Export Regs Stifle Business Opportunities, Says COAC Survey; Export Holds, Exams a Concern

Nearly one-third of exporters have lost sales because of U.S. export regulations, according to the CBP Advisory Committee on Commercial Operations (COAC) 2013 Export Survey (here). COAC members discussed the survey, the first of its kind, at a meeting on Nov. 15 in Washington, D.C. Two of the main takeaways from the survey were the impact of export regulations on exporters and freight forwarders and the high cost of exports held at ports. One way the government could mitigate these negative outcomes is through flexible programs that target risk based on industry sector, said CBP’s Dan Baldwin.

Exporters and Forwarders Mostly Small and Medium-Sized Businesses

COAC surveyed three groups -- exporters, freight forwarders and brokers, and carriers -- as part of its 2013 Export Survey. One commonality among exporters and freight forwarders/brokers is that both groups overwhelmingly comprise small and medium-sized enterprises, said COAC member Julie Parks, senior manager-export import operations at Raytheon. Fully 73% of exporters reported revenues of less than $500 million, as did 70% of forwarders and brokers. Given this fact, “any proposed changes to the declaration process really need to be vetted by these small- and medium-sized enterprises, because of their potential for large impacts to the U.S. export count,” said Parks.

Holds, Exam Costs Concerns for Forwarders

Concern over holds and exam costs were COAC’s takeaways from freight forwarder and broker responses. Among those groups, 70% said between 1 and 10% of their shipments get held before export, costing up to $2100 per hold. Among forwarders and brokers with shipments held at the border, about 46% reported release by the U.S. government in one to three days, and 36% had holds lasting more than 4 days. A majority of forwarders and brokers with holds cited multiagency coordination as the reason for longer holds.

The high cost of exams was also cited in forwarder and broker responses, with 43% of forwarders and brokers reporting their outbound exam costs average between $300 and $2100, and 14% reporting an average of more than $2000. Vincent Iacopella, chief operating officer at the Janel Group, told the committee that lowering that cost should be a priority. “The lower the transaction cost for exporters, the more competitive U.S. exports are globally,” he said. Iacopella said dialogue is ongoing with the Port of Los Angeles on that front. “We’ve started talking about ways that we can move examinations earlier in the process, maybe not have them happen in the places they’re happening now,” said Iacopella, “with the ultimate goal of moving that number away from $2100 and closer to $300, which would have an impact on transaction cost.”

Export Regulations Decrease Business Opportunities, Say Respondents

Both exporters and forwarders/brokers cited export regulations as decreasing business opportunities. Among forwarders and brokers, 77% reported they turned down business due to regulatory licensing requirements. “The way that we might look at is that exporters are reaching out to the people that they know trade, which are freight forwarders and brokers, and they’re asking for assistance [with] these regulations,” said Julie Parks. “And the brokers, because of the risk associated with some of that, might be saying no.”

And exporters themselves are losing business because of export regulations, the survey said. Nearly one-third of exporters lost sales because of U.S. export requirements. “They either didn’t want to get engaged in sales, or they lost them to another region because of the level of complexity that might be associated with our regulations,” said Parks.

If CBP wants to get involved in export facilitation through trusted trader programs, it will need to be flexible, said Dan Baldwin, executive director-cargo and conveyance at CBP’s Office of Field Operations. Baldwin suspects that many lost sales among exporters occurred among small- and medium-sized businesses in the textiles and agriculture sectors. “Those are also industry sectors that don’t tend to join C-TPAT [Customs-Trade Partnership Against Terrorism] as readily,” he said. That may be because programs like C-TPAT have “strict regimens” that “appeal to the Fortune 500-type companies,” Baldwin told the committee. “But if nothing else, one of the ACAS [Air Cargo Advance Screening] lessons is tremendous flexibility on the government’s part really opens up greater opportunities,” he said. “You may have an opportunity to actually achieve a broader outcome if you have slightly more flexible opportunities based on industry sectors that match up against the risk that you’re trying to achieve in the export environment, which clearly is the licensable type of work,” said Baldwin.