Customs Reforms Home and Abroad Offer Major Trade Benefits

An update to the widely disparate customs regulations in the U.S. and abroad would make for significant cost savings, even more so than the relaxation of tariffs, said panelists Jan. 31 who spoke at an event on reducing supply chain barriers. The event, hosted by the Washington International Trade Association, focused on the findings of a recent World Bank report that said the lowering of supply chain barriers would be of a greater benefit to international trade than tariff removal alone. The World Bank report is available (here).

While much of the benefit of modernized customs regulations would be for less developed regions, the U.S. could also stand to make some improvements by addressing the low-hanging fruit, said Ralph Carter, managing director of trade and international affairs at FedEx. A move toward the concept of single window that would streamline the U.S. government's look at the cargo information that must be reviewed by several agencies is among those improvements, he said. "There are some things in the customs reauthorization bill," he said. "The Centers of Excellence I think is an effort to move in that direction to start focusing on an industry and a sector and what they need and how do we get the various industries to come together." The certified importer program is also a good step in the right direction, establishing a population of companies that have been properly vetted, said Carter.

Customs updates won't take much of an "up front" investment but offers significant savings to the government, including in the U.S., said Mike Mullen, president of the Express Association of America, who wasn't on the panel but spoke during the question and answer session. For instance, raising the de minimis level would allow customs officers to do more things, he said. It would also be helpful for a single inspector, rather than several, to be responsible for enforcing the requirements of the agencies, who could then pass along their concerns to someone with more expertise, he said. "This kind of virtue should start at home," he said. "We have a situation on the U.S. border right now, in addition to customs, which does have a risk based approach, you have FDA and USDA, who do not have risk based approaches."

There's a number of improvements that are being looked at for addition to the customs reauthorization bill that will improve the customs process in the U.S., said Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers. Progress on improving automation through the Automated Commercial Environment has been slow, she said. "It's unfortunate and disappointing that we have not taken that further," she said. It remains unlikely that 100 percent scanning of imported cargo, a requirement recently pushed back to 2014, will ever come to pass, said Mullen. "The criteria for delaying it are not hard to meet, so I think that's going to continue."

Should be Part of Trade Negotiations

Consideration for supply chain barriers should become part of the discussion for international trade agreements, recommended Bernard Hoekman, director of international trade development at the World Bank. While such negotiations are often focused on tariff rules or certain products, supply chain issues should be considered as a bundle of things that can help the trade process, he said. While there's some consideration of customs issues in the World Trade Organization negotiations, the transportation services involved also should be understood, he said. This would mean more discussion between the regulators and the business world.

Another important change would be an emphasis on going paperless, something that came up repeatedly in the case studies in the World Bank report, said Hoekman. That needs to be done in an international context, he said. Paper processes are prone to error, create redundancies, which increase the number of errors and are prone to corruption, he said. Many businesses stressed this was a key priority, he said.