Home Legislative Action Congressional Testimony Oversight of the U.S .Customs and Border Protection Agency

Oversight of the U.S .Customs and Border Protection Agency

5/11/2016

Senate Finance Committee

---

Chairman Hatch, Ranking Member Wyden, 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 over 25,000 Customs and Border Protection (CBP) Officers, Agriculture Specialists and trade enforcement and compliance specialists who are stationed at 328 land, sea and air ports of entry across the United States.

Customs and Border Protection Entry Specialists, Import Specialists, Paralegal Specialists that determines 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 in order to ensure a fair and competitive trade environment pursuant to existing international agreements and treaties, as well as stemming the flow of illegal imports, such as pirated intellectual property and counterfeit goods, and contraband such as child pornography, illegal arms, weapons of mass destruction and laundered money. CBP is also a revenue collection agency—processing more than $2.4 trillion in trade goods and collecting more than $46 billion in revenue in Fiscal Year (FY) 2015.

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 revenue funds other federal priority programs. NTEU is deeply concerned with the lack of resources, both in dollars and manpower, 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.

As of January 2016, there are 2,463 CBP revenue occupations personnel onboard, 214 positions short of the CBP revenue staff authorized by Congress. These occupations include Import (935), Entry (434), Fines, Penalties and Forfeiture (291) National Import (79) and International Trade Specialists (122); Customs Auditors (327), Attorneys (104) and Chemists (123).

Continuing staffing shortages, inequitable compensation, and lack of mission focus, are the main reason why experienced CBP commercial operations professionals at all levels, who long have made the system work, are leaving or have left the agency. Further, 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, 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 many 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 actuality, 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 revenue maintenance 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 of revenue maintenance function positions, including vital trade facilitation and enforcement positions as Entry and Import Specialists, as a staffing ceiling rather than a floor.

CBP’s adherence to the March 2003 Import Specialist employment number as a ceiling has become evident in the most recent iteration of the SAFE Port Act’s mandated Resource Allocation Model. Section 403 of the SAFE Port Act required CBP to complete a Resource Allocation Model (RAM) by June 2007, and every 2 years thereafter, to determine optimal staffing for commercial and revenue functions. It directed that the model comply with the requirements of section 412(b) of the HSA of 2002 and required the CBP Commissioner, not later than September 30, 2007, to ensure that the requirements of 412(b) of the HSA were fully satisfied. The CBP positions covered by Section 412(b) include Entry Specialists, Import Specialists, Drawback Specialists, National Import Specialists, Fines and Penalty Specialists, Attorneys at the Office of Regulations and Rulings, Customs Auditors, International Trade Specialists, and Financial Systems Specialists.

The rationale for this provision arose from a Government Accountability Office (GAO) report (GAO-05-663) that stated, “as of June 2003, CBP has not increased staffing levels [at the POEs]” and “CBP does not systematically assess the number of staff required to accomplish its mission at ports and airports nationwide…” Further, GAO observed that “not identifying optimal staffing levels prevents CBP from performing workforce gap analyses, which could be used to justify budget and staffing requests.”

According to the 2007 RAM, 1,100 Import Specialists would be needed for optimal performance in FY 2010, an increase of 116 over the HSA Floor. In 2009, CBP renamed the Section 403 Resource Allocation Model to the Resource Optimization Model (ROM). The FY 2009 ROM reduces the FY 2010 optimal staffing levels for some revenue maintenance function positions, specifically the Import Specialist position.

For example, the FY 2009 ROM puts the lower range of Import Specialist positions needed in FY 2010 at the HSA statutory floor of 984, rather than 1,100 as stated in the FY 2007 RAM. And, in the most recent ROM for trade positions that CBP released on July 31, 2015, there is no increase in the lower range of the optimal staffing level of 984 for Import Specialists.

CBP did not even achieve that threshold number of Import Specialists positions in FY 2014. As stated in the FY 2015 ROM, the “Homeland Security Act threshold for import specialists is 984 positions; in FY 2014, there were 954 positions. The Model projects a range of 984 to 1,748 positions needed (between FY 2015 and FY 2022) for optimal performance”—an increase of 764 over the HSA floor. (See page 19 of ROM for Trade Positions, FY 2015.) In other words, there has been no increase in the number of Import Specialists on board since 2003 even though inbound trade volume grew by more than 24 percent between FY 2010 and FY 2014.

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 virtually-managed 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.

Also, critical for supporting the CEE’s virtually-managed and geographically dispersed workforce is the completion of the ACE. Now three years behind schedule and more than $1 billion over budget, CBP began rollout of the ACE “single window” for industry filing electronic trade entries on March 30, 2016. According to industry users, the ACE rollout has been challenging with users experiencing network error and system-wide crashes.

Many NTEU trade operations members assigned to the newly created CEEs have asked NTEU to express their concerns to Congress. The concerns and recommendations of CBP employees assigned to CEEs can be found in the attached Appendix A.

FY 2017 CBP BUDGET REQUEST

In any discussion of CBP’s budget, the Senate Finance Committee must recognize first and foremost 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 FY 17 Workforce Staffing Model. According to CBP’s FY 2016 Congressional Justification for Salaries and Expenses, despite an increase in appropriated funding for the hiring of 2,000 new CBP Officers, CBP still faces a staffing shortage of 2,107 CBP Officers in FY 2017 and beyond.

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”, dated April 4, 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.

Customs User Fees

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 23,775 CBP Officers currently funded, COBRA fees fund 2,859 full-time equivalent CBP Officers.

The Administration proposed in FY 15, FY 16 and again in its FY 17 budget requests, an increase of $2 in COBRA user fees. If enacted, a $2 increase would fund the hiring of 840 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.

Last year, 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 will 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, 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 improve border security and processing.

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 23,775 CBP Officers currently funded, IUFs fund 4,190 CBP Officer positions.

According to CBP’s FY 2016 Congressional Justification, IUF collections will remain stagnant in comparison to immigration costs. In FY 2015, IUFs raised about $630 million, while CBP’s actual costs to provide immigration inspections totaled about $830 million—thereby allowing CBP to recover only 76% of total costs. IUF rates were last increased from $6 to $7 in November 2001. The FY 2017 budget requests a $2 increase in the IUF. The additional revenue generated by this $2 fee increase would support over 1,230 new CBP Officers.

CBP CAREER LADDER PAY INCREASE

NTEU commends the Department for the recent increase in journeyman pay for CBP Officers and Agriculture Specialists. NTEU strongly supports extending this same career ladder increase, from General Schedule (GS)-11 to GS-12, to additional CBP positions, including CBP Entry, Import and Paralegal Specialists and CBP Seized Property Specialists. The journeyman pay level for the CBP Technicians who perform important commercial trade and administrative duties should also be increased from GS-7 to GS-9. These upgrades are long overdue and would show CBP trade personnel that CBP and Congress recognize the high level of expertise that these employees possess.

CONCLUSION

In effect, there has been a CBP trade staffing freeze at March 2003 levels and, as a result, CBP’s revenue functions are suffering. There is no increase in the FY 2017 budget request to hire additional CBP trade personnel who are responsible for stopping illegal and misclassified goods from entering U.S. commerce and for collecting import duties and ensuring importers fully comply with all applicable laws and trade agreements.

The stagnation in the number of CBP revenue staff and confusion with the full implementation of the CEEs undermines their mission.

Customs revenues are the second largest source of federal revenues that are collected by the U.S. Government. Congress depends on this revenue source to fund priority programs. The Committee should be concerned as to how much CBP trade enforcement staffing shortages are costing in terms of revenue losses to the U.S. Treasury. NTEU urges the Committee to authorize funding to hire additional trade enforcement and compliance personnel, including Import Specialists, to enhance trade revenue collection and to authorize a $2 increase in immigration and customs user fees to fund the hiring of the 2,100 additional CBP Officers needed to end the current CBP Officer staffing shortage.

The more than 25,000 CBP employees represented by the 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. Thank you for the opportunity to submit this testimony on their behalf.

Appendix A:

NTEU Members’ CEE Issues and Recommendations

1)  Remote Supervision and related issues: The virtual environment has led to the involvement of multiple layers of CEE supervision in matters that were resolved in the past by one on-site supervisor; multiple CEE conference calls across time zones force employees to work through lunch or stay past, or come in before, their tours of duty; and create inefficient administrative and work related procedures. Also, because employees and remote supervisors frequently work in different time zones, there is limited time to coordinate work during core business hours. NTEU members are concerned that remote supervision will require significant changes to established hours of work to ensure nationwide office coverage. Many CBP employees have child care and other issues, and rely on the established work hours and schedules.

NTEU members recommend that CBP incorporate as much on-site supervision as possible. At the very least, CEEs should align supervision by time zones with at least one “chief” in each time zone for each CEE or each CEE branch. Ports with 30 or more Import Specialists should include 10 teams. Each team should cover one of the 10 industry-specific CEE commodities, with a local supervisor for each team. In the small ports where remote supervision cannot be avoided, the remote supervision should be regional and in the same time zone.

2)  Lack of uniformity with regard to work practices and processes within each CEE: The CEEs were established to “increase uniformity of practices across ports of entry, facilitate the timely resolution of trade compliance issues nationwide, and further strengthen critical agency knowledge on key industry practices.” It has been the exact opposite when it comes to CBP dealing with its own employees. Each CEE handles issues differently when it comes to granting Alternative Work Schedules (AWS), leave, telework, religious observance policies and generally sharing information among CEE members. Across the country, there are differing levels of acceptance by managers of scheduling flexibilities allowable under law, such as telework. There are now situations where 4 or 5 employees at a local port are assigned to 3 or 4 different supervisors around the country. This creates a whole host of problems with regard to office coverage, leave, and telework, especially if there is a lack of uniformity with respect to scheduling policies across all ports.

NTEU members recommend that CBP, to the greatest extent possible, handle administrative and work process issues uniformly across all the CEEs.

3) CEE vs Port work: As much as CBP has tried to say that the CEEs will absorb all trade compliance functions, the local port structure is not going away. Appraisals of samples for seizure, exams, and first time importer walk-ins will continue to be done locally. On many occasions, the compliance staff has to physically examine a sample to make a determination.

NTEU members recommend that CBP develop uniform procedures to work within each CEE, to process work between CEEs, and to coordinate in some uniform manner with each Port. Furthermore, the CEEs need more frontline personnel—Import Specialists, Entry Specialists, and technicians--to make the concept functional.

4) Lack of proper technology to support the program: ACE is not nearly as functional as it needs to be in order to support the CEE program. The CEE program is being designed to function in a paperless environment. However, the development of ACE is not far enough along to support CEEs, resulting in inefficient processes that include time consuming scanning of photos and emailing information to the CEEs only to have the CEEs send the work back to the ports.

ACE development needs to be far enough along to actually support the CEE virtual structure. CEEs need equipment and additional support staff to allow trade compliance staff to perform their actual enforcement duties and responsibilities. At the very least, every employee will need a scanner on their desk. Also, CBP Officers who are feeding product detention information to the CEEs need better camera equipment. CBP trade compliance staff need to train Officers on how to use the camera equipment and on what to take pictures of.

5)  Lack of training: When the commodities were realigned to the new CEE structure, many employees switched lines of merchandise and are new to the commodity that they now handle. CBP has provided no training to those employees who switched lines of merchandise during the reorganization.

NTEU members recommend that each CEE conduct training at the CEE port on the particulars of the commodities handled by their CEE, including classification, appraisement and other agency requirements that might pertain to the commodities. Also, CBP should establish a process to solicit, evaluate and select interested private sector parties to assist in providing educational seminars to CBP CEE employees that would improve their ability to classify and appraise imported merchandise and improve the overall trade enforcement efforts of CBP.

6) CEEs were supposed to be commodity driven, however they are account driven: While the CEEs were supposed to be commodity driven, they are in fact account driven. As an example, Home Depot, which brings in a variety of products was placed in the electronics CEE, and has been told that the electronics CEE will handle all of their merchandise regardless of what CEE it actually belongs too. If an Import Specialist in the electronics CEE doesn’t know what to look for in a certain commodity outside of their CEE, they are to contact the CEE that handles that merchandise and ask questions. This a totally inefficient way of doing business and will also lead to less enforcement.

NTEU members recommend that commodities be properly assigned to the CEE with trained personnel to examine that commodity. For instance, CBP should assign the merchandise that Home Depot imports to the CEE that handles that merchandise.

7) Commercial Operations Advisory Committee (COAC) needs changes: The COAC is composed of private business interests from the importing community and customs law firms. There are no representatives of the CBP workforce who actually do CBP’s commercial operations work on the COAC.

NTEU members recommend that CBP rotate high level personnel working with the COAC and the CEEs. At many agencies, high-level employees are given assignments with finite terms on advisory committees, so that regulators can’t be unduly influenced. Also, it is past time that a representative of CBP frontline employees is appointed to the COAC.

8) Lack of transparency from CBP with regard to the challenges and issues facing the CEEs: NTEU has learned that CBP currently has two groups working to resolve CEE rollout issues, but CBP has not acknowledged this and NTEU has had no interaction with these groups.

NTEU members recommend that NTEU-represented frontline workers should be involved in every step of the process and participate as members of these work groups.