[Senate Hearing 118-806]
[From the U.S. Government Publishing Office]
S. Hrg. 118-806
EXAMINING TRADE ENFORCEMENT AND
ENTRY OF MERCHANDISE AT U.S. PORTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON INTERNATIONAL TRADE,
CUSTOMS, AND GLOBAL COMPETITIVENESS
OF THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
MAY 21, 2024
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
__________
U.S. GOVERNMENT PUBLISHING OFFICE
64-101 PDF WASHINGTON: 2026
=======================================================================
COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
DEBBIE STABENOW, Michigan MIKE CRAPO, Idaho
MARIA CANTWELL, Washington CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland TIM SCOTT, South Carolina
SHERROD BROWN, Ohio BILL CASSIDY, Louisiana
MICHAEL F. BENNET, Colorado JAMES LANKFORD, Oklahoma
ROBERT P. CASEY, Jr., Pennsylvania STEVE DAINES, Montana
MARK R. WARNER, Virginia TODD YOUNG, Indiana
SHELDON WHITEHOUSE, Rhode Island JOHN BARRASSO, Wyoming
MAGGIE HASSAN, New Hampshire RON JOHNSON, Wisconsin
CATHERINE CORTEZ MASTO, Nevada THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts MARSHA BLACKBURN, Tennessee
Joshua Sheinkman, Staff Director
Gregg Richard, Republican Staff Director
______
Subcommittee on International Trade,
Customs, and Global Competitiveness
THOMAS R. CARPER, Delaware, Chairman
RON WYDEN, Oregon JOHN CORNYN, Texas
DEBBIE STABENOW, Michigan JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey TIM SCOTT, South Carolina
BENJAMIN L. CARDIN, Maryland BILL CASSIDY, Louisiana
SHERROD BROWN, Ohio STEVE DAINES, Montana
MICHAEL F. BENNET, Colorado TODD YOUNG, Indiana
ROBERT P. CASEY, Jr., Pennsylvania JOHN BARRASSO, Wyoming
MARK R. WARNER, Virginia RON JOHNSON, Wisconsin
CATHERINE CORTEZ MASTO, Nevada THOM TILLIS, North Carolina
(II)
C O N T E N T S
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OPENING STATEMENTS
Page
Carper, Hon. Thomas R., a U.S. Senator from Delaware, chairman,
Subcommittee on International Trade, Customs, and Global
Competitiveness, Committee on Finance.......................... 1
Cornyn, Hon. John, a U.S. Senator from Texas..................... 3
WITNESSES
Pickel, John, senior director, international supply chain policy,
National Foreign Trade Council, Washington, DC................. 5
Paylor, James H., Jr., assistant general organizer, International
Longshoremen's Association, Pocono Pines, PA................... 7
Drake, John, vice president, transportation, infrastructure, and
supply chain policy, U.S. Chamber of Commerce, Washington, DC.. 9
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Carper, Hon. Thomas R.:
Opening statement............................................ 1
Prepared statement........................................... 35
Cornyn, Hon. John:
Opening statement............................................ 3
Prepared statement........................................... 36
Drake, John:
Testimony.................................................... 9
Prepared statement........................................... 37
Paylor, James H., Jr.:
Testimony.................................................... 7
Prepared statement........................................... 47
Pickel, John:
Testimony.................................................... 5
Prepared statement........................................... 49
Communications
National Association of Foreign-Trade Zones...................... 55
National Treasury Employees Union................................ 56
(III)
EXAMINING TRADE ENFORCEMENT AND ENTRY OF MERCHANDISE AT U.S. PORTS
----------
TUESDAY, MAY 21, 2024
U.S. Senate,
Subcommittee on International Trade,
Customs, and Global Competitiveness,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 2:31 p.m.,
in Room SD-215, Dirksen Senate Office Building, Hon. Thomas R.
Carper (chairman of the subcommittee) presiding.
Present: Senators Cardin, Cortez Masto, Grassley, and
Cornyn.
Also present: Republican staff: Laura Atcheson, Senior
Counsel for Senator Cornyn; Sophie Foley, Legislative Assistant
for Senator Cornyn; and Donald Stevens, Counsel for Senator
Cornyn.
OPENING STATEMENT OF HON. THOMAS R. CARPER, A U.S. SENATOR FROM
DELAWARE, CHAIRMAN, SUBCOMMITTEE ON INTERNATIONAL TRADE,
CUSTOMS, AND GLOBAL COMPETITIVENESS, COMMITTEE ON FINANCE
Senator Carper. Good afternoon, everybody. It is our
pleasure to call this hearing before the Senate Finance
Subcommittee on International Trade, Customs, and Global
Competitiveness to order. I want to especially thank my friend,
our colleague, Senator Cornyn and his team for the work that
they've done with majority staff to help us prepare for and
plan for this hearing.
I thank everyone who is here in attendance. I know you have
a lot going on, but we are delighted that you are able to work
this in. We look forward to a number of things, actually. We
look forward to hearing the expertise that our witnesses have
to offer, and we very much want to thank you for your service
to our country, but also for joining us here today to testify.
I want to thank our chairman, Ron Wyden. I want to thank
Mike Crapo, our ranking member, and the Finance Committee staff
for your policy expertise and for allowing us to borrow this
beautiful committee hearing room for the next couple of hours.
Today's hearing provides us with an important opportunity
to examine U.S. Customs and Border Protection policies and
procedures for goods entering the United States, and this
hearing also provides us with a forum to discuss the ways in
which the policies laid out by Congress can work to improve
port operations while enhancing our supply chains.
Trade, as we all know, is an essential part of our economy.
I am told that last year in 2023, the United States--get this,
the United States exported over $3 trillion in goods and
services--$3 trillion last year around the globe, while
importing nearly $4 trillion worth of goods in the same year.
And thanks to this exchange of products and services that
come through more than 300 ports of entry across the U.S.--
land, air, and sea--our daily lives are enhanced by access to
goods from not just across the border in other States, but all
around the world. In fact, trade facilitation is a little bit
like a puzzle: strong port operations and resilient supply
chains must fit together seamlessly to bring goods to the
United States.
And when it comes to port operations, most Americans may
not realize that there are literally thousands of employees who
work every day to ensure that our ports are safe and that they
are secure. It takes considerable coordination by the U.S.
Customs and Border Protection inspectors, as well as
specialized workers and longshoreman, like one of our witnesses
here today, in order to hold our international trading partners
accountable to the rules of the road. For example, when the
goods come through the Port of Wilmington, not far from my
home, it is the folks who I just mentioned who are doing the
due diligence to make sure that a shipping container does not
contain counterfeit products.
Some of these rules of the road are set by the Congress
through laws like the bipartisan Trade Facilitation and Trade
Enforcement Act, and by the bipartisan Uyghur Forced Labor
Prevention Act, both of which are designed to ensure that our
trading partners are paying their fair share of duties on the
goods that are coming into the United States. And it is our
port workers, like those at the Port of Houston--some of your
folks--who thoroughly inspect the goods that arrive in the U.S.
for illegal contraband like fentanyl, or clothing made with
forced labor, before approving them to move on to their next
destination.
Ultimately, all of these responsibilities shared by port
employees work hand in hand to enhance our economy and our
national security. We also have to ensure that the other piece
of the puzzle--that would be our supply chains--is sufficiently
strong in the face of pressure that life throws at us. For
example, during the COVID-19 pandemic, supply chain resiliency
was tested, maybe like never before. The pandemic exposed many
unprecedented challenges, like bottlenecks and delays for
medical products, that still affect us even to today.
And with the tragic collapse of the Francis Scott Key
Bridge nearly 2 months ago, as our colleague Ben Cardin knows,
our supply chains had to quickly adapt to a single but vital
port of entry not operating at all. Thankfully, we were able to
divert key imports like automobiles, sugar, and farm equipment
from Baltimore to nearby seaports. But the accident has put a
magnifying glass on the questions about preparedness of our
Nation's ports--and by extension, our Nation's supply chains--
for emergency situations like this one.
I will say this to our witnesses: my colleagues and I like
to quote Albert Einstein. Einstein said any number of things
that are memorable, but the one that I use, probably every day,
is that ``in adversity lies opportunity.'' I think he really
nailed it. In adversity lies opportunity. That was true when he
said it first, and it is true here today. Despite recent
adversity, today we have an opportunity to learn from our
witnesses' firsthand accounts of what is working and what is
not working when it comes to implementing trade laws, like the
ones I mentioned just a minute ago, and port operations.
We also have an opportunity at today's hearing to better
understand how we can and should invest in the long-term
resiliency and security of our supply chains. And in doing so,
we can prevent future product shortages, shore up the ability
to access lifesaving products, and reduce the impacts of
unpredictable situations on American families.
There's an old African proverb that goes something like
this: ``If you want to go fast, go alone; if you want to go
far, go together.'' And throughout this hearing, I urge our
colleagues on this committee to join Senator Cornyn and me and
our staffs in thinking about how we can go farther and faster
together. It is a shared responsibility of Congress, of port
workers, the Office of the U.S. Trade Representative, and
global trade-governing partners to work together to protect the
people that we serve while implementing the safety and security
of global trade.
So once more, I want to thank our colleagues. I especially
want to thank our ranking member and the members of our staffs,
who have been working and preparing for this hearing for not
just days or weeks, but actually months, as it turns out. And
we appreciate the witnesses appearing before us.
And with that, I am going to turn it over to our ranking
member, Senator Cornyn, for any comments he would like to make.
Thank you.
[The prepared statement of Senator Carper appears in the
appendix.]
OPENING STATEMENT OF HON. JOHN CORNYN,
A U.S. SENATOR FROM TEXAS
Senator Cornyn. Thank you, Mr. Chairman. I know how
enthusiastic you are about today's hearing and the subject
matter we are going to discuss, because you called me on
Saturday to encourage more of our members to attend the
hearing. But as usually happens here in the Senate, most of our
members have multiple, overlapping commitments, but that does
not detract at all from the importance of this and the
bipartisan support that this topic enjoys.
We know that trade is critical to promoting our economic
security, and it is important to improving the lives of all
Americans. And that is especially true in my home State of
Texas. Texas is home to 30 air, land, and sea ports of entry,
more than any other State in the Nation, and I think that would
put us right at about 10 percent of all of the air, land, and
sea ports in the country. Included in that list are three of
the five busiest land ports of entry, and the number one inland
port in terms of total volume along the U.S.-Mexico border.
To put this further in perspective, about half of all U.S.-
Mexico trade moves through a Texas port of entry. Texas fuels
America's economic growth, but I continue to hear about growing
challenges at our ports. U.S. Customs and Border Protection has
the thankless job of facilitating legitimate trade and travel
while enforcing our trade and immigration laws. In recent
years, the surge in illegal immigration along the southern
border has led to the temporary shutdown of passenger and rail
crossings, because they have simply been overwhelmed. Such
delays caused by the ongoing border crisis have resulted in an
overall loss of commerce, which is costly to both businesses
and consumers.
In addition to hindering legitimate trade and travel, these
challenges also make it hard to keep unlawful imports, such as
products made with forced labor, counterfeits, and drugs like
fentanyl, from entering the United States. That's why I
introduced the CATCH Fentanyl Act, which requires CBP to
analyze and test new technologies at the ports of entry to
determine which ones are the most effective, efficient, and
affordable.
But this is obviously only one piece of the broader changes
that are needed to keep up with the changing global trade
environment. Our ports of entry are understaffed, yet the
workload continues to grow. We owe a great deal to the men and
women who serve in our ports of entry day in and day out. Last
year, CBP processed more than $5 trillion in combined imports
and exports and nearly 37 billion imported cargo containers at
U.S. ports of entry.
While this continued growth is an overall positive for our
economy, we are simply not staffed and equipped to deal with
the volume. Evolving supply chains--which you mentioned--new
players entering the marketplace, and the growing volume of
commerce across our borders, all present unique challenges for
CBP and its industry partners.
I am eager to hear from today's witnesses about the best
ways they recommend for us to meet those challenges. We also
need to find new ways to increase efficiencies at our ports of
entry. Trusted Trader programs, for example, are one way to
accomplish this goal, as they allow CBP officers to focus on
higher-risk goods and travelers. We should work to enhance and
expand these programs where it makes sense, and I introduced
legislation with Chairman Carper to do just that. But the CTPAT
Pilot Program Act of 2023 requires DHS to create a pilot
program to assess the value of allowing third-party logistics
providers to participate in the program.
There are many other opportunities to strengthen U.S. trade
by implementing much-needed changes at America's ports, and I
look forward to hearing from these witnesses to figure out how
we might ease the burden on legitimate trade and travel while
increasing compliance and enforcing our trade laws.
Thank you very much.
[The prepared statement of Senator Cornyn appears in the
appendix.]
Senator Carper. Senator Cornyn, thank you so much, and
thanks to you again and your staff for helping us prepare for
this. And several thanks to other members of the committee who
are here. And those who are not--we are just in the middle of a
vote on the Senate floor, and I am sure we will be joined by
others as they meet their responsibilities, and we are looking
forward to their participation.
I am going to introduce our first witness, Mr. John Pickel.
And John Pickel is the senior director of international supply
chain policy at the National Foreign Trade Council. In his
role, Mr. Pickel promotes efficient and resilient supply chains
by advancing policies to prevent illicit trade while
implementing Customs best practices and upholding human and
labor rights. Previously, Mr. Pickel served as the Principal
Director of Trade and Economic Competitiveness in the
Department of Homeland Security. Prior to that, he served in
several different roles in the U.S. Customs and Border
Protection for, I believe, over a decade. Is that right; over a
decade? All right.
Well, Mr. Pickel, welcome, and the floor is yours. Thanks;
please proceed.
STATEMENT OF JOHN PICKEL, SENIOR DIRECTOR, INTERNATIONAL SUPPLY
CHAIN POLICY, NATIONAL FOREIGN TRADE COUNCIL, WASHINGTON DC
Mr. Pickel. Good afternoon, Chairman Carper, Ranking Member
Cornyn, and members of the subcommittee. Thank you for the
opportunity to discuss trade enforcement and entry of
merchandise at U.S. ports.
As you all know, the importation and export of cargo at 327
air, land, and maritime ports nationwide enables our national
and economic security by underpinning American jobs, ensures
adequate supply of inputs for domestic manufacturers, and
increases the purchasing power of U.S. consumers.
While all ports are different, each relies on various
government and private entities performing their role to
continue the flow of supply chains. Importantly, U.S. Customs
and Border Protection is the primary Federal agency charged
with enforcing U.S. trade laws and facilitating the flow of
legitimate cargo. Last fiscal year, CBP processed over $5
trillion in imports and exports to collect revenue, and with 47
other agencies that regulate imports, enforced over 500 U.S.
laws.
Before ships, planes, and trucks arrive at ports, CBP
receives information from various parties in the supply chain
to evaluate risk. Most importers and shipments comply with U.S.
laws, resulting in about 80 percent of inbound shipments being
released before they physically arrive. In cases where
incomplete or false information is received, CBP would benefit
from the adoption of technology like artificial intelligence
that can objectively validate data that drives risk assessment.
Data informs CBP processes and should be collected from the
right party at the right time in the entry process. Data
requirements should be developed in partnership with industry
to address well-defined needs without slowing supply chains or
increasing transaction costs. Modernizing CBP's authorities,
processes, and systems in a comprehensive way should balance
enforcement capabilities and facilitation principles to enable
resilient supply chains.
Recent supply chain challenges have shown that ports are
where we focus attention during system failures. Improved
efficiencies can be found in embracing trade facilitation
principles. A Third Way report found that improving trade
facilitation would save the U.S. economy $88 billion in export
costs and create about 1 million jobs across every State in the
country.
My written statement goes into more detail, but here are a
few facilitation opportunities. Trusted Trader programs are
mutually beneficial to government and industry, but the cost of
partnership is high for participants. Partnership benefits
should be evaluated on an ongoing basis in consultation with
businesses. Further, CBP should consider innovative ways to
create new Trusted Trader programs that reflect current supply
chain and business practices.
Duty-free treatment of low-value shipments, or de minimis,
facilitate supply chains while still subjecting shipments to
enforcement of U.S. laws. All de minimis shipments are required
to have the data that CBP uses for enforcement, and 80 percent
of de minimis shipments include even more data through ongoing
pilot programs.
Congress stated the economic benefits of de minimis when
raising the threshold in 2016. In fact, American exports
benefit from de minimis policies in 89 countries, where they
would otherwise face significantly higher tariffs than products
coming to the U.S. Those standards could roll back if the U.S.
signals lack of commitment in this area. Restricting de minimis
domestically would bog CBP down in collecting minimal revenue
at a loss, rather than targeting, detaining, inspecting, and
seizing actual noncompliant shipments.
Entry requirements across the U.S. Government should be
entirely digital and not require duplicative filing or data.
Current systems for data intake and sharing need to be updated
to maximize digital payments and adopt downtime procedures that
do not revert to paper entry forms. Agility in this area
requires a governance structure that creates clear decision-
making authority to resolve inconstancies and duplication
across agencies, dedicated resourcing, and an ongoing mandate
to continually smooth the path of imports and exports.
Responsible members of industry remain committed to working
with CBP and other government agencies to create clear,
compliant standards; address supply chain vulnerabilities; and
address risks, like forced labor and intellectual property
theft, at the source. Mitigating the root causes of these risks
rather than solely through border enforcement is more effective
in preventing violations from actually occurring and removes
stress from the port environment.
Supply chains are long, frequently complicated, and subject
to external stress. The NFTC and our members look forward to
working with this committee and others to reinvigorate public-
private partnerships that can result in meaningful systems
updates that reduce pressure on the flow of goods through our
ports.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Pickel appears in the
appendix.]
Senator Carper. Mr. Pickel, thank you very much for your
opening statement, for getting us started.
And our second witness is James H. Paylor, Jr., assistant
general organizer of the International Longshoremen's
Association.
The International Longshoremen's Association is the labor
union that represents the longshore workers on the east coast
of the United States. And over the last 5 decades, Mr. Paylor,
a third-
generation longshoreman, has established an impressive career.
For much of this time he has assumed the leadership positions
within his union, shaping its direction and championing the
rights of its members.
Mr. Paylor, welcome; you have the floor.
STATEMENT OF JAMES H. PAYLOR, JR., ASSISTANT GENERAL ORGANIZER,
INTERNATIONAL LONGSHOREMEN'S ASSOCIATION, POCONO PINES, PA
Mr. Paylor. Good afternoon, Chairman Carper, Ranking Member
Cornyn, and distinguished members of the subcommittee. Thank
you for the opportunity to appear to discuss trade and commerce
at our Nation's ports. That ends my prepared statement
[smiling].
I was a longshoreman starting in 1973, and as you pointed
out, I followed my father, who followed his father onto the
waterfront. In 1973, I worked in the hold of a vessel, loading
and unloading. The longshore industry consists of three
classifications, all longshoreman, which are: the loading and
unloading of vessels and barges; the facilitating of receiving
and delivery of cargo, which we refer to as clerks and
checkers; and then the maintenance division of the
International Longshoremen's Association, which does a
multitude of job functions while on the terminal.
When I became ship's carpenter, I was assigned a
responsibility of working directly with Customs back in 1973
and into 1974. That job at that time--actually, I was working
side by side with the Customs inspector, who would identify the
cargo, and we would travel with the inspector in different
locations of the terminal, and then open the cases or packaging
for anything--from apples to zebras is what I always say.
They've all been on the waterfront.
They would do what was said earlier in your opening
statements, where they would check the origin of the cargo and
make sure that the U.S. trade laws were in compliance with that
cargo, and they would also be checking for, actually, insects
and, in a lot of cases, drugs. When we found situations that
were suspicious, many times we would leave the Customs
inspectors to perform the rest of their inspection, and then
when they were complete, we would come back into the location
and resecure all the packaging onto the cargoes that were being
inspected. We would then turn in a billing process that
included a bill of lading for the cargo, the type of cargo, and
the type of inspection that we would provide, and then Steve,
our terminal operator, would bill the shipper for that cargo.
That changed. Once containerization came into play, it
changed the whole inspection process, where each location or
terminal had to designate a portion of the port facility to
accommodate the movement of the containers that would be
brought to a docking facility where the Customs inspector then
would identify the container and instruct us to open the
container--which was cutting a safety security seal--and then
open the container. And then the Customs inspector would also
determine how much inspection had to be done out of that
existing container. That went on for days at a time and is
still part of the process today. Once we unpackaged the
product, they would do the investigation, and then we would
repackage it and put it back into the same container and add a
new security seal to it that was recorded for delivery.
The other part of the inspections that were done at the
terminal back then were actually inspection on imported meat,
where thousands of loose boxes would come into the port. There
would be meat inspection rooms with the MID, or the Meat
Inspection Division of the USDA, and we would open the meat
boxes, actually cut 2-inch slabs out of the frozen meat, and
put them into a thawing tank, which would then be deposited
onto a tray for inspection. That was a pretty normal process,
okay?
Then another event came--September 11th--and everything
changed again. And what we realized on September 11th was, as
we stated earlier, Customs did not have enough inspectors to
staff all the different locations, especially with the higher
level of scrutiny that was being performed at each terminal.
They came up with the term of Centralized Examination
Stations. Instead of manning all the port facilities, have the
facilities send the containers to the Central Examination
Station. The impact was, we lost many jobs as a result of that,
and the people who were replacing our jobs at the remote area
were working for a lot less than the family-sustaining wages
that we got. That was the economics.
The most important piece was, we were taking containers off
the terminal and driving those containers through our
neighborhoods, up onto our highways, sometimes through our
sporting event facilities, crossing rivers and bridges, to go
to this remote area. So, the higher level of risk was
transferred from the port out into our communities.
We were concerned about it. We are still concerned about
that being an issue. We have a very good relationship with
Customs inspectors, and we expect to continue with that. And we
look forward to enforcing whatever policy rules that have been
enforced, which we were not part of. My recommendation would be
that when there is a policy change, that the ports themselves
also educate the port workers to make sure that they are
working in conjunction with the Customs inspectors as we move
forward.
The other thing I would recommend: consistent enforcement
for the port is an economic issue that also becomes an issue of
safety when those who have sinister minds are looking to breach
whatever securities we do have. If it is not being done
consistently in port, they would find it out.
So, I appreciate the opportunity and would be glad to
answer any questions.
[The prepared statement of Mr. Paylor appears in the
appendix.]
Senator Carper. Thank you. You just gave us the shortest
prepared statement.
Mr. Paylor. What was that?
Senator Carper. I think you delivered the shortest prepared
statement that we have had before this committee in quite a
while, but a very fulsome off-the-cuff statement that we very
much appreciate. And we thank you for sharing that with us and
look forward to having a chance to ask you some questions.
Our next witness, our final witness, is Mr. John Drake,
vice president--it's a job I always wanted but never landed--
for transportation infrastructure and supply chain policy at
the U.S. Chamber of Commerce. In his role, Mr. Drake represents
the business community on transportation and infrastructure and
supply chain issues. He is also, I am told, a Commercial
Customs Operations Advisory Committee member. Is that true?
Mr. Drake. Yes, sir.
Senator Carper. All right--advising the U.S. Customs and
Border Protection on trade.
Previously, Mr. Drake was a senior appointee at the
Department of Transportation and worked on Capitol Hill for
over 10 years. In what capacity?
Mr. Drake. So, two of note. I was professional staff for
the Senate Commerce Committee, and then also professional staff
for the House Transportation Committee.
Senator Carper. All right; thank you. With that having been
said, welcome aboard, and you have the floor. Thanks for
joining us.
STATEMENT OF JOHN DRAKE, VICE PRESIDENT, TRANSPORTATION,
INFRASTRUCTURE, AND SUPPLY CHAIN POLICY, U.S. CHAMBER OF
COMMERCE, WASHINGTON, DC
Mr. Drake. Well, thank you, Chairman Carper, Ranking Member
Cornyn, Senator Cortez Masto, Senator Grassley, and members of
the subcommittee. As the chairman said, my name is John Drake,
and I want to thank you for the opportunity to testify at
today's hearing on U.S. trade enforcement and entry of
merchandise on behalf of the United States Chamber of Commerce.
Look, international trade is critical to our Nation's
economy and way of life. Ports are fundamental to this trade,
including the 328 international land, air, and sea ports
throughout the United States that have a U.S. Customs and
Border Protection presence. The operations of these ports, and
moving goods efficiently, is of significant importance to the
business community. Delays, congestion, and inefficient
operations add costs to businesses and consumers, ultimately
making goods more expensive and our economy less competitive.
It does not feel that long ago when we were in the depths
of the COVID pandemic and many Americans were facing delays in
everything from toilet paper to products that required
semiconductor chips, and pictures of long lines of ocean
vessels waiting to enter the ports of LA and Long Beach
dominated the news. We have come a long way since those days,
but we have not returned to normal in any sense of the word.
Instead, today we are in a new normal of significant and
seemingly daily supply chain challenges.
To start, I think many things that are really sort of top-
of-mind for a lot of policymakers include: the shipping
diversions caused by the Red Sea crisis, the war in Ukraine,
and the collapse of the Francis Scott Key Bridge in Baltimore.
We also face labor challenges. For one, we have a shortage of
truck drivers, rail workers, longshoremen, pilots, mechanics,
and other necessary supply chain and logistics workers.
We also face disruptions stemming from contract
negotiations including the UAW strike in 2023, the Class I
freight railroads negotiations, the ILWU in the west coast port
terminals last year, and the Teamsters and UPS negotiations.
Right now, we are also tracking negotiations that are happening
between the ILA and the U.S. Maritime Alliance, renewing labor
contracts set to expire at the end of this September.
We also face a difficult situation at our southern border.
Migrant surges are disruptive, with CBP increasingly diverting
resources and performing short-term closures of key commercial
ports to help process migrants.
Make no mistake, these events are intended to illustrate
that businesses today are managing multiple C-suite level
disruptions at once that create their own set of challenges. As
a CEO of a prominent shipping company recently said, we were
accustomed to managing a ``black swan'' event once every couple
years. Today, we deal with one every week.
There are silver linings, though. For one, there is a
greater awareness and focus on the resilience and efficiency of
America's supply chains, including its ports of entries. This
is helping elevate discussions here in Washington, DC and in
other places around data and the opportunities to improve the
overall performance of our supply chains, where any friction
can lead to impacts on customer choice, price, and economic
development. That is why we are grateful for this hearing.
But it is clear that we are in a very different world than
just a few years ago. As such, we have several recommendations
for this committee. First, we urge you to consider changes to
CBP statutory authorities in a holistic context. Trade is
interconnected. There are significant concerns around threats
like forced labor, fentanyl, and counterfeits, among many other
challenges, and this deserves our attention.
But part of confronting these challenges means looking at
the entire universe of CBP's tools and authorities. Making a
change in one part of CBP's authorities can result in
unintended consequences to other parts of our trade laws that
will have unintended and potentially negative consequences on
our businesses and consumers.
Second, this committee should consider a comprehensive
Customs modernization effort that balances the equally
important goals of enforcing U.S. Customs laws with trade
facilitation, which will enhance the resiliency of our supply
chains and also promote economic securities--important goals,
both. That is why the Chamber is helping lead a coalition of
businesses and trade associations to help inform any update to
CBP trade authorities.
Finally, there are legislative opportunities out there as
well. We urge Congress to pass Senators Peters's and Cornyn's
Securing America's Ports of Entry Act of 2023. CBP staffing, as
Senator Cornyn noted, has not kept pace with demand generated
by the tripling of goods entering the U.S. in the last 25
years.
While CBP will need to look at tools beyond staffing to
keep pace with trade demands, staffing is important, and this
legislation will help CBP reduce the lengthy wait times; help
stop the flow of illicit goods, illicit drugs, and other
contraband; and facilitate new economic opportunities
throughout the U.S.
Thank you again for the opportunity to participate in this
hearing, and I look forward to your questions.
[The prepared statement of Mr. Drake appears in the
appendix.]
Senator Carper. Thanks; thanks so much for that statement,
and also for being with us today. I am going to yield to
Senator Grassley for the first questions.
Go ahead, Senator Grassley. Again, welcome.
Senator Grassley. I thank my colleague for your courtesy of
letting me go ahead so I can meet with the Waterloo Chamber of
Commerce; they are down.
Mr. Pickel, I want to talk about the Uyghur Forced Labor
Prevention Act--and several companies have been listed. Most
recently, Homeland Security listed 26 textile companies. Do you
think that this act has been effective in changing companies'
behavior, whether it be U.S. companies importing products from
China, or Chinese companies exporting to the United States?
Mr. Pickel. Thanks for the question, Senator. I would say,
from my time in government and my time in the private sector, I
have seen a level of attention to the issue of forced labor
that I did not experience before the UFLPA was enacted into
law. Are there still issues that need to be ironed out in terms
of how industry and government are working together to fully
implement every provision of the UFLPA? Absolutely. I think
there is a lot of work that can be done in terms of
understanding how certain technologies can be used and how due
diligence standards can be clarified to make sure that we have
the best shot at making sure that we are keeping forced labor
out of the country.
I do think the UFLPA--the provisions that envision getting
at the root causes of forced labor, the diplomatic engagement,
as well as using our trade negotiating and trade engagements to
actually address those conditions--is a far more sustainable
approach than relying almost entirely on border enforcement,
which should be more of a backstop and less of a single point
of failure.
Senator Grassley. Do you think it works effectively from
third countries--you know, transitioning from China to other
countries to come to the United States? Is that a problem?
Mr. Pickel. Sure, transshipment. So transshipment is
potentially an issue of all forms of trade law compliance;
forced labor is no exception to that. Forced labor is
challenging because in many instances, Customs and Border
Protection has to evaluate many tiers back in the supply chain
where, if they are looking at counterfeits or they are looking
at some other type of violation, they are looking at the goods
as they are presented to them, as they exist right in front of
them, so it is a different dynamic. They are having to go
further back in the process.
Transshipment is not necessarily always an illicit
practice, but to the extent that it is used to mask where
products are coming from, it can present a challenge.
Ultimately, CBP needs to have better visibility into the risks
that exist around the world, something that other agencies
should be contributing more to, in my view, so that CBP can
share that information with their trusted trade partners.
Senator Grassley. Thank you.
Mr. Drake, since the enactment of the Trade Facilitation
and Trade Enforcement Act, there has been discussion about the
effective level of the de minimis threshold. I supported the
passage of that act, and I still consider myself a free trader;
however, I believe that continuous abuses of this threshold
must be addressed. Do you think that there is a more effective
level Congress could set in the de minimis threshold in order
to prevent abuses such as bulk importation of counterfeits?
Mr. Drake. So, we have found that the $800 level has been
very successful, and it has allowed CBP to target its limited
enforcement resources to where they are best appropriate. That
being said, we recognize that the trade environment has changed
significantly over the last 25 years. There are concerns out
there that CBP is not collecting certain types of data that
would help further refine its enforcement mission, but we would
argue that that is true for not just de minimis shipments, but
all up and down the trade environments--so, formal entry and
informal entry, et cetera.
We have been supportive of CBP looking to expand the data
it is collecting from new parties in the Customs space like
warehouses, fulfillment centers, et cetera, but we think that
more can be done, and we do think that efforts to single out de
minimis are inappropriate, and I think we would say that a
comprehensive review of the data that CBP is collecting at all
levels of trade is a more appropriate focus for Congress's
attention.
Senator Grassley. Okay.
Mr. Pickel, I am going to have a question in writing,
because my time is up, so I will ask you to answer that in
writing. Thank you very much.
Senator Carper. Senator Grassley, thank you so much. How
long were you the chairman of this committee? How many years
did you serve on this committee?
Senator Grassley. All but 4 of the 44 years I have been in
the Senate.
Senator Carper. So you are sort of a newcomer, huh?
[Laughter.]
Senator Grassley. That was from 1986 to 1990, when we did
not have enough Republicans, because I was way down there.
Never thought I would ever get to the top.
Senator Carper. Yes, but you did. How long did you serve as
chair for this committee?
Senator Grassley. Six years in the House and 44 here, I
guess would add up to 50, right?
Senator Carper. That is pretty impressive. Good years, 50
good years; thank you. Thanks so much for helping us kick this
off.
I think we are going to take a turn to Senator Cortez Masto
and then maybe to Senator Cornyn if he is ready.
Go ahead; welcome. We are glad you are here.
Senator Cortez Masto. Thank you, Mr. Chair. I understand
from Senator Grassley there's hope for me, because I am down at
the end. So at some point in time, I am assuming there is hope
for me. [Laughter.]
Senator Carper. You will be here faster than you think. And
if I can make it, you can too, believe me.
Senator Cortez Masto. Thank you. Thank you for this
discussion. Gentlemen, thank you for being here.
One of the things I want to talk about is U.S. Foreign-
Trade Zones, which in Nevada is an important area for so many
of our businesses. I am hearing from our businesses and from
our Las Vegas Foreign-Trade Zone that Customs and Border
Protection struggles to maintain adequate staff to respond to
the needs of those Foreign-Trade Zones in a timely manner.
And I'm curious, Mr. Pickel and Mr. Drake, has this been
your experience as well, or are you seeing businesses having
those same challenges?
Mr. Pickel. I would start by offering that I think this is
one symptom of what has been alluded to today, which is that
U.S. Customs and Border Protection has had ongoing and pretty
pervasive staffing shortages, going back to before I started
working there in 2011.
Senator Cortez Masto. Nationally, not just at the southern
border, but nationally, everywhere across the country?
Mr. Pickel. Yes, Senator; yes. And so I think compounding
that challenge is that there are some FTZs in the country--I am
not sure about the FTZs or subzones in your State--but they can
exist up to 60 miles or 90-minutes drive time away from the
ports of entry, so I know that that is particularly challenging
for some ports, that are staffed at one or two or three CBP
officers, to be able to get out to those ports.
They do try to adopt additional types of oversight--whether
it is closed-circuit videos or different types of compliance
programs, weekly reports that are generated by the FTZs that
show their inventory control, and so forth--but in terms of the
actual physical presence there, I would tie that back to the
nationwide staffing shortage and the systemic challenges with
that distance.
Senator Cortez Masto. And I appreciate that.
You know, I was down, a couple months ago, at the Nogales
Port of Entry in the Tucson Sector, and I understand that port
alone--just talking with the Customs agents there who work
there, the men and women--it handles $30 billion in trade each
year, just in those two ports of entry. But I also know what
you are saying is that they are understaffed and overwhelmed,
not just with the immigration that is happening, but the trade,
the increasing trade that they see.
And really, that is one of the reasons why I supported the
bipartisan border security act, the James Lankford, Kyrsten
Sinema, and Chris Murphy legislation that was put together,
because in that legislation--based on what I was hearing
firsthand at the border, particularly the Tucson Sector--it
provides additional resources for U.S. Customs and Border
Protection, among other things: additional resources to hire
U.S. Customs and Border Security personnel, and money, almost a
billion dollars, to expand border security and operational
capacity. And it is what I am hearing in my State; it is what I
saw at the border.
And I suspect, and I may be wrong, but, Mr. Drake, it is my
understanding that the U.S. Chamber supported this legislation
when it first came out. I suspect it is for that reason: to
provide additional resources that are necessary for our Customs
and Border Protection, is that correct?
Mr. Drake. That is correct. I think we see the failure to
act on immigration reform as a missed opportunity. I think we
would say that a lot of the challenges that CBP is experiencing
at the southern border are in part because the immigration laws
are out of date, but we do think that border security is an
important area we need to focus on to fix this problem.
Senator Cortez Masto. Yes, thank you; I appreciate that.
One of the other things I was hearing from my businesses is
that there are just a lot of duplicative data requirements,
rather than a streamlined entry or export process. Is that true
as well, of what you are hearing and seeing? I am just curious.
Mr. Drake, we can start with you.
Mr. Drake. It is, I think, duplicative. And also, I think
another area where the business community is concerned is that
oftentimes the data that is being asked to be collected isn't
necessarily tied to a specific goal in the enforcement regime.
So, this data that you are asking us to provide to CBP, for
example, is this tied to screening for fentanyl or screening
for counterfeits? You know, maybe it is. I think what we would
argue is CBP has not always been the best at articulating that
clear connection and how that data collection ask would meet
those revised goals.
Senator Cortez Masto. Thank you.
Mr. Pickel?
Mr. Pickel. I would just add that I mentioned in my
statement that there are 47 different Federal agencies that
work with CBP to regulate the importation of products. Each one
of those agencies has their own unique entry requirements and
their own ways of approaching their regulatory
responsibilities. So, to the extent that information can be
shared better among those agencies and then there could be more
of a cohesive governance structure around how data is
collected--there is an automated system that collects this
data, and to the extent that there were more of a decision-
making structure to de-conflict and de-duplicate those data
requirements, that would definitely smooth the experience in
sort of the digital data input process.
Senator Cortez Masto. Thank you. And I suspect that is why
you called for the codification of the Border Interagency
Executive Council, one of the reasons. Is that right?
Mr. Pickel. Yes.
Senator Cortez Masto. Thank you; my time is up. I
appreciate that.
Senator Cornyn [presiding]. Thank you, Senator Cortez
Masto.
Gentlemen, the Congress appropriated $380 million in Fiscal
Year 2024 for Non-Intrusive Inspection equipment additionally
for DHS's fentanyl initiative, including $32 million for
expanded lab capacity under the fentanyl initiative that
provided funding for an increase of 2,000 border agents,
bringing the total funding level to 22,000 agents and 150 new
CBP officers who work at the ports of entry.
Now, I realize that none of that has been implemented yet,
but Congress has been generous, I think even by Washington, DC
standards, to try to respond to the needs of being shorthanded
at the border. Mr. Pickel, Mr. Drake, do you have any other
suggestions for things we need to do to meet the resource
problems at the border? Mr. Pickel first.
Mr. Pickel. Sure; thanks for the question, Senator. I would
say that, as I said, CBP has been in a pervasive staffing
shortage. I think with respect to the trade responsibilities,
which obviously are one facet of a very complicated job for the
agency, it is very important to look for creative ways to use
innovation.
We talked a little bit about data, the use of data and the
way that CBP gets that before cargo actually arrives at a land
port, an airport, a sea port. And being able to do more to
evaluate risk using that data--using technology like artificial
intelligence to be able to validate that data using an
objective source--would really help CBP be able to identify
risk more readily, rather than sort of continuously needing
more and more and more officers.
So, the adoption of AI, I think, is one example. So, to put
it in the context of NII at a land border port, if AI were able
to compare a static image of a truck coming through a port
compared to the way that that truck came across the port the
last five times to see anomalies, AI technology could do that
much quicker than the naked eye of a CBP officer.
Senator Cornyn. Just to press the issue a little bit, if AI
can help us detect infractions and problems at the border, you
are still going to need CBP agents to follow up on that, right,
and be the enforcement and compliance action?
Mr. Pickel. Yes.
Senator Cornyn. Okay, so we are not talking about
displacing the flesh-and-blood human beings?
Mr. Pickel. No, I do not think that process will be
entirely automated, but I think that the idea is that you are
taking the CBP officers and putting them in the roles that you
need a person to do and letting the technology compare the data
points across time. So the CBP officer would still do the
inspection, they would still make sure that all the other entry
requirements are being met.
Senator Cornyn. And, Mr. Drake, just to add to that
question, would the Trusted Trader programs--because, if you go
to the border, for example, they have a lot of people that
basically have already been inspected, not at the border, but
before they get to the border, and then they have secure
containers or other facilities that obviate the need to
duplicate that at the border. Are those the sorts of things
that you think will help?
Mr. Drake. Absolutely. And I think they have been very
successful up until now. I think with the legislation that you
are considering, as well as if Congress were to look at these
programs more fully, I think our recommendation there is to
continue to make sure that the advantages that are bestowed
upon participants in those programs meet or exceed the
administrative aspects, and that there is a strong dialog that
is happening between the Federal Government and the private
sector to make sure that what is being asked of the private
sector is understood and is discussed ahead of time.
Senator Cornyn. Let me come back to you again, Mr. Drake.
We talked a little bit--you alluded in your opening statement
to the disruption in legitimate trade and travel as a result of
the migrant surge across the border. And of course, we know
that so many personnel have to be relocated to try to deal with
processing migrants and the like, but in particular, CBP has
suspended rail crossings in Eagle Pass, TX multiple times, as
you know, during the migrant surges, so they were shifted over
to assist border control. Do you happen to know what percentage
of rail traffic between the United States and Mexico the Eagle
Pass rail crossing accounts for?
Mr. Drake. That is a good question, Senator. So, Eagle Pass
is a significantly important rail crossing between the U.S. and
Mexico; my understanding is the most important rail crossing
right now. And certainly, I believe it handles the majority of
rail traffic between the U.S. and Mexico itself.
Senator Cornyn. My notes here indicate that Borderplex
Alliance estimates it to be about 45 percent. Does that sound
about right?
Mr. Drake. That sounds about right; yes, sir.
Senator Cornyn. Okay. Union Pacific Railroad estimated a
daily overall impact of over $200 million to the U.S. economy
for the closure. Does that sound about right?
Mr. Drake. I think it was a little bit higher. You are
talking about the closure that happened back in December? Yes,
my understanding is the number was around $205 to $210 million.
Senator Cornyn. And, Mr. Pickel, what are the economic
impacts downstream when you have these sorts of problems at the
border in suspending rail crossings, for example? What are the
economic impacts? And do these impact supply chain resilience?
Mr. Pickel. Yes, of course. So, in addition to the impacts
that the rail processing operations had, there were also
several instances where the Bridge of the Americas out in El
Paso was shut down, the cargo facilities there, and I think
there is sort of a macro impact in terms of encouraging the
movement of manufacturing facilities back to the Western
Hemisphere from areas like Southeast Asia, and realizing that
there could be potentially fragile border situations that would
prevent those products from coming into the United States.
And the potential downstream economic impacts that you
referred to are that those products are going to be
manufactured further away. There are people who work in
distribution centers. There are people who stock shelves who
are waiting for those products to come, and of course
consumers. I mean, these situations can lead to product
shortages for consumers, potential work stoppages in extreme
situations, and also rethinking of investment, if there seem to
be persistent risks.
Senator Cornyn. Well, because my State, Texas, is ground
zero for a lot of these problems, we are perhaps more
acquainted with the challenges that the current crisis at the
border presents, but, Mr. Drake, I seem to remember a poster by
the U.S. Chamber of Commerce that talks about where the jobs
that are created by the binational trade are distributed, and I
am sure those include the State of Maryland and the State of
Nevada, the State of Delaware, virtually all 50 States. So
there is a huge economic impact across the entire country when
those supply chains are disrupted or because of bottlenecks
associated with shortages of CBP and other inspection
facilities.
My time is up.
Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman.
I am going to talk about uncertainties and catastrophic
events that affect the supply chain. I know, Mr. Drake, you
mentioned the Port of Baltimore with the Francis Scott Key
Bridge that collapsed when the Dali struck it, totally closing
the Port of Baltimore, the third busiest port in our country.
And I want to start off by saying there was incredible
cooperation to deal with all aspects of that catastrophic
event, from the Federal Government, State Government, local
government, private sector, all working together. And today,
the port is opened months earlier than we thought possible.
There has been help to the businesses whose supply chains were
disrupted. There has been some help for the workers as well as
small businesses, et cetera.
So I want to start off by saying there was a really unified
response, but there are challenges here. The Port of Baltimore
does about $80 billion of business a year. We are number one in
roll-on/roll-off cargo. And during the early stages when the
bridge was knocked down, I met with a lot of the business
owners and the labor people, and they were puzzled, because it
was difficult for a small business operator of a trucking
company to take their trucking company and go to another port
and get business because of the protocols of the port and all
the politics involved there. There were challenges with the
workers at the port as to whether they could transfer some of
their work to other places. That was also a turf problem that
we had to deal with.
We had shippers that needed alternative supply routes, and
we worked to get that done, but there was some concern that it
might not return to the Port of Baltimore, and that might be
the price for alternative routes. So there were trades there
that did not seem to be consistent policy. And do we need to
rethink how we can have a more seamless national system?
Because unpredictable, catastrophic events seem to be occurring
more frequently these days, do we need to have a better
understanding as to how we can work together in a unified way
to make sure we protect supply chains, but also protect a
community that goes through an unpredictable event?
Mr. Drake, you look anxious to answer.
Mr. Drake. So I will tell you, as of the last 4 or 5 years,
the business community is getting exceptionally better at
responding to catastrophic events. This is one of those
situations where, as you said, the response has been over the
top, and the fact that this terrible thing happened, six people
lost their lives, and yet local government, State Government,
the business community, the Federal Government, and Congress
came together to solve this--and as you noted, we are well
ahead of where we thought we were going to be at this point.
That being said, we have a bridge that we have to replace
quickly, because I think the business community it not going to
be able to wait forever. We work very closely with the Maryland
Chamber of Commerce in helping its response efforts. We know
that for people who work in Baltimore, a 30-minute commute now
is 2 hours each way or 3 hours each way. That is not
sustainable, and if it is going to take 4-plus years to get a
bridge rebuilt, you wonder how long people will wait.
And that bridge is not just critical for people who are
going to and from work, but it is also critical for supply
chains, right? It does add cost.
Senator Cardin. Let me just underscore that point. There
were, I think, 34,000 vehicles that crossed that bridge. There
are three crossings in the Port of Baltimore on the north-south
corridor. Two are tunnels; one was the Francis Scott Key
Bridge. Many of the containers could not go through the tunnels
because of the cargo that they contained. The delays are--it
could be an hour delay, with the detours. That affects costs
and supply, you are exactly right. We are now experiencing
tremendous traffic problems because the port is open. We are
happy the port is open, but there is gridlock now. And you are
right: patience will run thin.
So I very much appreciate your statement. We have got to
get moving on that quickly. One of the reasons why our
delegation, bipartisan delegation, thinks it is urgent that we
pass the bill that allows for the 100-percent State
reimbursement--which is what we do during these catastrophic
events now--is that we want to start the construction phase as
quickly as possible. And to start the construction phase, that
bill has to be passed for it to be 100 percent Federal share.
It is not the time limit, which many of my colleagues think; it
is when you start the construction phase, you have to have that
law in place.
So, Mr. Chairman, I am just making a plea to my colleagues:
we have to get that bill done as quickly as possible so it is
not the reason for the delay on the work being done to replace
the bridge. And, Mr. Drake, I appreciate you bringing that up,
because it does affect supply chain. It is beyond just the Port
of Baltimore; it is an efficiency issue, there is a frustration
issue, and the response to date has been great. It is going to
take a while to get that bridge replaced, but we do not want to
see unnecessary delays. So thank you.
Mr. Drake. Yes, and, Senator, we would love to work with
you on that legislation.
Senator Cardin. Thank you; thank you.
The chairman of the Environment and Public Works Committee
came back, so I will repeat it all again. It is urgent that we
get--the Chamber of Commerce is agreeing with me--that we get
that bill passed.
Senator Carper. Repetition is good.
Senator Cardin. We cannot start the construction phase
until that bill is done, and it is affecting the supply chain
in our port. Just wanted to make that point.
Senator Carper. Senator Cardin, thank you; just thanks for
being a great friend and a great colleague on this committee.
And we serve--we sit next to each other on two different
committees, and he finds it hard to get away from me. He lives
just down the road, not too far away. All right; thanks, pal.
I have a question here, Mr. Pickel. I might be wrong, but I
think when Bob Dole was in the U.S. Senate, he may have served
on the Finance Committee. I am not sure of that, but he may
have served on the Finance Committee, which would mean he had
sat literally right here.
His wife, Elizabeth Dole, was quite an accomplished person,
the Cabinet Secretary in, I think one of the Bush cabinets, and
she was nominated to be a Cabinet Secretary. And you may know
this, when people are nominated for a Cabinet position, it is
not uncommon for them to be introduced at the committee, before
the committee of jurisdiction, by their home State Senator, or
one of their home State Senators.
And when Elizabeth Dole was nominated to be a Cabinet
Secretary many moons ago, her home State Senator showed up to
introduce Elizabeth Dole. And I do not have the words, exactly,
but I think he said to his colleagues that day, ``I regret that
I have but one wife to give for my country.'' ``I regret that I
have but one wife to give to my country.'' [Laughter.] I love
Bob Dole, Bob Dole and Elizabeth. He is deceased, sadly, but
Bob Dole and I are both veterans--different wars, but great
sense of humor, great service.
I understand that you may have a spouse who has not been
nominated to be a Cabinet Secretary, but to serve in some other
capacity, maybe even in the U.S. Senate where we serve. And
take just a minute and explain to us--well, this is not her
confirmation hearing, but what is the nature of her
responsibilities in the Senate? I am told she is quite a gift
from your family.
Mr. Pickel. Yes, my wife Megan is the first woman to serve
as the Journal Clerk of the U.S. Senate.
Senator Carper. Say that one more time.
Mr. Pickel. Sure; my wife Megan is the first woman to serve
as the Journal Clerk of the U.S. Senate.
Senator Carper. Explain what that means.
Mr. Pickel. She sits on the Senate floor and captures the
official records of the Senate's proceedings.
Senator Carper. Pretty scary, huh? [Laughter.] Usually not.
Thank you for sharing your wife with all of us.
Mr. Pickel. Yes; my pleasure.
Senator Carper. Mr. Paylor, are you up for another
question? I thought you would be. In your testimony, I believe
you mentioned the close relationship that many longshoremen
have with Customs and Border Protection agents at ports across
the country.
My question for you, Mr. Paylor: could you just take a few
minutes for us and discuss differences between the work that
longshoremen perform and the work that Customs and Border
Protection agents perform at the ports, and how both groups
work together to make sure that goods that move through these
ports are thoroughly inspected?
Mr. Paylor. Thank you, Mr. Chairman. If I can, I would like
to applaud Senator Cardin's understanding of the impact of the
Francis Scott Key Bridge on the Port of Baltimore. I think he
outlined it very well.
But to answer your question, the relationship that we have
had goes back to even before my time. Starting in 1973, my
father performed the work of assisting Customs way before I was
even on the waterfront. But that relationship developed into
the friendship, and it was based on mutual respect for the
labor that was performed before containerization, which was
much more burdensome back then than it is today, where more
skill is required to handle all the containers versus the old
style of cargo or freight, which was boxed, cased, and loose at
the time. So I think the relationship that grew was the
understanding of the skill that we provided to perform the
labor that was needed for them to have the ability to assist as
much cargo as possible with the manning that they had available
at the terminals where we were working.
And they were spread thin, where they were working at
container terminals. Most ports are multifaceted and are, as
some finger piers still remain today--which were used pretty
frequently back in the 1970s and the 1980s. That, once again,
all changed through containerization, but that relationship
still exists today, and it is one of respect.
And the people who work side by side with the Customs
inspectors at the terminals are usually return employees who
are there day to day. And in a casual labor industry, sometimes
that is not the case at all facilities. But they developed
those relationships and have an understanding, and it helps the
process be expedited, to get as much cargo done or inspected in
an 8-hour period and sometimes longer, by virtue of each other
understanding the relationship and the responsibilities that
both the inspectors have and our people have who facilitate the
handling of the cargo while they are inspecting.
Senator Carper. I am going to just follow up and ask if any
other witness wants to comment on what we are talking about
here. But, Mr. Paylor, can you just discuss with us briefly how
staff from other partner government agencies stationed at U.S.
ports--like Food and Drug Administration, like the Coast
Guard--work with longshoremen at these ports?
Mr. Paylor. Yes; the USDA is a perfect example, which is a
division of the CBP. And when you have food products--like in
your own port, we have bananas that are the staple or the
anchor business of the Port of Wilmington, and we have a lot of
stone fruit that comes from other locations in South America
and Central America and all places from around the globe.
So USDA plays a very integral part in making sure that that
cargo is to be inspected for the quality of the fruit, making
sure that there are no insects in there that would be harmful
to our environment. So it is something that happens on a
regular basis, a daily basis, and provides a lot of overtime.
So once again, those relationships that we develop with CBP
inspectors are the same that we develop with the USDA
inspectors.
Senator Carper. Thank you.
A question, if I could, for Mr. Pickel. The COVID-19
pandemic and Russia's war in Ukraine--senseless war in Ukraine,
I would say--have jumbled supply chains and disrupted the
global economy in many ways; unprecedented ways, I think. And
in your testimony I think you mentioned that in order to build
stronger and more resilient supply chains across all sectors,
companies must work with the Federal Government to anticipate
supply chain challenges and do their fair share to ensure that
goods entering the United States are safe for our consumers.
My question: would you please take a few moments to share
with us how different industries can work with the Federal
Government to share information and build more resilient supply
chains in an effort to prevent the supply chain bottlenecks and
shortages that Americans have become all too familiar with?
Mr. Pickel. Thanks for that question. I think it is a very
important one, and one that is not entirely new in the context
of port operations, in some of the agencies that we have talked
about already today, certainly with CBP.
Many of the sort of best innovations from a process
standpoint that I have seen CBP adopt--and some of the partner
government agencies--come as a direct result of having not only
formal but informal consultations, engagement, with private
industry. Much of that is done through the Commercial Customs
Operations Advisory Committee that is established in statute
and that Mr. Drake, my fellow panelist, serves on.
I would say that it is important to also have conversations
on an ad hoc basis as well to really identify what are some of
the pressing concerns that industry is seeing, and challenges
that CBP is seeing, and how those issues can be resolved, but
also to look forward and say, what is the next wave of emerging
challenges that we are going to be facing? Particularly because
many Federal agencies sort of operate in a silo, right--they
are performing their responsibilities at a port of entry or
within a process. So, in many instances, industry can help to
sort of see across the supply chain that may be regulated by
multiple different agencies and help find where there may be
innovations that they can borrow from other agencies as well.
So I would say the simple answer to your question is to
talk to each other, to really stay in constant communication.
You know, one example I would give is the Air Cargo Advance
Screening Program, where CBP identified challenges in the air
cargo environment in terms of getting data in enough time to
able to screen packages that were coming to the U.S. on
aircraft. And, for lack of a better phrase, industry and CBP
officials kind of locked themselves in a room and said, ``We
have to figure this out.'' And they did; they figured out a
construct that is the operative requirement now for security
filings related to air cargo.
So I think that constant communication and collaboration is
the most important component.
Senator Carper. All right; thank you for that. Anybody else
want to comment on that question? Anybody? Gentlemen? Mr.
Paylor, Mr. Drake, anything? No? Okay.
I have another question, Mr. Drake, for you, involving
examining data collected and shared at U.S. ports. And having
access to accurate and reliable data is a critical component
for sound decision-making, as you know, and anticipating new
challenges. In your testimony, Mr. Drake, you discussed how the
data that Customs and Border Protection collect can be used to
potentially improve port operations, specifically at land
ports.
Here is my question: can you please take a few minutes to
discuss how Customs and Border Protection might improve the
ways in which they use and share data collected at U.S. ports,
as well as any recommendations that you have for members of
this committee to ensure the data is made available?
Mr. Drake. Thank you, Senator, for the question. I think
two recommendations--and I think this was referenced earlier on
in the hearing. But the first is, CBP does collect significant
data. Oftentimes that data is good and helpful, but they need
to do a better job of sharing that data with the 47 other
Federal agencies that have a role in helping safeguard what is
coming into our country. Those PGAs oftentimes will not get
that data, and sometimes when they do get that data, they are
operating on it in different ways or with a different set of
priorities than CBP.
We think it is absolutely critical that Congress intervene.
And this is something the administration can do, but we think
that it would benefit from congressional support, which would
set priorities on making sure that NHTSA, USDA, EPA, other
agencies that have a role in making sure that we are not
getting counterfeits, we are not getting invasive species, or
other bad stuff coming in, that they are doing their job as
well.
I think the second recommendation that we would have is
that CBP, we believe, could do a better job of sharing the data
it is collecting with the private industry. The private
industry is always going to be the front line of every sort of
trade problem that we see, and they want to make sure that they
are making the best decisions possible.
A really good area for that is if CBP provided more
specific information to the business community to help the
business community understand if they are doing business with
the right folks or if they should be shifting to a different
supplier, a different carrier, et cetera.
Senator Carper. All right. I am going to follow up that
question with another one. Would you also, for us, just please
discuss the role of the private sector in ensuring that Customs
and Border Inspection has accurate data about the goods that
are moving through our ports and how these relationships might
be further strengthened?
Mr. Drake. Yes. So CBP's success is always going to be
based on the data it is collecting, and oftentimes that data is
the first part of the shipment that happens, right? If the good
is at the port and CBP does not have any data on that good,
they are going to have a very difficult time evaluating what
that product is and if it needs to be intervened or not.
We would say that it is absolutely critical that the data
that the private sector is providing--excuse me, let me take a
step back. We would say that CBP is, in all cases, collecting
the data on all parties it needs to be collecting today. So,
the huge explosion of e-
commerce in this Nation, right--you have a variety of new
players who are in the trade space who were not there 15, 20
years ago.
Senator Carper. For example?
Mr. Drake. For example, warehouses, fulfillment centers, e-
commerce platforms. Those players are not the traditional
express carriers that have been operating under CBP authority
for decades. They are not necessarily, in all cases, providing
data to CBP, and we would argue that, in a lot of cases, they
should be. It is going to help CBP's enforcement mission, but
it also is going to level the playing field.
Senator Carper. Okay; thank you.
Mr. Paylor, are you up for another question? Good. As we
all know, a friend, Ben Cardin, was just here, and I am sure he
covered this, but I am going to revisit it. And if I am
covering some ground that has already been covered, I
apologize. But as we all know, on March 26th, tragedy struck as
the Francis Scott Key Bridge in Baltimore collapsed after being
hit by a malfunctioning cargo ship; six individuals tragically
lost their lives.
As a result, the Port of Baltimore had to initially stop
all cargo ships from moving in and out of the port in order to
clear the debris and carefully remove parts of the collapsed
bridge. The Port of Baltimore is an economic powerhouse. We
think our port in Delaware is a powerhouse, a rail powerhouse,
and we are good, but the Port of Baltimore is even more so.
But the Port of Baltimore employs thousands of people from
the region, including some from Delaware and Pennsylvania as
well as Maryland, and its initial closure and now gradual
opening have had ripple effects across sectors. My question for
you, Mr. Paylor, is, could you please discuss with us how the
initial closure and gradual reopening of the Port of Baltimore
have impacted members of the International Longshoremen's
Association, them and their families?
Mr. Paylor. Yes; thank you, Mr. Chairman. It is a very
important question, and I think it is one that cannot be
answered at this point completely, and that is because the
assessment is still growing and trying to be understood. But
the accident that caused the shutting down of the terminal had
a direct effect on 1,800 members of International
Longshoremen's Association. There are a few different locals in
Baltimore; the majority of those people have been out of work
completely.
And even with the support of unemployment insurance that
mitigates some of their losses, when you have people who are
working pretty regularly--as you pointed out, the level of
containers and railroad products that go through the port
generates not just a lot of man hours for our members, but also
for people who are not union members, or are members of other
unions, truck drivers--that filters down to the mom and pop
stores that are right outside work complexes, to the local
banks that are being impacted.
But when you have 1,800 people who are now out of work and
not collecting their income, the wages are only a part of the
impact. When you lose 2 months of your income, how do you pay
your mortgage, how do you pay your car payment, and how do you
make things feasible when you are looking at that debt you are
accumulating?
The other thing that has to be taken into consideration in
our industry is that making eligibility for your medical
benefits is based on a yearly situation. It is all hours
accumulated for a year of service for next year's coverage, so
we do not even know what the impact of that is going to be at
this point, but it is serious when your members lose health
benefits. Hopefully there is a system in place that could help
mitigate that also, but once again, still it has not been
identified.
I think the important piece that was said just a minute
ago, which is a little deeper thinking, is now that they have
lost significant cargo, container cargo and railroad, the good
news is, for the supply chain, they have moved to adjacent
ports, which could have been the Port of Wilmington, DE; the
Port of Norfolk, VA; and as far south as Savannah and as far
north as New York. But what will be the mystery that nobody has
an answer for is, how much of that cargo will return? If they
can only process a certain number of vessels and cargo, based
on it being open but restricted, that could cause problems that
are more long-term if carriers or shippers decide they would
have to go to a different port.
Then you have the situation where one port's pain is
another port's gain, where port authorities are always highly
competitive against one another, so the opportunity to take
advantage of one's pain to provide cheaper rates, possibly, to
the shippers or to the carriers in order to attract cargo that
has not been able to be serviced in the Port of Baltimore is
another unknown, and I do not think we have a full
understanding of what the impact will be.
And once again, the fact that it was an accident upsets the
supply chain to the highest level, when it gets back to the
whole purpose behind Customs inspections, now that people see
what can be done by an accident, what would happen in any
competing port or the same port if it was done intentionally by
some type of terroristic action?
Senator Carper. Okay. I think you have, in part, answered
the next question I am going to ask, but I am going to ask it
anyway. And you just think about it, and any response you have,
go ahead and let us have that, and then we will pick on
somebody else. But could you also please discuss with us how
port workers had to shift their operations, and how shipping
companies adapted to this emergency situation in Baltimore?
Mr. Paylor. Yes. Well, let me speak for labor. The good
news is, having the unity of the International Longshoremen's
Association, which works in all the same competitive ports,
there was the unity we shared with the Ports of Norfolk, for
example, Philadelphia, Delaware. They all offered the
unemployed people from the Port of Baltimore to come to their
ports and help them provide the service to the cargo that left
Baltimore to go to those other respective ports. So it was
good.
Unfortunately, the logistics of travel made it impossible
in some cases. The other one is that there are contracts in
place in other locations where the contract, and the benefits
especially, are proprietary to the employees who work in those
respective ports, so by traveling, even if it was practical,
the credit that would be needed for your cumulative hours for
benefits was something that we found impossible. And then there
were some employees who were really willing to work out and
help the industry and help the U.S. economy, and there were
others who wanted to take advantage of the fact that that cargo
had to go somewhere.
So you had both the good and the bad that comes along with
an issue like that. I like to believe that the unity that we
shared was a full example of solidarity, and I do believe that
the majority of employers who could, have offered help, that it
was all good intentions and not what I said: taking advantage
of the opportunity to become the new competitor for the Port of
Baltimore.
Senator Carper. All right; thank you. Thank you for those
responses.
The next question--it is going to be a question for all
three of you, but we will start with Mr. Drake and then over to
Mr. Pickel, and then back to Mr. Paylor. Mr. Drake, the
question concerns preparedness for future emergencies at U.S.
ports.
We would like to think there will never be an emergency or
something as dire or even worse than what has been experienced
in Baltimore, but we all know that is probably not realistic.
So my question is, as I mentioned in my opening statement, the
collapse of the Francis Scott Key Bridge raised questions about
the preparedness of our Nation's ports, and by extension our
Nation's supply chains, for future emergency situations.
My question, Mr. Drake, for you first: how can the Federal
Government better ensure that all U.S. ports are better
prepared to address future emergency situations similar to that
which we have witnessed in Baltimore?
Mr. Drake. Thank you for the question. So, it is helpful
that everyone--you, the Congress, the business community--is
thinking about these issues much more regularly than they were
before. That is certainly helpful.
You know, I would argue that if we were to experience a
repeat of the west coast port crisis that we had in 2020, we
would likely be in the exact same situation that we were back
then. Not a whole lot has changed at that level to prevent the
pile-up, for lack of a better term, that we saw back in 2020,
from repeating itself.
That being said, it is critical that the conversations
between the private sector and those who are working the
ports--everyone from the workers to the carriers to the
shippers to the local governments--are staying in close
contact. The Federal Government is helping to inform those
discussions as well. You know, there is a new program at the
Department of Transportation called the FLOW effort. This is a
public-private partnership where the private industry will
share data with the DOT, and the DOT will aggregate that data
and share it back with the private sector.
Where this was exceptionally helpful was in the immediate
aftermath of the collapse of the Francis Scott Key Bridge. DOT
was able to provide data in real time and help the private
community understand where they should go next to begin the
diversification away from the Port of Baltimore and identify
other ports that could handle that traffic. We need more
efforts like that to prepare us for the next emergency.
Senator Carper. All right; thank you.
Same question, if I could.
Mr. Pickel. We have to acknowledge sort of a core limiting
factor in how the Federal Government responds to port
vulnerabilities and supply chain conditions in general, right?
Ports are not owned by the Federal Government, supply chains
are not owned by the Federal Government, but obviously they can
have influence on how those resources are used, right?
So I think with that sort of understanding, looking at how
the Federal Government can continue to be a convener of sorts--
this was a great silver lining that came out of the west coast
port congestion dynamic that John just referenced, where you
had industry and all different government agencies getting on
these pretty prolific Zoom calls, where there were 200 screens
of individuals who were talking about how to address different
conditions that were contributing to port congestion, and
having the ability to have agility within each of those areas
of responsibility across the different agencies, as well as the
many different private actors who performed their
responsibilities within the port boundaries.
I think, from a Federal Government standpoint, the key word
here is agility--the ability for Federal agencies that operate
within port boundaries to be able to shift their resources, and
if cargo is relocating to an adjacent port, being able to move
personnel there to absorb the additional capacity that is being
taken on, or the additional volume, I should say, as well as
how to create a resumption plan.
So, we have talked a lot about CBP, but other DHS agencies
have responsibilities within the port boundaries: the
Transportation Security Administration, they oversee the
transportation program for truck drivers to be able to maneuver
around ports; the Coast Guard, they handle port security, they
have port security plans that are in place that should take
into account how ports resume their operations.
So I think they can be that sort of cohesive nature between
all these disparate organizations that operate within a port
and link back to the broader supply chains, but I think coming
at it from a perspective that, as I said earlier, they do not
own the infrastructure or the supply chain itself.
Senator Carper. All right: thank you.
Mr. Paylor, same question; let me just repeat it. How can
the Federal Government better ensure that all domestic ports
are prepared----
Mr. Paylor. I understand the question, Mr. Chairman, and I
should yield to the two gentlemen who are more qualified, but I
would like to give you a labor perspective on it.
Senator Carper. We never yield to our colleagues, even when
they are more qualified. [Laughter.]
Mr. Paylor. But anyway, I have three thoughts on it. One is
consistent enforcement, which may not be practical with so many
ports and so many different facilities, and Customs having
their own procedural ways of doing things a little bit
differently State to State, port to port. But one of the things
I learned just in the last week, looking at a few things based
on the questions that Olivia was running by me--and I just did
a very unprofessional question and answer for a number of
different ports. And one of them is a very simple, but very
significant layer of security, and that is called a seal that
goes onto the container from the port where it originated or
from the manufacturer--that could have been in China,
Singapore, or anywhere else.
That container then goes to the port that is going to be
loading it onto a vessel, and all the paperwork should have
that security seal, which is usually a very large number
identification, on it. That container goes onto the vessel, and
then when it comes into the United States, that should be
looked at as one of the first layers of security, to make sure
that container was not opened en route and therefore tampered
with.
And that is where I see one of the inconsistencies of
something that looks small but that is significant. That should
be done when there is a change of custody of the container,
when it is being shipped to a port in the United States, and
then again when it is being shipped out of the terminal and put
onto our public roads.
The other thing I think that is necessary, and I think Mr.
Drake alluded to, is that the private operators are sometimes
your first line of defense, and I agree with that, but really
the first line of defense is the people who board that vessel
every day and are familiar with the things that we are talking
about right now, and are concerned. Those are the same people
who are from our industry. When there was a global disruption
on supply chain, President Daggett instructed our people that
this is what we do under all circumstances--we have done it
during wars, and now we are dealing with the war of the
pandemic--we show up, and we go to work.
So what I think should be done is, there should be
orientation for all port facilities, for all workers, to make
sure they clearly understand the importance of what is being
done, with the people who work side by side with CBP, but with
CBP themselves, so it is not looked at as a secondary or
auxiliary work, but it is a primary function for Homeland
Security purposes, and for the safety of the people who work at
the port.
And I think that the way of funding something like that,
that is so different--it is my understanding that the harbor
maintenance tax has accumulated and it has a fund sitting there
with not a lot of draw on it, and I think that would be a way
of funding that.
The third thing that I would suggest is that when you are
looking at the applications that are being made--whether it is
TIFIA, or PIDP, or the TIGER grants that are used for port
modifications--I think when those applications are being made
to modify an existing port or for the purpose of funding the
development of a new port, it should be required and a
prerequisite that an inspection facility is part of and
developed into that facility before receiving any public
moneys, because it is something that has to be controlled at
our ports and not taken out onto our public streets.
Senator Carper. Okay; thank you. We have at least maybe one
or two more questions, if you all are up for that. Again,
thanks for joining us today.
With respect to Customs Trade Partnership Against Terrorism
compliance--this would be a question probably for you, Mr.
Pickel, and maybe for Mr. Drake.
The Customs Trade Partnership Against Terrorism--we are big
on acronyms around here. I am not, but there is an acronym for
Customs Trade Partnership Against Terrorism, and it is CTPAT.
And it is a program that is a public/private-sector partnership
and represents one layer of Customs and Border Protection's
multilayered cargo enforcement strategy.
This program asks trading partners to implement stricter
security procedures throughout their supply chains, and in
return their goods or cargo are screened more quickly. Last
year for the second time, the CTPAT Pilot Program Act, which
Senator Cornyn and I introduced, passed by unanimous consent in
the Senate, which means nobody voted against it. And we are
very pleased with that.
The legislation would create a pilot program to strengthen
CTPAT and aims to reduce cargo congestion at ports of entry
while strengthening our national security. I believe that is a
win-win situation.
Question for Mr. Pickel and for Mr. Drake: could each of
you please describe for us how our international trading
partners and companies in the private sector might benefit from
the Customs Trade Partnership Against Terrorism program?
Please, go ahead.
Mr. Pickel. Thank you, sir. I would say, for importers who
are bringing products to the United States, there are really
two fronts where they potentially benefit from participation in
CTPAT. The first is, as you noted, they receive fewer Customs
inspections because they are vetted partners. When they are
selected for inspection, they are given front-of-the-line
privileges, as we say. They are inspected first.
I will note that the CTPAT program is required to review
benefits that are provided to its members on a regular basis
and consult with industry when adjusting those benefits. So
that is a very important process to go through as well.
CTPAT is part of a global construct called the Authorized
Economic Operator concept. And so, other countries have
reciprocal programs, and CBP actually will review those
programs of other countries as well and provide reciprocal
treatments to members of 18 other countries' AEO programs. So
there really is a global impact when we talk about lessening
some of the stress for those parties who have taken on
additional responsibility to vet, on the security side in
particular.
The CTPAT sort of brings into scope both trade compliance
principles as well as security compliance principles. When you
get into the international context, the mutual recognition
arrangements--not agreements, arrangements; there is an
important distinction there--are focused more on the security
side of things, so there is definitely a safety emphasis there.
Senator Carper. All right; thank you.
Mr. Drake, same question.
Mr. Drake. I think Mr. Pickel answered it very well, and I
would align myself entirely with his remarks.
Senator Carper. Okay.
Well, first of all, you have done an admirable job on an
important, sometimes not easily described issue, and you have
done more than justice to it, I think.
I want to say to our staffs--Senator Cornyn's staff on the
minority and our staff on the majority--I want to thank them
very much for choosing you. Out of the thousands of witnesses
we could have brought forward, you rose to the top. We are
grateful for that.
I have a question I would like to ask. When we have a panel
with diverse points of view, and complementary but different
kinds of backgrounds, one of the questions I would like to
ask--I am always looking for consensus. When people watch the
news, they follow the news, they think all we do is fight down
here, that we hate each other. And we not only do not fight, we
actually work together, and for the most part we have decent
relationships.
But I have said a million times in this room, bipartisan
solutions are lasting solutions, and I am always looking for
how we find consensus on difficult issues. So let me just ask
for each--we will start, Mr. Drake, with you, and then Mr.
Paylor and then Mr. Pickel. My question would be, where is
there consensus amongst the three of you? Where do you think
there is consensus in what you said and heard that you would
leave and say, of all that we have heard you give to us today,
these are the areas where there is a real consensus? And it is
important that you not ignore that consensus, but actually grab
it; seize the day.
And so I am going to ask Mr. Drake, where are some areas
where you think there is consensus that we should not look that
gift horse in the mouth?
Mr. Drake. In the trades, when we are talking ports of
entry in particular, first and foremost I think is, we all
agree that ports are absolutely fundamental to our economic
competitiveness, but also to our communities, to the people who
work there and the businesses that support them. And I think
there is broad consensus that we are absolutely aligned, that
we do not want to do anything that would undermine the strength
of our ports or the people who work there, and we also want to
make sure that we are looking at their long-term success.
So I think if we can start there--and recognizing that
there are always going to be principle differences or principle
disagreements between my organization and Mr. Paylor's
organization and Mr. Pickel's organization--I still believe
that that fundamental recognition and agreement can help guide
a whole variety of consensus and bipartisan agreements on a
whole variety of things regardless of what we are talking
about: immigration reform, port security, and the like.
Senator Carper. All right; thank you for that.
Mr. Paylor, areas of consensus, please?
Mr. Paylor. Yes, Mr. Chairman, I agree that I think the
consensus is that everybody has the same goal of protecting the
interests of the United States and the people who we all
represent. As a survivor of September 11th--I shared this just
the other day, that if somebody had asked me on September 10th
did I ever think that what happened on September 11th would
have happened, I would have said on September 10th, no way that
that would ever happen, and it did.
And I feel the same way about the ports now having that
experience, that the ports are secure, for the most part. I
think inconsistency creates some problems, sometimes
bureaucracy interferes with consistency, but I think that with
the longshoreman who is actually the one up here working with
the Customs inspector who is trained to perform the policies
that you create up here with the different governmental
agencies and independent agencies, I think that the goal is the
same.
So how do you streamline what we have learned through
mistakes, and how do we get the people to be consistent with
the bottom line? What are the right procedures? And they will
change from time to time. But I think as long as there is the
willingness of groups that are sitting at this table and the
bipartisan support that you require to get policies done, I
think that we are on the right path.
We do not criticize Customs and Border inspectors at this
point. We know that they are all hardworking men and women, and
we are glad to work alongside them. But I think education for
all levels, from the private sector to the public sector--which
is your port authorities, and including labor, whether it is
union or in other cases, other unions--I think they all have to
have the same understanding of how our ports work.
Senator Carper. Great; thank you.
Mr. Pickel, what are a couple of the areas of consensus
that you would lift up for the consideration of our members of
this committee and their staffs? A lot of people are watching
this by television and watching it remotely, but are there some
areas that you would lift up for us?
Mr. Pickel. Well, let me just note that it is difficult to
be the third person answering when two fantastic answers
preceded me.
Senator Carper. You know what we say when that happens? We
have a way of saying, I would like to take the words of my
colleague and embrace them, and there are ways that we can do
that; you can too.
Mr. Pickel. Absolutely. So I think I would highlight--I
would agree with what my copanelists have said. I think one
thing I would observe is that the element of partnership that
exists at ports, and the mutual respect for the importance of
roles that so many different actors play, really underpins the
importance of the port environment. But also, just as
consumers, as parents, as existing in society, I mean we have
all known what it is like to go to a local store and it is
difficult to find a particular product that you need if your
child is sick, for example, and how we can use the power of
international trade and secure supply chains, resilient supply
chains, not only to create employment opportunities and sort of
share the ability to supply ourselves and the rest of the world
with things that we all need, but also to access those critical
supplies.
So for example, I think the Medical Supply Chain Resilience
Act was something I was hoping to highlight with Senator
Tillis, but I know you and he cosponsored that legislation.
Perfect example of ways to engage with our trading partners to
make sure that we have access to medical supplies with our most
trusted allies. I think that is a great example of looking for
ways to expand those partnerships to overcome the
vulnerabilities that, quite frankly, are not going anywhere.
I think I also heard here today that we do not think that
there is going to be a return to prepandemic normalcy, so
really embracing the opportunities where they exist and
capitalizing on those systemic strengths within the global
international trade system----
Senator Carper. All right; thanks for that.
I think there may be one other question I would like to ask
each of you, and it is: if you were sitting where I am sitting,
and if you had the opportunity to figure out, maybe a question
that should have been asked that you were not asked, what might
be a question that you would like to see asked of this panel.
And if you wanted to answer that question, you could do that as
well. But what do you think maybe we could have asked, should
have asked, and have not asked?
Go ahead, Mr. Drake; you want to take a shot at that? There
is no right or wrong answer; it is not a pass/fail.
Mr. Drake. You know, there have been a lot of, I think,
good questions and discussion during the course of this
hearing. This is a really challenging environment right now,
when you look at the supply chain issues before us. And I think
from my vantage point, the most important thing is just to know
that you all are continuing to show up and ask questions.
So I do not know if I necessarily have a specific question
that I would say that this committee should be asking of us. I
think instead what I would encourage, or what I would urge, is
that the committee continue doing these types of discussions,
these types of hearings, to hear about these issues, because I
do not think that the challenge that we discussed today about
the growth of e-
commerce, the growing trade volumes that are expected to be
coming to our ports, they are not going away, and sitting and
doing nothing is simply not a solution. And I think at some
point Congress is going to have to come forth and take a hard
look at these authorities and these laws and see if there is a
willingness and an interest to update them for today's trade
environment.
Senator Carper. Thank you, sir.
Mr. Paylor, please; same question. Do you know a question
that you think could be asked, should be asked, that has not
been?
Mr. Paylor. I do not know if I can frame it that way,
because I think that this experience has been great, and the
questions that have been asked are right on to some of the
concerns I had coming in here. I think that what I would offer
is that, I was in Sydney, Canada, and a member of Parliament
asked me why did I come from the United States to promote port
development, where they were going to put a container facility
in Sydney, Canada? And I explained to them, you have the public
sector that provides the true asset, which is the land on your
harbors, then you have the private investor that gets involved
and puts the money up for the capital improvement themselves.
Why would you not want to include labor--who I was representing
at the time--into that discussion in order to make sure that
the people who are going to be working and protecting your
investment, protecting your asset, are being involved?
So I would just say that labor does not belong up there
unless it is elected through our constitution, but I do believe
that having labor from the longshore industry involved would be
a total asset on a regular, ongoing basis when enforcing
consistency place to place.
Senator Carper. All right; thank you.
Anyone else? Please.
Mr. Pickel. I would just add, I think something that we
have talked about in our own ways throughout this exchange
today is how can we use existing resources, existing
authorities, existing sort of latent specialization, to address
the challenges that we see today, as well as to be able to see
what challenges may be 5, 10, 15 steps down the road.
I think that this is a difficult area to do that because
jurisdictions, both within Congress as well as across Federal
agencies, are a bit dispersed when we talk about supply chains;
certainly not when we talk about Customs authorities and other
areas, but I think really honing in on what the specific
elements are that kind of combine to really promote supply
chain resilience would benefit from being mapped out with other
agencies, and not limited to Customs and Treasury and so forth.
Senator Carper. Good; thank you.
Before we close--I spent a lot of years of my life in the
Navy. I was a naval flight officer--last Vietnam veteran here
serving in the U.S. Senate--and spent a lot of time in
airplanes. We have a big Air Force base in Dover that most
Americans have heard of, in some cases for tragic reasons,
because it is the last resting place, if you will, for the
fallen heroes that are brought to Dover before they are
reunited with their families. But we also have huge C-5
aircraft, C-17s, and I was describing it the other day at an
event. The Dover Air Force base is the air bridge, a big part
of the air bridge, between our country and Ukraine, playing an
extraordinarily valuable role in that capacity.
I came out of the Navy, and I ended up moving to Delaware
and got myself an MBA and went to work in what was the Division
of Economic Development for only about 6 months. And the
Democrats did not have anybody to run for State Treasurer;
nobody wanted to run. We had the worst credit rating in the
country. We were tied for dead last with Puerto Rico, and they
were embarrassed to be in our company. But nobody wanted to
run. I raised my hand--I had been in Delaware for not even a
year or more--and so they let me run.
But I have never forgot what I learned in the 6 months that
I worked in the Delaware Division of Economic Development. And
one of the things that I have taken with me all of these years
is that government does not create jobs. Sometimes we as
politicians, we feel like we create jobs. I was told recently,
when I was Governor for 8 years, more jobs were created in
those 8 years than in any 8-year period in history in the State
of Delaware, and obviously I did not create one of them.
What I sought to do as Governor of our State was help
create a nurturing environment--a nurturing environment for job
creation. What does that include? Access to capital for folks
who want to start a business or grow a business; it includes
workforce. And when I visit employers up and down the State of
Delaware--I do that every week--I ask three questions: how are
you doing; how are we doing, our congressional delegation, the
Federal Government, how are we doing; what can we do to help?
What I hear from almost everybody in the workforce is, we
need people to come to work, people who are trainable, who will
come and do a day's work for a day's pay.
In terms of what is important in job creation: access to
energy, and as we go further into the future, access to energy
that is clean energy that will help us not only provide our
energy needs, but also help us successfully combat the climate
crisis that is real, of course, every day.
Intellectual property--in Delaware we have more companies
incorporated in Delaware, I think, than any other State in the
country, and one of the reasons why they do that has something
to do with protection of intellectual property. That is
important to them, as you might imagine.
And another issue is transportation, the ability to get
goods and services where they need to go and when they need to
go in a cost-efficient way. For some people, those issues are
not all that interesting, but if we care about jobs for our
children, our grandchildren, we had better be interested in
them, and we had better be interested in our ports.
When I was privileged to serve as Governor of Delaware, a
fellow came, my Deputy Chief of Staff--his name is John Carney;
he is now the Governor of Delaware. But he was my Deputy Chief
of Staff, and he came to me one day and he said, ``The State of
Delaware should buy the Port of Wilmington.'' I said,
``Really?'' And he said, ``It is owned by the city of
Wilmington, and it does not have any money to invest in the
port. The city could use revenues, and if we were to buy the
Port of Wilmington, the city would have the revenues they
need.'' The State was awash at the time in money, and we could
use some of the State's money to take a kind of tired,
dilapidated port and actually make it shine, and that is what
we did, and that is what we have continued to do.
As it turns out, a lot of people think all that is not that
important, who we sell the stuff we produce to around the world
or vice versa. Actually, it is hugely important. We like to
think the markets of the U.S. are more vast than they are, but
most of the markets that we sell to are outside of our Nation,
and a lot of goods go by ships.
I said earlier, I spent a lot of my young life in an
airplane, and it is important what we do with airplanes, like
at Dover Air Force Base. But it is what we do in ships, in
waterways, that at the end of the day is really the 800-pound
gorilla in all of this.
So, I think you gave us some good ideas that I think we
will follow up on, some good ideas we can work on together with
our colleagues. I like to say ``everything I do, I know I can
do better,'' and I think we can always do a better job with
respect to the way that we are sending, selling, shipping our
goods, our services to other countries around the world, and
receiving theirs in return.
And with that, in closing, I want to just express my thanks
to Senator Cornyn and his staff, and I want to express my
thanks to the majority staff for working together in an almost
seamless way to bring us all together for what I think has been
an informative hearing on the entry of merchandise into our
U.S. ports.
We thank you as well for joining us today and for
discussing the importance of trade enforcement and trade
facilitation at the U.S. ports across our country.
For Senators who wish to submit their questions for the
record--we call those QFRs, questions for the record--those
questions are due from our members in 7 days, a week from
today, and we are going to ask our witnesses to respond to
those in 24 hours. Just kidding. We are going to ask you to
respond in 45 days--that is a long time--45 days to respond to
the questions for the record that you might receive from all of
us.
And one of my favorite parts of hearings--I chair the
Committee on Environment and Public Works. We helped write the
bipartisan infrastructure bill. We are just about to report out
a major water resource development act--the election is
tomorrow. We work on all kinds of issues, recycling, you name
it. We get into all kinds of stuff, and occasionally, at the
end of those hearings, I will want to make a unanimous consent
request. And when you ask for unanimous consent, that you want
to get something down into the record, and if none of my
colleagues are still in the room, if they have left and gone to
other hearings or they are on the floor voting, I love asking
unanimous consent to do stuff when nobody is in the room,
because there is nobody there to object.
So, if there is no objection, we are going to adjourn. And
as you leave, go with our thanks, and I hope you will give us a
chance to follow up and explore some of what has been discussed
today.
Thank you very much. And with that, this hearing is
adjourned.
Thank you.
[Whereupon, at 4:26 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Hon. Thomas R. Carper,
a U.S. Senator From Delaware
Good afternoon. It's my pleasure to call to order today's hearing
before the Senate Finance Subcommittee on International Trade, Customs,
and Global Competitiveness.
Thank you to our ranking member, Senator Cornyn, and his team for
working with my staff and me to plan this hearing. We look forward to
hearing the expertise that our witnesses have to offer, and I want to
thank them for joining us to testify today.
I also want to thank Chairman Ron Wyden, Ranking Member Mike Crapo,
and the Finance Committee staff for your policy expertise and for
allowing us to borrow the committee hearing room for the next couple
hours.
Today's hearing provides us with an important opportunity to
examine U.S. Customs and Border Protection policies and procedures for
goods entering the United States. This hearing also provides us with a
forum to discuss the ways in which the policies laid out by Congress
can work to improve port operations while enhancing our supply chains.
Trade is an essential part of the American economy. In 2023, the
United States exported over $3 trillion in goods and services around
the globe, while importing nearly $4 trillion worth of goods in the
same year. And thanks to this exchange of products and services that
come through the more than 300 ports of entry across U.S. land, air,
and sea, our daily lives are enhanced by access to goods from around
the world.
Effective trade facilitation is like a puzzle. Strong port
operations and resilient supply chains must fit together seamlessly to
bring goods to the United States.
When it comes to port operations, most Americans may not realize
that there are thousands of employees working every day to ensure that
our imports are safe and secure. It takes considerable coordination by
U.S. Customs and Border Protection inspectors, as well as specialized
workers and longshoremen, like one of our witnesses here today, in
order to hold our international trading partners accountable to the
rules of the road. For example, when goods come through the Port of
Wilmington, it is the folks I just mentioned who are doing the due
diligence to make sure that a shipping container does not contain
counterfeit products.
Some of these rules of the road are set by Congress through laws
like the bipartisan Trade Facilitation and Trade Enforcement Act and
the bipartisan Uyghur Forced Labor Prevention Act, both of which are
designed to ensure that our trading partners are paying their fair
share of duties on the goods coming into the United States.
And it is our port workers, like those at the Port of Houston, who
thoroughly inspect the goods that arrive in the U.S. for illegal
contraband, like fentanyl or clothing made with forced labor, before
approving them to move on to their next destination. Ultimately, all of
these responsibilities, shared by port employees, work hand in hand to
enhance our economy and our national security.
We also have to ensure that the other piece of the puzzle--our
supply chains--are sufficiently strong to face the pressures that life
throws at us. For example, during the COVID-19 pandemic, supply chain
resiliency was tested like never before. The pandemic exposed many
unprecedented challenges, like bottlenecks and delays for medical
products, that still affect us today. And with the tragic collapse of
the Francis Scott Key Bridge nearly 2 months ago, our supply chains had
to quickly adapt to a single, but vital port of entry not operating at
all.
Thankfully, we were able to divert key imports like automobiles,
sugar, and farm equipment from Baltimore to nearby seaports. But the
accident put a magnifying glass on questions about the preparedness of
our Nations' ports and, by extension, our Nation's supply chains, for
emergency situations like this one.
As many of my colleagues can attest, I often like to quote Albert
Einstein: ``In adversity lies opportunity.'' Despite recent adversity,
today we have an opportunity to learn from our witnesses' firsthand
accounts of what's working and what's not working when it comes to
implementing trade laws--like the ones I mentioned earlier--in port
operations.
We also have an opportunity at today's hearing to better understand
how we can and should invest in the long-term resiliency and security
of our supply chains. In doing so, we can prevent future product
shortages, shore up our ability to access lifesaving products, and
reduce the impact of unpredictable situations on American families.
There is an old African proverb that goes something like this: ``If
you want to go fast, go alone. If you want to go far, go together.''
Throughout this hearing, I urge our colleagues on this committee to
join Senator Cornyn and me in thinking about how we can go further and
faster together. It is the shared responsibility of Congress, port
workers, the Office of the U.S. Trade Representative, and global trade-
governing bodies to work together to protect the people we serve, while
improving the safety and security of global trade.
Once more, let me thank our ranking member, all of our colleagues
on this committee and our staffs, as well as the witnesses appearing
before us today.
______
Prepared Statement of Hon. John Cornyn,
a U.S. Senator From Texas
Thank you, Mr. Chairman, and thank you to our witnesses for joining
us today.
Trade is critical to promoting economic security and improving the
lives of all Americans, and it is especially important to my home State
of Texas. Texas is home to over 30 air, land, and sea ports of entry--
more than any other State in the Nation. Included in that list are
three of the five busiest land ports of entry and the number one inland
port, in terms of total volume, along the entire U.S.-Mexico border.
To further put this in perspective, about half of all U.S.-Mexico
trade moves through a Texas port of entry. Texas fuels America's
economic growth, but I continue to hear about growing challenges at our
ports.
U.S. Customs and Border Protection (CBP) has the thankless job of
facilitating legitimate trade and travel while enforcing both trade and
immigration laws. In recent years, the surge in illegal migration along
the southern border has led to the temporary shutdown of passenger and
rail crossings. Such delays caused by the ongoing border crisis have
resulted in an overall loss of commerce, which is costly to both
businesses and consumers.
In addition to hindering legitimate trade and travel, these
challenges also make it hard to keep unlawful imports such as products
made with forced labor, counterfeits, and deadly drugs like fentanyl
from entering the United States. This is why I introduced the CATCH
Fentanyl Act, which requires CBP to analyze and test new technologies
at land ports of entry to determine which ones are most effective,
efficient, and affordable.
But this is only one piece of the broader changes that are needed
to keep up with the changing global trade environment. Ports of entry
across the U.S. are understaffed, yet the workload continues to grow.
We owe a great deal to the men and women who serve at our ports of
entry day in and day out.
Last year, CBP processed over $5 trillion in combined imports and
exports, and nearly 37 million imported cargo containers at U.S. ports
of entry. While this continued growth is an overall positive for our
economy, we aren't equipped with the resources to maintain it.
Evolving supply chains, new players entering the marketplace, and
the growing volume of commerce crossing our borders all present unique
challenges for CBP and its industry partners. I'm eager to hear more
from today's witnesses about the best ways to meet those challenges.
We also need to find ways to increase efficiencies across ports of
entry. Trusted trader programs are one way to accomplish this goal as
they allow CBP officers to focus on higher-risk goods and travelers. We
should work to enhance and expand these programs where it makes sense,
and I introduced legislation with Chairman Carper to do just that.
The CTPAT Pilot Program Act of 2023 requires DHS to create a pilot
program to assess the value of allowing additional third-party
logistics providers to participate in the program. There are many
opportunities to strengthen U.S. trade by implementing much-needed
changes at America's ports.
I look forward to hearing from today's witnesses on how Congress
might help ease the burden on legitimate trade and travel, while
increasing compliance and enforcing our trade laws.
______
Prepared Statement of John Drake, Vice President, Transportation,
Infrastructure, and Supply Chain Policy, U.S. Chamber of Commerce
Chairman Carper, Ranking Member Cornyn, and members of the
subcommittee, my name is John Drake, and I am the vice president of
transportation, infrastructure, and supply chain policy for the U.S.
Chamber of Commerce. Thank you for the opportunity to testify at
today's hearing regarding U.S. Trade enforcement and entry of
merchandise.
ports are top concern to u.s. businesses
International trade plays a critical role in the American economy
and way of life. Ports are critical to this trade, including the 328
international land, air, and sea ports throughout the United States
that include operations by the U.S. Customs and Border Protection.\1\
The operation of these ports--and their ability to move goods
efficiently as freight grows--is of top concern to the U.S. Chamber.
Delays, congestion, and inefficient operations at ports adds costs to
U.S. businesses and consumers and makes our economy less competitive.
---------------------------------------------------------------------------
\1\ ``At Ports of Entry,'' U.S. Customs and Border Protection,
https://www.cbp.gov/border-security/ports-entry.
This point was dramatically seared into the public's consciousness
during the West Coast port crisis beginning in 2020. This COVID-19
pandemic-era ``demand surge'' arose to a very substantial degree from
U.S. Government outlays to State and local governments, households, and
businesses. Congressional appropriations--signed into law in the Trump
and Biden administrations--provided more than $6 trillion in emergency
supplemental funding to address the pandemic. Partly as a result, U.S.
spending on durable goods was an astonishing 25 percent higher in 2021
than 2 years earlier. This was an unprecedented surge in demand, and
while production of goods ranging from semiconductors to home goods
actually expanded briskly, industry simply could not keep up with the
breakneck expansion in demand fueled by government outlays. Economists
also note that when U.S. consumers made a dramatic shift in spending
from services to goods, with many of these goods purchased on e-
---------------------------------------------------------------------------
commerce platforms.
The resulting record import volumes were further complicated by
factories, port terminals, and other operations impacted worldwide due
to sporadic shutdowns in response to infection outbreaks, putting
pressure on every link in the supply chain--especially the West Coast
ports. The most visible aspect of these bottlenecks was the record
number of ships backed up off the ports of Los Angeles and Long Beach.
On November 16th, a record 86 container ships were at anchor or
loitering offshore waiting for a berth assignment. For reference, from
2018 to 2019, the number of ships at anchor or loitering was typically
zero--arriving ships proceeded directly into port to offload cargo.
We have come a long way since those days, but there remain
significant supply chain challenges confronting the business community,
including the forced shipping diversions from the Red Sea crisis, the
war in Ukraine, and the Francis Scott Key bridge collapse in Baltimore,
MD that is forcing short-term shifts in trade routes by carriers and
shippers. Additionally, the business community is facing labor
challenges that include a shortage of truck drivers, rail workers, and
pilots, as well as numerous contract negotiations over the past few
years that either resulted in a strike--as in the case of the recent
United Auto Workers action earlier this year--or near strikes--
including the Class I freight railroads and their rail unions that
resulted in Congress intervening to stop a strike (2022); the contract
negotiations between the west coast port terminals and the
International Longshoremen and Warehouse Union (2023); and the
Teamsters and UPS (2024). Finally, the business community is facing
challenges at our southern border as migrant flows have forced the U.S.
Customs and Border Protection (CBP) to divert resources and perform
short-term closures of certain commercial ports of entry in order to
assist in the processing of migrants. Each of these events forces a
business to divert limited time and resources to developing contingency
plans, negotiate new shipping routes, or take on higher costs of
delivering their products to their customers.
Today, the business community is closely watching the unfolding
negotiations on a new master contract between the International
Longshoremen's Association, representing approximately 85,000 members,
and the United States Maritime Alliance, representing the employers of
the East and Gulf Coast port terminals. While we have some time before
the expiration of the current contract on September 30, 2024, the
reality is the business community is wary and if they believe these
negotiations are stalling then shippers will start diverting cargo away
from these ports in anticipation of potential labor disruptions. That
said, we urge both sides to continue negotiating in good faith to
maintain consistent and reliable service levels until the completion of
a new contract.
Make no mistake, the accumulation of these events is creating an
enormously difficult operating environment for the business community.
Indeed, one of our member company CEOs recently stated that ``we were
accustomed to managing a `black swan' event once every couple of years.
Now, we are dealing with one every week.''
One of the ``silver linings'' of the COVID-19 pandemic was greater
awareness and focus on the resilience and efficiency of America's sea
ports, where any friction can lead to impacts on consumer choice,
price, and ultimately economic development. Unfortunately, the lack of
a reliable, consistent, and comparable operational performance data
across different ports is proving to be a major challenge to
stimulating improvement in the efficiency of ports.
While modern ports collect data for performance purposes, the
quality, consistency, and availability of data, the definitions
employed, and the capacity and willingness of the organizations to
collect and transmit data to a collating body have all precluded the
development of a robust comparable measures to assess performance
across ports and time. The introduction of new technologies, increased
digitalization, and the willingness on the part of industry
stakeholders to work collectively toward system wide improvements have
now provided the opportunity to measure and compare container port
performance in a robust and reliable manner.
This issue cuts into the long-term competitiveness of our seaports,
essentially the ``productivity'' of these ports, or how quickly they
can load and unload ships. A high level of productivity means
containers and goods move quickly through ports, helping keep
transportation costs low and getting products to store shelves quickly.
Unfortunately, our ports rank as some of the least productive in
the world. The World Bank Group and IHS Markit recently ranked the top
ports in the world and the U.S. had only one port (Wilmington, NC at
#44) in the top 50. Our two most important ports--Los Angeles and Long
Beach--ranked #336 and #346, respectively (and just behind the Port of
Houston at #335). Cutting the performance gap will mean modernizing our
ports the way the rest of the world has already done--in part through
automation. With trade volumes expected to continue growing this is
especially important. Many of our ports are already at capacity and
cannot handle any more traffic without degradation in service levels.
Without improvements from automation and other changes, our less-
competitive ports will hurt the competitiveness of U.S. businesses. But
these steps can only be done in partnership with our port workers
(https://documents.worldbank.org/en/publication/documents-reports/docu
mentdetail/099051723134019182/p1758330d05f3607f09690076fedcf4e71a).
Another ``silver lining'' of the COVID-19 pandemic has been an
increased willingness to utilize data in public-private partnerships to
improve the agility of supply chains. A good example of this is the
U.S. Department of Transportation's Freight Logistics Optimization
Works (FLOW), a public-private partnership among industry and
government that is a forward-looking, integrated view of supply chain
conditions in the United States. FLOW data helps forecast how current
capacity and throughput will fare against future demand, helping
participating companies anticipate changes in supply chain throughput
and take proactive step to mitigate previously unanticipated delays.
The FLOW program was especially valuable in the wake of the Francis
Scott Key bridge collapse, which provided participating members
forward-looking data on bookings as far as 60 days ahead, and where
there were opportunities to move cargo with little to no obstacles.\2\
---------------------------------------------------------------------------
\2\ ``How supply chains used FLOW after the Baltimore bridge
collapse,'' By Colin Campbell, Larry Avila, and Alejandra Salgado,
Supply Chain Dive, May 15, 2024. https://www.
supplychaindive.com/news/flow-baltimore-bridge-collapse-response-
supply-chains-home-depot-ch-robinson-its-logistics/715992/.
---------------------------------------------------------------------------
congress should not ``pull the thread'' on trade law
U.S. Customs and Border Protection (CBP) is the primary Federal law
enforcement agency tasked with screening imports and making sure they
comply with U.S. law.\3\ CBP employs a risk-based approach that
segments importers into higher- and lower-risk pools, allowing the
agency to focus its resources on higher-risk imports, while expediting
lower-risk flows. CBP uses multiple factors to identify high-risk
shipments, including data transmitted at multiple points of the import
process, beginning before goods are loaded in foreign ports and
continuing long after the time goods have been admitted into the United
States. Additionally, CBP works with 47 other Federal agencies
(``partner government agencies'' or ``PGAs'') to enable they perform
their responsibilities in administering the law.\4\
---------------------------------------------------------------------------
\3\ https://www.cbp.gov/border-security/ports-entry.
\4\ CBP, ``Partner Government Agencies Supporting the Border
Interagency Executive Council.'' https://www.cbp.gov/newsroom/photo-
gallery/photo-library/partner-government-agencies-supporting-border-
interagency.
Volumes of shipments can shift quickly based on the agile nature of
supply chains and how businesses serve their customers. CBP and others
are acknowledging that the sheer volume of de minimis shipments is
overwhelming the agency's limited resources and the data submitted to
CBP on these shipments is insufficient to properly identify high-risk
shipments. But these claims are misleading, and CBP has publicly
refuted claims that de minimis is a loophole and that the agency
doesn't screen de minimis shipments. In addition, CPB has clarified
that it uses the same targeting logic for large and small entries.\5\
---------------------------------------------------------------------------
\5\ International Trade Today, April 25, 2023.
For example, the agency collects significant data on de minimis
shipments--with broad authority to expand these collection requirements
under existing law.\6\ By way of example, the table below illustrates
the data CBP collects from de minimis shipments arriving into the
United States via express air transportation, and are also found under
CBP's existing regulations.\7\ Additionally, CBP is currently
conducting a program called the section 321 data pilot to evaluate new
data requirements to help with oversight of de minimis shipments.\8\
---------------------------------------------------------------------------
\6\ ``Section 321 Data Pilot.'' Federal Register 84:35405 (July 23,
2019), pg. 35406.
\7\ International mail shipments are subject to a different set of
CBP regulations. See 19 CFR part 145, subpart G. CBP's shortcomings in
implementing these requirements were the subject of a recent OIG report
found here. https://www.oig.dhs.gov/sites/default/files/assets/2023-09/
OIG-23-56-Sep23-Redacted.pdf.
\8\ ``Section 321 Data Pilot.'' Federal Register 84:35405 (July 23,
2019), pg. 35405.
Data Collected on de Minimis Shipments
------------------------------------------------------------------------
Air Cargo Advance
Screening (ACAS) Data Air Manifest Data \10\ Manifest Release Data
\9\ \11\
------------------------------------------------------------------------
Shipper Name Air Waybill Number/ Value
Master and House
Airway Bill Number(s)
as applicable
------------------------------------------------------------------------
\9\19 CFR 122.48b.
Shipper Address Trip/Flight Number Country of Origin
Carrier Code
------------------------------------------------------------------------
\10\19 CFR 122.48a. CBP
requires similar data
reporting for goods
arriving in other
modes of
transportation such as
trucks arriving at the
land border.
Consignee Name Airport of Arrival Shipper Name, Address,
and Country
------------------------------------------------------------------------
\11\19 CFR 143.23.
Consignee Address Airport of Origin Ultimate Consignee
Name and Address
------------------------------------------------------------------------
Cargo Description Scheduled Date of Specific Description
Arrival of the Merchandise
------------------------------------------------------------------------
Airway Bill Number Total Quantity Quantity
------------------------------------------------------------------------
Total Quantity Total Weight Shipping Weight
------------------------------------------------------------------------
Total Weight Precise Cargo
Description
-------------------------------------------------
Shipper Name and
Address
-------------------------
Consignee Name and
Address
-------------------------
Flight Departure
Message
-------------------------
Weight Code *
-------------------------
Entry Type *
-------------------------
Entry Number *
-------------------------
Currency of Value *
-------------------------
Bond Type (Carrier) *
------------------------------------------------------------------------
* ACE Customs Automated Manifest Interface Requirements (CAMIR).
Taken together, de minimis is an important pillar of trade
facilitation allows U.S. businesses to remain competitive
internationally while allowing CBP to balance its critical law
enforcement responsibilities with its resources.
cbp must focus on addressing the most serious trade vulnerabilities
CBP's Section 321 Data Pilot is part of a larger--and more urgent--
effort by the agency to update its oversight capabilities in the face
of larger changes in the trade environment over the last several years.
During this time, numerous new business models like marketplaces,
consolidators, and fulfillment centers have entered the trade
environment and are importing more goods into the United States. Most
of these businesses have ``previously operated outside the Customs
clearance process,'' according to CBP and the agency lacks the data to
track transactions by these new businesses because many of them did not
exist until recently.\12\
---------------------------------------------------------------------------
\12\ CBP, ``Privacy Impact Assessment for the E-Commerce `Section
321' Data Pilot,'' September 26, 2019, pg. 3. https://www.dhs.gov/
sites/default/files/publications/privacy-pia-cbp-section
321-059-september2019.pdf.
Indeed, CBP acknowledges that the data it collects on all entry
types--de minimis, informal, and formal--often fails to answer key
questions about an import, such as the seller's identity,\13\ and the
traditionally regulated parties, like carriers, often ``are unlikely to
possess all of the information relating to a shipment's supply
chain.''\14\ Simply put, the data CBP collects is out of step with
certain aspects of today's new trade environment. As noted above, CBP
is currently testing solutions to this data issue, which the agency can
resolve under its current authorities.
---------------------------------------------------------------------------
\13\ Ibid., pg. 3.
\14\ Ibid., pg. 3.
Further, CBP's enforcement data shows that about half of all
seizures of counterfeit and pirated goods by value are in the express
and international mail environments, while the other 50 percent are in
ocean, rail, and other modes that carry relatively fewer low-value
shipments. In other words, de minimis shipments do not attract more
counterfeit or pirated goods than other trade channels; nor does de
---------------------------------------------------------------------------
minimis impede CBP's ability to effect seizures.
Taken together, this shows that the issues that allow illicit goods
to enter the U.S. are present across all types of entry. At the same
time, eliminating de minimis would create substantial new challenges
for CBP and U.S. consumers and businesses, including additional costs
to CBP, more processing time due to the additional volume of goods
moving through informal and formal entries, and increase inflationary
pressures on costs for consumers.\15\ Eliminating de minimis would draw
critically needed resources away from the more effective path of
focusing on shipments using tried and true risk-based methodologies.
---------------------------------------------------------------------------
\15\ Hufbauer, Gary Clyde and Hogan, Megan, ``Proposal to get rid
of duty-free imports would punish American consumers and small
businesses.'' Peterson Institute for International Economics. October
2, 2023. https://www.piie.com/blogs/realtime-economics/proposal-get-
rid-duty-free-imports-would-punish-american-consumers-and-small-
businesses.
CBP is preparing a Notice of Proposed Rulemaking that incorporates
features of the Type 86 Test and Section 321 Data Pilots that will
require additional data of traders. CBP needs to issue this proposed
rule, including an articulation of findings coming out of the Entry
Type 86 Test and 321 Data Pilot (which combine to be 80 percent of de
minimis entries), allow a sufficient public comment period to encourage
robust feedback on this economically significant policy, and include a
phased implementation beginning at least 270 days after the publication
of the final rule to ensure the trading community and CBP have time to
make the necessary adjustments to systems and procedures.
congress should update customs law
Rather than ``pull the thread'' on de minimis, we urge Congress to
consider a comprehensive Customs modernization effort that balances the
equally important goals of enforcing U.S. Customs laws with
facilitation of legitimate goods, which enhances resilient supply
chains and promotes economic security--goals that government and
industry share and can achieve together.
Underpinning our Nation's competitiveness are the Customs laws and
rules that facilitate lawful trade and protect American businesses,
workers, and consumers from nefarious actors seeking to introduce
unlawful goods and products into our country. The last update to the
Nation's Customs laws made under the Trade Facilitation and Trade
Enforcement Act of 2015 included many important provisions but the
trade landscape has changed dramatically since enactment of that law,
including the explosive growth of global e-commerce, the emergence of
many new actors (good and bad) in the trade environment, post-COVID
supply-chain constraints and resiliency planning, and growing attention
to supply chain transparency. Overall, many of these changes are
positive, including a number that provide opportunities for small and
medium-sized businesses to compete in the global economy like never
before. However, they also create challenges for supply chains as more
participants and business models enter the space.
CBP has sought to contend with the realities of this new trade
environment by bringing together the trade community in developing the
agency's 21st Century Customs Framework (21CCF). This was an important
starting point to the Customs modernization discussion, and we
applauded CBP's decision to involve the Commercial Customs Operations
Advisory Committee (COAC) and the trade community through the 21CCF
Task Force in developing the 21CCF proposal--which was finalized last
year and is currently in the interagency process. The COAC's work
reflects a rich history of CBP working in partnership with the trade
community to ensure U.S. trade laws consider modern business practices,
reflect that most trade is lawful, and focus CBP resources on nefarious
actors seeking to undercut U.S. businesses, workers, and consumer;
indeed, the Trade Act of 1974 stated the administration ``shall seek .
. . and take into account'' business input in setting trade policy.
But with the 21CCF effort done, Congress must now step in to
develop and advance a truly comprehensive Customs modernization
legislative proposal. Any legislation must include a robust trade
facilitation component that supports our Nation's competitiveness and
provides appropriate entities with the necessary tools to combat
nefarious actors. Customs modernization should not only provide CBP
with appropriate authority and tools to stop unlawful trade, but to
facilitate lawful trade, protect good actors, and provide opportunities
for the trade community to engage with CBP in advancing its important
trade mission.
The Chamber is helping lead a coalition of business groups focused
on developing the next Customs modernization effort and I am including
in my testimony a copy of our recent letter and list of
recommendations.
conclusion
Ports are a critical component of U.S. trade. In addition to the
recommendations listed above, we also urge Congress to pass the
bipartisan Securing America's Ports of Entry Act of 2023. The men and
women of the U.S. Customs and Border Protection play a critical role in
safeguarding our borders from dangerous people and materials, and in
enhancing the Nation's global economic competitiveness by enabling
legitimate trade and travel. CBP staffing has not kept pace with demand
generated by the tripling of goods entering the U.S. in the last 25
years. This bill, introduced by Senators Peters and Cornyn, would
provide authorization for CBP to hire officers who work tirelessly at
each port of entry to protect our national and economic security.
Providing additional CBP officers at this time of growing volumes of
international passengers and cargo would reduce lengthy wait times,
help stop the flow of illicit drugs and other contraband, and
facilitate new economic opportunities throughout the United States.
Thank you again for inviting me to participate in this hearing, and
I look forward to your questions.
attachment one
June 6, 2023
The Honorable Ron Wyden The Honorable Jason Smith
Chairman Chairman
U.S. Senate U.S. House
Committee on Finance Committee on Ways and Means
Washington, DC 20510 Washington, DC 20515
The Honorable Mike Crapo The Honorable Richard Neal
Ranking Member Ranking Member
U.S. Senate U.S. House
Committee on Finance Committee on Ways and Means
Washington, DC 20510 Washington, DC 20515
Dear Chairman Wyden, Chairman Smith, Ranking Member Crapo, and Ranking
Member Neal:
The undersigned organizations support your efforts to modernize the
Nation's Customs laws to meet the challenges of today's trade
environment. As this work continues, we strongly urge you to include
the attached trade facilitation provisions into any Customs
modernization legislation to protect American consumers from unsafe or
harmful goods and to ensure U.S. businesses and workers can compete on
a level playing field in a rapidly changing trade environment.
Trade is the lifeblood of our Nation's economy. Forty million
American jobs--roughly 1 in 5--depend on trade.\1\ Access to imports
increases the purchasing power of the average American household by
about $18,000 annually.\2\ Manufacturers rely on imports of
intermediate goods and raw materials, which represent more than 60
percent of all U.S. goods imported, to provide high-quality products at
competitive prices.\3\
---------------------------------------------------------------------------
\1\ Trade Partnership Worldwide LLC (2020). Trade and American
Jobs: The Impact of Trade on U.S. and State-Level Employment: 2020
Update, https://tradepartnership.com/wp-content/uploads/2020/10/
Trade_and_American_Jobs_2020.pdf.
\2\ Hufbauer, Gary C, and Lu, Zhiyao (Lucy) (2017). The Payoff to
America from Globalization: A Fresh Look with Focus on Costs to
Workers. Peterson Institute For International Economics, https://
www.piie.com/publications/policy-briefs/payoff-america-globalization-
fresh-look-focus-costsworkers.
\3\ U.S. Chamber of Commerce, ``The Benefits of International
Trade,'' January 15, 2021, https://www.uschamber.com/international/
trade-agreements/the-benefits-of-international-trade.
Underpinning our Nation's competitiveness are the Customs laws and
rules that facilitate lawful trade and protect American businesses,
workers, and consumers from nefarious actors seeking to introduce
unlawful goods and products into our country. The last update to the
Nation's Customs laws made under the Trade Facilitation and Trade
Enforcement Act of 2015 included many important provisions but the
trade landscape has changed dramatically since enactment of that law,
including the explosive growth of global e-commerce, the emergence of
many new actors--good and bad--in the trade environment, post-COVID
supply-chain constraints and resiliency planning, and growing attention
to supply chain transparency. Overall, many of these changes are
positive, including a number that provide opportunities for small and
medium-sized businesses to compete in the global economy like never
before. However, they also create challenges for supply chains as more
---------------------------------------------------------------------------
participants and business models enter the space.
U.S. Customs and Border Protection (CBP) sought to wrestle with the
realities of this new trade environment by bringing together the trade
community in developing the agency's 21st Century Customs Framework
(21CCF). This was an important starting point to the Customs
modernization discussion, and we applaud CBP's decision to involve the
Commercial Customs Operations Advisory Committee (COAC) and the trade
community through the 21CCF Task Force in developing the 21CCF
proposal--which we expect to be finalized after the next COAC meeting,
scheduled for June 14th. The COAC's work reflects a rich history of CBP
working in partnership with the trade community to ensure U.S. trade
laws consider modern business practices, reflect that most trade is
lawful, and focus CBP resources on nefarious actors seeking to undercut
U.S. businesses, workers, and consumer; indeed, the Trade Act of 1974
stated the administration ``shall seek . . . and take into account''
business input in setting trade policy.
As the 21CCF effort winds down, the next step is for Congress to
develop a truly comprehensive Customs modernization legislative
proposal. Any legislation must include a robust trade facilitation
component that supports our Nation's competitiveness and provides all
entities with the necessary tools to combat nefarious actors. Customs
modernization should not only provide CBP with appropriate authority
and tools to stop unlawful trade, but to facilitate lawful trade,
protect good actors, and provide opportunities for the trade community
to engage with CBP in advancing its important trade mission.
Therefore, as Congress works to modernize CBP's Customs
authorities, we recommend that the attached priorities be included as
part of a comprehensive legislative proposal. These additional
proposals are necessary tools and resources to help meet the realities
of today's trade landscape while also helping simplify and streamline
the Customs process to make U.S. businesses more competitive in the
global economy.
Sincerely,
Airlines for America
American Association of Exporters and Importers
American Trucking Associations
Autos Drive America
Cargo Airline Association
Consumer Technology Association
Foreign Trade Association
National Association of Manufacturers
National Customs Brokers and Forwarders Association of America
National Foreign Trade Council
National Retail Federation
Retail Industry Leaders Association
U.S. Chamber of Commerce
CC: Members of Senate Finance Committee
Members of House Ways and Means Committee
attachment two--coalition priorities
customs modernization reauthorization proposals
The trade landscape is changing. The rise of global e-commerce,
post-COVID
supply-chain constraints and resiliency planning, new sourcing
considerations, new players in the trade space, and the overall
rethinking of trade. These changes can make global supply chains more
complex as more participants and business models enter the space. These
challenges, however, also present opportunities. For example, small and
medium-sized businesses now can compete in the global economy in new
and powerful ways.
The U.S. Customs and Border Protection's 21st Century Customs
Framework (21CCF) is an important starting point to any Customs
modernization discussion. We also applaud CBP's decision to involve the
trade community through the Commercial Customs Operations Advisory
Committee (COAC) and the 21CCF Task Force in developing the 21CCF
proposal. The vast majority of the trade community is compliant with
existing U.S. trade laws and shares a commitment to advancing our
Nation's economic security. While work on this effort is winding down,
the trade community is shifting its focus to Congress on completing
work on a comprehensive Customs modernization legislative proposal.
Congress should look to the 21CCF proposal as a starting point while
also looking to build upon CBP's existing trade facilitation
authorities and incorporate a robust trade facilitation component that
supports our Nation's competitiveness and provides all entities with
the necessary tools to combat nefarious actors. Customs modernization
should not only provide CBP with appropriate authority and tools to
stop unlawful trade, but to also improve trade facilitation, protect
good actors, and provide opportunities for the trade community to
engage with CBP in advancing its important trade mission.
Therefore, as Congress works to modernize CBP's Customs
authorities, we outline several priorities below that are critical to
any legislative effort. The 21CCF product is an important start but
these additional proposals will be critical to provide CBP with the
tools and resources to meet the changes of the trade landscape while
also helping simplify and streamline the Customs process to make U.S.
businesses more competitive--and resilient against forced labor and
counterfeits--in the global economy.
trade facilitation proposals
A Government-Wide Policy Approach to Customs Entry
Processes: The current, fragmented approach to goods entry is
unnecessarily costly and slow, with many agencies requiring
duplicative information via paper-based processes. CBP's
Automated Commercial Environment (ACE) established the
capability for a single, intergovernmental interface; however,
in practice, each Federal agency adopted or opted to continue
different policies, procedures, and processes that undermined
the promise and intent of ACE, resulting in shippers
interacting with multiple agencies to clear goods. There should
be a single, centralized policy and regulatory process that is
coordinated through CBP, utilizing the Border Interagency
Executive Council (BIEC) or another body that reduces the
duplicative nature of the entry process while modernizing many
of the current paper-based processes into a fully digital
process. Regardless of the mechanism, the authority to make and
drive decisions must reside within this forum and the private
sector should be fully included to provide valuable insight
into the impact of current and future trade developments. The
initial focus of this effort should be reducing the redundant
information requirements across government agencies and
consolidating inspectional authorities on the border to ensure
appropriate personnel are available when and where CBP is
clearing shipments.
Continue to Facilitate Entries Under Regulations: Congress
should expand the United States' global leadership in
implementing the Trade Facilitation Agreement by amending 19
U.S.C. 1498 to grant the Secretaries the ability through
rulemaking to adjust for inflation for entries under
regulations. Finally, Congress should codify the parties
granted the right to make entry as currently defined under
Customs regulations.
Fight Forced Labor Through Better Information Sharing:
Forced labor is abhorrent and has no place in supply chains.
Congress should consider the following proposals to mitigate
forced labor:
Require public disclosure of a sanitized
(e.g., non-classified) version of the Department of
State's and the United States Trade Representative's
diplomatic strategies to address root causes of forced
labor.
Empower the Forced Labor Enforcement Task
Force created under the United States-Mexico-Canada
Free Trade Agreement (USMCA) to execute its mission to
coordinate a government-wide strategy.
Encourage CBP and other government
agencies to share specific information with the private
sector, particularly with trusted entities, to better
inform sourcing decisions and address forced labor
risks earlier in the supply chain.
Create a ``safe space'' for industry to
voluntarily share information with the government
without fear that such exchanges will result in
punitive actions or violate existing law. Other Federal
agencies have established similar ``safe spaces'' to
great effect.
When goods are detained or denied entry
due to suspected forced labor, CBP should be required
to disclose what specific component of the shipment is
suspected of forced labor composition. This would
expedite the submission and review of documents
relevant to CBP's concern.
Require CBP to disclose why a shipment
was denied entry to allow importers to identify and
remediate areas of concern of their supply chains
suspected of forced labor.
Timelines for Government Response: The trade is bound by
very defined timelines in most circumstances and yet there are
very few timelines that bind CBP and other partner government
agencies (PGAs). This can lead to uncertainty for U.S.
businesses as they try to move forward with business planning,
product launches, and financial certainty. The Customs
modernization effort should establish reasonable timelines for
CBP and other PGAs to respond to trade actions and requests,
such as petitions, protests, advice, and Customs rulings. If a
decision is not produced within the timeline, it should be
considered an affirmative response for the trade. Holding
agencies accountable to provide timely decisions should be a
key part of this legislation.
Codify the Express Delivery Sector: The pandemic underscored
the importance of the express delivery sector as it was crucial
to maintain global supply chains to transport necessary medical
supplies and consumer goods as safely and efficiently as
possible. U.S. importers and exporters from across industry
sectors have always relied on this mode of transportation prior
to the pandemic, but more so during it. However, the express
delivery clearance process exists only by regulation, without
specific statutory basis like other essential members of the
trade community such as brokers and importers. Codifying the
unique processes and procedures of the express industry in
statute, as currently reflected in regulation and trade
agreements, would recognize the express sector as a standard
mode--like air, rail, truck, and ocean vessel--by which cargo
enters the U.S. Such codification of the express delivery
clearance process includes the allowance for:
A single submission of information, a
manifest, covering all goods contained in an express
shipment;
Expedited release of these shipments
based on the minimum documentation of a single
submission of information; and
Consolidated entries.
Establish Data Collection Standards: Data is critical for
CBP to perform its important trade function but there should be
clear standards that guide why CBP may require the trade
community to provide certain data, how it can be used, and
affirmatively require the removal of duplicative data
requirements across all U.S. Federal agencies. One solution is
to tie CBP's data collection to the trade facilitation
principles modeled after the Trade Act of 2002 (see 19 U.S.C.
1415). Congress previously took important steps to streamline
and automate the appropriate level of data required to import
goods into the U.S. and it should continue working with the
trade community to ensure the accuracy and usefulness of
required data and to create the opportunity for voluntary
bidirectional information sharing. Requiring additional data at
entry frequently adds transaction costs for business and
therefore CBP should be able to clearly justify new data
collection requirements. Government information requirements
should apply equally to all delivery service providers, to
include the U.S. Postal Service. In addition, with increased
authority for CBP to collect data, it is important to include
appropriate business confidentially protections so that
confidential information does not end up in the public domain.
Clarify the Benefits, Opportunities, and Harmonization of
Trusted Trader Programs: Congress should direct GAO, DHS IG, or
other appropriate oversight bodies to provide regular
evaluations of Trusted Trader programs, like CTPAT to evaluate
the benefits provided to participating organizations are
commercially significant and consistent with requirements in
the Trade Facilitation and Trade Enforcement Act of 2015. This
evaluation should also include the codification of minimum
standards of participation to provide objective measurements of
participation. In addition, this evaluation should consider
reducing certain fees to reflect the lower ``service'' demands
for specific entries due to private-sector investments in
Trusted Trader program participation. In addition, Trusted
Traders should be seen as a reliable cadre of partners who are
willing to collaborate with the government in addressing
ongoing and emerging compliance challenges with an eye toward
effective and efficient solutions. All U.S. Government agencies
should be required to recognize this status by providing
similar benefits in the entry process. Trusted Traders are
given benefits through third country programs where Mutual
Recognition Arrangements are in place but are not ``trusted''
by Federal agencies that have regulatory authority related to
import requirements. Congress should require Trusted Trader
recognition across that group of U.S. agencies. The study
should also examine importers to pay duties in a similar manner
to how corporations pay quarterly estimated taxes, which allows
the importer to reconcile each quarter or at the end of the
year based on what is entered into commerce versus shipments
reexported, destroyed, or filed for duty drawback.
Limit the Use of Outdated ``Redelivery'' Authority: Cargo
released from ports for entry into the U.S. economy is
currently subject to a 60-day ``redelivery'' period after
release decisions are made, meaning a government agency can
arbitrarily require that cargo be made available for further
inspection or be subject to significant financial penalty. This
does not align with modern trade practices where goods are
frequently delivered directly to the end user in a short period
of time after release. This authority should be limited further
and reserved for security and safety concerns only.
Progressive Filing: Government agencies have access to
significant information about shipments before they arrive at
U.S. ports for formal processing by CBP. This information
allows for advanced targeting and analysis by other agencies
that have regulatory responsibilities in the import process and
should facilitate quicker determinations of admissibility. This
goal would be well served by embracing iterative or progressive
data filing to allow the best party, with access to the most
current data file it at the earliest feasible time, building
the data for each shipment until the arrival at the border. At
such time, if an entry summary is filed, it must be certified
and submitted by an importer, importer-of-record, or licensed
Customs broker. This should be linked to trusted trader and
authorized economic operator benefits, such as admissibility
decisions that the trade can rely upon, qualification of free
trade agreement qualifications, and promoting confidence in the
broader construct of a secure and compliant supply chain.
Essentially, Congress should direct CBP to establish a Green
Lane for inbound cargo, that could have full USG release prior
to arrival. This program would be in addition to the
information already filed for security purposes, especially in
the air environment, and apply to both imports and exports.
Section 301 Duty Refunds: Many companies granted exclusions
from section 301 duties are owed refunds on duties that had
already been paid because exclusions were retroactive to when
duties went into effect. The problem is that CBP's legal
authority to process the refunds expired before these companies
were able to collect refunds. In many cases, the Customs clock
ran out before the exclusion was even granted--in these cases,
companies never had an opportunity to get their money back.
Legislative language is necessary to give CBP the one-time
legal authority it needs to ensure companies can get their
money back.
Automated Commercial Environment (ACE): The trade community
currently faces a series of challenges which ACE was designed
to meet, including a lack of capability to handle and track in
real time intermodal shipment transfers, insufficient
functionality to allow the supply chain to efficiently handle
in-bond functions, and the automation of the export process.
Funding to provide the functionality to meet these needs is a
critical near-term requirement. Congress should also direct CBP
to develop the successor trade facilitation system (ACE 2.0) to
allow for a business process model or account-based processing
(e.g., giving businesses the choice to file entries in a manner
that makes sense for them). This successor system should have
an effective governance structure that supports government-wide
decision making as well as incorporates the needs of and
gathers regular feedback from industry. This system should also
be optimally efficient and fully leverage current information
processing technology (AI, cloud computing, et cetera).
Duty and Fee Structure Study: Congress should direct a study
by the Government Accountability Office or other appropriate
independent authority to examine CBP's current duty and fee
structure and make recommendations on a comprehensive
restructuring in light of today's trade environment. The study
should examine the effects of users who pay the duties and
fees, especially small and medium-sized entities, as well as
what duties and fees are obsolete in today's economy.
Support Due Process: Congress should ensure due process for
all parties involved in the trade where there is a suspected
violation or noncompliance with U.S. law.
Visibility and Transparency: Congress should require CBP to
provide visibility parity to all currently authorized parties
(to include brokers and carriers) of a shipment to allow for
transparent information exchange and effective streamlining of
imports.
Increased Resources to Fight Counterfeits: CBP should take
additional steps to help battle counterfeiting, equipping
private-sector actors with better information on both good and
bad actors. As a start, CBP should fully implement provisions
in the Trade Facilitation and Trade Enforcement Act of 2015 to
increase information sharing with the private sector to
facilitate targeted enforcement. Additionally, it should
simplify the process of detention and seizure of counterfeit
products.
Enhance Information Sharing with the Private Sector: The
government should more readily share enforcement-related
information with ``parties of interest'' to a particular
transaction. Current limitations, like the Trades Secrets Act,
should be revisited and revised along the lines of section
71022(d) of the Senate-passed U.S. Innovation and Competition
Act of 2021. Congress should permit the sharing of information
on abandoned shipments, not just those where an official
enforcement action was taken.
Fund Ports of the Future: Port infrastructure is not able to
keep up with the volumes and needs of modern trade. Funding
should be appropriated and allocated to CBP cargo processing
and trade facilitation capabilities, including advanced
technologies like Artificial Intelligence/Machine Learning and
advanced robotic facilities including advanced Nonintrusive
Imaging technologies.
Green Trade Benefits: Congress should focus CBP's efforts to
develop a ``green trade'' strategy by providing specific duty
preferences and by directing the agency to develop commercially
meaningful benefits for ``green''-compliant imports, among
other steps.
______
Prepared Statement of James H. Paylor, Jr., Assistant General
Organizer, International Longshoremen's Association
Good afternoon, Chairman Carper, Ranking Member Cornyn, and
distinguished members of the subcommittee. Thank you for the
opportunity to appear today to discuss trade and commerce at our
Nation's ports.
My name is James H. Paylor, Jr., and I am currently an assistant
general organizer of the International Longshoremen's Association, a
labor union that represents over 65,000 longshore workers on the
Atlantic and Gulf Coasts, the Great Lakes, major U.S. rivers, Puerto
Rico, Eastern Canada, and the Bahamas. I have been a longshoreman since
1973 and worked primarily as a ships carpenter/maintenance worker.
Longshore workers load and unload vessels and barges and perform
clerical work to effectuate the receiving and delivery of cargoes.
Maintenance and terminal employees perform a multitude of ancillary job
functions on the terminals and piers.
As a carpenter at the terminals in Philadelphia and southern New
Jersey, I assisted the Customs inspector by opening the casings, boxes,
crating, or any packaging so that the inspector could confirm that the
cargo was the cargo shown on the bill of lading (a listing of goods
consigned to the control of the stevedore/
terminal operator). The inspectors checked the country of origin to
ensure that the cargo was in compliance with U.S. trade rules, looked
for anything that was suspicious in the cargo and the packaging, and
examined for insects and drugs. The Customs inspectors inspected
various types of cargo, including breakbulk cargo, containers, and
special or heavy-lift cargoes.
In particular, imported meat was and is still inspected at special
facilities on or near the piers and terminals. The ILA-represented
employees open a select number of boxes for the inspector to confirm
that goods meet U.S. trade requirements as to the quality of meat and
to ensure that no tainted meat or toxins enter the country. Once the
inspector reviews the samples, ILA-represented employees repackage the
meat and stamp all boxes that are USDA-approved. The longshore workers
then load the cargo onto trucks for delivery. A similar process is used
for imported fruit and vegetables.
Over the years, several events forced modifications to the
inspection procedures of Customs and Border Protection (CBP). One such
event was the implementation and continued growth of containerization.
Today, much of the cargo is transported in containers. CBP examination
stations have been erected at the container terminals and longshore
workers assist inspectors to identify the containers that require
inspection. Longshore workers also cut the security seals, open the
containers and, upon the direction of the CBP inspector, remove the
contents of the container and open the casing for direct inspection.
The inspection includes confirming the contents' country of origin,
ensuring that the contents are consistent with the information
container on the manifest and identifying anything suspicious as to the
product or casings, particularly to identify illegal drug importation.
After the inspection, longshore workers repackage the cargo and
resecure the container with a new security seal. The ILA members are
very proud to work with CBP and in many cases have even developed
friendships.
Another major event that caused modifications to CBP's inspection
procedures was the September 11, 2001 terrorist attacks. After
September 11, 2001, CBP's level of scrutiny heightened to include
inspection for weapons of mass destruction. Local jargon was ``Drugs,
Bugs and Bombs.'' Because there were not enough CBP inspectors to serve
ports with multiple facilities, Centralized Examination Stations (CES)
were created. Many of the CES were away from the waterfront facilities
so cargo was trucked from the port facilities to the CES. For example,
a CES was created in Chester, PA to serve the Ports of Philadelphia and
Wilmington because the location was centralized between the two ports.
Although this solution solved the CBP inspector shortage, the creation
of off-terminal CES had a severely negative impact on the ILA-
represented workforce. When the inspections moved from the terminal,
the ILA-represented employees who worked with the CBP inspectors at
waterfront facilities lost their jobs. The employees who performed
their functions at the CES were paid a lower hourly rate and received
lower employee benefits. The creation of CES replaced family-sustaining
jobs with poor working standards. In addition, the additional truck
move to the CES added an additional expense to the shipper's usual
delivery cost.
In addition to the economic impact on both the ILA-represented
workforce and the shippers, the creation of the off-terminal CES
increased the risk of relocating weapons of mass destruction and
illegal drugs to another location. In the Port of Philadelphia,
containers are discharged at the waterfront terminal, trucked through
communities, on highways, past a sports complex, over an Interstate 95
bridge crossing to the CES in Chester, PA. If any of those containers
house weapons of mass destruction, this extended transport could have
disastrous effects.
CBP has done a fantastic job of implementing technology through the
Vehicle and Cargo Inspection System (VACIS) non-intrusive x-ray
machines that are currently being utilized at our ports and with
databases that prioritize risk, CBP is certainly performing at the
highest level. However, with the constantly growing cargo volumes and
the necessary demand to protect our borders in the south and on all
coasts, our ports are still a highly vulnerable target for future
terrorist actions.
The ILA's members have been the first line of defense at our ports
and have shown an unwavering commitment to our country. Most recently,
when the collapse of the Francis Scott Key Bridge in Baltimore caused
supply chain pressures, the longshore workers in other ports accepted
the challenge and kept cargo moving.
The Transportation Infrastructure Finance and Innovation Act
(TIFIA) program, Transportation Investment Generating Economic Recovery
(TIGER) grants, and Port Infrastructure Development grants have
provided funding to facilitate port growth. I recommend that, in the
future, to be eligible to receive one of these grants, the applicant
must present a construction design that includes inspection locations
at the waterfront facility. Revenue from the port maintenance taxes
could also be used to educate longshore workers on the CBP procedures
to enhance their understanding of the shared responsibility to ensure
the safety of the ports and the country as a whole.
Finally, one of the other issues of concern is that the process of
inspecting container seals to ensure that cargo has not been tampered
with is not consistent from port to port. I suggest that a uniform
procedure be implemented in all ports to ensure that safety is
paramount in all locations.
The International Longshoremen's Association congratulates the
hardworking men and woman of the U.S. Customs and Border Patrol, and I
thank you for the opportunity to testify before this subcommittee.
______
Prepared Statement of John Pickel, Senior Director,
International Supply Chain Policy, National Foreign Trade Council
about national foreign trade council
NFTC is the premier association for leadership and expertise on
international trade and tax policy issues. We believe trade and tax
policies should foster fair access to the opportunities of the global
economy and advance global commerce for good. NFTC serves as a nimble
and effective forum for businesses to engage critical and complex
issues together and to foster trust with governments to improve policy
outcomes in the U.S. and around the world. Leveraging its broad
membership and expertise, the NFTC contributes to a greater
understanding of the critical role that an open, rules-based
international economy plays in the success of American businesses,
entrepreneurs and workers, and shared global prosperity.
overview
Supply chains have been challenged by inadequate supply of
equipment like chassis and containers, disputes between labor and port
management, logistical inefficiencies that clogged ports with empty
containers, and shortages of services like truck drivers. During the
pandemic, disruptions that were once unfathomable became commonplace as
deliveries were delayed, vessels were stacked off the coast, and
everyday needs like medications were scarce.
The scale of disruptions during the pandemic showed that supply
chains are inherently nimble, particularly when industry and government
collaborate to find ways over, around, or through obstacles. In some
cases, resilience added significant costs that many businesses are not
able to absorb. That sense of shared commitment and government-industry
collaboration, which thrived during the pandemic, is equally important
now in mitigating impacts of geopolitical tension, economic pressures,
and infrastructure failures.
Supply chain pressures are felt most acutely at ports of entry,
making them the focus of efforts to untangle supply chains. However,
many of the processes that play out at ports of entry begin long before
a vessel arrives in Houston, a truck crosses a land border in Laredo or
Detroit, or a plane carrying express packages or international mail
lands at JFK or LAX. There is a missed opportunity to address supply
chain issues before they reach a port of entry.
Consumers drive demand in international trade and businesses
structure supply chains to meet those needs. Partnership between
government and industry to develop policies and regulations that
anticipate and respond to supply chain challenges would promote
resilience and avoid requirements that could snarl supply chains.
Industry should be seen as an ally that can partner with government
agencies to ensure the facilitation of entry of legitimate goods to the
U.S. economy as well as the enforcement of laws that prevent the entry
of illicit and dangerous items.
customs processes at ports of entry
U.S. Customs and Border Protection (CBP) is the primary Federal
agency charged with facilitating the entry of legitimate goods into the
American economy and taking appropriate law enforcement action to
address illicit shipments.
CBP is the largest U.S. Federal law enforcement agency, with over
65,000 employees. While that organization has responsibilities in other
policy areas, this statement will focus on its trade mission. At 328
ports of entry across the country, CBP processed over $5 trillion in
combined imports and exports in Fiscal Year 2023. This includes 36.6
million cargo containers, 190 million express shipments, 81 million
international mail shipments, and over a billion de minimis
shipments.\1\
---------------------------------------------------------------------------
\1\ https://www.dhs.gov/sites/default/files/2024-03/
2024_0311_fy_2025_budget_in_brief.pdf.
While CBP has a consistent presence at all air, land, and maritime
ports of entry, they also coordinate with nearly 50 Federal agencies to
enforce approximately 500 trade laws.\2\ In FY22, CBP collected $111.8
billion in duty, taxes and fees and seized over 46,000 shipments.\3\
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\2\ https://www.cbp.gov/newsroom/stats/
trade#::text=CBP%20is%20responsible%20for%20
enforcing,imports%20and%20unfair%20trade%20practices.
\3\ https://www.cbp.gov/newsroom/stats/trade.
Early in my tenure at CBP, someone told me ``if you have seen one
port, you have seen one port.'' Maritime ports work differently from
northern border land ports, which are different from airports and
southern border land ports. Even within a single port, merchandise can
arrive by different means. At airports, for example, passengers bring
back items that need to be declared and are subject to duty, express
consignment carriers transport high volumes of packages in their own
planes, international mail arrives on commercial passenger flights, and
all manner of shipments arrive through non-express air cargo carriers.
These examples are not exhaustive, but meant to give a sense of the
diversity in port processes. No matter the port or manner of entry, CBP
screens shipments of all values and receives trade data to inform
revenue collection operations and security information to evaluate
risks and ensure all trade laws are followed.
importance of data and cargo processing digitization
The effective use of cargo information by CBP and other Federal
agencies is fundamental for effective enforcement at U.S. ports that
does not slow the movement of trade that fuels the American economy.
Whether cargo is arriving at our ports by air, land, or sea, various
parties file information with CBP before cargo arrives at the port,
providing trade and security data that serves as the basis of risk
across various fields. While a small number of shipments or ``entries''
are selected for various types of examinations or other additional
scrutiny, most of the cargo is ``released'' before it actually arrives
at the port. This data also allows other government agencies to execute
their respective authorities. In order for all of this to work smoothly
and efficiently, systems that collect and share this information and
share it with appropriate government and private sector entities need
to be constantly upgraded.
Because data elements are provided by various ``filers'' throughout
the entry process and rely on transaction documents throughout the
supply chain, the government should use innovative approaches to
objectively validate this data. Industry has worked closely with CBP
and other agencies to identify the best way to provide data that
addresses well-defined enforcement gaps.
That said, sometimes more data is just more data. One example of
this principle is the use of Harmonized Tariff Schedule (HTS)
classification for shipments that already provide detailed
descriptions. Correctly classifying products adds considerable
transaction costs to the entry process and is only operative when
determining the amount of duties owed. There has been discussion over
the years about the enforcement value of HTS codes but, in my view,
they do not increase capabilities beyond duty assessment. In addition
to added costs and potential time delays for industry, government
agencies can be overwhelmed by an influx of surplus data that makes the
``haystack'' larger, thus making it harder for their processes to focus
on relevant information.
The effective collection of data from the right parties at the
right time in the Customs entry process, and using innovative,
digitally enabled methods to validate that data, promotes compliance
and effective enforcement of Customs authorities and trade
facilitation.
importance of trade facilitation and adoption of technology
As I discussed before the full Finance Committee last February,
trade facilitation measures support resilient supply chains, promotes
economic competitiveness and underpins 40 million American jobs that
rely on international trade.\4\ A report by Third Way found that
reducing administrative burdens throughout our supply chain has the
potential to save the United States $88 billion in export costs and
create just under 1 million jobs nationwide across every State in the
country.\5\
---------------------------------------------------------------------------
\4\ Trade Partnership Worldwide LLC (2020). Trade and American
Jobs: The Impact of Trade on U.S. and State-Level Employment: 2020
Update. https://tradepartnership.com/wpcontent/uploads/2020/10/
Trade_and_American_Jobs_2020.pdf.
\5\ Horowitz, Gabe (2022). Reducing the Red Tape Around Supply
Chains. Third Way. http://thirdway.imgix.net/pdfs/reducing-the-red-
tape-around-supply-chains.pdf.
Trade facilitation principles should be seen as the low-hanging
fruit when looking for logistics and entry efficiency at ports in the
U.S., and their adoption should be encouraged among our trading
partners. Effective trusted trader, de minimis, and process automation
programs speed the flow of trade. They are tested and proven ways to
promote resilience and enable enforcement and are consistent with how
CBP currently implements U.S. trade laws.
Trusted Trader Programs
Trusted Trader programs are beneficial to the government and
industry. Through participation in these programs, actors engaged in
international trade demonstrate a high level of compliance with legal
entry requirements through a significant initial assessment of business
practices and recurring validations. Participants must comply with
minimum security criteria, or otherwise be subject to suspension or
removal from the program.
Participating in and maintaining eligibility for this program is
expensive, so Congress has mandated that these programs, including
CBP's Customs-Trade Partnership Against Terrorism (CTPAT), provide
commercially significant benefits for program participants.\6\ In
addition to efficiency gains for industry and government in the U.S.,
mutual recognition of similar programs around the world encourages best
practices and improves efficiency of cross border movements. Mutual
recognition of Authorized Economic Operator programs is a mutually
beneficial construct to industry and governments and should be expanded
as a supply chain resilience best practice.
---------------------------------------------------------------------------
\6\ See 19 U.S.C. 4311(b).
As the name of CTPAT implies, the program has traditionally been
focused on ensuring high levels of security related compliance among
potential participants. In recent years, however, the trade-focused
Importer Self Assessment has been folded into CTPAT and trade-related
minimum security criteria, notably around forced labor, have been
---------------------------------------------------------------------------
incorporated.
CTPAT should be continually refreshed to expand its benefits for
membership, in consultation with industry, to encourage membership
among companies that will experience costly barriers to participation.
Further, CBP should consider opportunities in creating additional
trusted trader programs (outside of the CTPAT umbrella) to encourage
participation by new segments of the trade community.
Facilitative Treatment for Low-Value Shipments
American businesses and consumers benefit from a strong de minimis
policy, as Congress intended when increasing the value threshold for
duty free treatment to $800 in 2016.\7\ This fixture of U.S. Customs
law empowers small businesses to source inputs for products that will
become American exports. It increases the purchasing power of low-
income consumers who would otherwise be disproportionately affected by
the combination of inflation and the increased costs of tariffs. De
minimis also allows Customs officers to enforce U.S. laws without
requiring the completion of cumbersome processes related to duty
calculation. CBP currently receives data that enables enforcement of
U.S. laws in de minimis shipments. As a baseline, manifest data for de
minimis shipments provides information about the sender, recipient,
value, country of origin, detailed product description, and more to
inform risk assessment. More data was received on almost 80 percent of
de minimis shipments so far this year through the Entry Type 86 test
and 321 data pilot.\8\
---------------------------------------------------------------------------
\7\ See Pub. L. 114-125, section 901 (130 STAT. 147).
\8\ See https://www.cbp.gov/trade/basic-import-export/e-commerce.
Compliance rates in de minimis shipments are on par or better than
other environments when put in the context of overall volume. For
example, over 90 percent of fentanyl is seized on the southwest land
border.\9\
---------------------------------------------------------------------------
\9\ See https://abcnews.go.com/Politics/border-officials-seizing-
lot-fentanyl-complicated-problem-solve/story?id=105255151.
American leadership in encouraging other countries to adopt a
meaningful de minimis standard also promotes the competitiveness of
U.S. exports. Almost 90 countries around the world provide duty free
treatment for low-value goods.\10\ Efforts to degrade our strong de
minimis policy are being noticed by other governments, which would be
more likely to reduce or eliminate their de minimis standards. As a
result, U.S. exports would be subject to Customs duties when entering
those economies. This would create a race to the bottom that increases
the end cost to consumers and reduces the competitiveness of American
businesses in the global economy.
---------------------------------------------------------------------------
\10\ See https://www.trade.gov/de-minimis-value.
There are several opportunities to build on the current de minimis
policy. First, CBP should adopt meaningful technology tools that use
public-facing, proprietary, and law enforcement information to validate
cargo data provided across all values and ways that they arrive in the
U.S. Second, a whole of government approach should be adopted to
improve information sharing. In the same way that CBP uses data to
identify risk, the ability of 47 partner government agencies to execute
their regulatory missions would be enhanced by sharing data more widely
and more efficiently. Third, Congress should require CBP to issue
findings and seek feedback on next steps related to the Entry Type 86
and 321 data that have been a test and pilot, respectively, since
2019.\11\
---------------------------------------------------------------------------
\11\ See https://www.federalregister.gov/documents/2019/07/23/2019-
15625/section-321-data-pilot and https://www.federalregister.gov/
documents/2019/08/13/2019-17243/test-concerning-entry-of-section-321-
low-valued-shipments-through-automated-commercial-environment.
---------------------------------------------------------------------------
Digitization of Border Processes
The U.S. Government set the standard for digitizing border
procedures, including participation of the many Federal agencies with
various authorities related to imports, large and small, that arrive at
our ports around the clock. While the creation of a digital system for
the input of data has created efficiencies for industry and government,
improvements still need to be made. CBP is expected to develop
functionality labeled as ACE 2.0 in 2026.\12\ This process should
incorporate the functionality needs of industry users as well as other
government agencies.
---------------------------------------------------------------------------
\12\ See https://www.cbp.gov/trade/innovation/envisioning-ace-20.
This process would benefit from governance improvements that
provide clear decision making authority, priorities, resourcing, and
private sector coordination responsibilities. This could be
accomplished through codification of the Border Interagency Executive
Council--which was established to serve as a coordination body.\13\
This structure would be a helpful tool in response to supply chain
disruptions like cyber events and port congestion.
---------------------------------------------------------------------------
\13\ See Executive Order 13659, February 19, 2014.
Finally, Congress should provide clear direction to CBP and other
agencies that regulate cross-border trade on the business standards and
best practices they should be incorporating into current and future
systems. For example, updated systems should accept electronic payments
and downtime procedures should be developed by all Federal agencies to
prohibit reliance on the filing of paper forms.
Clear Compliance Standards
Global supply chains can be challenged by new compliance programs
that must address increasingly diverse legal standards and policy
prescriptions. As U.S. trade laws and those of our trading partners
adopt new laws and requirements on imports in areas such as
environment, labor, and others, compliance efforts would greatly
benefit from clear standards on how to demonstrate compliance. These
mandates frequently require more precise visibility into supply chains,
including tracing back to raw materials in some cases. When developing
these statutory and regulatory constructs, governments should
collaborate to develop a shared understanding of how to best
demonstrate compliance. This interaction should also include
consideration of how to address identified risks before cargo arrives
at U.S. ports.
prioritize addressing risk at the source
Reliance on border enforcement to address risks puts additional
stress on ports, government resources, and the ability of industry to
effectively move goods across borders. An example of this principle is
forced labor prohibitions. Forced labor is abhorrent and has no place
in supply chains. Keeping items made using forced labor out of supply
chains is a shared objective of government agencies and responsible
industry. Border enforcement is an important element of forced labor
enforcement, but these measures must be supported by a clear government
effort to engage trade partners through direct diplomatic channels. The
U.S. Government has a responsibility to work with our trading partners
to strengthen governance around their domestic labor standards,
identify forced labor products being transshipped, and facilitate the
sharing of information between governments that improves the targeting
of illicit activity. Further, U.S. Federal agencies should develop
mechanisms for sharing information about known risks with industry to
better inform sourcing decisions. Diplomatic engagement was envisioned
by the Uyghur Forced Labor Prevention Act and various information
sharing constructs could be used to share resulting assessments with
supply chain professionals, especially trusted traders, to achieve this
objective. Similarly, working with trading partners to address
intellectual property theft, at the source, would be more effective
than relying entirely on border enforcement.
conclusion
Supply chains are long, frequently complicated, and subject to
external stress. Promoting compliance with U.S. trade laws by providing
predictability and resilience is a shared objective of government and
industry. Ports are dynamic and unique, with many moving pieces that
frequently operate independently. Entry processes should reflect a
desire to minimize pressure on the flow of goods through ports.
Collaboration between government entities and industry continues to be
an effective way to employ principles of risk management and trade
facilitation that will advance U.S. economic security in the future.
NFTC and our members look forward to working with the committee in this
pursuit.
______
Communications
----------
National Association of Foreign-Trade Zones
National Press Building
529 14th Street, NW, Suite 1071
Washington, DC 20045
Phone 202-331-1950
Fax 202-331-1994
https://www.naftz.org/
The National Association of Foreign-Trade Zones (NAFTZ) appreciates the
opportunity to submit comments to this hearing on ``Examining Trade
Enforcement and Entry of Merchandise at U.S. Ports.'' NAFTZ is the
collective voice of all constituents of the U.S. Foreign-Trade Zone
program, a vital component of the U.S. economy. The FTZ program was
created by Congress in 1934 to benefit American jobs by creating
physical areas within the United States that are considered outside of
the U.S. commerce for customs entry purposes. After thorough vetting by
the Departments of Commerce and Homeland Security, companies utilize
FTZ benefits to help level the playing field for their U.S. operations
where tariff inequities create an unintended advantage for foreign
competitors. According to data to Congress in the latest annual FTZ
Board report, there are 1,200 active FTZ operations across the country
directly employing more than 500,000 American workers. There is at
least 1 FTZ in every state.
U.S. FTZs fit squarely into supply chain logistics, security and trade
enforcement. U.S. FTZs must comply with specific operational,
regulatory and reporting requirements including all import regulations
applicable to every U.S. importer as well as additional security
requirements and CBP access unique to FTZ operations. FTZs are also
subject to CBP reporting when each shipment arrives at the zone. In
both instances, CBP receives the same detailed data, meaning that CBP
actually receives the data twice along with the same manifest reporting
requirements for all goods destined for and transiting the U.S. Unlike
other importers, however, the data from an FTZ is produced after
physically receiving and inspecting the goods, rather than from supply
chain documentation utilized prior to the goods arriving and finalized
over a longer period of time.
Taken collectively, as a result of the numerous levels of reporting,
FTZs provide supply chain transparency not available in other modes of
importing. The NAFTZ has long advocated for FTZs to have access to de
minimis filing to provide that transparency to low-value shipments into
the U.S. since the goods would be received and inspected prior to
entering the commerce, which is not the case in today's de minimis
environment. Data received by CBP when the goods are admitted to the
zone in addition to the manifest data received while the goods en route
would give CBP the opportunity to inspect those goods at any time
within the FTZ. This would provide incentive to keep these warehouses
open in the U.S., employing American workers, rather than moving
operations offshore to utilize de minimis and avoiding tariffs and data
reporting.
CBP's regulations and the level of security required to become an FTZ
also permits the storage of potentially inadmissible goods while
assessment of the goods is under review. In the case of goods targeted
for forced labor concerns, U.S. FTZs can help alleviate port storage
constraints by offering alternative secure storage of the goods while
CBP is making a determination. However, CBP has revoked this ability,
citing resource and systems challenges which has not only presented an
undue burden on the trade, but an undue burden on CBP.
NAFTZ is advocating for dedicated resourcing of the FTZ program
supervision within CBP to address these and other needs within the
program. The economic potential that spurred Congress to create the
U.S. FTZ program is not being fully realized due to CBP resource
constraints. According to data reported by the U.S. FTZ Board in its
annual report, over the past decade, U.S. FTZ operations--both
production and distribution--have increased significantly, employment
has grown 35 percent, and resulting exports have increased 132 percent
(236 percent from distribution and 98 percent from production),
exemplifying the program's success. This critical supply tool could
further be used to promote re-shoring, supply chain diversity, security
and sustainability, with proper funding of CBP resources dedicated to
the program.
We encourage the entire federal government to unlock the full potential
of FTZs through full inclusion of these vital U.S. importers when
considering trade enforcement and the merchandise entry process.
Thank you.
______
National Treasury Employees Union
800 K Street, NW, Suite 1000
Washington, DC 20001
202-572-5500
https://www.nteu.org/
Statement of Doreen P. Greenwald, National President
Chairman Carper, Ranking Member Cornyn, distinguished members of
the subcommittee, thank you for the opportunity to provide this
testimony. As President of the National Treasury Employees Union
(NTEU), I have the honor of leading a union that represents 29,000
Customs and Border Protection (CBP) Officers, Agriculture Specialists
and trade enforcement and compliance specialists who are stationed at
328 air, sea, and land ports of entry across the United States and 16
Preclearance stations throughout the world.
CBP's mission at the ports of entry includes, but is not limited
to, combating human smuggling, countering illicit drugs, and
facilitating the lawful flow of trade and travel, to ensure our
national and economic security. CBP employees at the ports of entry are
the second largest collectors of revenue in the federal government,
collecting almost $112 billion in duties, taxes, and fees in FY 2022.
In addition, CBP Office of Field Operations (OFO) personnel are on the
frontline of illegal narcotics interdiction. CBP seizures of fentanyl
have been escalating for several years, increasing by more than 200
percent over the last 2 fiscal years. In FY 2022, CBP seized
approximately 14,700 pounds of fentanyl nationwide, permanently
removing these drugs from the illicit supply chain, keeping them out of
our communities and denying drug trafficking organizations profits and
critical operating capital.
Our air, sea and land ports of entry are in desperate need of more
CBP employees to reduce wait times for international travelers and
cargo shippers, improve the interdiction of illegal drugs and illicit
goods, and handle the processing of migrants seeking asylum. Congress
must support CBP trade enforcement personnel who save lives, save jobs
and raise significant revenue every day.
According to CBP's most recent publicly released workload staffing
models, the agency needs to hire over 4,000 CBP Officers, 250
Agriculture Specialists and at least 160 non-uniformed Trade
Specialists to address staffing needs at the ports of entry. These
staffing shortages have led to longer wait times at border crossings,
increased workloads, overtime for personnel and temporary duty
assignments (TDYs) to southwest border ports that exacerbate staffing
shortages at other ports.
Unfortunately, the final FY 2024 DHS appropriations deal only
provided funding to hire 150 CBP Officers to serve at southwest border
ports of entry which does not begin to meet the staffing needs at the
ports of entry nationwide either to process legal international trade
and travel vital to the U.S. economy or to stop deadly fentanyl and
other contraband from crossing through U.S. ports of entry. Inadequate
funding for these CBP employees shortchanges our economic growth and
our national security.
In addition, CBP expects the staffing crisis at the ports to
explode by 2028. Acting CBP Commissioner Troy Miller testified that due
to the expiration of 20-year LEO retirement coverage for CBP Officers
hired prior to July 6, 2008, the agency expects CBP Officer retirements
will increase by 400 percent in 2028. He stated that this attrition
will need to be addressed by over-hiring of CBP Officers in FY 2026 and
2027 and that we will need to also increase funding for the Federal Law
Enforcement Training Centers (FLETC) because these new hires will need
to be trained.
In addition to uniformed CBP Officers responsible for trade
enforcement, CBP employs non-uniformed trade personnel, including Entry
Specialists, Import Specialists, Paralegal Specialists that determine
and assess fines, penalties and forfeitures, Customs Auditors and
Attorneys, and other trade compliance personnel. These CBP trade
employees are the frontline of defense against illegal imports and
contraband and enforce over 400 U.S. trade and tariff laws and
regulations to ensure a fair and competitive trade environment pursuant
to existing international agreements and treaties, as well as stem the
flow of illegal imports, such as illicit opioids, pirated intellectual
property, and counterfeit goods, and contraband such as child
pornography, illegal arms, weapons of mass destruction, and laundered
money.
When CBP was created in 2003, it was given a dual mission of not
only safeguarding our nation's borders and ports from terrorist
attacks, but also the mission of regulating and facilitating
international trade. CBP is responsible for collecting import and
antidumping and countervailing duties and ensuring importers fully
comply with all applicable laws, regulations, quotas, Free Trade
Agreement (FTA) requirements, and intellectual property provisions.
Customs revenues are the second largest source of federal revenues
collected by the U.S. Government after tax revenues, and that revenue
funds other federal priority programs. CBP employees processed more
than $3.35 trillion in total import value of goods and collected almost
$112 billion in total revenue in Fiscal Year (FY) 2022.
NTEU is deeply concerned with the lack of resources, both in
dollars and workforce, being devoted to CBP's trade functions. Lack of
sufficient focus and resources not only costs the U.S. Treasury in
terms of customs duties and revenue loss, but also costs American
companies in terms of lost business to unlawful imports.
Along with facilitating legitimate trade and enforcing trade and
security laws, CBP trade personnel are responsible for preventing entry
of illegal transshipments, goods with falsified country of origin,
goods that are misclassified, and goods produced by forced labor. CBP
implements Section 307 of the Tariff Act of 1930 (19 U.S.C. 1307)
through issuance of Withhold Release Orders and findings to prevent
merchandise produced in whole or in part in a foreign country using
forced labor from being imported into the United States, as well as the
Uyghur Forced Labor Prevention Act (UFLPA) (Pub. L. 117-78), that
prohibits the importation of goods into the United States manufactured
wholly or in part with forced labor in the People's Republic of China,
especially from the Xinjiang Uyghur Autonomous Region, or Xinjiang.
Since the UFLPA went into effect through May 29, 2023, CBP stopped more
than 4,000 shipments of goods valued at over $1.3 billion for
enforcement action review.
In FY 2022, CBP added only 65 new positions across its trade
enforcement enterprise to support UFLPA efforts. This included hiring
new CBP officers, import specialists, trade analysts, auditors,
intelligence analysts, investigators, attorneys, and support staff. The
increased enforcement scope of the UFLPA, however, has highlighted
resource gaps for CBP to sustain consistent UFLPA operations across the
328 ports of entry, 10 Centers of Excellence and Expertise, field
offices, and headquarters.
According to CBP's most recent Resource Optimization Model (ROM)
for Trade issued in 2021, there are 2,349 CBP revenue occupations
personnel onboard, 154 positions short of the CBP revenue staff
authorized by Congress. These occupations include Import (937), Entry
(395), Fines, Penalties, and Forfeiture (84) National Import (89) and
International Trade Specialists (197); Customs Auditors (321),
Attorneys (111) and Chemists (106).
By law, CBP must submit to Congress its Trade ROM every 2 years. It
is our understanding that CBP has not yet provided its FY23 Trade ROM
to Congress and NTEU urges the Committee to request CBP to provide FY23
Trade ROM to the Committees on Ways and Means and Finance as soon as
possible.
Continuing staffing shortages, inequitable compensation, and lack
of mission focus are the main reason experienced CBP commercial
operations professionals at all levels, who long have made the system
work, are leaving, or have left the agency. Further, more than 25
percent of CBP Import Specialists will retire or be eligible to retire
within the next few years.
When Congress created the DHS, the House Ways and Means and Senate
Finance Committees included Section 412(b) in the Homeland Security Act
(HSA) of 2002 (Pub. L. 107-296). This section mandates that ``the
Secretary [of Homeland Security] may not consolidate, discontinue, or
diminish those functions . . . performed by the United States Customs
Service . . . on or after the effective date of this Act, reduce the
staffing level, or reduce the resources attributable to such functions,
and the Secretary shall ensure that an appropriate management structure
is implemented to carry out such functions.''
In October 2006, Congress enacted the Security and Accountability
For Every (SAFE) Port Act (Pub. L. 109-347). Section 401(b)(4) of the
SAFE Port Act directed the DHS Secretary to ensure that requirements of
section 412(b) of the HSA (6 U.S.C. 212(b)) are fully satisfied. CBP
satisfied this statutory requirement by freezing the number of
``maintenance of revenue function'' positions at the level in effect on
the date of creation of the agency in March 2003. As you know, CBP was
created by the merger of the former U.S. Customs Service, the
Immigration and Naturalization Service, and the Animal, Plant, Health
Inspection Service. In March 2003, the number of commercial operations
employees at the former U.S. Customs Service was significantly less
than prior to 9/11.
In March of 2003 when CBP stood up, there were only 984 Import
Specialists on board. That is 265 Import Specialist positions less than
the 1998 base total, and 505 less than the FY 2002 Import Specialists
optimal staffing level. A significant reduction in the number of
``maintenance of revenue function'' positions had occurred at the U.S.
Customs Service between 9/11 and March 2003 when CBP was established.
Section 412(b) of the HSA reflected Congress' concern regarding this
diminishing number of customs revenue function positions versus customs
security function positions at the U.S. Customs Service and fears that
erosion in revenue functions would continue and be exacerbated in the
future by its merger into CBP.
Even though CBP complied with the letter of Section 401(b)(4) of
the SAFE Port Act, it appears to NTEU that CBP views the ``March FY
2003 Staff On-Board'' numbers ``maintenance of revenue function''
positions, including vital trade facilitation and enforcement positions
as Entry and Import Specialists, as a staffing ceiling rather than a
floor. CBP did not even achieve that threshold number of Import
Specialists positions in FY 2021. As stated in the FY 2021 ROM, the HSA
threshold for import specialists is 984 positions; in FY 2021, there
were only 937 positions onboard.
Despite the significant investment in forced labor trade
intervention, prevention and enforcement, the number of CBP's non-
uniformed trade personnel has not materially increased since CBP was
established in 2003 even though inbound trade volume multiplied 32
times between FY 2003 and FY 2023.
De Minimis Entry and CBP Synthetic Opioid Interdiction
The vast majority of all illicit drug entering the U.S. are seized
by CBP at the ports of entry. Between 2013 and 2017, approximately
25,405 pounds, or 88 percent of all opioids seized by CBP, were seized
at ports of entry. CBP plays a leading role in addressing the nation's
opioid epidemic--a crisis that is getting worse, as the deadly chemical
fentanyl is being manufactured in China and is either funneled through
Mexico in regular cargo or sent by mail and express consignment
operators directly to addresses in the U.S. One of the main arteries of
illicit precursor drugs to and through the U.S. to Mexico for
processing is by de minimis shipments.
The increase in de minimis shipments is linked directly to the
passage of the Trade Facilitation and Trade Enforcement Act of 2015
(TFTEA), Pub. L 114-125, which was signed into law on February 24,
2016. In Section 321 of TFTEA, Congress significantly changed the way
``low value'' imports enter into the U.S. by raising the de minimis
threshold from $200 to $800. The de minimis threshold was first enacted
in 1938 at $5 to avoid administrative expense to the government
disproportionate to the amount of revenue realized from inspecting low
value goods.
In 2015, before TFTEA, shipments valued at $200 or less were
approximately 134 million. In 2016, the year after the passage of
TFTEA, de minimis shipments increased by 65 percent to nearly 220
million. Between 2016 and 2022, the number of de minimis shipments had
increased to 685 million--a 410% increase in 7 years and the number of
de minimis shipments topped one billion in 2023.
According to CBP Acting Commissioner Troy Miller, every day, nearly
4 million low value de minimis shipments arrive at CBP facilities for
targeting, review, and potential physical examination. Once a shipment
qualifies as de minimis, it may automatically be declared under Section
321 during import. In terms of imports, it would still require
inspection (per law) but there is less paperwork involved. Because
there are no duties or taxes owed at arrival, these shipments speed
through the clearance process and are seldom held for inspection. And
even though de minimis packages are low value, they pose the same
potential health, safety, economic security, and forced labor risks as
larger and more traditional cargo and containerized shipments. Low
value does not mean low risk. And in actuality, these packages are not
only not inspected, but their paperwork is rarely reviewed by CBP due
to overwhelming volume and severe CBP understaffing at the ports.
In April, CBP Acting Commissioner Miller testified that ``the small
package environment skyrocketed in FY 2023 . . . with over 1 billion
packages claiming de minimis preferences in the U.S. Currently, CBP
processes approximately 4 million de minimis packages per day, up from
2.8 million this time last year. This poses significant challenges for
all of us as bad actors exploit this explosion in volume to traffic
illicit goods.''
In FY 2022, the majority of CBP seizure cases originated in the de
minimis environment, including those related to narcotics (including
fentanyl), agriculture, intellectual property rights, and health and
safety. De minimis now represents 85% of shipments entering the U.S.
and the primary mode of transportation is air (express and postal),
though de minimis cargo coming in through ocean and truck shipments are
steadily increasing.
In September 2019, CBP began requiring the electronic filing of
necessary documents for de minimis packages. Entry Type (ET) 86 allows
CBP to ``ensure regulatory requirements are met while expediting
clearance.'' In other words, ET 86 allows CBP to electronically clear
low value freight at express consignment speeds in all cargo
environments, but without paying express consignment fees.
The shippers' desire to move things as fast as possible is in
direct conflict with CBP's ability to conduct enforcement. The main
problem is that CBP is severely understaffed in the regular cargo
environment where most of ET 86 freight is being processed.
NTEU fought to increase CBP staffing at express consignment hubs
where the highest volume of de minimis packages have been entering the
U.S. over the past several years. For example, NTEU worked to more than
double the CBP Officers at the Cincinnati DHL hub from 20 to 47 CBP
Officers. Now more and more of de minimis packages are coming through
regular air cargo and CBP has only three CBP Officers inspecting
regular cargo at the Cincinnati airport.
Also, ET 86 packages and freight that go through cargo modes other
than express consignment are not subject to the Express Consignment
Carrier Facilities (ECCF) fee that reimburses CBP for costs incurred at
and in support of operations at express consignment facilities.
Section 337 of the Trade Act of 2002 (Pub. L. 107-210), codified as
19 U.S.C. 58c (b)(9)(A)(ii) and (b)(9)(B), authorizes the establishment
and use of the Express Consignment Carrier Facilities (ECCF) fee to
fully reimburse CBP for costs incurred at and in support of operations
at express consignment facilities. Congress mandated that 50 percent of
ECCF fee collections (along with the inflation amounts) be paid to the
Secretary of the Treasury. The balance is used to reimburse CBP for the
cost of providing inspection services to express consignment operators
or carriers.
The FY 2025 President's Budget includes a proposal for a De Minimis
User Fee that would cover CBP's costs for the staff and tools needed to
better identify, and seize, illicit fentanyl being shipped in small
packages. There would be a $2.00 fee per non-ECCF and non-mail package
lower than $800 and CBP would maintain this fee. This new $2.00 de
minimis user fee proposed in the FY25 budget request must first be
authorized by the House Ways and Means and the Senate Finance
Committee.
NTEU fully supports the establishment of the $2.00 de minimis user
fee but urge Congress to make sure that this user fee goes 100 percent
to reimburse CBP for the cost of providing inspection services to ET 86
shippers--in other words fund new CBP Officers and other trade
enforcement personnel to handle the increasing volume of ET 86
shipments at the ports that are seeing the dramatic increases.
Additional CBP trade enforcement staff will not only help to stop the
flow of undervalued, illicit, and counterfeit shipments currently
flowing into the U.S. but also increase trade revenue collections and
penalizing violators of the Trade Act of 2002.
Trade Act of 2002 and Electronic Advance Data
Under Section 343 of the Trade Act of 2002 (Pub. L. 107-210) as
amended, and under the SAFE Port Act, CBP has the legal authority to
collect Electronic Advance Data (EAD) provided by air, sea, and land
commercial transport companies, including Express Consignment Carriers
and importers. In the postal environment, bilateral agreements
regarding EAD between the U.S. Postal Service (USPS) and foreign postal
operators have increased CBP's ability to target high-risk shipments.
Additionally, the Synthetics Trafficking and Overdose Prevention (STOP)
Act (Pub. L. 115-271) requires that DHS prescribe regulations requiring
the USPS to transmit advance electronic information for international
mail to CBP consistent with the statute. Currently, USPS provides EAD
from more than 129 foreign postal services, and CBP utilizes EAD to
actively target international mail shipments at seven International
Mail Facilities.
For cargo arriving by aircraft, express consignment operators are
required to provide EAD to CBP prior to the scheduled arrival of
express cargo in the U.S. Express consignment operators accept items
for delivery to the U.S. at points of sale in foreign countries and
maintain control of items until they are delivered to the addressees.
Analysis of EAD is one of the tools that helps CBP identify threats
in inbound international express cargo items and includes the sender's
name and address,
recipient's/consignee's name and address, contents' description, number
of pieces, and total weight. Express consignment operators found in
violation of these requirements are subject to a penalty. EAD
requirements were to be implemented by CBP in three phases.
Phase 1 required complete electronic manifests provided to CBP for
international cargo 4 hours prior to arrival from most of the world and
for Canada, Mexico, the Caribbean, parts of Central and South America
at wheels up from the foreign airport. However, every day these
manifests are inaccurate with countless overages, which are shipments
that are not included on the manifest. In other words, an overage is an
un-manifested, unknown shipment which is in violation of the law. A
manifest may have 1 or 500 overages, but the highest penalty for all
overages is $5,000, and this penalty is routinely mitigated to $50 for
a first violation and $100 for subsequent violations.
Phase 2 required air carriers, including express consignment
operators to provide quality shipper/consignee data. These addresses
should show that the packages are received from legitimate businesses/
addresses and are delivered to legitimate end consumers/addresses. If
not, the carrier or express consignment operator is subject to a
penalty.
In 2007, CBP drafted the Phase 3 implementation plan, but to date
has not implemented it. Phase 3 would allow CBP Officers to impose a
monetary penalty for incorrect manifest descriptions and false value
declarations. Without implementation of Phase 3, CBP Officers cannot
penalize carriers for bringing in items manifested as one thing that
turn out to be another. Many of these shipments are not concealed well
and are often simply mislabeled. For example, narcotic chemicals may be
labeled car parts or supplement powder, and CBP cannot impose a penalty
for this type of mislabeling.
GAO reports that express consignment operators have reported that
``they are able to individually scan each item upon arrival, providing
an opportunity to identify and set aside express cargo targeted for CBP
inspection based on EAD.'' (GAO-17-606, page 29.) However, CBP Officers
tell NTEU that this is not the case for overages that arrive
unmanifested or for mislabeled packages. These CBPOs report that
express consignment operators rely on Phase 1 electronic manifests to
be accurate when they frequently are not. Also, when first rolled out,
Trade Act violations were required to be reported to HQ. That is no
longer the case.
Also, according to GAO, ``although CBP has been using EAD to target
express cargo for inspection since approximately 2004, it has not
evaluated whether this method results in benefits relative to other
methods of choosing express cargo . . . for inspection.'' (GAO-17-606,
page 28.)
For these reasons, NTEU recommends that Congress direct CBP to
provide a report on an annual basis on the individuals and companies
that violate the Trade Act to the Senate Committee on Ways and Means
and Finance. This report should include the violator's name; the
violation committed; the port of entry/location through which the items
entered; an inventory of the items seized including description of the
item and quantity; place of origination including address of the
violator; the amount in penalties assessed by CBP for each violation by
violator name and port of entry/location; the amount of penalties that
CBP could have levied for each violation by violator name and port of
entry/location and the rationale for negotiating down the penalty for
each violation by violator name and port of entry/location.
Congress, by requiring CBP to report this useful information on
violators and violator penalty assessments, would enhance CBP's
interdiction of prohibited items from entering the U.S. through express
consignment operators.
Lastly, even though accurate and reliable advance information is
critical to CBP's targeting efforts to ascertain legitimate shipment
transactions from those involved in illegal and illicit business
transactions utilizing the U.S. Postal Service and private carriers,
the ability to assess penalties for violations of Section 343 of the
Trade Act is equally important. Unfortunately, penalties are routinely
mitigated to a fraction of the full penalty and are now just considered
the cost of doing business.
Imposing proper penalties would not only increase compliance but
would also provide significant revenue. For example, at one express
consignment port of entry where penalties had previously been mitigated
to 1% of the maximum penalty, they have recently been mitigated to 10%.
In 2023, 97 penalties were assessed at that port for a total of
$1,821,098. Of these 97 penalties, 42 were Trade Act violations. But
many ports do not have as robust a penalty effort as this express
consignment hub because of staffing limitations. It is unclear to what
extent the original Trade Act penalties were mitigated from the
original penalty amount and how much could have been collected in
penalty if not mitigated. A penalty is not an effective deterrent if it
is mitigated to a token amount that is just seen as the cost of doing
business.
RECOMMENDATIONS
The more than 29,000 CBP employees represented by NTEU are proud of
their part in keeping our country free from terrorism, our
neighborhoods safe from drugs and our economy safe from illegal trade,
while ensuring that legal trade and travelers move expeditiously
through our air, sea, and land ports. These men and women deserve more
staffing and more resources to perform their jobs and fulfill their
trade enforcement mission of stopping illicit drugs and illegal goods
from entering U.S. commerce thereby saving lives, saving jobs, and
raising revenue.
Therefore, NTEU urges the Committee to:
Support FY 2024 funding for at least 1,000 new CBP Officers,
240 Agriculture Specialists and 100 non-uniformed CBP trade
operations personnel;
Authorize a $2.00 De Minimis User Fee and ensure that this
user fee goes 100 percent to reimburse CBP for the cost of
providing inspection services to ET 86 shippers;
Reevaluate the de minimis threshold and reform the process
that verifies the valuation of cargo entering the U.S. under
Section 321;
Support a requirement for CBP to provide a report on an
annual basis on the individuals and companies that violate the
Uyghur Forced Labor Prevention Act and the Trade Act of 2002 to
the House Committee on Ways and Means and Senate Committee on
Finance; and
Support legislation to end the mitigation of Trade Act
penalties.
Thank you for the opportunity to submit this statement for the
Record to the Committee.
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