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June 30, 2008 

Senate Finance Committee Holds Oversight Hearing on Customs and Other Trade Functions

Last week, the Senate Finance Committee held an oversight hearing as part of the committee's efforts to reauthorize the customs and trade functions in the executive branch. Appearing before the Finance Committee were the Commissioner of U.S. Customs and Border Protection (CBP); the Assistant Secretary for Immigration and Customs Enforcement; the Deputy Assistant Secretary of Treasury for Tax, Trade and Tariffs; the Vice-Chairman of the International Trade Commission; and the General Counsel of the Office of the United States Trade Representative.

This was the second Finance Committee hearing held on customs reauthorization issues this past year. At the first hearing held on March 13, 2008, the Finance Committee heard testimony from various members of the business community who indicated that the "customs agencies have focused on their new security mission at the expense of their historical trade mission."

In his opening remarks, Committee Chairman Max Baucus (D-MT) expressed concerns over the potential consequence of increased security measures at border crossings and asked CBP to explain whether the agency possessed sufficient staff to ensure both trade enforcement and facilitation. Chairman Baucus also stated that:
I also have real questions about CBP’s responsiveness to this Committee, particularly CBP’s Office of International Trade. We established this Office as part of the SAFE Port Act in 2006 to prioritize CBP’s trade functions. But it has failed to consult its oversight Committee before releasing significant new policy proposals. And it often fails to address Committee inquiries in a timely manner. We have to find a better way of working together.
In his opening remarks, Ranking Member Grassley (R-IA) expressed concerns over CBP's handling of the proposed elimination of the “first sale” rule by noting that:
CBP's proposal appears to counter an established practice of some two decades on the part of Customs. Yet, the agency did not consult this Committee before proposing a change of such magnitude. And that, quite frankly, is not acceptable.
Senator Grassley also indicated that another CBP issue that needed to be reviewed "is implementation of the 10+2 initiative, particularly with respect to 24-hour advance submission of data."

During his testimony, CBP Commissioner Basham updated the Committee on CBP’s progress in a few key areas -- Importer Security Filing rulemaking (aka 10+2), the creation of the Office of International Trade and the establishment of the Secure Freight Initiative.

While he did not go into specifics, Commissioner Basham signaled that the 10+2 rule, which would require importers and carriers to provide certain data elements within 24 hours before cargo is laden aboard a vessel, is currently being finalized.

Commissioner Basham also reported that the Secure Freight Initiative, a program that tests the feasibility of scanning 100% of U.S.-bound containers at the foreign port, has been launched at three Puerto Cortes, Honduras, Port Qasim, Pakistan and Southampton, England. However, due to diplomatic and technical challenges and CBP’s limited resources, CBP will focus its investment in high-risk trade corridors that pose the greatest security risk.

With respect to the first-sale rule, Commissioner Basham stated that "while we believe this change would be more consistent with the provisions of the U.S. value law, we have sought input from the trade on this matter through an official public comment period." Significantly, Commissioner Basham stated that:
CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with the Congress and the private sector, or without the explicit approval of the Secretary of Treasury.
Other speakers at the hearing provided updates on activities at their agencies. Among other things, ITC Vice-Chair Pearson indicated that they are projecting that antidumping and countervailing import injury petitions "will remain at relatively high levels in FY 2008 and FY 2009" since such filings increase during economic downturns and due to the increase in the number of countervailing duty petitions filed against products from China.

The hearing testimony presented by each of the witnesses can be found here.

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