Home Legislative Action Congressional Testimony Protecting American Jobs: Strengthening Trade Enforcement Including Anti-Dumping and Maritime Laws

Protecting American Jobs: Strengthening Trade Enforcement Including Anti-Dumping and Maritime Laws

5/25/2011

Senate Committee on Appropriations Subcommittee on Homeland Security

---

Chairman Landrieu, Ranking Member Coats, 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 over 24,000 Customs and Border Protection (CBP) Officers, Agriculture Specialists and trade enforcement and compliance specialists who are stationed at 331 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—collecting $32 billion in duties and fees on imports valued at more than $2 trillion in 2007.

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 for collecting antidumping and countervailing duties. According to a GAO report on Customs Revenue Functions (GAO-07-529), CBP collected nearly $30 billion customs duties in FY 2006, but did not collect approximately $150 million in antidumping duties alone in 2006. In addition, it is estimated that $500 million in antidumping duties were left uncollected between 2001 and 2006 (See GAO-07-529, page 23 and pages 29-30.)

TRADE ENFORCEMENT AND COMPLIANCE STAFFING

When CBP was created, 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 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. This revenue funds other federal priority programs. NTEU is deeply concerned with the lack of resources, both in dollars and manpower, devoted to CBP’s trade functions. Lack of sufficient focus and resources costs the U.S. Treasury in terms of customs duties and revenue loss and costs American companies in terms of lost business to unlawful imports.

Because of continuing staffing shortages, inequitable compensation, and lack of mission focus, experienced CBP commercial operations professionals at all levels, who long have made the system work, are leaving or have left the agency. 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 and significantly less than the need as stated in the U.S. Customs Service Optimal Staffing Levels Fiscal Years 2000-2002 (February 25, 2000), known as the Resource Allocation Model (RAM).

For example, according to the U.S. Customs RAM, in FY 1998, the optimal staffing level for Import Specialists at the U.S. Customs Service was 1,249 and, based on workload in FY 2002, the optimal staffing level for Import Specialists was 1,489 (pages 2, A-1 and M-1 through M-12.)

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 stood up. 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 fear that it would continue and be exacerbated 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 (see Appendix I), including such vital trade facilitation and enforcement positions as Entry and Import Specialists, as a ceiling rather than a floor.

CBP’s Resource Allocation/Optimization Model

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 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 must comply with the requirements of section 412(b) of the Homeland Security Act (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.”

The former U.S. Customs Service’s last internal review of staffing for Fiscal Years 2000-2002, dated February 25, 2000, shows that the U.S. Customs Service needed over 14,776 new hires just to fulfill its basic mission (U.S. Customs RAM, page 2 and A-1)--and that was before 9/11. Since then, the Department of Homeland Security was created and the U.S. Customs Service was merged with the Immigration and Nationalization Service and parts of the Agriculture Plant Health Inspection Service to create CBP. CBP was given an expanded mission of providing for both the first line of defense against domestic terrorism and making sure trade laws are enforced and trade revenue collected.

The first Section 403 RAM, dated July 6, 2007, stated that “CBP has over 8,200 employees that are involved in commercial trade operations. The Model suggests that to carry out these commercial operations and to adequately staff the needs for priority trade functions, the optimal level of staff in FY 2008 would be over 10,000 employees” (page 12 of CBP Report to Congress on Trade Resource Allocation Model.) 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 (see page 16).

In 2009, CBP renamed the Section 403 Resource Allocation Model or RAM (the SAFE Port Act mandated Report to Congress). It is now called the Resource Optimization Model (ROM). The FY 2009 ROM reduces the FY 2010 optimal staffing levels for some revenue maintenance function positions, specifically the Entry and Import Specialist positions (see Appendix II). For example, the FY 2009 ROM puts the number of Import Specialist positions needed in FY 2010 at the HSA floor number of 984, rather than 1,100 as stated in the FY 2007 RAM.

Import Specialist Allocation Model (ISAM)

In 2009, CBP Office of Field Operations updated its Import Specialist Allocation Model (ISAM), “a decision support tool in the allocation of resources.” The number of Import Specialists allocated for staffing the ports of entry, however, was determined to be 984 prior to the compiling of the ISAM. The allocation model was done with the staffing number outcome already pre-determined.

In the ISAM, CBP states that the Office of Field Operations “manages a set allocation of 984 for Import Specialists, which is the minimum staffing requirement set forth by the Homeland Security Act of 2002.” Since the number of Import Specialist positions is frozen at 984 nationwide, CBP’s ISAM proposed a net reduction of 52 Import Specialist positions (from 179 to 127) at New York City area ports, shifting those positions to other ports (see Appendix III) in order to handle current workload. CBP plans to eliminate positions at the ports with the highest number of Import Specialists—primarily the New York City region--to fill needs in other ports. NTEU is concerned that the ISAM is a zero-sum model that does not address actual staffing needs.

Ports specialize in different areas of trade compliance and have different needs depending on the operation—air, sea, or land ports. Larger ports handle all areas of trade compliance whereas smaller ports might see a large amount of one type of commodity or only deal with a small range of trade compliance issues.

Because of these differences between the ports of entry, rather than using a one-size fits all metric to determine allocation of Import Specialists, the data elements and factors that CBP weighs in determining allocation of Import Specialists should be different for each port depending on what type of operation it is and what the prevalent trade issues are at that port. Then, staffing should be decided using a work to staff ratio based on a formula and weighting of the elements for that port specifically.

“Informed compliance” is not given any weight at all when determining Import Specialist staffing needs at individual ports. Authorized by the Customs Modernization Act (Mod Act), “informed compliance” plays a major role in CBP’s trade enforcement and compliance operations. Two new concepts that emerged from the Mod Act are “informed compliance” and “shared responsibility,” which are premised on the idea that in order to maximize voluntary compliance with trade laws and regulations, the trade community needs to be clearly and completely informed of its legal obligations.

Accordingly, the Mod Act imposes a greater obligation on CBP to provide the public with improved information concerning the trade community's rights and responsibilities under customs regulations and related laws. Both the trade and CBP share responsibility for carrying out these requirements. For example, under Section 484 of the Tariff Act, as amended (19 U.S.C. 1484), the importer of record is responsible for using reasonable care to enter, classify and determine the value of imported merchandise and to provide any other information necessary to enable CBP to properly assess duties, collect accurate statistics, and determine whether other applicable legal requirements, if any, have been met. CBP is then responsible for fixing the final classification and value of the merchandise. An importer of record’s failure to exercise reasonable care could delay release of the merchandise and, in some cases, could result in the imposition of penalties.

It is the responsibility of the importers of record to make sure that what they submit to CBP is correct and it is the job of the Import Specialist, through informed compliance, to verify that what is being submitted is correct. Therefore, when considering Import Specialist staffing allocations at each port, the time the Import Specialist spends meeting with and educating the importing community should be part of the equation. NTEU believes that if done in this manner, CBP’s Import Specialist staffing allocations would require increased Import Specialist staffing levels nationally.

Tariff Sharing

Last year, in response to an Import Specialists staffing shortage and pursuant to the 2009 ISAM, CBP is implementing at certain ports a tariff sharing scheme. For example, because CBP has frozen at 984 nationwide the total number of Import Specialist positions, CBP is in the process of reducing by 52 positions (from 179 to 127) the number of Import Specialists at the New York City area ports (see Appendix III) and shifting those positions to other ports. To address the loss of 52 Import Specialist positions at New York City area ports of entry (New York-Newark gains 3 Import Specialist positions, but JFK loses 55 Import Specialist positions), CBP has implemented tariff sharing between the port of New York/Newark and JFK airport. Until last year, each port (Newark and JFK) processed all types of entries and all types of commodities via the Harmonized Tariff Schedule (HTS). In other words, each port had full tariff coverage.

Because of this reduction in trade personnel, each port has now been assigned only parts of the HTS, not the entire HTS, and each port only processes only half the commodities entering its port. Tariff sharing presents a number of operational problems. Because the HTS will be split, each port will have half the number of commodities teams (staffed by Import Specialists) than they currently have. Certain kinds of merchandise will continue to be unloaded at the port of Newark, but the only commodity team that is trained to process it will be at JFK. And other merchandise will continue to be unloaded at JFK, but the only commodity team trained to process it will be in Newark. CBP has directed Import Specialists to, in these cases where there is no longer the appropriate commodity team present at the port to do a physical examination, take digital photos of the merchandise and email the photos to the other port. A digital photo cannot determine lead levels in toys or thread count in textiles. This is a short-sighted solution to an Import Specialist staffing shortage that will affect taxpayers, trade compliant importers, and the federal treasury.

Rather than hire additional Import Specialists at ports of entry where they are needed, CBP instead is shortchanging the New York City trade community. It is clear that the FY 2009 ROM, that states that only 984 Import Specialists are needed nationwide, does not adequately reflect the optimal staffing levels for Import Specialists as evidenced by the need to implement a tariff sharing scheme at New York City region ports of entry.

Tariff Sharing and Anti-dumping Orders

Tariff sharing significantly affects Import Specialists’ timely disposition of anti-dumping orders. The problems that arise from tariff sharing centers around the movement of entries between JFK and Newark. When liquidation orders are published in the Federal Register, CBP has six months to liquidate and process those entries. There is almost always a certain amount of lag time between when the liquidation orders are published in the Federal Register and when the Import Specialists on the commodity team associated with that merchandise are actually made aware of the liquidation orders. In actuality, the Import Specialist rarely has the full six month period to liquidate and process these order.

Prior to the Federal Register posting, the entries are kept in files with the commodity team that handles the merchandise. For example, under tariff sharing, the entry paperwork of commodities that are received at JFK, but are inspected by a commodity team at Newark, is supposed to be transferred to Newark and not filed at JFK. In many cases, however, when the liquidation order is issued, the commodity team in Newark goes through their files of anti-dumping entries. Frequently, there are JFK entries missing that were lost in transportation. At that point, Newark Import Specialists contact JFK to see if they can find the lost files. If the lost files can’t be found, the Newark Import Specialist makes an inquiry to the Records Department to try and to retrieve these entries, which takes time.

Pressed for time, Import Specialists then call the broker to ask the broker to reconstruct the entries and send these reconstructed entries to the commodity team. The commodity team then reviews these reconstructed entries to make sure that the entry type codes are the correct type for anti-dumping entries and that the entries were put on hold and not previously liquidated. If this happens, CBP could lose its ability to liquidate at the anti-dumping rates that are applied via the liquidation order and the extra duties cannot be collected. Recently in Newark, CBP lost the extra duty on seventeen entries due to this very scenario. These liquidation orders encompass hundreds of entries. Conversely, JFK has the same problem on their end when they have anti-dumping entries to deal with. This same problem with disposition of anti-dumping orders is occurring at the ports of Detroit and Port Huron where CBP has also implemented tariff sharing.

Under tariff sharing, revenue from anti-dumping orders is being lost. Again, it is clear that the FY 2009 ROM, that states that only 984 Import Specialists are needed nationwide, does not adequately reflect the optimal staffing levels for Import Specialists that process anti-dumping orders.

Finally, NTEU has just learned that because the Import Specialists at the Ports of NY/NJ are overwhelmed with work due to the loss of the 52 trade positions (that has resulted CBP implementing tariff sharing at these ports), CBP has begun assigning audits to Import Specialists at other ports, even though the majority of the merchandise and entries associated with the importer being audited come into the Ports of NY/NJ.

FY 2012 CBP Budget Request

Several years ago, pursuant to the provisions of the SAFE Port Act, there was a small increase in the number of CBP trade enforcement and compliance personnel. There was no increase in funding for CBP trade operations staffing in the FY 2010 DHS appropriations bill and again, the FY 2011 continuing resolution has no increase in full-time equivalents (FTEs) for CBP trade operations personnel.

In effect, there has been a CBP trade staffing freeze at March 2003 levels and, as a result, CBP’s revenue function has suffered. The FY 2012 budget requests funding for CBP’s enforcement program to “prevent trade in counterfeit and pirated goods, and enforce exclusion orders on patent-infringing and other Intellectual Property Rights violative goods.” This request, however, includes no increase in CBP trade operations staff at the POEs to implement this trade enforcement program. NTEU urges the Committee to appropriate funding to hire additional trade enforcement and compliance personnel, including Import Specialists, at the POEs to enhance trade revenue collection.

CBP Career Ladder Pay Increase

NTEU commends the Department for the recent increase in journeyman pay for CBP Officers and Agriculture Specialists. Unfortunately, many deserving CBP trade and security positions were left out of this pay increase, which has significantly damaged morale. The 23,450 armed, uniformed CBP Officers and uniformed CBP Agriculture Specialist will be eligible for the increase, but the approximately 2,000 non-uniformed CBP commercials operations employees will not.

NTEU strongly supports extending this same career ladder increase, from 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 Congress recognizes the high level of expertise that these employees possess.

Study of Dedicated Funding

In 2007, the total value of all imports into the U.S. was more than $2 trillion. Processing these imports meant handling 22 million entry summaries by CBP Entry Specialists, Import Specialists and support staff. In addition to its security and trade missions, CBP works with over 40 federal agencies to help enforce a wide range of laws from consumer product and food safety, to environmental protection. It is clear that additional CBP commercial operations staffing and training funds are needed. Multiple proposals to increase customs fees are currently being promoted to support a great variety of proposed programs. Security needs, along with important national trade policy goals, require additional financial resources. NTEU encourages the Committee to request a study of the setting, collection and utilization of these customs and user fees. This study should determine the relationship between current fees and monies allocated for CBP services and assess the need for additional fees.

Conclusion

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 cost in terms of revenue loss to the U.S. Treasury.

And most importantly, for the purposes of this hearing, CBP trade personnel are responsible for stopping illegal transshipments, goods with falsified country of origin, goods that are misclassified and for collecting antidumping and countervailing duties. The ongoing freeze in the number of CBP trade compliance and enforcement staff undermines this mission.

In order to prevent customs fraud and duty evasion, NTEU urges Congress to increase the number of trade compliance and enforcement staff responsible for enforcing antidumping and countervailing duty orders issued under title VII of the Tariff Act of 1930 (19 U.S.C. 1671 et seq.) and preventing the importation of merchandise in a manner that evades that antidumping and countervailing duty orders issued under title VII of the Tariff Act of 1930 (19 U.S.C. 1671 et seq.) — a responsibility that falls solely on the shoulders of CBP Import Specialists.

NTEU urges the Committee to fund the hiring of additional needed CBP trade staff to enforce the over 400 U.S. trade and tariff laws and regulations for which they are responsible, to end the current practice of tariff sharing at several major ports of entry, and to ensure full tariff coverage at all major trade ports of entries listed on the ISAM (Appendix III.)

The more than 24,000 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.