FIELD HEARING ON TRADE IN AMERICA STATEN ISLAND

5/23/2023

THE COMMITTEE ON WAYS AND MEANS UNITED STATES HOUSE OF REPRESENTATIVES


Chairman Smith, Ranking Member Neal, distinguished members of the Committee, 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.

Customs and Border Protection Entry Specialists, Import Specialists, Paralegal Specialists that determine and assess fines, penalties and forfeitures, Customs Auditors and Attorneys and other trade compliance personnel are the frontline of defense against illegal imports and contraband. These employees 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. These CBP employees also collect revenue—processing more than $3.35 trillion in total import value of goods and collecting more than $111.8 billion in total revenue in Fiscal Year (FY) 2022.

Along with facilitating legitimate trade and enforcing trade and security laws, CBP trade personnel are responsible for stopping illegal transshipments; goods with falsified country of origin; goods that are misclassified; and collecting antidumping and countervailing duties.

Trade Enforcement and Compliance Staffing
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 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. 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.

CBP needs sufficient trade personnel to ensure compliance with and enforce trade laws. In addition to ensuring that there are enough personnel to manage the growth in trade and complexity, CBP non-uniformed trade personnel need to be trained and expert in both modern business practices and in traditional competencies such as classification, valuation, compliance, and enforcement.

According to CBP 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 two years. It is our understanding that CBP has not yet provided its FY 23 Trade ROM to Congress and NTEU urges the Committee to request CBP to provide FY 23 Trade ROM expeditiously.

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 twenty-five percent of CBP Import Specialists will retire or be eligible to retire within the next few years.

When Congress created the Department of Homeland Security (DHS), the House Ways and Means and Senate Finance Committees included Section 412(b) in the Homeland Security Act (HSA) of 2002 (P.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 (P.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 diminishment in the 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.

Centers of Excellence and Expertise
In 2011, CBP established the Centers of Excellence and Expertise (CEEs)–10 industry-specific Centers that require significant changes to CBP trade operations employees’ workload and work practices. In 2014, four of the CEEs began operating at an accelerated level of processing and became fully operational. On March 24, 2016, the remaining six CEEs came on board. The 10 Centers are:

Pharmaceuticals, Health and Chemicals - New York, NY Agriculture and Prepared Products - Miami, FL Automotive and Aerospace - Detroit, MI Apparel, Footwear and Textiles - San Francisco, CA Base Metals - Chicago, IL Petroleum, Natural Gas and Minerals - Houston, TX Electronics - Los Angeles, CA
Consumer Products and Mass Merchandising - Atlanta, GA Industrial and Manufacturing Materials - Buffalo, NY Machinery - Laredo, TX

According to CBP, CEEs are managed virtually with geographically dispersed teams. However, many operational and logistical challenges remain with the reorganization of commodity teams at the ports of entry. These challenges include issues associated with remote supervision; the inability of Automated Commercial Environment (ACE) to support the CEE initiative resulting in wasteful inefficient work-around practices; a lack of uniformity between the CEEs in terms of workload and work practices; catering to the trade at the expense of revenue recovery; lack of clear guidance as to what is CEE work and what is port work; and insufficient training for both employees and supervisors.

Trade Act of 2002 and CBP Synthetic Opioid Interdiction
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 or sent by mail and express consignment operators directly to addresses in the U.S. International mail facility (IMF) and express consignment carrier environments account for approximately 19 percent of the illicit drug seizures at POEs in FY 2022.

Under Section 343 of the Trade Act of 2002 (P.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 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 IMFs.

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 electronic manifests to CBP for international travel four hours prior to arrival and for Canada, Mexico, the Caribbean, parts of Central and South America at “wheelsup.” However, every day these manifests are inaccurate with countless “overages.” An overage is a shipment that is not included on the manifest. In other words, an overage is an un-manifested, unknown shipment which is in violation of the law. A manifested shipment may have 1 or 500 overages, but the highest penalty for “overages” is $5,000, and this penalty is routinely mitigated to $50 for a first violation and $100 for subsequent violations.

Phase 2 required 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 businesses/addresses. If not, the 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 House Committee on Ways and Means and Senate Committee on 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, as important is the ability to assess penalties for violations of Section 343 of the Trade Act. Penalties are routinely mitigated to a fraction of the full penalty and are just considered the cost of doing business.

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 to date, 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 considered as just the cost of doing business.

FY 2024 CBP Budget Request
The President included in its FY 2024 budget requests $22.1 million to hire 150 CBP Officers to serve at Southwest Border ports of entry, but no funding for CBP trade operations personnel. While NTEU appreciates Congress providing funding for 125 CBP Officer new hires for FY 2023 and the President’s FY 2024 request for funding for 150 CBP Officers, based on CBP’s most recent workload staffing models, CBP needs to hire at least 1,750 CBP Officers, 250 Agriculture Specialists and 154 non-uniformed Trade Specialists to address current staffing needs at the ports of entry.

In addition to CBP Office of Field Operations (OFO) role as an economic driver and in raising of nearly $112 billion in annual revenue, CBP OFO personnel also are on the frontline of illegal narcotics interdiction. Most illicit drugs, including fentanyl, enter the United States through our Southwest Border POEs. In fact, last fiscal year, nearly 66 percent of illicit drugs seized by CBP at the Southwest Border were seized at ports of entry. In FY 2022, CBP seized 15,000 pounds of fentanyl nationwide, with the majority – 12,500 pounds – seized at POEs and in FY 2023 to date, CBP seizures at POEs already exceed more than 12,000 pounds of fentanyl. The drugs are concealed in privately owned vehicles, commercial vehicles, and in the pedestrian environments.

Fentanyl and other synthetic opioids are also encountered in international mail facility and express consignment carrier environments, accounting for approximately 19 percent of the illicit drug seizures at POEs in FY 2022. CBP seizures of fentanyl have been escalating for several years. At our POEs alone, fentanyl seizures increased more than 200 percent in the last two fiscal years and, with the more than 10,000 pounds of fentanyl already seized to date in FY 2023, CBP OFO is on track to surpass last fiscal year’s total seizures by the end of April. These seizures permanently removed these drugs from the illicit supply chain, kept them out of our communities, and denied drug trafficking organizations profits and critical operating capital.

In FY 2021 and 2022, there were approximately 7,800 CBP Officers assigned to the Southwest Border (SWB) ports. According to CBP, the same number of officers who processed approximately 6,300 migrant encounters per month in FY 2021 processed nearly14,400 per month in FY 2022. And despite greater workloads, CBP Officer staffing levels have remained the same, with CBP OFO using details and overtime to fill staffing gaps. The details and overtime have had negative impacts on the health and morale of CBP OFO personnel.

Due to the ongoing CBP Officer staffing shortage at the ports, CBP again has found it necessary to solicit CBP Officers for temporary duty assignment (TDY) to SWB land ports of entry beginning in April 2022. In the past year, OFO detailed approximately 3,200 CBP Officers to SWB ports for various operations with over 400 CBP Officers deployed to ports of entry within the San Diego, Tucson, El Paso, and Laredo Field Offices in Wave 7 of this TDY that commenced on April 16, 2023.

These TDYs are filled by CBP Officers currently assigned to air and seaport locations, exacerbating staffing shortages at those ports and deployed officers have expressed operational concerns about short staffing their own permanent duty port during their detail to SWB ports. The cost of these details is also of concern. In a May 2, 2023, Inspector General (IG) report (OIG-23-24) the DHS IG estimates that these details cost approximately $5,100 for each detailee’s travel and per diem.

In addition to TDYs, CBP uses overtime to fill staffing gaps and to reduce wait times at ports of entry. OFO relies on overtime to compensate for the understaffing to maintain operations. Prior to these TDYs, CBP Officers at the SWB ports were forced to work two to three double shifts every 2 weeks due to lack of staff. The IG reports that from “October 1, 2018, through April 30, 2022, CBP Officers at SWB ports worked roughly 5.1 million hours of overtime, resulting in $403 million in gross overtime pay. In the first 7 months of FY 2022, CBP Officers worked approximately 881,000 overtime hours, an average of 114 hours—or 14 additional workdays a year.”

“Overtime is also used to reduce wait times at ports of entry. From FY 2019 through FY 2021, 13 of the 34 Southwest border ports were consistently below recommended staffing levels. One, the San Ysidro port of entry in California, which according to CBP is the world’s busiest land border crossing, was below its recommended staffing levels by an average of 217 officers each year. This port also had the most overtime use compared to other ports along the Southwest border, with 811,057 overtime hours worked from October 1, 2018, through April 30, 2022.”

And once CBP Officers reach their statutory limit on overtime, overtime waivers are needed – “meaning more ordering to work overtime and double shifts.” (See page 19, OIG-23-24.)

The President’s request to fund the hiring 150 CBP Officers to serve at Southwest Border ports of entry 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. Appropriated dollars fund approximately 18,000 CBP Officer positions and Customs user fees fund approximately 7,600 CBP Officers’ salaries and expenses are funded by Customs User Fees.

Customs User Fees
In any discussion of CBP’s budget, the House Ways and Means Committee must recognize the role that user fees play for passenger processing, trade enforcement, and facilitation inspection services provided by CBP to international traders and travelers. NTEU strongly supports increasing and indexing to inflation all user fees collected by CBP and depositing these indexed fees into designated user fee accounts to fund the hiring of additional CBP Officers as identified by CBP’s Workforce Staffing Model.

For years, NTEU has maintained that delays at the ports result in real losses to the U.S. economy. According to the U.S. Department of the Treasury, more than 50 million Americans work for companies that engage in international trade and, according to a University of Southern California (USC) study, “The Impact on the Economy of Changes in Wait Times at the Ports of Entry”, from 2013, for every 1,000 CBP Officers added, the U.S. can increase its gross domestic product by $2 billion, which equates to 33 new private sector jobs per CBP Officer added. This analysis was supplemented by USC in its update entitled “Analysis of Primary Inspection Wait Times at U.S. ports of Entry” published on March 9, 2014. This study found that by adding 14 CBP Officers at 14 inspection sites at 4 international airports, the potential total net impact would increase annual Gross Domestic Product (GDP) by as much as $11.8 million.

CBP collects Customs User Fees (CUFs) which include CUFs authorized by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to recover certain costs incurred for processing, among other things, air and sea passengers, and various private and commercial land, sea, air, and rail carriers and shipments. The source of these user fees are commercial vessels, commercial vehicles, rail cars, private aircraft, private vessels, air passengers, sea passengers, cruise vessel passengers, dutiable mail, customs brokers, and barge/bulk carriers.

COBRA fees are deposited into the Customs User Fee Account and are designated by statute to pay for services provided to the user, such as 100% of inspectional overtime for passenger and commercial vehicle inspection during overtime shift hours. Of the 25,590 CBP Officers currently onboard, COBRA fees fund 3,446 CBP Officer positions.

In past years, the Administration proposed in its budget requests an increase of $2 in CUFs. According to 2017 budget projections (the last time this user fee increase was proposed), if enacted, a $2 increase in CUFs would support the hiring of 840 new CBP Officers. According to NTEU’s calculations based on the FY 2017 budget request, indexing CUFs to inflation and depositing that increase into the Customs User Fee Account would support the hiring of approximately 600 new CBP Officers.

Immigration User Fees
CBP collects immigration inspection user fees (IUFs) from air and sea passengers traveling to the U.S. Increasing and indexing the IUF will allow CBP to better align air passenger inspection fee revenue with the costs of providing immigration inspection services.

Of the 25,590 CBP Officers currently onboard, IUFs fund 4,179 CBP Officer positions.

IUF rates were last increased from $6 to $7 in November 2001. According to 2017 budget projections (the last time this user fee increase was proposed), if enacted, a $2 fee increase would support the hiring of over 1,230 new CBP Officers.

Diversion of Customs User Fees
Any increases to the Customs User Fee Account should be properly used for much-needed CBP staffing and not diverted to unrelated projects. Indexing COBRA user fees to inflation would raise $1.4 billion over ten years—a potential $140 million per year funding stream to help pay for the hiring of additional CBP Officers to perform CBP’s law enforcement, trade, and travel facilitation missions.

In 2016, Congress approved a highway bill that indexed CUFs to inflation but diverted this funding from the Customs User Fees Account to the General Fund to pay for unrelated highway and infrastructure projects. Again, indexing CUFs to inflation and directing the additional funding to the Customs User Fee Account would support the hiring of new CBP Officers to address the current 2,107 CBP Officer staffing shortage. As enacted, CUF payers now pay $140 million a year in additional COBRA fees, but CBP does not receive one additional dime to fund much needed new CBP Officer personnel.

If Congress is serious about job creation, wait times, international tourism, trade enforcement and facilitation, and illicit narcotics interdiction, Congress should reverse this decision and redirect the funds raised by indexing the COBRA portion of CUFs to inflation and use these increased fees to fund CBP Officer new hires.

RECOMMENDATIONS
Funding for additional CBP OFO frontline employees must be increased to ensure security, interdict illicit narcotics, drive job creation, raise revenue and mitigate prolonged wait times for both trade and travel at our nation’s ports of entry. The use of TDYS and excessive overtime as a substitute for funding CBP OFO new hires is unsustainable.

Therefore, NTEU urges the Committee to:
• request CBP to provide FY 23 Trade ROM without delay;
• support legislation to authorize increased funding through appropriations for much needed non-uniformed CBP trade operations personnel;
• enact increases in Custom user fees indexed to inflation to fund needed CBP Officers new hires;
• reject the efforts to divert Customs user fee funding from CBP staffing and overtime to unrelated projects;
• direct CBP to provide a report on an annual basis on the individuals and companies that violate the Trade Act to the House Committee on Ways and Means and Senate Committee on Finance; and
• end the mitigation of Trade Act penalties.

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 are deserving of more resources to perform their jobs better and more efficiently.

Thank you for the opportunity to submit this Statement for the Record to the Committee on their behalf.