[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
SUBCOMMITTEE ON RURAL DEVELOPMENT
ENTREPRENEURSHIP AND TRADE
HEARING ON TEXTILE IMPORT ENFORCEMENT
IS THE PLAYING FIELD LEVEL FOR
AMERICAN SMALL BUSINESSES?
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
June 18, 2009
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 111-031
Available via the GPO Website: http://www.access.gpo.gov/congress/house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
PARKER GRIFFITH, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
?
STANDING SUBCOMMITTEE
______
Subcommittee on Rural Development, Entrepreneurship and Trade
HEATH SHULER, Pennsylvania, Chairman
MICHAEL MICHAUD, Maine BLAINE LUETKEMEYER, Missouri,
BOBBY BRIGHT, Alabama Ranking
KATHY DAHLKEMPER, Pennsylvania STEVE KING, Iowa
ANN KIRKPATRICK, Arizona AARON SCHOCK, Illinois
YVETTE CLARKE, New York GLENN THOMPSON, Pennsylvania
(iii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Shuler, Hon. Heath............................................... 1
Luetkemeyer, Hon. Blaine......................................... 2
WITNESSES
Baldwin, Mr. Dan, Assistant Commissioner, Office of Trade, U.S.
Customs and Border Protection, Department of Homeland Security. 4
APPENDIX
Prepared Statements:
Shuler, Hon. Heath............................................... 14
Baldwin, Mr. Dan, Assistant Commissioner, Office of Trade, U.S.
Customs and Border Protection, Department of Homeland Security. 16
Nation, Mr. Dan, President, Parkdale Mills Inc., Gastonia, NC.... 22
Yager, Dr. Loren, Director, International Affairs and Trade,
Government Accountability Office............................... 34
Stowe, Mr. Harding, Former President & CEO, R.L. Stowe Mills,
Belmont, NC.................................................... 45
Crichton, Mr. Richard T., MRC Consulting, Services, Inc.,
Hopkinton, NH.................................................. 48
Autor, Mr. Erik, Vice President, International Trade Counsel,
National Retail Federation..................................... 51
Statements for the Record:
Shuler, Hon. Heath, Letter to Baldwin, Mr. Dan, Assistant
Commissioner, Office of International Trade, U.S. Customs and
Border Protection.............................................. 58
Baldwin, Mr. Dan, Assistant Commissioner, Office of International
Trade, U.S. Customs and Border Protection, Letter to Shuler,
Hon. Heath..................................................... 60
(v)
SUBCOMMITTEE ON RURAL DEVELOPMENT
ENTREPRENEURSHIP AND TRADE
HEARING ON TEXTILE IMPORT ENFORCEMENT:
IS THE PLAYING FIELD LEVEL
FOR AMERICAN SMALL BUSINESS?
----------
Thursday, June 18, 2009
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Heath Shuler [chairman
of the Subcommittee] presiding.
Present: Representatives Shuler, Michaud and Luetkemeyer.
Also Present: Representative Kissell.
Chairman Shuler. The Subcommittee hearing is now called to
order.
Before we get started, we are going to be having votes. We
have 28 votes on the House floor probably in the next 15 to 30
minutes. Therefore, that is probably a couple of hours. So
we're going to try to get to ask quickly as we can opening
statements and hopefully some Q&A, and if not we will just have
to come back. We apologize for the schedule. Sometimes we just
do not have control over the schedule. So we will try to get
through this as quickly as possible.
In recent weeks our economy has shown promising signs of
recovery, but we are not out of the woods yet. With
unemployment hovering at 9.4 percent, we cannot afford to let
up now. We need every job we can get, particularly in core
industries.
But for entrepreneurs and textile trade, keeping workers on
payroll is harder than ever. Every year we export $16 billion
worth of items like fabric and clothing. Textiles are a small
business driving industry and make everything from mini yard to
baseball caps.
Even more importantly, the sector employs one million
American workers, but while textiles clearly play an important
role in our economy, manufacturers are struggling. Like
everyone else, these businesses have been battered by the
recession, but unlike the rest of the country, textile firms
are facing an additional crippling challenge.
In this morning's hearing, we're going to discuss the
impacts of illegal imports on textile entrepreneurs. For small
businesses, these are often overlooked, but it is an extremely
important concern. Today we will shed some light on the issue.
A balance trade system is critical, particular to the
health of small businesses. That is why the current situation
is so troubling. While domestic firms are playing by the rules,
foreign importers are dodging terrorists and getting around
other trade laws. By gaming the system, they are managing to
deliver impossibly cheap products, undercutting honest
entrepreneurs.
For textile firms across the country, this has been
devastating. Between 2002 and 2007, more than 1,300 textile
mills have closed their doors. When these businesses shut down,
they took countless jobs with them. In fact, the industry
employment levels have dropped more than 40 percent since 2002.
And because most textile firms are located in rural
regions, those areas are really suffering. When a textile plant
closes, it sets off a domino effect. It is not just mill
workers who are impacted. It is restaurants, where they eat,
the clothing store where they go shopping, and the supermarkets
where they get their groceries.
We often worry about shipping our jobs overseas. Well, that
is exactly what happens with textiles. A properly functioning
inspection system is essential not just to protect American
consumers, but to protect American jobs. Yet textile
examinations have dropped off considerably. If we are going to
guard against illegal imports then we will need greater
enforcement. It is critical that the Customs and border patrol
make textile inspections a priority.
For centuries textiles have played an important role in the
U.S. economy, but today the U.S. is struggling. It is suffering
at the hands of foreign businesses that are cutting corners to
cut costs. We need to be sure our homegrown firms have a level
playing field.
Domestic textile businesses do not just keep Americans at
work. They sustain an entire community.
I would like to thank all of the witnesses in advance for
their testimony. I know that they have taken time from their
businesses to be here, and I look forward to hearing from them.
With that I will yield to our Ranking Member for his
opening statement.
Mr. Luetkemeyer. Thank you, Mr. Chairman for holding this
hearing on this very important issue. It is one I know is
particularly pressing for folks back in your district.
The U.S. textile industry is a critical component of our
nation's economy, boasting the third largest exporter of
textile products in the world with over 16 billion in exports
last year. The textile industry has experience dramatic changes
in the past decade.
Today the U.S. textile industry is undergoing negative
profits, countless plant closings, layoffs, and possible
bankruptcies. In 1790, a British mechanic named Samuel Slater
is said to have introduced the first successful American cotton
spinning mill in Pawtucket, Rhode Island.
This occasion transferred New England from an agricultural
to industrial region. The textile industry's focus on the
individual rather than the family or community was a major
shift in American society. It meant that the federal government
would only encourage industry. The actual operation of mills
would be left to individuals.
Today, in a lagging economy, individuals who own textile
firms, the majority of whom are small business owners, are
struggling to stay afloat. A real concern, especially given
this country's mounting unemployment rate, is the fact that the
textile industry employs nearly one million workers in the U.S.
From 2002 to 2007, the levels of employment have fallen by over
41 percent.
In the decades following World War II, the American textile
industry lost ground to firms in Asia and central and South
America. In 1946, imports of cottons and wood in manufacturers
were worth 45 million and 41 million, respectfully.
Within ten years, they had risen to 161 million and 196
million. However, textile communities throughout the nation
were forced to develop new economic strategies, but many
textile towns continued to decay reflecting the new realities
of American industry in a global context.
Folks in the industry are saying that many of these jobs
are being lost because of illegal imports, illegal textile
transshipment, the shipment of goods to an intermediate
destination and from there to yet another destination to
circumvent trade laws and other applicable trade restrictions,
and inbound diversion are methods being used to evade U.S.
Customs duties.
To be sure, I am an ardent supporter of free trade so that
we can expand markets for American products. However, we must
insure that free trade is fair trade. We should not allow other
nations to illegally exploit our trade agreements to avoid
tariffs imposed by the U.S., eventually leading to job losses
in domestic manufacturing. This is something this Subcommittee
must examine.
I know the Small Business Committee and this Subcommittee
recognize how critical U.S. textile industry is to the economic
health of this country.
Again, thank you, Mr. Chairman, for holding this hearing. I
look forward to hearing from the witnesses examining possible
strategic issues for maintaining U.S. textile companies'
competitiveness in global markets.
With that I yield back.
Chairman Shuler. Thank you, sir.
At this time I would like to just recognize Larry Kissell,
also from North Carolina, who is talking about an area and a
region that North Carolina has certainly suffered in the
textile industry. So not on the Committee, but obviously, this
is very important to the people in his community, and so,
Larry, thank you for being on the dias today.
At this time I would like to yield to Mr. Michaud for his
opening statement.
Mr. Michaud. Thank you very much, Mr. Chairman and Mr.
Ranking Member, for having this very important hearing today.
It is so important that, as you know, I chair the Veterans
Affairs Committee. We have a hearing today over there with
several bills. I chose to relinquish the gavel toe be here
today because of the importance of this hearing.
Having read through the testimony last night, I am also
pretty amazed and shocked, but not surprised at some of the
testimony we're going to hear today. And although I have not
been a proponent of contracting out, I'm willing to look at
that provision as it relates to Customs. If it means that we
are going to get better enforcement of what is happening at our
borders, as well as retailers--I have been a strong supporter
of small businesses, and reading some of the testimony from the
retailers about their concern about over zealous enforcement
because of the textile industry--I would be pleased with
enforcement of the current laws and put the burden on some of
the retailers if they knowingly import products that are
illegal They actually could lose their license if caught.
That's how strongly I feel about this.
When you look at the fact that the USTR--I am not too
impressed with the current USTR, what he has been saying, and
quite frankly, I do not think he understands what is happening
when you look at trade and the lack of enforcement o trade.
It gets right back to CAFTA. when we passed CAFTA it passed
by a slim vote. One of the reasons why it did pass
unfortunately is some of the textile industry supported it
because of the commitment by the Bush Administration that they
would enforce the law.
The enforcement has not occurred not only on CAFTA but a
lot of the other trade deals, and I think it is important when
we look at the impact of trade, when we look at what is
happening at our borders that we have that strong enforcement.
And I can tell you, Mr. Chairman, having talked to some
border patrol folks after 9/11, one of the concerning issues
that I have not only on the lack of enforcement when you look
at, you know, trading issues, but also national security issues
when some border patrol individuals have told me that when the
line backs up, the supervisor will go out--and this on the
Mexican border, not the Canadian border--the supervisor will go
out and just tell the border patrol folks to let them through.
So that is not very encouraging when I hear that from those
who are supposed to protect our borders, but I will be looking
forward to hearing what U.S. Customs has to say and how we can
improve and make sure that enforcement is strong enforcement,
as well as hearing from the retail industry on why they are
concerned about over zealous enforcement and if they are
willing to make sure that the retailers who are knowingly
breaking the law, that they are punished as well.
So I yield back my time, Mr. Chairman, and really want to
thank you and the Ranking Member for having this very important
hearing here today.
Chairman Shuler. Thank you, sir.
Our first witness is Dan Baldwin. Mr. Baldwin is Assistant
Commissioner of the Office of International Trade with the U.S.
Customs and Border Protection.
Mr. Baldwin, you are recognized for five minutes.
STATEMENT OF DAN BALDWIN, ASSISTANT COMMISSIONER, OFFICE OF
INTERNATIONAL TRADE, U.S. CUSTOMS AND BORDER PROTECTION,
DEPARTMENT OF HOMELAND SECURITY
Mr. Baldwin. Chairman Shuler, Ranking Member Luetkemeyer
and distinguished members of the Subcommittee, I am pleased to
appear before you today to discuss the actions that we are
taking today at Customs and Border Protection to insure that
the laws governing the importation of goods in the United
States, and particularly textiles, are properly enforced.
As you mentioned, my name is Dan Baldwin, Assistant
Commissioner of our Office of International Trade. My office is
responsible for formulating CBP's trade policy, developing
trade programs and enforcing our U.S. import laws.
The mission of CBP is to prevent terrorist and terrorist
weapons from entering the United States, while also
facilitating legitimate trade and travel. Indeed, no other
country has been as open to legitimate international trade or
as committed to facilitating trade by simplifying and
automating its trade processes.
As a result of America's free trade policies, in our
increasing efficiencies in processing global trade over 50
percent of the goods we buy in this country are, in fact,
imported. Legitimate trade is an integral part of our American
business.
Last year we published the CBP trade strategy, our public
blueprint for now CBP will carry out its trade mission,
facilitating legitimate trade without depending on ever
increasing cargo inspections at our 300-plus ports of entry.
As a practical matter, we can no longer inspect our way out
of trade problems as an exclusive measure of our enforcement
actions. Many of our ports of entry are already saturated and
simply cannot accommodate escalating cargo examination regimes.
Because of these constraints, the CBP trade strategy recognized
the need for a more layered enforcement approach. This means
working both upstream before the entry occurs and downstream
after the merchandise has already been entered.
Pre-entry activities, including reaching out to other
governments to leverage global partnerships to accomplish our
common goals. Post entry enforcement includes conducting audits
and taking civil or criminal action against those who ignore
our trade laws.
Since we cannot physically inspect every shipments, we rely
on risk analysis and targeting to identify those shipments most
likely to violate our trade statutes and regulations. The
domestic textile industry has achieved substantial productivity
gains by investing billions in new plants and equipment and now
ranks third globally in exporting textile products.
The industry has expressed strong concerns, however that it
is not receiving the full benefits of its highly competitive
productivity because of unfair trade practices by the
countries. The elimination of textile quotas in 2009 largely
removed the incentive through illegally transshipped textiles,
but many risks were named. These include country of origin
fraud, illegitimate trade preference claims, misdescription and
misclassification, duty evasion, gross under valuation, and
well as outright smuggling.
In response to these threats, CBP maintains a robust trade
enforcement program to insure compliance with all laws and
regulations governing imports. Our trade enforcement resources
are concentrated on the most significant trade risks which are
designated as priority trade issues.
Textiles and apparel continue to be economically sensitive
commodities and have, in fact, been identified as one of our
top seven priority trade issues. The goals of the textile PTIs
to insure that textile imports which generate more than 42
percent of the duties collected by CBP fully comply with the
applicable laws, regulations, free trade agreements, trade
preference program requirements, and intellectual property
provisions.
CBP uses the multi-faceted layered approach to enforce our
trade laws and to insure the appropriate revenues collected.
This includes trade pattern analysis, on-site verification,
review of production records, audits and laboratory analyses.
Risk management driven textile enforcement operations are
used to address noncompliance with these laws, free trade
agreements, and other requirements. New tools are constantly
being utilized to increase the effectiveness of these
operations, including our automated targeting system which
provides numerous targeting elements that were not available in
the past to allow specific issues to be addressed while
facilitating those legitimate shipments.
In addition, we continue to target entities for visits by
textile product verification teams, make audit referrals, and
work with foreign governments to enforce our trade laws.
While seizure statistics at the ports have fallen due to
the elimination of quotas, our ability to review shipments and
penalize violators reach as well outside the ports. I would
strongly caution against the practice of relying solely on
seizure statistics as an accurate measure of CBP textile
enforcement activity.
In 2008, CBP performed 11,800 textile trade exams. Over
1,700 samples were tested by our laboratories. And 42 textile
related audits and another 79 were initiated over last year.
The textile product verification team visits, sometimes we find
that the facility does not exist or lacks the capacity to
produce the textile products in question.
Since 2000, we have visited over 4,500 factories, including
472 this last fiscal year alone. These on-site verification
visits disclose major discrepancies, discourage future fraud,
and help us target specific shipments into this country.
A major concern we have today, however, is that of the
supply chain management within the industry itself. Currently
our verification process and controls are limited to the
manufacture and importation of the textile goods themselves.
That leaves large gaps between those two points where we have
little information, lack the authority to make in-country
visits or require additional records to insure that
manufacturers, processors, and importers are all complying with
the goods within the entire supply chain process.
In summary, let me say that the U.S. Customs and Border
Protection is committed to vigorous enforcement of the trade
laws and regulations. We recognize the vital importance of the
textile industry to this country, and we continue to focus a
substantial amount of our trade enforcement resources in this
priority area to help protect our domestic industry and its
vital role as an employer in our economy.
Thank you for the opportunity to testify, and I am happy to
field any questions you may have at this time.
[The prepared statement of Mr. Baldwin is included in the
appendix.]
Chairman Shuler. Thank you, Commissioner.
At this time we will open it up for questions. The first
question I have is if you were to give a grade by the agency,
if you were to grade the agency on the overall, the numbers if
you were to take every single container that comes in either
from our ports or from I guess it would be the land ports, what
would be the grade if you were to grade the overall agency in
the last five years of being able to examine all?
You know, examine every single container would be an A.
What grade would you give the agency?
Mr. Baldwin. I would give it an incomplete for the
following reason, sir. I think the point I was trying to make
in my testimony, if I were to try to grade--
Chairman Shuler. We are in politics.
Mr. Baldwin. I understand. Well, that is why I gave it an
incomplete. While I would try to argue that inspecting,
examining at the physical border every single shipment, I would
probably give CBP an F for collapsing the American economy. It
is just not possible to do, and I think what you will hear from
the next panel is that nobody wants us to examine every
shipment.
What we need to do a better job, and I think we do a fine
job actually of being able to target the high risk commodities
and take the verification activity that needs to take place at
the right point in the supply chain.
I would suggest to you that the paradigm of intensive cargo
examinations at the physical border in Detroit or Los Angeles
or New York or Loredo, when we had a quota system in place and
we suspected illegal transshipment from the Far East, that was
the right point in the supply chain to take a look at that
activity.
However, since those admissibility issues no longer exist
for the most part and our risks are primarily related to free
trade agreements and qualifications within those free trade
agreements, physical inspection at the border looking for the
sweater is really not the right place to be doing that, nor is
it the right skill set for our uniformed officers to be looking
at that.
This is where you might want to deploy better risk analysis
with our targeters in our national targeting analysis groups in
New York and in Headquarters, where we might want to use more
robust use of our auditors and import specialists that
understand production records and internal control system
evaluation, looking at qualification processes by the supply
chain as opposed to the goods themselves.
Chairman Shuler. So by not examining, we actually have a
national security threat then, by not examining all of the
containers.
Mr. Baldwin. No, sir. We screen 100 percent of every
shipment that comes in here, meaning our targeters take a look
at and evaluate for risk every shipment that comes in this
country, but we do not examine every container that comes into
the country.
Chairman Shuler. All right. So what are some improvements?
As members of Congress, you know, I think so often we want to
beat up an agency or talk about it. What are the things that we
can do to help?
Obviously national security is at the top of the list, but
to protect our businesses, small business and entrepreneurs and
especially textiles. What can we do in order to change the law
or better to improve the work that is done in order for us to
accomplish our goal, which is to protect American jobs?
Mr. Baldwin. Well, one item that I would suggest and I
tried to touch upon is sort of an evolution into evaluating our
trade work along a supply chain model as opposed to the
tangible good model. I think what we use in Customs and Border
Protection certainly for security is trying to evaluate the
entire supply chain. From the point the container has been
stuffed abroad to the point it is here, we would like to
evaluate who has control of the goods all along the way.
Certainly in the arena of import safety and intellectual
property rights you are seeing that take greater hold as well;
that while the goods are important to evaluate that they are,
in fact, safe, it is also important to know the players
involved throughout the supply chain, that they are upholding
their obligations each and every step.
And I think there is a lot of promise in a lot of our trade
enforcement actions if we evolve into that direction as well.
One of the issues that I try to point out, and certainly having
some discussions with some of our distinguished members on the
next panel, is understanding how complex the supply chain
process, the manufacturing process when it goes abroad, for
example to CAFTA countries and how much work goes within those
countries. Do we have the right visibility and traceability
within those countries? It probably does not exist today.
But I think their way to address that is using a supply
chain philosophy as a complement to our traditional enforcement
methodologies to get more visibility and more accountability
for some of our trading partners abroad.
Chairman Shuler. So what happens when you get, say, a
container of sweaters that comes in and you have seen that they
are trying to dodge the tariffs or, you know, that it is
improperly imported? What do you do with that container?
Mr. Baldwin. Depending upon the violation, let's
hypothetically say it is misclassified and they should have
paid a higher rate of duty. What we will do is we will issue
them a bill and they can pay a higher rate of duty, but the
sweaters go on their way and enter the stream of commerce in
the United States.
If it is illegally marked, we may require them to put the
proper marking on the goods or perhaps we will even seize the
goods in those circumstances, but for the vast majority of
circumstances where we would have kept those goods out of the
stream of commerce when the quota regime went away through the
WTO agreements, we no longer do that. Now it is usually a
financial issue, a financial remedy that is applied.
Chairman Shuler. So how much money is recovered typically
of the fines?
Mr. Baldwin. That I would probably have to get back to you
with some exact numbers.
Chairman Shuler. but it actually could be a source of
revenue, probably lost revenue from the federal government and
probably not collecting those tariffs.
Mr. Baldwin. And I think what we could probably provide to
you in a follow-up, sir, is to take a look at what does our
compliance baseline show as the statistical risk for those
kinds of issues and give you some sort of idea of what that
dollar amount would be.
Chairman Shuler. So if someone--
Mr. Baldwin. But--
Chairman Shuler. Oh, go ahead.
Mr. Baldwin. But I was going to say in our larger
compliance measurement program this is not textile specific,
but all imports. We find that we collect 99 percent of the
duties that are owed through a statistical baseline measure
that we've had in place since 1995.
So while there might be several hundred million dollars at
risk from time to time, given the 30-plus billion dollars we
collect in revenue, we are not seeing revenue underpayment as a
significant risk just yet.
Chairman Shuler. Okay. At this time I will yield to our
ranking member, Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Do you have a figure of roughly how much or what the value
of textile goods is that comes into our country illegally?
Mr. Baldwin. Illegally?
Mr. Luetkemeyer. Yes.
Mr. Baldwin. No, sir, I do not.
Mr. Luetkemeyer. Well, do you acknowledge that some does
come into our country illegally?
Mr. Baldwin. I am certain that there are cases of smuggling
in the inbound diversion as has been highlighted before.
Mr. Luetkemeyer. Okay. You talked about being
mischaracterized or mis-licensed or whatever. I mean, do you
have figures on that?
Mr. Baldwin. We would be happy to get you some more
specific information in terms of the magnitude of the violation
in the aggregate. The kind of numbers we do collect and I could
provide for you is the amount of verification activities and
what kind of activities we conduct and what results from that.
That in and of itself though does not show the amount of
the risk that we have identified in the textile industry as a
whole.
Mr. Luetkemeyer. So how do we know what kind of job we are
doing if we do not have an idea of how much we are stopping or
that we are verifying?
Mr. Baldwin. Well, sir, we do have an idea of how much were
verified. My apologies if I misunderstood the question. I
thought you were asking how much of a risk is it. How much are
we missing? That is a number I could probably give you a
statistical number for, but my degree of confidence is not the
highest.
What I can tell you is how many examinations we do, how
many import specialist verifications we do, how many audits we
do, how many laboratory analyses we do, and what the results of
that verification activity would be throughout the supply chain
process.
Mr. Luetkemeyer. A minute ago you said that you were able
to collect dollars and fines on some of the things that have
been coming into the country incorrectly or under wrong permit
or whatever, but you indicated you kind of allowed the stuff to
go on in and then collected the money after the fact.
Mr. Baldwin. That is correct. We will issue a bill.
Mr. Luetkemeyer. Is there any reason why you do not hold it
until you get the dollars in hand?
Mr. Baldwin. Because the issue at hand is not an
admissibility issue. The goods are allowed into the country. It
is just that we will assess a bill and pay the right amount of
money and allow the goods to go downstream. There is no legal
reason to seize or detain the goods at that time.
Mr. Luetkemeyer. The fact that they have not gotten
something correct, the fact that they owe the government some
money and have not paid the bill, that is not enough to hold
it?
Mr. Baldwin. No, it is not. We will issue them a bill, and
we will hold them accountable for paying the bill, but for
delaying the cargo entry, that is not a legal reason to hold
the goods as a detention or seizure.
Mr. Luetkemeyer. How long does it take to get payment on
those things?
Mr. Baldwin. Usually from most reputable companies we will
get 30, 60, 90 days, a short time.
Mr. Luetkemeyer. What about the ones that are not
reputable?
Mr. Baldwin. Then we send them up to our Office of Finance
for a collection action.
Mr. Luetkemeyer. And how long does that take?
Mr. Baldwin. For the most part it is usually collected
within a reasonable amount of time.
Mr. Luetkemeyer. Man, I am pulling teeth here. Do you have
an answer of just the number of days other than ``reasonable''
and others?
Mr. Baldwin. Off the top of my head, sir, no, I do not have
an exact answer.
Mr. Luetkemeyer. So we do not know how we can hold and how
we can make sure that we get the dollars on the ones that we
know are irreputable firms.
Mr. Baldwin. Those that we know are damaged companies,
those that we know are irreputable, as you put it, I will have
to come back with you some answers, but as of right now I don't
have a strong answer for that.
Mr. Luetkemeyer. Have you identified some companies that
are some problems so that if those companies ship goods to us
that you can immediately target those?
Mr. Baldwin. We do run special operations and do target
certain companies for enforcement action, and we do our
enforcements. We do our import specialist review and look at
their corporate records, yes. We do take actions against those
companies.
Mr. Luetkemeyer. Do you look at their corporate records in
their country?
Mr. Baldwin. Here in the United States, the importers.
Mr. Luetkemeyer. Okay. Whenever you target somebody like
that, do you target it from the point that it is manufactured
all the way through the chain to where it gets here or are you
just catching them at the border?
Mr. Baldwin. What we will do is we will target them, you
know, through our risk analysis processes. We will target them
for whatever the issue may be, for example, like under
valuation. We will work through the importer trying to gain the
records to understand and decipher where the problem occurred,
but some of the problems that have recently been brought to my
attention, for example is not really with the importer or the
foreign apparel manufacturer, but it is actually further
downstream than that, perhaps through the knitter or a
consolidator, and that is where some of the problems occur, and
that is where we do not have visibility or traceability into
their operations.
Mr. Luetkemeyer. Okay. Thank you, Mr. Chairman.
Chairman Shuler. At this time I would like to yield to Mr.
Michaud for his questions.
Mr. Michaud. Thank you very much, Mr. Chairman.
Thank you, Mr. Baldwin, for coming here today.
As I mentioned, I read all of the testimony and actually
had a chance to talk to some of the people in the industry, and
some of the concerns without mentioning the individual
mentioned that they feel that you are the roadblock to custom
enforcement, and that you actually facilitated the office from
moving more of an enforcement role to a policy role.
In reading the testimony also from Mr. Stowe, he had
mentioned in his testimony that Customs has not hired over 72
textile apparel specialists that Congress has appropriated. If
that, in fact, is true, then I would probably agree with the
statement that you are the problem as far as not enforcing.
Reading the GAO testimony, they talked about their previous
findings suggesting that the shift in mission contributes to a
reduction, reduced focus and resource devoted to custom revenue
functions, and they also have a lot of concern.
So I guess my question to you, Mr. Baldwin, is: can you
explain, in fact, why you have not hired the Customs officials
to beef up the enforcement at the borders? And do you think
Customs has dropped the ball on enforcement since you cannot
state or give accurate numbers at this point to the Ranking
Member?
And my third question is later on we are hearing testimony
from a former U.S. Customs and Border Protection Agency
individual who is going to speak, and he makes suggestions, and
if you had a chance to read his testimony, do you agree with
the recommendations that he is proposing for us?
Mr. Baldwin. First off, I would comment that it is
unfortunate if I am viewed personally as a barrier to our
enforcement actions, but a couple of things I would point out.
First, when we formed the Office of International Trade
back in 2007 through the Safe Port Act process, for the first
time we actually created an Executive Director for commercial
targeting enforcement. The agency never had a specific office
dedicated to nothing except targeting and our enforcement
action. So I think that should alleviate one point.
Second, I think it is unfortunate that there still
continues, and it seems like I answer the question most every
year, that we have not hired the personnel that was directed
back in 2005. First, the $9 million that was provided was
divided between Customs and Border Protection and Immigration
and Customs enforcement.
Second, the statistics simply just do not prove that out. I
can point to what is in my written testimony. In 2006 the
import specialist position alone had 264 positions dedicated to
textile enforcement; in 2008, two years later under my
leadership, 329 positions.
I do not know where the misconception continues to go.
Mr. Michaud. But you are saying the 72 textiles and apparel
specialists have been hired?
Mr. Baldwin. They were hired, and I have actually testified
on textile issues in the past and have consistently said they
have been hired.
I think the problem results unfortunately in the perception
that we still have not done enough with those positions. And
while I am happy to continue to talk about what our enforcement
actions have taken, I would be happy to give you more
statistics on what actions we have taken and what successes we
have had.
I do not want to diminish the fact that of the 329
positions we have for import specialist in our agency today, it
composes about 35 percent of all important specialists for all
issues, dwarfing the amount of resources we dedicate to
intellectual property rights, import safety, anti-dumping and
countervailing duty, dwarfs the amount of resources we have.
Mr. Michaud. My time is running out. So do you feel that
your operation is more of enforcement or a policy?
Mr. Baldwin. I would say what we do is we have both. What I
would strongly suggest is we have--
Mr. Michaud. More on enforcement or more on policy?
Mr. Baldwin. We have two separate divisions. One is
dedicated solely to policy issues. One is dedicated solely to
enforcement issues. We give them equal attention. We give
considerable attention to our enforcement role. We have
significantly stepped up the number of special operations we
conduct on issues, the work we do with our sister agency,
Immigration and Customs Enforcement, for criminal civil
investigative matters has significantly increased not on just
textiles but all trade enforcement issues.
Mr. Michaud. And do you support the recommendations on the
next panel from the former U.S. Customs and Border Patrol
Agency? Do you support his recommendation?
Mr. Baldwin. Could you refresh my memory as to what that
recommendation might be?
Mr. Michaud. Actually he makes several recommendations for
improvement in textile verification teams as well as
recommendations for better enforcement of the classification
and evaluations of imports.
I know my time has run out, but we are going to have to run
out for votes. So if you have not seen his testimony, hopefully
during the break you can look at it.
Mr. Baldwin. But certainly as a question for the record I
would be happy to come back with a more formalized answer if we
are not able to get to it after the break.
Mr. Michaud. Great. Thank you.
Chairman Shuler. Thank you, sir.
I have one last question.
Mr. Baldwin. Yes, sir.
Chairman Shuler. If 40 percent of the duty tariffs coming
into the U.S. is textiles and we are only examining on the
basis of value of only a fraction of those and those that you
are examining we are seeing at 44 percent of them are under
valued from CAFTA, if 44 percent from the CAFTA agreement and
only 44 percent of them are under valued, how many millions if
not billions of dollars is the U.S. losing?
Mr. Baldwin. First off, I would say most of the efforts we
would take to evaluate those are targeted initiatives. So we
have already gone through the process and said this is a high
risk and we have high level suspicion that this is fraudulent.
We could not statistically extrapolate from that number to say
that that is the magnitude of the universe, but we do have
programs that can give a statistical projection as to what
those risks would be, and we do use those to help us improve
our targeting for future actions.
Chairman Shuler. My last comment would be for every one
that we do not fully examine, and I know that may be difficult,
may cause, you know, us to hire more people; for every one that
does not, there is a family and there is a job out there that
Americans are losing every single day. If we are losing that
much money and revenue, we are also losing even more of that in
the quality of life in America for not having a job.
So I hope that we can collectively work together, and I
think obviously from the Ranking Member, I think we are on the
same page talking about there is a lot of money that is being
lost, but more importantly, we are looking at lots of jobs in
the U.S.
So hopefully we can work together. I think that is the most
important thing we could do is actually work together and pull
the rope in the same direction.
Yes, and if you could just identify a staff member who is
going to be staying for our next witnesses.
Mr. Baldwin. Jo Reese will be here, as well as members of
our Congressional Affairs.
Chairman Shuler. Perfect. That would be great.
Well, at this time we are going to be in recess until the
call of the Chair again, and we will be back shortly after the
votes are over.
Thank you.
[Recess.]
Chairman Shuler. I call this hearing back to order.
Due to the length of the series of votes and the schedules
of our witnesses, we will forego having the second panel of
witnesses appear before the Subcommittee.
I ask unanimous consent that the witnesses' statements be
submitted to the record and any necessary follow-up questions
be conducted through written correspondence. Without objection,
so ordered.
I ask unanimous consent that the members will have five
days to submit statements and supporting material for the
record. Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 6:41 p.m., the Subcommittee meeting was
adjourned.]
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