WASHINGTON: The US administration under President Donald Trump may have generated shockwaves elsewhere, but little has changed when it comes to Customs cargo clearance. The only impacts on US Customs and Border Protection in Trump’s first six months have been the debacle of the executive order on immigration, and the appointment of Kevin McAleenan as Customs commissioner, said Susan Kohn Ross, a partner at Mitchell Silberberg & Knupp and frequent commentator in JOC.com. “Beyond that, we haven’t seen any impact,” she said. From a cargo perspective, she added, there has not been a significant cut in the budget because there has not been a Trump budget. There is no sense yet of what the priorities will be at the Department of Homeland Security, other than to protect the US borders. “That’s been a standard phrase for a long time but we don’t know what that means — or may mean — under the new administration,” Ross said. McAleenan’s appointment has been universally hailed, in part because so many mid-level positions remain unfilled throughout the Trump administration, and many details of US trade policy remain uncertain, including the outcome of the looming renegotiation of the North American Free Trade Agreement.
“My overall impression is that people are still concerned about the trade policy uncertainty,” said Marianne Rowden, president and CEO of the American Association of Exporters and Importers. It has been a calming factor to have McAleenan, who has been at the agency 20 years, heading up Customs, she said. Ross agreed: “Everybody was thrilled by the idea that we would get somebody at the head of the agency that knew what they were doing. That was a huge plus. And getting somebody of the caliber of Kevin McAleenan was sort of the icing on the cake.” The American Apparel and Footwear Association (AAFA) also was pleased with McAleenan’s nomination to the Customs post. Nate Herman, senior vice president, supply chain at the association, said McAleenan is familiar with all aspects of the government agency and understands the need to balance trade enforcement and trade facilitation — a big concern for shippers.
Because Trump cares a lot about trade enforcement, Herman said he expects more from Customs in that area. But “that would have happened anyway because of the implementation of the Trade Facilitation and Trade Enforcement Act, the TFTEA, by Congress last year,” he said. “But we don’t think trade facilitation will be forgotten,” he added. “There were a lot of initiatives started under the TFTEA that were put into statutes — and made permanent — or new things that were required of Customs to improve trade facilitation.” This includes work to improve Customs’ collaboration with the trade in programs such as the Centers of Excellence and Expertise, and Customs-Trade Partnership Against Terrorism.
Ross said it is “quite remarkable” that Customs can get cargo and passengers cleared more or less in a timely fashion, considering all of the things on its plate. “There are issues from the trade side that are really concerning, that have a major impact on the ability of companies to do business,” Ross said. Customs may take years to resolve a legal challenge a company may have about a liquidated damage case, seizure, or penalty. Companies may wait two years, only to have their protest granted and have their money returned to them. “When you start tying up cash that could be used for other things within a company, that’s never a good thing.” She added, “And if you want to get a bonded warehouse, it’s not uncommon for that process to take six to nine months. Most of the delay comes simply from not having the people available to go out and take a look at the facility and do all the other things that need to get done to bless the operation.” Customs needs the appropriate staffing and budgeting to be able to handle all of the non-border functions needed for trade facilitation. There are concerns about the agency’s Centers of Excellence and Expertise. “Unfortunately, how well they run is directly related to the quality of the center director,” Ross said, “and some of them leave a lot to be desired.”
The centers are account-based, and not all the staff may be familiar with the respective industry and its individual companies. It makes it difficult to administer the regulatory requirements for that industry appropriately. “When you have people who don’t understand the industry or basic accounting records, don’t understand how a free trade agreement applies to an industry, it’s a recipe for disaster,” Ross said. The issue of inadequate staffing for the dual mission of Customs is tied to Congress. Legislators mostly focus on adding to the numbers of border agents and on more interdiction of drugs. There may be millions of dollars added to Customs’ budgets to increase staffing, but the funds end up shoring up border operations. Customs cannot seem to get more funding to expedite cargo clearance.
Moreover, in both political parties, Ross explained, there are members of Congress “who want to look tough to their constituents by showing they are addressing the law enforcement” aspects of Customs. There’s “nothing sexy” about explaining to constituents that the t-shirts imported from China can get to their local Wal-Mart faster now because Customs has added a hundred people to its staff.” Moreover, knowledge about what Customs really does is “pretty darn thin” in the House and Senate, according to Ross. Herman said the AAFA wants to move forward with the Automated Commercial Environment (ACE), which was postponed again this spring, saying there is concern about the reoccurring deadline delays. “I was assured by a CBP official [in early July] that this latest delay will be brief, and that ACE will finally be fully implemented within the next few weeks. We are ready to go.” Eventually, ACE will be “very helpful.”
Ross said Customs has made a remarkable product in ACE, given all the complications they had to go through. But it also had severe financial limitations, adding to the challenge because Congress is not giving them money. Eventually, a lot more companies will get their ACE accounts, Ross said, and that will help in a variety of areas in terms of tracking and other issues. E-commerce has created a new set of headaches to the trading area, she said. There is a de minimis rule of $800, so goods that may be otherwise regulated by the Food and Drug Administration, the Consumer Product Safety Commission, or other government enforcement agencies are not seeing them because there is no formal entry made on those shipments. Ross said there is a lot of concern about public health and safety.
Canada has a lower de minimis rule at $20 and Mexico’s is also lower — now $50 — than the United States. Taking advantage of the differential in de minimis rules, some companies have set up distribution centers in Canada, into which they are sending (from Asia) regular shipments in bulk to distributors who then arrange to do e-commerce deliveries to individual consumers in the United States, taking advantage of the $800 de minimis. “Under $800, you get the shipment through under Section 321,” Ross explains. “Above that, you have to file a formal entry. It’s the difference between saying that your goods are worth, say, $799, and don’t have to say anything else, versus saying they’re worth $800 or more — and so you have to submit a commercial invoice, a packing list — and go through a long, involved process. Customs is trying to do two things, Ross said. “One is to figure out a way to retain the institutional knowledge that the more experienced people have, so that they don’t keep losing them every time a class retires, which is what we’ve been through just now. Second, they are trying to get smarter about understanding whom they are dealing with, so that they can focus on the bad guys.”
