Emergency Committee For American Trade - Publications

SECTION III.1: TRADE LEGISLATION

Much of U.S. trade is governed by legislation, from tariffs to trade remedy actions to rules on regulation of goods and services imports. This chapter covers several of the principal areas of trade legislation where there has been action over the last year or where action is likely, including:

Passage of legislation late last year on preference;
Recent legislative proposals to improve enforcement of U.S. trade agreements and trade laws;
Reform of the trade remedy (antidumping, countervailing duty and safeguard) laws; and
Reform of the Customs structure.

Other key legislative frameworks and proposals are discussed as follows: renewal of Trade Promotion Authority in section II.1; permanent normal trade relations with Vietnam in section II.2; permanent normal trade relations with Russia in section II.3; approval of the U.S.-Oman Free Trade Agreement and consideration of trade agreements with Peru, Colombia, Panama and Korea in section II.4; proposed modifications to the framework for national security investment reviews in section III.2; sanctions legislation in section III.6; international tax issues in section III.9; renewal of trade adjustment assistance programs in III.10; and legislative frameworks for the Caribbean Basin preference programs in section IV.3.

Building a Consensus on Trade and Investment Liberalization

ECAT believes it is critical for the United States to rebuild a national and bipartisan consensus on the value of trade and investment liberalization – a consensus that existed for decades following World War II. We must effectively demonstrate that expansionary trade and investment policies are essential to U.S. economic growth and the high U.S. standard of living.

ECAT is working with the Administration, Congress and others in the private sector to help rebuild this consensus. An important part of this endeavor involved ECAT’s multi-year effort to document the importance of trade and investment liberalization in generating prosperity in the United States in the 1990s, as discussed in more depth in section I.1.

ECAT POSITION: ECAT supports efforts by the Administration, Congress, and the private sector to rebuild the consensus on the importance of trade and investment liberalization.

Trade Preference Program Legislation

In December 2006, the House and Senate passed legislation (H.R. 6406 and H.R. 6111) to extend and expand trade preference programs for developing countries generally and for sub-Saharan Africa, Haiti, and the Andean Pact countries, as well as other measures. Signed into law on December 20, 2006, this legislation included the following key preference program provisions:

Generalized System of Preferences (GSP)

Extends GSP for two years to September 30, 2008.

Expands President’s authority to limit benefits for products that constitute 150 percent of the competitive need limit or 75 percent of U.S. imports of that product.

African Growth and Opportunity Act (AGOA)

Extends current provision allowing benefits for apparel made with fabric from third countries until 2012, with a 3.5 percent cap.

Limits third-country fabric benefit for apparel goods made from components that are in “abundant supply” in Africa, including denim, which is deemed to be in abundant supply because of known production in Lesotho.

Provides duty-free treatment for lesser-developed countries for certain textiles (non-apparel) of wholly-made African fabric.

Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act

Creates new preference program for Haiti, applying the same criteria and textile and apparel transshipment requirements as AGOA.

Provides duty-free treatment for apparel from Haiti, where 50 percent of the value of the finished product is made of U.S., Haitian, FTA, or preference-program origin in years one through three; in year four, the percentage grows to 55 percent and in year five, to 60 percent.

Limits benefits to one percent of U.S. apparel imports in year one, growing by 0.25 percentage points per year through year five.

Allows a “single transformation” rule of origin for bras.

Provides a small tariff preference level (TPL) for woven apparel, of 50 million square meter equivalents (SMEs) in years one and two and 33.5 million SMEs in year three.

Liberalizes the rule of origin for wire harnesses, providing benefits if 50 percent of the value added is of U.S., Haitian, or TA origin.

Andean Trade Preferences Extension Act

Extends Andean Trade Preferences Act for six-months for Peru, Colombia, Ecuador, and Bolivia,

Provides an additional six-month extension for each country, where both the United States and that country complete their legislative process to approve a trade agreement.

ECAT POSITION: ECAT welcomed Congress’ passage of legislation extending the Generalized System of Preferences, the African Growth and Opportunity Act, and the Andean Trade Preferences Act and creating a new preference program for Haiti. These programs will expand trade and investment opportunities for U.S. farmers, manufacturers, service providers and their workers and will help promote economic development in the developing world.

Trade Remedy Law Legislation and Issues

Attention will also continue to be focused in 2007 on a variety of trade-remedy law issues, including in WTO negotiations and dispute settlement cases involving trade-remedy rules, and, potentially, reforms to U.S. trade-remedy law.

WTO Rules Negotiations

As discussed in section II.2, the WTO Doha Development Agenda (DDA) negotiations include negotiations to clarify and improve trade-remedy disciplines, such as antidumping and countervailing duties. With increasing U.S. exports of farm and manufactured goods and growing U.S. imports of industrial inputs, major parts of the U.S. farm and business communities have a significant interest in the DDA negotiations to clarify and improve these rules.

Notably, the United States, while oftentimes viewed as the major user of trade remedy actions, is increasingly the target of antidumping actions by developed and developing countries. Since the WTO was established in 1995, U.S. exports have been subject to 169 antidumping actions, second only to China as the top respondent in antidumping cases. Such actions by foreign countries have restricted U.S. agricultural and non-agricultural exports, including beef, corn and other products.

At the same time, antidumping measures taken by the United States have slowed considerably in the last several years. At the same time, cases have become increasingly complicated where cases brought by one industry increasingly have negative effects on other U.S. industries. And in some cases, the petitioner is seeking not to protect domestic production, but rather exports from a third country.

Antidumping has long been justified as necessary to offset market-distorting government policies that create protected home markets allowing a country’s exporters to discriminate on price in foreign markets with an unfair competitive advantage. Yet, there is no requirement to prove such conditions. Nor are the rules to determine whether price discrimination is occurring based on normal business practice. As a result, antidumping actions can unnecessarily create their own artificial and unfair barriers.

The DDA negotiations, therefore, represent an important opportunity to improve the rules on trade remedies to ensure that they target appropriate behavior and price discrimination and do not result in protectionistic or unfair barriers against U.S. farmers and manufacturers.

Congressional Trade Remedy Proposals

Several bills have been introduced in the 110th Congress to amend U.S. trade remedy laws, including the following:

S. 364, Strengthening America’s Trade Law Act: Introduced by Senator Rockefeller (D-WV), S. 64 includes several major changes to antidumping, countervailing duty and safeguard laws that would likely increase tariffs under these rules on U.S. imports.

H.R. 708, Trade Law Reform Act: Introduced by Congressman English (R-PA), H.R. 708 includes several major changes to antidumping, countervailing duty and safeguard laws that would enhance the ability to place tariffs under these rules on U.S. imports.

H.R. 1127, American Manufacturing Competitiveness Act: Introduced by Representative Knollenberg (R-MI), H.R. 1127 would allow U.S. manufacturers that use products subject to countervailing or antidumping duty proceedings or use domestic like products to participate in antidumping and countervailing duty investigations. It would also require the International Trade Commission (ITC) to weigh whether the imposition or continuation of antidumping or countervailing duty orders on products would benefit domestic producers more than it would harm industrial users of the products.

H.R. 1229, Nonmarket Economy Trade Remedy Act: Introduced by Congressman Davis (D-AL) and English (R-PA), H.R. 1229 would amend U.S. countervailing duty law to make it explicitly applicable to non market economy countries. It also adds special rules for the calculation of countervailing duties for non market economy countries and requires Congressional approval before a country can graduate from nonmarket economy to market economy status.

S. 796/H.R. 782, Fair Currency Act: Introduced by Senators Bunning (R-KY) and Stabenow (D-MI) in the Senate and by Congressmen Ryan (D-OH) and Hunter (R-CA) in the House, this legislation would provide that, despite WTO rules, currency manipulation constitutes a countervailable subsidy.

As Congress considers modifying U.S. trade remedy laws, ECAT urges that any modification:

be consistent with U.S. obligations, including the WTO, the North American Free Trade Agreement (NAFTA) and other trade agreements;
not undermine the U.S. negotiating position in the WTO or other international negotiations;
balance the interests of the industry seeking relief and other U.S. stakeholders that are affected by the application of these laws; and
establish a fair and proper comparison of prices that is based on commercially relevant considerations and normal business practices.

As described below, U.S. trade remedy provisions and decisions have already been the subject of numerous challenges in the WTO. The enactment of WTO-inconsistent provisions, as has been proposed in the past several years, undermines U.S. leadership in the world trading system and our ability to convince other countries to honor their commitments. It also undermines U.S. competitiveness and subjects U.S. exporters to the risk of retaliation

WTO Dispute Settlement Cases Involving U.S. Trade Remedy Laws

U.S. trading partners have sought several reviews of U.S. trade remedy provisions since binding dispute settlement provisions were adopted with the establishment of the WTO in 1995. Other WTO members, particularly the EU, have similarly seen a significant number of WTO trade-remedy-related cases.

Continued Dumping and Subsidy Offset Act (“Byrd Amendment”)

Senator Byrd (D-WV) successfully attached an amendment, the “Continued Dumping and Subsidy Offset Act (CDSOA),” to the FY 2002 agriculture appropriations bill approved in October 2000. This provision requires that antidumping and countervailing duties be distributed to affected domestic producers who supported the antidumping and countervailing duty actions in the first place, rather than deposited in the general treasury. Eleven parties -- the EU, Mexico, Australia, Brazil, Chile, Canada India, Indonesia, Japan, South Korea, and Thailand -- sought WTO dispute settlement consultations with the United States arguing that the legislation violates several WTO provisions.

In September 2002, the panel reviewing the case found that the CDSOA is an impermissible action against dumping and subsidies under the WTO Antidumping and Subsidies Agreements, respectively, because it is a remedy in addition to what is already authorized under those agreements. The Appellate Body agreed with the panel in January 2003. Several countries developed retaliation lists and the European Union imposed retaliatory measures.

With the strong support of ECAT, the House and Senate in December 2005 repealed the CDSOA, which had been found to violate WTO rules as discussed below. The repeal was included in S. 1932, the Budget Reconciliation bill and provides that CDSOA is repealed for entries "made and filed after October 1, 2007."

ECAT strongly opposed enactment of the CDSOA because it undercuts U.S. leadership in the global trading system and is inconsistent with U.S. trade obligations. As well, it sets a precedent that we do not want other countries to follow by increasing the incentives for filing antidumping and countervailing duty cases. Through this provision, domestic companies that are successful in having antidumping and/or countervailing duties imposed on foreign competitors, receive a cash reward for their success. This is not in the interest of U.S. exporters who may face similar laws abroad.

Zeroing Methodology

Zeroing is a practice by which the United States (and some other countries) treats certain price comparisons as zero values in calculating the overall dumping margin when such comparisons do not show dumping. This methodology has been ruled as contrary to the United States’ WTO obligations in several cases, including softwood lumber imports from Canada and numerous products from the European Union. The Commerce Department eliminated the use of the zeroing methodology in investigations starting on February 22, 2007.

Given commercial realities and international obligations, the United States should eliminate all zeroing in its calculation of antidumping duties not only in investigations, but also with respect to administrative reviews.

Hot-Rolled Steel from Japan

On July 24, 2001, the WTO Appellate Body issued its report finding that the United States’ application of antidumping duties on imports of hot-rolled steel from Japan violated the WTO agreement on antidumping measures. In particular, the Appellate Body (and lower panel) found that the U.S. methodology for calculating the so-called “all-others rate” did not rely fully on actual company information, but included some calculations based on “facts available.” The Appellate Body also found fault with the ITC’s injury analysis. An arbitrator determined that the United States would have 15 months, until November 23, 2002, to comply with this ruling.

While the United States complied with the ruling on the investigation, there remains at issue its lack of implementation of the all-other’s rate. Japan has agreed to several extensions for the United States to come into compliance with this part of the decision. ECAT strongly supports the approval and implementation of legislation to bring the United States into compliance as soon as possible.

Privatization Methodology under the U.S. Countervailing Duty Law

U.S. trading partners have also brought several cases against the methodology used by the Commerce Department in determining whether government subsidies to a government-owned company continue after the company has changed ownership or been privatized (so-called privatization methodology). In May 2000, the WTO Appellate Body found that the U.S. privatization methodology used in the case of hot-rolled lead and bismuth carbon steel products (Leaded Bar decision) was inconsistent with the WTO Agreement on Subsidies and Countervailing Measures. The United States terminated the duties, but did not propose any legislative modifications as the EU had sought.

On November 13, 2000, the EU requested consultations in 14 separate U.S. countervailing duty proceedings (involving imports of steel and other products) with respect to the Commerce Department’s privatization methodology, arguing that this methodology was found to be inconsistent in the earlier Leaded Bar decision. Consultations were held in December 2000, and a panel was formed in September 2001. The panel ruled in July 2002 that the statutory provision on privatization (section 771(5) (F) of the Tariff Act of 1930) and the Commerce Department’s privatization methodology were inconsistent with the WTO Subsidies Agreement. In December 2002, the Appellate Body upheld the panel's finding that the Commerce Department’s methodology was inconsistent with the Subsidies Agreement. It rejected, however, the panel’s reasoning that an arm's length sale of a government-owned firm for fair market value always extinguishes prior subsidies; rather it creates a rebuttable presumption that prior subsidies are extinguished. The Appellate Body found that the statutory provision was not, therefore, inconsistent with WTO rules.

The Commerce Department modified its methodology on privatization and issued revised determinations, revoking two orders entirely and one order in part. In five additional cases, the Commerce Department recalculated the countervailing duty rates. On November 7, 2003, the United States informed the WTO that it had complied with the WTO rulings. On March 17, 2004, the EU informed the WTO that it found these actions insufficient and requested further consultations with the United States. The WTO panel formed to hear this case ruled in August 2005 that the United States had complied with WTO rules, except with respect to its failure to examine the privatization of British Steel and Aceralia and in the treatment of new evidence in the British Steel case.

Other Trade Remedy Cases

In addition to the cases discussed above, U.S. trading partners have challenged several U.S. antidumping and countervailing duty decisions and safeguard measures on many occasions, including

the United States’ application of section 201 of the Trade Act of 1974 (safeguard actions) with respect to wheat gluten, lamb meat, circular welded carbon line pipe, line pipe and wire rod, and steel products. In each of these cases, the WTO Appellate Body ruled against the United States, finding in particular flaws in the determination of whether dumped or subsidized imports caused injury or the threat thereof to the domestic industry.
Other specific cases, including steel plate from India, corrosion-resistant steel from Germany, oil country tubular goods from Argentina and Mexico, steel pipe from Italy, and cement from Mexico.

The Canadian complaints against U.S. antidumping and countervailing duties imposed in softwood lumber decisions are discussed in section IV.3.

ECAT POSITION: It is vitally important that both U.S. unfair trade laws and Section 201 maintain – in both the legal provisions and their application – a careful balance between the interests of the petitioning industry and the interests of other U.S. industries and consumers. It is critical that Congress and the Administration oppose any efforts to impose import restraints or amend U.S. antidumping, countervailing duty, or safeguards laws in ways that would invite foreign retaliation, encourage restrictive foreign mirror legislation, and/or violate the United States’ international trade commitments.

2006/2007 Legislative Proposals on the Enforcement of Trade Agreements

Several legislative trade policy proposals were introduced in 2006 that seek to expand the Administration’s enforcement efforts of trade agreements and, in some cases, Congress’ role in that effort. Additional legislation on these issues can be expected in 2007. The two primary pieces of legislation are summarized below.

Trade Competitiveness Act: Introduced on February 16, 2006 by Senate Finance Committee Ranking Member Baucus (D-MT) and Senators Hatch (R-UT) and Stabenow (D-MI), S. 2317, the Trade Competitiveness Act, would require the Office of the United States Trade Representative (USTR) to issue an annual report on enforcement reviewing enforcement actions taken and priority foreign country trade practices on which enforcement action will be focused. In preparing this report, USTR is required to consult with the Senate Committee on Finance and the House Committee on Ways and Means, which can each vote to identify priority country practices to be identified in USTR’s report. Following issuance of the report, USTR is required to seek appropriate resolution of each priority country trade practice identified through a variety of possible actions, including dispute settlement procedures or the negotiation of an agreement that would eliminate the practice. USTR is required to report on the action taken and, in certain cases, to report on why dispute settlement or a negotiated agreement was not sought. USTR is then required to report on progress to the two committees every six months. This legislation would also establish the position of Chief Trade Prosecutor at USTR, who would seek to ensure that U.S. trading partners comply with trade agreements to which the United States is a party. The legislation also includes a sense of Senate resolution seeking action by the International Monetary Fund to request consultations and recommend remedial action on foreign exchange rate policies. This legislation is one in a series of several pieces of legislation that Senator Baucus introduced in 2006 to address competitiveness issues.

Stand Up for America Act: Introduced on February 8, 2006, by Congressman Rangel (D-NY), Cardin (D-MD), Stark (D-CA), Levin (D-MI), McDermott (D-WA), Neal (D-MS), McNulty (D-NY), Becerra (D-CA), Pomeroy (D-ND) and Davis (D-AL), H.R. 4733, the Stand Up for America Act, would establish an Office of the Congressional Trade Enforcer (CTE) appointed by House and Senate officials for a period of five years. The CTE would seek to ensure compliance with trade agreements by the United States’ trading partners by investigating alleged violations and issue indictments. The legislation would then require USTR to commence appropriate dispute resolution procedures unless the violation is ended or where such a case would cause serious harm to the national security of the United States. Congress is also given the authority to compel, through joint resolution, USTR to initiate dispute settlement proceedings. The legislation would also establish an Office of Market Access Assistance in the CTE.

In addition, the House of Representatives approved the United States Trade Rights Enforcement Act, H.R. 3283, in July 2005. First introduced by Ways and Means Committee Chairman Thomas and Congressman English (R-PA), this legislation, as discussed in section IV.1, focuses significantly, but not exclusively, on U.S.-China trade issues. Its principal provisions include:

Amend U.S. countervailing duty law to include explicitly applicability to nonmarket economy countries, providing that the application does not double count duties and is consistent with U.S. international obligations.
Impose bonding requirements on new shippers.
Require monitoring of China’s implementation of specific WTO commitments by USTR and the Commerce Department and biannual and, in some cases, monthly reports on these issues.
Require a Treasury report on currency manipulation, including an analysis of China’s termination of its dollar peg.
Issue a sense of Congress resolution that China should join the WTO Government Procurement Agreement and suspend operation of its government procurement law.
Provide appropriations to USTR.

ECAT strongly supports the need for the vigorous enforcement of trade agreements to which the United States is a party and other actions to address market access barriers abroad. As recognized by S. 2317, not all issues can be resolved through the same process. For example, some issues may be best resolved through dispute settlement; in other cases, the legal arguments may not be as clear and other strategies, such as negotiated resolutions, may be more effective, timely and, therefore, appropriate. ECAT is also concerned by proposals that would establish an independent authority to decide what cases should be brought, when that party has no responsibility for actually handling litigation and is not required to consider the seriousness of the issue or even the views of the companies whose commercial issues are involved.

U.S. Customs and Border Protection Issues

U.S. Customs and Border Protection, a unit of the Department of Homeland Security, represents a key element in the United States’ trade competitiveness. Its role has changed dramatically since it was first authorized to collect customs duties on goods in 1789. While duty collection remains important, Customs and Border Protection plays an integral role in facilitating legitimate trade and protecting the nation’s borders, a role that was reemphasized with its transfer to the Department of Homeland Security in 2002. In order for U.S. farmers, manufacturers, service providers, and retailers to remain competitive, efforts must be made to help the U.S. Customs Service keep pace with technological developments and the changing international economic environment.

Transfer of Customs Functions to Department of Homeland Security

In November 2002, Congress approved H.R. 5005, the Homeland Security Act of 2002. This legislation established the Department of Homeland Security (DHS), to prevent terrorist attacks within the United States and reduce the vulnerability of the United States to terrorism. As part of the consolidation of numerous U.S. Government functions, the U.S. Customs Service was moved from the Department of the Treasury to the DHS and renamed U.S. Customs and Border Protection (CBP). CBP was placed within the Directorate of Border and Transportation Security, along with the Transportation Administration of the Transportation Department, the Federal Protective Service of the General Services Administration, the Federal Law Enforcement Training Center of the Department of the Treasury, and the Office of Domestic Preparedness of the Office of Justice Programs. The Commissioner of Customs remains as head of CBP within DHS.

The Homeland Security Act provides that the customs revenue functions are not transferred to the DHS and that the Secretary of DHS may not consolidate, discontinue or diminish the customs revenue functions of the Customs Service or reduce staffing levels or resources attributable to these functions. Further, the Treasury Secretary is authorized to appoint up to 20 persons to work with the DHS in performing customs revenue functions. No funds available to Customs or customs user fees collected by Customs as part of the Consolidated Omnibus Budget Reconciliation Act may be transferred to any other agency or office of the DHS. The President is required to include a separate budget request for the Customs.

Trade-Related Security Initiatives

ECAT supports legislative and executive branch actions that encourage and fund investment in technology solutions that will screen all cargo efficiently without the disruption of the flow of goods. (e.g. Operation Safe Commerce or the Hong Kong Port Project). While the technology does not currently exist, progress is being made rapidly. ECAT supports the government’s efforts to screen all cargo efficiently without the disruption of the flow of goods.

After several months of consideration, both the House and Senate passed H.R. 4954, the Security and Accountability for Every (SAFE) Port Act in September 2006 which seeks to address 100-percent-container screening and other issues. The President signed this legislation into law on October 13, 2006. Key provisions of the SAFE Port Act include the following:

Requires development of a pilot project for integrated scanning systems.

Requires 100-percent-cargo screening of cargo containers after the integrated scanning system is feasible, effective and meets certain requirements.

Enhances security requirements for U.S. facilities and vessels.

Authorizes funding for port-security grants based on risk.

Requires radiation scanning of containers entering high-volume U.S. ports by the end of 2007 and to all ports by the end of 2008 after the development of a plan.

Requires development and implementation of a strategic plan to enhance the security of the international supply chain, (defined as the end-to-end process for shipping goods to or from the United States, beginning at the point of origin through a point of distribution to the destination); and (2) submission of an interim and final report to Congress for the strategic plan. Also specifies requirements for the strategic plan.

Requires rulemaking to establish minimum standards and procedures for containers in transit to the United States.

Legislatively authorizes the Container Security Initiative (CSI) and requires Administration to report to Congress on its effectiveness.

Legislatively authorizes Customs-Trade Partnership Against Terrorism (C-TPAT).

Require the Secretary of the Treasury to establish an electronic trade data interchange system, to be known as the International Trade Data System (ITDS), to eliminate redundant information requirements, regulate the flow of commerce, and enforce laws relating to international trade by establishing a single portal system operated by CBP.

ECAT supports Congress’ action in the SAFE Ports Act to enhance security. At the same time, ECAT is concerned by the language in H.R. 1 that requires 100 percent screening of cargo, without linking that objective to its technological feasibility or the goal of not disrupting trade flows.

Other key trade-related security measures developed by CBP include the Customs-Trade Partnership Against Terrorism and the Container Security Initiative:

Customs-Trade Partnership Against Terrorism (C-TPAT). C-TPAT is a voluntary government/private sector partnership to enhance security and expedite compliant cargo. C-TPAT is focused on enhancing international supply-chain security through building partnerships between CBP and businesses active in international trade. Through the partnership, businesses implement enhanced security procedures while CBP helps ensure expedited processing. The success of C-TPAT has been in its cooperative, voluntary and flexible nature that maintains a focus on preventing terrorism and enhancing commerce.

Container Security Initiative (CSI). Through the CSI, CBP has negotiated agreements to improve container security with 50 foreign ports, covering 90 percent of containerized cargo shipped to the United States. In particular, the CSI creates a regime that identifies high-risk containers, which are prescreened before they are shipped. Containers are screened as early in the supply chain as possible, generally at the port of departure through state-of-the-art technology. CBP works with local customs officers to improve security screening and processes. CBP expects to expand the CSI to eight additional ports in 2008.

Recently changes to these programs have been made through administrative action and/or legislation, and others are being discussed. ECAT believes extensive discussions should take place between the business community and government at all levels prior to legislating or implementing any significant changes. Moreover, ECAT strongly believes these programs should remain cooperative, voluntary, focused on preventing terrorism and with defined benefits. Flexibility through collaboration is essential, as supply chains are global in nature and very different depending on industry and company. Discussions on the usefulness and impact of requiring additional advance-shipment data to Customs should continue at the Customs Operational Advisory Committee (COAC) and Customs Trade Support Network (TSN) Supply Chain Security Committee. Special care must be used in prescribing “standards” or solutions that might add little to increased security, while substantially disrupting the flow of shipments in foreign and U.S. ports.

ECAT remains very concerned with Customs’ adoption of the “24-hour manifest rule,” which became effective in December, 2002. Pursuant to Customs’ regulations, all carriers and non-vessel operating common carriers (NVOCCs) are required to file their cargo declarations 24 hours before their cargo is laden aboard a vessel at a foreign port. While ECAT recognizes and supports the U.S. Government’s interest in evaluating the contents of shipments for national security and other reasons, this rule does not substantially advance that goal. Rather, it will impede commercial shipments, which oftentimes do not have fully complete manifest information ready that far in advance of shipment. This regulation is overly restrictive and will impede the legitimate commercial flow of goods into the United States to the detriment of U.S. companies, workers and their families. At the same time, it will do little to deter those who seek to evade U.S. laws who can continue to file fraudulent manifests.

Automation Modernization

CBP has sought to develop and implement the so-called Automated Commercial Environment (ACE) to enable Customs to process more efficiently and cost-effectively imports and exports and to better protect U.S. borders from threats from abroad.

Start-up on ACE began in earnest in the summer of 2003, with the establishment of an ACE secure data portal and an initial 41 account participants. Activities have since been expanded. In December, of 2004, Customs introduced in Blaine, Washington, its first port for “e-Manifest: Trucks” through which truck manifests are automated. Customs has expanded its work to additional ports and an electronic manifest (e-Manifest) for trucks was introduced. Ports are being moved to ACE in geographic clusters. In early 2007, there were more than 4,100 ACE Secure Data Portal accounts, and more than 4,500 corporate entities (based on Importer of Record Number) are approved to pay duties and fees monthly. Full ACE deployment is expected by the end of 2010.

ECAT continues to support full funding of the ACE program from general revenues and the modernization of Customs’ operations in order to promote more cost-efficient and effective commercial and enforcement programs.

Customs Modernization

The U.S. Customs Service also continues to be engaged in implementing the provisions of the Customs Procedural Reform and Simplification Act of 1978 (1978 Procedural Reform Act) and the Customs Modernization Act (the so-called Mod Act), which was enacted as title VI of the NAFTA Implementation Act of 1993. The 1993 Mod Act eliminated statutory requirements for paper documentation and provided authority for full electronic processing of customs-related transactions. In return for waiving paperwork requirements, the Mod Act imposed certain recordkeeping requirements on importers and required the production of some information after the fact. The Mod Act also authorized several automation initiatives based on the 1978 Procedural Reform Act, including remote-entry filing, periodic entry and duty payment. As well, the Mod Act required modifications in duty drawback provisions and procedural safeguards.

Under Mod Act authority and prior authority provided by the 1978 Procedural Reform Act, the Customs Service has engaged in a significant reorganization of its activities and functions. While Customs’ reorganization has resulted in some greater efficiency, the importing and exporting communities remain very concerned that implementation and interpretation of authorized reforms are not yet complete, nor fully consistent with the goals and requirements of the 1978 Procedural Reform Act and the Mod Act. In particular, concerns have been raised regarding:

Customs’ Compliance Assessment and its Trade Compliance Risk Management processes, including Customs’ reliance on audit-based evidentiary standards (relying on the Generally Accepted Government Audit Standards (GAGAS) rather than the reasonable care standard of the Generally Accepted Accounting Principles (GAAP)).

Customs’ Compliance Measurement and its associated penalty processes (increased cargo inspections, etc.) which penalize otherwise compliant and unsuspecting importers for errors or omissions caused by licensed brokers and express couriers.

ECAT supports efforts to further modernize the Customs Service to promote greater trade facilitation and efficiency in a manner consistent with its mandate. In particular, ECAT believes that Customs could substantially improve its operations to better achieve border and economic security through adoption of the following proposals:

Eliminate reconciliation for all entries that provide statistical updates only and have no impact on revenue;
Simplify and reduce the Harmonized Tariff Schedule;
Provide a total electronic interface for all required data to eliminate paper documents;
Eliminate the release of confidential and trade-sensitive data to non-governmental agencies;
Operate ports 24 hours/7 days a week;
Reduce the required data for exports and imports to a single set of. data.

ECAT POSITION: ECAT is committed to working with U.S. Customs and Border Protection (CBP), the Department of Homeland Security and the Department of the Treasury to help ensure that the restructuring of Customs functions progresses in a manner that fulfills our national security and enforcement goals, while also facilitating the flow of legitimate commercial trade that provides enormous economic benefits to the United States. ECAT strongly supports implementation of the SAFE Ports Act and full funding of the Automated Commercial Environment (ACE) from general revenues. ECAT also strongly supports improvements in the operation of CBP, including through full and improved implementation of the Customs Modernization Act and the Customs Procedural Reform and Simplification Act of 1978 in a manner that facilitates trade.