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Lawmakers Ready to Launch Customs Conference with Outcomes Largely Uncertain

July 8, 2015 by Brian Dabbs and Brian Feito|Top News

The House is set to vote in the coming days to put in motion a conference on Customs Reauthorization legislation in order to resolve differences between the House and Senate versions of the bill, said lobbyists in recent interviews. The verdict is still out on a range of policies that will directly impact compliance professionals and the broader trade community. Legislative conference is a notoriously secretive process, but lawmakers are expected to hammer out compromises on some major issues, including CBP evasion prevention and enforcement and Miscellaneous Tariff Bill process reforms.

House and Senate leadership have vowed over recent months to move Customs Reauthorization to President Barack Obama’s desk shortly after passage of renewals for the Generalized System of Preferences, the African Growth and Opportunity Act, Trade Promotion Authority and a set of other trade bills. Obama signed those bills into law on June 29 (see 1506290045). He has also pushed for quick resolution on the customs legislation (see 1505200025).

The Senate gave the go-ahead on June 24 to start a conference (see 1506250019). Sens. Orrin Hatch, R-Utah, Ron Wyden, D-Ore., and five other Finance Committee members will act as conferees for the Senate side. The House hasn't yet approved a motion to go to conference. That vote could come before the end of the week or early the week of July 13, said the lobbyists. A spokesman for House Speaker John Boehner, R-Ohio, didn’t respond for comment. The whole process could wrap up by the end of the month, said the lobbyists.

ENFORCE VS. PROTECT

The two chambers are still negotiating over the Senate-passed ENFORCE Act and the House’s PROTECT Act, the lobbyists said. Both those bills aim to change and improve strategy on fighting duty evasion by setting timelines for administrative and judicial review, but the ENFORCE Act gives review responsibility to CBP. The agency then has to adhere to several strict deadlines for different stages of the investigation process (see 14050720). Importers and trade compliance professionals have complained that will shift resources from other critical CBP functions (see 1505150015).

The two bills also broaden the definition of evasion, which may result in more allegations for CBP or the Commerce Department, depending on the version that wins out, said Marguerite Trossevin, an attorney with Jochum Shore. Both bills define evasion as any “material and false” verification or omission. That will create “an administrative process in Customs that will encroach on Commerce's jurisdiction to administer the trade laws,” said Trossevin,” unless there is a mechanism, like there is in PROTECT, to ensure that Commerce retains jurisdiction over what is and is not subject to AD/CVD duties.”

Some importers may suffer unfairly as a result of the broadened definition, said Trossevin. “ENFORCE also fails to guarantee due process for trusted traders and innocent importers who may themselves be victims in evasion schemes” by potentially forcing those importers to pay duties on products, she said.

Proponents of the ENFORCE Act argue that giving CBP investigative responsibilities into evasion allegations will stamp out some of the illegally imported goods common in the U.S. market. “We can all agree that the duties should be applied at the border, but if Customs does let some illegal shipments through, there has to be a way to go back and investigate that activity and apply the duties if necessary,” said one lobbyist with ties to the manufacturers. “The agency that has the information available is Customs. They have the data and know what's coming into the country.”

The PROTECT Act lays out a number of unique provisions on trade alerts and other measures geared toward preventing illegal goods from entering the U.S. market in the first place. The end result may be a combination of the two bills, said customs lawyer Jon Fee of Alston & Bird. “There certainly can be a melding of the two bills,” said Fee. “That can happen if the legislative process works well.”

Customs Broker Importer ID Requirements

A key difference between the bills that affect customs brokers is a requirement in the House bill that brokers implement procedures for collecting the identity of importers and maintain “records of the information used to substantiate a person’s identity, including name, address, and other identifying information.” Brokers that fail to collect the information would be subject to a $10,000 penalty under 19 USC 1641, and license suspension or revocation. The bill leaves minimum standards for collecting the identity of importers to CBP’s discretion, requiring that CBP issue regulations outlining specifics. No such provisions are currently in the Senate bill.

The House bill would also require CBP to report on the best way to make sure foreign nationals provide customs brokers with accurate data, as well as the establishment of “a system for customs brokers to review information maintained by relevant Federal agencies for purposes of verifying the identities of importers.”

The National Customs Brokers & Forwarders Association of America criticized the “heavy-handed approach taken by the House bill,” in a letter sent to Ways and Means Committee leadership on June 18 (see 1506220022). NCBFAA lobbyist Jon Kent says the trade association has been working on making sure the importer identity provisions don’t make it into law, and is “optimistic.”

Miscellaneous Tariff Bill

The Miscellaneous Tariff Bill remains a contentious part of the approaching Customs Reauthorization conference. The Senate passed an MTB process reform measure as part of its customs bill. That provision aims to add impartiality to the process by allowing domestic producers to submit requests for specific MTB tariff suspensions directly to the International Trade Commission, as well as through lawmakers (see 1504200017).

The House is a bigger challenge due to continuing concerns over earmarks, and lawmakers in that chamber haven’t yet put forth a MTB-related bill. It’s still up in the air whether the two sides can hammer out a product, said the lobbyist with manufacturing ties. “I don't know that the Senate language could pass muster in the House,” the lobbyist said. “But they could also get a little bit creative with the language as long as it stays germane.”

The National Association of Manufacturers recently posted a blog that said this may be the last opportunity to resurrect the MTB program, which last expired at the end of 2012 (see 1506300071). A spokesman for House Ways and Means Chairman Paul Ryan, R-Wis., declined to comment on the prospects for reform as part of the customs vehicle. “It’s clear the MTB process needs to be reformed to comply with House rules,” said the spokesman. “Still, [Ryan is] interested in working with members to resolve this challenge."

Both sides of Capitol Hill are, in fact, striving to reach an agreement, said American Apparel and Footwear Association Executive Vice President Steve Lamar. “The MTB issue is ripe for consideration in the conference,” said Lamar. “Certainly there’s a variety of options to allow the MTB program to start again.”

Provision Designed to Override TPA Malaysia Language

The Senate Finance Committee tacked language onto Trade Promotion Authority legislation in April to bar expedited consideration of free trade agreements with Malaysia and other countries that host mass human trafficking (see 1504270008). TPP supporters criticized the language as an obstacle to wrapping up TPP negotiations with all 12 nations, and the House then added revised language, which is designed to supersede the TPA language, onto its Customs Reauthorization bill. The new provision provides an off-ramp by allowing the president to override the TPA trafficking restriction if Malaysia and other nations demonstrate “concrete actions” toward reform. The revised language is likely to make it into a final customs bill, said the lobbyists. Lawmakers have for weeks aimed to resolve this issue through customs conference (see 1505260037).

Currency Manipulation

The differing currency provisions in each bill are likely to be the most controversial and heated negotiations in conference, trade experts have said over recent months. The Senate passed a provision in its Customs Reauthorization bill that would direct the Commerce Department to impose countervailing duties on imports from currency manipulators (see 1504230001). The bill would allow Commerce to assess the benefit from manipulation by comparing the average real exchange rate, drawn from two metrics, to “the official daily exchange rate identified by” the U.S. government.

Sen. Chuck Schumer, D-N.Y., spearheaded the inclusion of that language at the committee level. GOP Sens. Jeff Sessions, R-Ala., and Lindsay Graham, R-S.C., signed onto the bill earlier as primary co-sponsors. A Schumer spokesman didn’t respond for comment on expectations for the provision in conference, and the lobbyist with manufacturing ties said the bill likely won’t make it into a final compromise. “The big elephant in the room is the Schumer-Graham currency provision,” said the lobbyist. “But I think everyone's figured out that's not going to happen. Both sides will have some chits to trade based on what’s in the two bills.”

The Senate legislation also includes currency provisions to require Commerce report on currency exchange rate policies with major U.S. trade partners. That bill also directs the Obama administration to create an advisory committee on exchange rate policy. The House legislation takes a similar approach on those two fronts.

Other Differences

Other differences between the House and Senate customs reauthorization bills that are set to be resolved in conference include: