Flexing their legislative muscles, Senators Grassley and Baucus, the Finance Committee Chairman and the committee’s ranking Democrat, respectively, have in effect said, “Enough already with security, security, security. Let’s not forget about trade facilitation and protection of the revenue.” Recently, the senators introduced S. 3658, the “Customs and Trade Facilitation Reauthorization Act of 2006.” While the bill contains provisions addressing supply chain security programs, it also contains provisions that may help reverse or at least slow the swing of the pendulum in Customs policymaking, which since the creation of the Department of Homeland Security (DHS) in 2003, has swung in an ever widening arc toward border and supply chain security.

In S. 3658, Senators Grassley and Baucus have presented their case that Customs commercial operations and revenue protection functions have been neglected by DHS. In a series of findings, the bill notes that the Homeland Security Act of 2002 prohibited staffing level reductions attributable to the customs revenue function, yet since 2003 staffing dedicated to customs revenue, trade facilitation and trade enforcement has declined by 16% and the number of commercial investigations by Immigration and Customs Enforcement (ICE) has declined by 15%. Meanwhile, as the number of people dedicated to customs commercial operations and enforcement decreases, a dramatic increase has occurred both in the number of cargo containers entering the United States and in customs revenue collections. S. 3658 contains a wide range of measures designed to ensure that Customs reinvigorates its traditional functions.

First, the bill addresses staffing and enforcement issues. It authorizes the appropriation of monies that would be used for:

• Increasing the number of Customs inspectors, import specialists, and auditors;
• A new Intellectual Property Rights Enforcement Division within the Office of Regulations and Rulings, staffed by ten attorneys and five auditors, and a senior investigative liaison from ICE to coordinate intellectual property enforcement efforts; and
• The assignment of another senior investigative liaison from ICE to Customs’ Office of Field Operations to coordinate all other enforcement efforts involving ICE and Customs.

Second, the bill addresses trade facilitation issues. It would:

• Ensure that all Federal Government agencies that require documentation for clearing or licensing importations and exportations participate in the International Trade Data System (ITDS), a component of the Automated Commercial Environment (ACE) that is now being developed;
• Provide a statutory basis for the Customs- Trade Partnership Against Terrorism (C-TPAT) and the Importer Self- Assessment Program (ISA) by making them part of a new Customs Industry Partnership Program (CIPP) in which the already established three tiers of participation of C-TPAT would be retained;
• Provide for a Trade Resumption Plan to address not only the aftermath of a terrorist incident, but any transportation disruption that results in a significant delay, interruption or stoppage in the flow of international trade regardless of the cause; the plan would include the redeployment of resources, a training program for Government personnel, and revised cargo targeting and inspection protocols, including establishing priorities based on types of cargo, where it originated, who transported it, how it was transported, and whether the importer is a Tier 3 participant in CIPP; and
• Enact a new drawback regime.

Finally, S. 3658 would require that the Department of the Treasury beef up the staff of the Office of Tax, Trade, and Tariff Policy so that it can carry out its oversight of the customs revenue functions. Treasury retained this responsibility when Customs was transferred to DHS in 2003, as did the Senate Finance and House Ways and Means Committees, but until now, neither Treasury nor the Congressional committees have bucked the “security above all else” trend. At this point, the fate of S. 3658 is unclear, but one thing seems likely: that the Government’s fixation on border and cargo security is reaching its apex, and future legislation affecting Customs will strike a better balance between cargo security, cargo facilitation, and revenue protection.

For more information, please contact any of the following lawyers:

Dan Wendt, dwendt@milchev.com, 202-626-5898

Richard Abbey*

*Former Miller & Chevalier attorney

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