger entries.

11 If we have unique certificate numbers, we're 

12 talking about potentially hundreds of them, or 

13 thousands, per entry. If we can do something that's 

14 more of, like, just a declaration you have a 

15 certificate, that becomes a much smaller data 

16 collection. It might be less useful to the Commission, 

17 but it's certainly much easier.

18 And that's kind of the direction that Customs 

19 has gone over the years, in terms of how do you declare 

20 things for free trade agreement qualification. It's no 

21 longer that you have to present the certificate with 

22 the entry; you present a declaration that you're making 
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1 the claim, and Customs accepts that as you have the 

2 certificate.

3 MS. NOVAK: Thank you. We can take one final 

4 question.

5 (No response.)

6 MS. NOVAK: Everyone is ready to go, I think.

7 Carol, I could invite you up at this time for 

8 closing remarks.

9 Thanks again to all of our presenters today.

10 VIII. CLOSING REMARKS

11 MS. CAVE: Thanks, Bonnie. I just wanted to 

12 wrap up today and say -- I do want to say thank you 

13 very much for all of you coming today and taking your 

14 time out of your busy schedules. I know this is not an 

15 easy task, and it's a huge accomplishment to move this 

16 issue forward. And hopefully we've got a lot of good 

17 feedback today, and a lot of interaction.

18 Just a reminder to everyone, we are very 

19 serious about the open comment period. The deadline is 

20 October 31st. I know you all spoke today; a lot of it 

21 will be part of the public record. But if you really 

22 just want to make sure that we got your word, please do 
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1 file those comments at the regulations site.

2 I also want to remind everyone we did say, in 

3 the notice for this meeting, the issue -- and you've 

4 heard it throughout the day, both from our federal 

5 partners, the need for pilots, and things of that 

6 nature. I would like you to all please be on the 

7 lookout for any future developments that we do there, 

8 because we do take this very seriously, and we do want 

9 it to work very well. So please be on the lookout for 

10 that.

11 And then, lastly, this day could not be 

12 possible without the staff who actually put this 

13 together. And they're probably hiding behind that 

14 closed door, but Celestine Kish has been amazing at 

15 putting this all together. She's actually over here 

16 from Bonnie's staff on rotation to me. And, 

17 unfortunately, she's going back. But she has put this 

18 entire thing together with very little assistance from 

19 my team, but a lot of help from the general counsel's 

20 office, Mary House, and also Alison -- Alison? Oh, my 

21 God, I'm so sorry. Jacqueline Campbell.

22 So, you know, I just say to you guys thank you 
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1 very much for all the work that you guys have done, and 

2 then we look forward to working with all of you in the 

3 future. So thank you.

4 (The meeting was concluded at 3:58 p.m.)

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