NFTC Supply Chain Expert Looks Forward to CCF Legislation, Argues for Better UFLPA Entity List

Once CBP submits its proposal for a new customs modernization law, National Foreign Trade Council Senior Director of International Supply Chain Policy John Pickel says, Congress will dig into how they want to shape the bill. It’s not an easy task to produce a bill with a balance between enforcement and trade facilitation, but that’s Congress’ intention, he said.

Policymakers on the Hill “want to look at some of the logical extensions of TFTEA," Pickel said in a recent interview at NFTC offices in Washington. The Trade Facilitation and Trade Enforcement Act of 2015 was the last major customs bill in Congress.

One of the priorities for importers is to have partner government agency requirements that are harmonized with CBP requirements and are truly digital.

The Border Interagency Executive Council, or BIEC, has been great, but to deconflict duplicative requirements or end paper-based submissions, “there needs to be an ongoing governance structure” with decision-making powers, he said.

Policymakers talked about streamlining requirements across the U.S. government in the run-up to TFTEA, but, he said, “now the visibility of customs procedures has grown exponentially. I think there is the opportunity to elevate an interagency group and actually make these decisions effectively.”

To address consistency between CBP and other agencies that have a role in regulating imports for better efficiency in the entry process will require multiple committees to coordinate on the bill's drafting, he said.

“It’s just going to be a robust process," he said. "As with any legislative process, I expect everybody’s going to be happy about a few things, and everybody’s going to be upset about a few things, and everything in between.”

Compared to TFTEA, he believes the trade’s voice is going to be more organized; last time, different segments of industry all popped up with their views at different times. This time, there will be an effort to find common ground that the majority of trade wants to advocate for.

“We are expecting the private sector will have an opportunity to weigh in on what works and what doesn’t," he said.

While CBP will not recommend changes to the de minimis threshold established under TFTEA in its request for a 21st Century Customs Framework, there has been a lot of talk of changing de minimis eligibility in the House of Representatives, with Trade Subcommittee ranking member Rep. Earl Blumenauer, D-Ore., pushing to exclude Chinese exports entirely from de minimis. House Ways and Means Chairman Jason Smith, R-Mo., when he had a chance to ask questions at a recent trade subcommittee hearing on customs modernization, asked a witness what should be done to change de minimis policy to avoid abuses by China (see 2305250033). When the chairman hosted a full committee hearing on trade, and Blumenauer asked Smith to support his proposal to exclude China, Smith replied: "It appears that loophole is almost an $800 free trade agreement for China. That’s what it looks like to me."

Pickel doesn’t agree that de minimis “all of a sudden became a vector for noncompliance.”

Advocates for businesses that import oppose such a change, and they are telling members of Congress: “A reduction of de minimis would be a regressive tax increase on American consumers and businesses who are already facing inflationary pressure.”

Business advocates say CBP has taken significant steps to enhance screening of small packages. In emailed follow-ups after the interview, Pickel said, "Restricting de minimis treatment to exclude shipments from China only harms compliant companies. The sustainable answer is to augment the existing policy with more intelligent enforcement capability."

Pickel, who was counsellor to the CBP commissioner for trade facilitation and enforcement matters earlier in his career, said sending illicit goods to the U.S. “is not unique to de minimis.”

Advanced technology like AI, machine learning, and robotics would make enforcement smarter, he argues.

Although there is energy in the House to change the law, Senate Finance Committee Chairman Ron Wyden, D-Ore., and Finance Committee member Sen. John Thune, R-S.D., were original sponsors of a bill that aimed to increase the threshold from $200 to $800, the change made in TFTEA.

As NFTC talks to staff and members of Congress, he said, “We’re seeing some real interest in digging into nuance -- to really have a constructive conversation about where concerns reside while not losing the economic benefits of de minimis.”

A Democratic Senate trade staffer, in a phone interview with International Trade Today, asked, if you ban Chinese participation in de minimis, would the goods move to a warehouse in Vietnam?

“What is the goal here? What are you trying to shut off? Is the goal that you think there’s some sort of illegal product coming through? Is the goal that you’re not protecting the revenue," she asked. "What is the objective here and then we can work through what the solutions are.”

Although it has been a while since Congress passed a broad customs law, there have been several recent laws passed that affect the trade, including the Ocean Shipping Reform Act and the Uyghur Forced Labor Prevention Act.

The first bill was a response to difficulties exporters were having booking berths on ships going back to Asia during the pandemic, and also addressed detention and demurrage charges, which surged as the logistics industry struggled to deal with the surge of imports that came during the pandemic, as Americans shifted spending from services to goods, and as government support gave many additional discretionary income.

Congress is continuing to talk about how to restrict the ability to levy demurrage charges, and some would like to give the Federal Maritime Commission the authority to tackle rail storage fees (see 2305030079 and 2305230030).

Pickel recommended caution. “FMC has had such an expansion of their responsibility” already and policymakers should consider what role is appropriate for them given their resourcing and underlying authorities, he said.

This examination of whether they should cover rail issues “needs to take into account what their operational capabilities are.”

On UFLPA, importers want CBP to share more information about which companies compel laborers to make their products, and, in the case of detentions, more clarity about which product triggered the action. A shipment could include a number of different products, but even if just one is suspected of a link to Xinjiang, the entire cargo is held at port, he said.

CTPAT members are starting to get entry numbers, however. “I think that’s a step in the right direction," he said.

Importers want to know how to avoid “risk earlier in the supply chain. Nobody wants forced labor in your supply chain, nobody. It’s far easier to shift sourcing” than to deal with a detention and trying to document that there isn’t forced labor in the good. But to make that approach work, information sharing needs to improve, Pickel said.

The UFLPA said that a forced labor task force would compile an entity list of companies known to hire transferred Xinjiang minorities or known to produce in Xinjiang. That list has very few companies so far.

The former executive director of CBP's Trade Remedy Law Enforcement directorate, the office responsible for enforcing UFLPA and the broader ban on importation of goods made with forced labor, has said that CBP won't list every company it has determined uses forced labor, because those companies change their names too quickly after they're caught (see 2302170047). Ana Hinojosa said the entity list will be updated, however, likely once a year.

Pickel pushed back against the argument that an entity list is not helpful because of firms changing their names. In an emailed follow-up after the interview, he wrote: "CBP has infrastructure to identify shifts by illicit actors, seeking to conceal their activities. They aren’t stymied by a simple name change."

He said if the entity list were built out, it "would provide valuable insight for the trade community to model compliant sourcing."

Importers need more information about which companies are implicated in forced labor. “They’re thirsty for it. They want to have visibility. They already believe they’re on the right side of the line," he said, later adding that companies want to validate their compliance efforts.