CBP Begins Discussions on 'Mod Act 2.0' Legislation to Support Future Trade Processes

ATLANTA -- The next several years represent an opportunity for CBP and the trade community to begin work on “Mod Act 2.0” legislation to set the stage for modernized customs processes over the next few decades, said Cynthia Whittenburg, deputy assistant commissioner in CBP’s Office of International Trade, at the East Coast Trade Symposium on Dec. 5. After 24 years under the original Customs Modernization Act of 1993, “we find ourselves once again inhibited by our current legislation and regulations,” she said. Judging by that law, which took five to seven years until final passage, the process could be a lengthy one, she said.

The American Association of Exporters and Importers has been working on a package of proposed updates to the customs laws in Title 19 that would be necessary to allow CBP to implement modernized processes, “or at least take restrictions out of the way” and allow the agency to take the “next steps,” said Richard Belanger, a customs lawyer with Sidley Austin. AAEI is rolling out the list “relatively soon,” and the list may serve as a “vehicle to move forward” with legislative changes if it’s the “joint decision of industry and government to do that,” Belanger said.

The modernization effort may be met with “a fair degree of support” from within the Trump administration, said Michael Dougherty, assistant secretary of border, immigration and trade policy with the Department of Homeland Security. The administration has “expressed interest in growing American business and creating new jobs for Americans,” so there is going to be “strong interest in Mod Act 2.0,” said Dougherty, who was a member of Trump’s DHS transition team before his appointment to his current position. “This is something we’re going to want to see more of,” he said.

Several current CBP programs and requirements are ripe for change that may require Congress to act, panelists that took part in the discussion said. Reconciliation, a program created by the original Customs Modernization Act, “provides an opportunity to look to the future” in terms of simplification or other modifications, said John Leonard, executive director of trade policy and programs at CBP. Rules on record keeping haven’t been updated in 24 years, despite the emergence of business trends like cloud computing and outsourcing, Belanger said. Legislation could also eliminate the “albatross” of uncollected antidumping and countervailing duties by moving the U.S. from a retrospective to a prospective system, like the rest of the world has, he said.

Legislative changes may also be necessary to an account-based model for statements and payments, he said. The approach could be flexible, with businesses able to choose whether to keep statements transaction-based or move to a monthly model, Whittenburg said. But the merchandise fee, with its statutorily required per-entry minimums and maximums, represents an “elephant in the room” that impedes any option for an account-based model, she said.

One improvement CBP could make immediately based on existing law involves post-summary corrections, said Tom Gould of Sandler Travis. As originally intended, post-summary corrections were to act as complete replacements of entry summaries, with importers using reasonable care to correct the information. But in practice CBP has not been treating PSCs that way, Gould said. Instead, CBP has been requiring PSCs to go through a review process and, if no review is completed in time, rather than presume the importer practiced reasonable care the agency automatically denies the PSC.

CBP is currently examining the policy, and in particular how to use the reasonable care principle to “make the process a little more streamlined and quicker,” Leonard said. The policy can cause serious headaches in cases wherein the importer is correcting an underpayment of duties. If CBP doesn’t correct the PSC and liquidates the entry as entered there is no recourse to protest and the importer may not be able to file a prior disclosure, Gould said.