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CBP’s Determination to Delay its
Proposal to Eliminate the First Sale Rule (Full Statement by Commissioner
W. Ralph Basham)
Date: June 14, 2008
Commissioner Testifies on CBP’s Trade Functions and Enforcement
Efforts
(06/24/2008)
Statement
of Commissioner W. Ralph Basham
U.S. Customs and Border Protection
Senate Finance Committee
U.S. Senate
June 24, 2008
Introduction and Overview of Agency
Chairman Baucus, Ranking Member Grassley, and Members of the Committee,
it is a privilege and an honor to appear before you today to discuss
U.S. Customs and Border Protection’s (CBP) trade functions
and enforcement efforts.
I want to begin by expressing my gratitude to
the Committee for the interest and support you continue to provide
as CBP performs our important security and trade enforcement work
without stifling the flow of legitimate trade and travel that
is so important to our nation’s economy. These are our "twin
goals:" building more secure and more efficient borders that
at the same time will facilitate legitimate trade and travel.
Your support has enabled CBP to make significant
progress in securing our borders and protecting our country against
the terrorist threat. CBP looks forward to working with you to
build on these successes.
I am pleased to appear before you today alongside
witnesses from several government agencies, especially Assistant
Secretary Myers from our DHS sister agency ICE, with which CBP
maintains a cooperative working relationship on trade issues.
As America’s frontline border agency, CBP
employs our highly trained and professional personnel, resources,
expertise and law enforcement authorities to discharge our mission
of preventing terrorists and terrorist weapons from entering the
United States, apprehending individuals attempting to enter the
United States illegally, stemming the flow of illegal drugs and
other contraband, protecting our agricultural and economic interests
from harmful pests and diseases, protecting American businesses
from theft of their intellectual property, regulating and facilitating
international trade, collecting import duties, and enforcing United
States trade laws.
As the single, unified border agency of the
United States, CBP’s missions are extraordinarily important
to the protection of America and the American people. In the aftermath
of the terrorist attacks of September 11th, CBP developed initiatives
to meet our twin goals of improving security and facilitating
the flow of legitimate trade and travel.
Our strategy to secure and facilitate cargo
moving to the United States is a layered defense approach built
upon interrelated initiatives. Among them are: the 24-Hour and
Trade Act rules; the Automated Targeting System, housed in CBP’s
National Targeting Center; the use of Non-Intrusive Inspection
equipment and Radiation Portal Monitors; the Container Security
Initiative; and the Customs-Trade Partnership Against Terrorism
initiative. These complementary layers enhance port security,
and protect the nation.
Changes Since Last Authorization Hearing
in 2006
Since the last authorization hearing before this Committee in
2006, CBP has worked to enhance our layered enforcement approach
to cargo security. Specifically, CBP is currently working to finalize
the Importer Security Filing rule-making, commonly referred to
as “10+2.” Per the requirements of the SAFE Port Act,
CBP consulted with the COAC (the Departmental Advisory Committee
on Commercial Operations of U.S. Customs and Border Protection)
when developing this draft rule. We worked with the trade community
to review information and identify the data sources they used
as the cornerstone of the international logistics process. CBP
has focused on identifying which data elements will increase the
transparency of the global supply chain and improve its overall
targeting processes prior to the lading of containers onto U.S.
bound vessels. Obtaining data earlier in the logistics process
will assist CBP in making more informed decisions when inspecting
individual shipments and, as a result, will facilitate entry and
expedite clearance for low-risk cargo.
A second--and perhaps the most noteworthy change
since our last authorization hearing--is that CBP, with your Committee’s
assistance and oversight, finalized the creation of the Office
of International Trade in October of 2006. The Office of International
Trade consolidates the trade policy, regulatory and enforcement
functions of CBP into one office to support a multilayered approach
to trade facilitation and compliance. It provides uniformity and
clarity for the development of CBP’s national strategy to
facilitate legitimate trade and manages the design and implementation
of results-driven strategic initiatives for trade compliance and
enforcement. The Office directs national enforcement responses
through effective targeting of goods crossing the border as well
as strict, swift punitive actions against companies that fail
to comply with our trade rules. The Office of International Trade
provides the legal tools to promote facilitation and compliance
with trade and border security requirements through: the issuance
of all CBP regulations, legally binding rulings and decisions,
informed compliance publications and structured programs for external
CBP training and outreach on international trade laws and CBP
regulations. This Office is also responsible for continually analyzing
and updating our interpretation of U.S. trade laws.
For instance, in January of this year, CBP published
a Notice of Proposed Interpretation in the Federal Register seeking
public comment on a proposed new interpretation of the phrase
“sold for exportation to the United States” for purposes
of applying the transaction value method of valuation in a series
of sales importation scenario. Generally this is the price paid
by the buyer in the United States to the foreign distributor,
rather than the price paid by the foreign distributor to a foreign
manufacturer. While we believe this change would be more consistent
with the provisions of the U.S. value law, we have sought input
from the trade on this matter through an official public comment
period. As discussed in more detail below, Congress subsequently,
in the Food, Conservation and Energy Act of 2008 (Pub. L. No.
110-246), required CBP to collect valuation information from importers
and included a sense of Congress that CBP should not publish a
final interpretative rule on this issue before January 1, 2011.
The Office of International Trade also coordinates
with international partners and other U.S. government agencies
to enforce intellectual property rights, identify risks to better
detect and prevent the importation of contaminated food products
and other unsafe imports, and enforce of free trade agreements.
By promoting trade facilitation through partnership programs such
as Account Management and Importer Self-Assessment, the Office
of International Trade is streamlining the flow of legitimate
shipments and fostering corporate self-governance as a means of
achieving compliance with trade laws and regulations. A risk-based
audit program is used to respond to allegations of commercial
fraud and to conduct corporate reviews of internal controls to
ensure importers comply with trade laws and regulations.
Additionally, since the last authorization hearing,
CBP, in partnership with the Department of Energy has piloted
the Secure Freight Initiative (SFI) and has submitted the first
SFI report to this Committee. SFI, as required by the SAFE Port
Act, tests the feasibility of scanning, in a foreign port, 100
percent of U.S.-bound, maritime port containers before they are
laden on a vessel. SFI integrates radiation detection and imaging
equipment to provide additional data elements to CBP officers
to help mitigate risk and adjudicate radiation alarms.
Meeting the legislative requirements of the
SAFE Port Act, the first three SFI ports (Puerto Cortes, Honduras;
Port Qasim, Pakistan; and Southampton, United Kingdom) became
fully operational on October 12, 2007, and are attempting to scan
100 percent of U.S.-bound maritime containers (the total U.S.-bound
container volume at these three ports from October 12, 2007 to
May 25, 2008 was 170,564 containers). Furthermore, CBP and DOE
are working to pilot scanning equipment in additional diverse
environments that provide unique challenges, which include certain
terminals in Hong Kong (now fully operational), Salalah (Oman),
and Port Busan (South Korea).
As the report details, the implementation of
SFI in Pakistan, Honduras, and the United Kingdom, and the limited
testing in the additional SFI locations illustrates that the scanning
of all U.S.-bound maritime containers in a foreign port is possible
on a relatively contained scale. However, several diplomatic,
technical, and logistical challenges remain and will affect future
deployments. As DHS develops a specific policy, in conjunction
with the DOE and the DOS, we will prioritize our resources and
efforts by focusing on specific higher risk trade corridors where
the most security benefit can be realized. Based on preliminary
results from the three pilot locations, and in light of the considerable
costs and challenges associated with SFI, this high risk trade
corridor approach represents the most responsible investment of
limited available resources for the scanning of cargo containers
at foreign ports.
Trade Law Enforcement
The face of trade has changed over the last several years. The
negotiation and enactment of new free trade agreements, the changes
in the textile industry with the elimination of quotas on all
WTO countries and then establishment of new quotas on China, the
new laws enacted involving bioterrorism and wood packing material,
as well as the concerns about a potential avian flu pandemic have
caused us to take another look at the way we deploy our resources.
It has caused us to reexamine the way we equip our Import Specialists
and other trade personnel to address such complex and challenging
issues. The deployment of our resources to ensure that we focus
on those issues that have the greatest impact on the economy and
the welfare of the American people has been at the forefront of
our trade mission.
CBP has developed staffing models in accordance
with the Homeland Security Act and the SAFE Port Act to determine
the appropriate level of staff by analyzing criteria such as workload,
threat and complexity. These models help identify requirements
for CBP Officers, Agriculture Specialists, Auditors, Lawyers,
International Trade Specialists and the various CBP revenue positions.
The models provide an optimal level of staffing and are used as
a national guide in the allocation of available resources. They
are used as a decision support tool to make better resource decisions
and to allocate available resources based upon the current financial
plan. These models assist CBP in determining staffing needs, but
do not eliminate the judgment of experienced personnel when making
decisions on allocating staff. The models can adjust to changes
in workload, processing times, complexity of tasks and threat
levels.
CBP addresses national trade risks and priority
issues through multi-disciplinary trade strategies that provide
solutions to both enforcement and facilitation challenges. Specifically,
we are developing the CBP Trade Strategy to direct actions and
resources around trade issues posing significant risks. The strategy
is organized around priority trade issues, which were developed
using a consistent risk-based analytical approach with a clear
emphasis on integrating and balancing the goals of trade facilitation
and trade enforcement.
With a strategic approach to addressing trade
risks, CBP can successfully facilitate legitimate trade while
effectively protecting the American public and economy. This includes
protecting American business from theft of intellectual property
and unfair trade practices, enforcing trade laws related to admissibility,
collecting the appropriate revenue, and shielding the American
public from harmful pests in agricultural products and other health
and public safety threats.
The fundamental principles of the Trade Strategy
are to:
- Facilitate Legitimate Trade and Ensure Compliance
Employ risk management principles and advance targeting of information
to facilitate legitimate trade. Expand partnerships with the
trade community, other U.S. government agencies, and international
entities to ensure compliance. Expand the pre-entry and post-release
verification programs to reduce cargo delays at the border.
- Enforce U.S. Trade Laws and Collect Accurate
Revenue
Improve risk analysis and targeting through expanded information
sharing with the trade community, other U.S. government agencies,
and international entities. Apply swift, consistent enforcement
actions to address and deter high-risk trade law violations.
Employ trade expertise to set priorities, direct policy, enforce
compliance, and collect proper duty.
- Advance National and Economic Security
Protect U.S. consumers and industry through the prevention of
unsafe imports and the imposition of border measures in response
to findings of unfair trade practices. Advance DHS and CBP security
priorities to meet priority mission and assist other U.S. government
agencies with their primary concerns. Strengthen national trade
policy by influencing the development of trade laws and regulations
that enable CBP to more effectively administer trade policy.
- Intensify Modernization of CBP’s Trade
Processes
Streamline trade processes and enhance delivery of services
to stakeholders through automated, account-based, and paperless
processes and technology. Strengthen trade expertise and ensure
a skilled workforce capable of effectively executing CBP’s
mission. Ensure commitment to change to realize the benefits
of modernization.
Priority Trade Issues:
The Priority Trade Issues (PTIs) integrate the key trade risks
from political, economic and resource concerns while balancing
the goals of trade facilitation and trade enforcement. The PTIs
include:
- Agriculture – We must detect and prevent
the intentional or unintentional contamination of agricultural
products that could cause harm to the American public, American
agriculture, or the nation’s economy.
- Antidumping and Countervailing Duty –
We will enforce antidumping and countervailing duty determinations
and ensure timely and accurate collection of duties.
- Import Safety – CBP recognizes the challenges
we face in maintaining safe and secure imports. To ensure the
enhanced safety of imports, CBP is actively participating in
the President’s Interagency Working Group on Import Safety.
Furthermore, CBP has established a Division for Import Safety
within our Office of International Trade.
- Intellectual Property Rights (IPR) –
We are improving the effectiveness of IPR enforcement by ensuring
a single, uniform approach and focusing on known or alleged
violators with high aggregate values of the infringing goods
or whose infringing products threaten health and safety or economic
security.
- Penalties – Our goal is to improve the
effectiveness of the trade fraud penalty process by emphasizing
national direction, uniformity, swift action, alternatives to
traditional commercial fraud penalties, and focusing our resources
on Priority Trade Issues.
- Revenue – We will maximize collection
efforts by ensuring strong controls over the revenue process
and focusing on material revenue risks.
- Textiles and Apparel – CBP will ensure
the effective enforcement of the anti-circumvention laws, trade
agreements, and trade legislation regarding the importation
of textile and apparel.
Farm Bill Provisions
First Sale
- As discussed above, in January of this year,
CBP published a Notice of Proposed Interpretation in the Federal
Register seeking public comment on a proposed new interpretation
of the phrase “sold for exportation to the United States”
for purposes of applying the transaction value method of valuation
in a series of sales importation scenarios. The proposed interpretation
would require the price paid by the buyer in the United States
to the foreign distributor to form the basis for valuation.
This interpretation is a departure from the current application
of the valuation statute, which allows importers to use the
price paid by an intermediary to a foreign manufacturer as the
basis for determining the transaction value of merchandise being
imported into the United States. This departure from the current
valuation method has been controversial.
- The Farm Bill instructs CBP to require each
importer of merchandise to declare whether the transaction value
of the imported merchandise has been determined on the basis
of a first or earlier sale.
- CBP is required to submit a report that includes
the number of importers that declare transaction value on the
basis of first sale, the tariff classification of such merchandise
and the value of the merchandise, on a monthly basis to the
United States International Trade Commission (USITC).
- We have had preliminary discussions with
the trade and are examining the most efficient means of collecting
the required information while minimizing the impact on the
trade.
- The Farm Bill also includes a sense of Congress
that CBP should not proceed with its proposed interpretative
rule until January 1, 2011 and upon certain coordination and
consultation with Congress, the Commercial Operations Advisory
Committee, the International Trade Commission, the Secretary
of Treasury, and the trade. CBP does not intend to proceed further
on the proposal on first sale before January 1, 2011. Nor will
we change the current interpretation with respect to first sale
without consulting with the Congress and the private sector,
or without the explicit approval of the Secretary of Treasury.
Wine Drawback
A miscellaneous trade provision codifies a current drawback practice
that permits wine of the same color to be deemed commercially
interchangeable. We did not object to this provision and have
worked cooperatively and successfully with the wine industry on
language that will be part of drawback simplification legislation
that will be acceptable to both the industry and CBP.
Softwood Lumber Act
Title III of the Farm Bill became law and we have begun the process
required for implementing the softwood lumber provision. When
this process is complete, we will provide a full briefing for
this Committee as well as the relevant committees of the House.
Although we will try to minimize the adverse impact on the trade,
I know that this provision will require software reprogramming
on their part and may affect softwood lumber imports from as many
as 85 countries.
Conclusion
We look forward to working with you on a reauthorization bill
which will support our trade functions.
Mr. Chairman, Members of the Committee, we have
briefly addressed CBP’s critical initiatives today that will
help us protect America against terrorists and the instruments
of terror, while at the same time enforcing the laws of the United
States and fostering the Nation’s economic security through
lawful travel and trade. We realize there is more to do, and with
the continued support of the Congress, CBP will succeed in meeting
the challenges posed by the ongoing terrorist threat and the need
to facilitate ever-increasing numbers of legitimate shipments
and travelers. Thank you again for this opportunity to testify.
I will be happy to answer any of your questions.
Article Source:
United States. Department of
Homeland Security. U.S. Customs and Border Protection. Commissioner
Testifies on CBP's Trade Functions and Enforcement Efforts. 24
Jun. 2008. 26 Jun 2008 <http://www.cbp.gov/xp/cgov/newsroom/congressional_test/enforce_efforts.xml>
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