The next politically appointed Customs and Border Protection commissioner faces a steep learning curve, funding challenges and calls from many in the trade community to improve a key trusted trader initiative.
President Obama in early August nominated the nation’s drug policy czar R. Gil Kerlikowske to take the top post at the CBP, which has been without a politically appointed commissioner for nearly two years, limiting the agency’s ability to lobby Congress for more money and to take bolder action.
If approved by the Senate, Kerlikowske won’t just have to bring himself up to speed with the complicated and jargon-filled world of Customs; he’ll also have to show he understands the importance of working with the trade community to move goods quickly and efficiently, said Marianne Rowden, president and CEO of the American Association of Exporters and Importers.
“I think he is going to have to convey to the trade community that he is listening and open to suggestions,” she said.
It’s unclear whether Kerlikowske, who has 37 years of law enforcement and drug policy experience, will push the agency toward law enforcement over trade facilitation or keep the focus on a safe balance of the two, said Peter Friedmann, an international and trade attorney.
Ray Kelly, who served as Customs commissioner from 1998 to 2001 before going on to become New York City’s police commissioner, guided the agency more toward law enforcement by requiring headquarters employees to wear uniforms and carry guns, and prohibiting all workers from collaborating with the trade community, Friedmann noted.
In stark contrast, Ralph Basham, a former Secret Service officer who was Customs commissioner from 2006-09, emphasized trade facilitation.
Aside from shaping Customs culture, Kerlikowske will have to navigate the agency through fiscal tightening, largely a result of the federal sequestration. The agency’s $11 billion budget was cut by more than $700 million in the first wave of the sequestration, and the next wave of cuts is expected on Oct. 1.
Customs was able to minimize the impact of furloughs and reduce overtime at ports of entry this year, after Congress passed a continuing resolution allowing the agency to shift funding to avoid delays in cargo clearance at ports.
Customs has warned that federal sequestration cuts could prevent the agency from completing by October 2016 a long-delayed major cargo-processing system. The Automated Commercial Environment — an umbrella system for all of Customs’ communications with importers, exporters and brokers — is largely dependent on Congress giving the agency some $420 million to finish the job. The project, which will replace the outdated Automated Commercial System, already has cost more than $3 billion and is more than $1 billion over budget.
ACE project delays have hurt customs brokers who have had to spend hundreds of thousands of dollars on software for the new program and the outdated cargo processing system it’s replacing. Making the case to Congress for continued funding and keeping the ACE project on track are two ways Kerlikowske can aid the trade community.
Customs is using a more agile strategy of creating and rolling out pieces of ACE in bite-size pieces and getting regular feedback, but there is still industry skepticism that the agency can keep to its timetable, Rowden said. Much of that work will be for naught if the 47 other government agencies that can slow clearance of imports don’t get onboard with the single-window platform of ACE, which allows importers to input all necessary data into one document.
Customs’ signaling that it plans to help in export processes is less welcome by many in the trade community, Rowden and Friedmann said. Both are concerned that building an export component to ACE could hamper, more than help, shippers’ processes.
Brenda Smith, executive director of Customs’ ACE business office, said the agency over the next 12 months will work on building ACE’s export component by first modernizing the technology and then streamlining the entry process by taking into account export controls reform and President Obama’s initiative to double exports in the five years by 2015.
“We get the message that for both better facilitation and better enforcement we have to have the data and be able to use the data. Getting the data has to be cheap and easy,” Smith said.
The next politically appointed Customs chief also could strengthen the agency’s case for the Customs-Trade Partnership Against Terrorism program. C-TPAT importers get frustrated when their cargo is held up with no reason given, making the trusted trader collaborate program seem one-sided, said Peter Quinter, a customs and international trade attorney at GrayRobinson, a Florida-based law firm.
“I think it was a great concept. It was a good idea to expand the border and send agents overseas. Has it really affected the efficiency of the supply chain? I don’t think so,” he said.
Many shippers are reluctant to join the program because they’re not sure the benefits outweigh the time and money it costs to become and stay a C-TPAT participant, Rowden said. There is also talk of some C-TPAT members staying in the program not because of the benefits, but because of the risk of losing face by exiting the trusted trader initiative.
Customs is working to strengthen the C-TPAT program by expanding the ranks of countries with which the U.S. has mutual recognition agreements and providing more benefits to members, said Dan Baldwin, executive director of cargo and conveyance security at CBP. He said other federal agencies are responsible for the majority of cargo holds, and the creation of the single window is aimed at minimizing supply chain slowdowns.
Customs soon will launch a pilot that will merge C-TPAT and the Importer Self-Assessment Program to provide about a dozen new benefits and incentives to participants, Baldwin said. The agency, he said, realizes it needs to make the program more attractive. A recent University of Virginia study found the program was “kind of a wash at the end of the day” for participants.
C-TPAT shippers import more than half of the nation’s inbound goods by value annually, the agency said, and are 3½ times less likely to have their shipments examined by the agency and seven times less likely to see their cargo go through an extensive examination.
Customs is working to boost the numbers of participants by allowing foreign trade zone entities and bonded warehouse operators to become C-TPAT members. Some 4,300 importers and 3,100 carriers are among the 10,643 C-TPAT members. Baldwin said the agency might want to start gauging C-TPAT success not by how many members it has, but by how many countries it has mutual recognition agreements with. Customs has agreements with New Zealand, Canada, Jordan, Japan, South Korea, the European Union and Taiwan.
A new major mutual recognition arrangement partner will be announced at Customs’ annual trade symposium in late October, Baldwin said. And a mutual recognition agreement with Mexico could be forged as soon as the end of 2015.
Customs is considering whether to begin working out the legal process of a mutual recognition agreement with China. The customs offices of the two countries have completed more than 250 joint validations and planned to do 50 more by the end of September. India and Brazil also are interested in entering mutual recognition agreements, awaiting U.S. determination of whether each country has the necessary security controls in place.
Improving C-TPAT should be No. 1 on the new commissioner’s agenda, but efforts to support an environment dedicated to trade facilitation also should be high.
Many old-guard Customs veterans who understand the importance of working with the trade community are retiring. Rowden is concerned the new wave of Customs officials won’t have the dedication of their predecessors and may view the agency as a stepping-stone, instead of a calling, as CBP Acting Commissioner Tom Winkowski and his team do. A trade-focused commissioner would help allay those worries.
“We need to have a dialogue with the new commissioner,” Rowden said. “What has been missing is a real strategic plan that outlines the role of data and the role of trusted trader programs. There needs to be a strategic rethinking.”