# U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR43014 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** June 22, 2015 - **Citation:** R43014 ## Text U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security (name redacted) Specialist in International Trade and Finance (name redacted) Section Research Manager June 22, 2015 Congressional Research Service 7-.... www.crs.gov R43014 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Summary International trade is a critical component of the U.S. economy, with U.S. merchandise imports amounting to $2.4 trillion and exports to $1.6 trillion in 2014. The efficient flow of legally traded goods in and out of the United States is thus a vital element of the country’s economic security. U.S. Customs and Border Protection (CBP), within the Department of Homeland Security (DHS), is the primary agency charged with monitoring, regulating, and facilitating the flow of goods through U.S. ports of entry (POEs). CBP’s policies are designed to (1) ensure the smooth flow of imported cargo through U.S. POEs; (2) enforce trade and customs laws designed to protect U.S. consumers and business and to collect customs revenue; and (3) enforce import security laws designed to prevent weapons of mass destruction, illegal drugs, and other contraband from entering the United States—a complex and difficult mission. Congress has a direct role in organizing, authorizing, and defining CBP’s international trade functions, as well as appropriating funding for and conducting oversight of its programs. In the Senate, on May 14, 2015, S. 1269 was incorporated into H.R. 644 (renamed the Trade Facilitation and Trade Enforcement Act of 2015) and subsequently passed by a vote of 78-20. On June 12, 2015, the House passed an amended version of H.R. 644 by a vote of 240-190. Senate and House leaders have reportedly committed to resolve the two bill versions in a conference committee. Laws currently authorizing the trade facilitation and enforcement functions of CBP (as outlined in the Customs Modernization and Informed Compliance Act, Title VI of P.L. 103-182) emphasize a balanced relationship between CBP and the trade community based on the principles of “shared responsibility,” “reasonable care,” and “informed compliance.” Since the 9/11 terrorist attacks of 2001, Congress has placed greater emphasis on import security and CBP’s role in preventing terrorist attacks at the border. Legislation addressing customs procedures and import security includes the Homeland Security Act of 2002 (P.L. 107-296), the Security and Accountability for Every (SAFE) Port Act of 2006 (P.L. 109-347), and the Implementing Recommendations of the 9/11 Commission Act of 2007 (P.L. 110-53). CBP’s current import strategy emphasizes a risk management approach that segments importers into higher and lower risk pools and focuses trade enforcement and import security procedures on higher-risk imports, while expediting lower-risk flows. CBP’s “multi-layered” risk management approach means that security screening and enforcement occur at multiple points in the import process, beginning before goods are loaded in foreign ports (pre-entry) and continuing long after the time goods have been admitted into the United States (post-entry). How effectively CBP has performed its import policy mission is a matter of some debate. Some participants in CBP’s “trusted trader” programs argue that the concessions (e.g., expedited processing; fewer container inspections) CBP provides at the border do not adequately justify the effort and expense to certify their supply chains. Questions have also been raised about CBP’s management of trade facilitation, especially the means through which the Automated Commercial System (ACS) trade data management system is being phased out in favor of the newer Automated Commercial Environment (ACE). Some critics also assert that CBP has not adequately fulfilled its trade enforcement role, especially its duties for preventing illegal transshipments, protecting U.S. intellectual property rights, and collecting duties. Still others criticize CBP’s performance of its security functions, especially because it does not yet physically scan 100% of maritime cargo as mandated by the SAFE Port Act of 2006, as amended. In May 2014, DHS Secretary Jeh Johnson extended the deadline for an additional two years. Congressional Research Service U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Contents Introduction ..................................................................................................................................... 1 Overarching Import Policy Goals .................................................................................................... 1 Legislation in the 114th Congress .................................................................................................... 4 Legislative History of U.S. Customs and Trade Facilitation, Enforcement, and Import Security Policies ............................................................................................................... 8 Major Trade Facilitation and Enforcement Legislation ............................................................ 9 The “Mod Act” of 1993 (Title VI of P.L. 103-182) ............................................................ 9 Title IV of the Security and Accountability for Every (SAFE) Port Act of 2006 (P.L. 109-347) ................................................................................................................ 10 Major Post-9/11 Import Security Legislation .......................................................................... 10 Trade Act of 2002 (P.L. 107-210) ...................................................................................... 11 Maritime Transportation Security Act of 2002 (P.L. 107-295) .......................................... 11 Homeland Security Act of 2002 (P.L. 107-296)................................................................ 12 Coast Guard and Maritime Transportation Act of 2004 (P.L. 108-293)............................ 13 Security and Accountability For Every (SAFE) Port Act of 2006 (P.L. 109-347) ............ 13 Implementing Recommendations of the 9/11 Commission Act of 2007 (P.L. 11053) .................................................................................................................................. 15 The Import Process ........................................................................................................................ 15 Pre-Entry: Advanced Cargo Screening, Scanning, and Inspections ........................................ 17 Trusted Trader Programs ................................................................................................... 18 Advance Electronic Cargo Information ............................................................................ 20 Automated Targeting System ............................................................................................ 21 Import Security Scanning and Inspections Abroad ........................................................... 21 Import Processing At Ports of Entry ....................................................................................... 23 Import Security and Trade Enforcement at U.S. Ports ...................................................... 23 Trade Facilitation .............................................................................................................. 27 Post-Entry: Continued Trade Enforcement ............................................................................. 30 Liquidation ........................................................................................................................ 30 Recordkeeping and Post-Entry Audits .............................................................................. 31 Issues for Congress ........................................................................................................................ 32 Trade Facilitation .................................................................................................................... 32 Authorization of Existing CBP Trade Facilitation Programs ............................................ 32 Trusted Trader Program Benefits ...................................................................................... 32 Wait Times at Land Ports of Entry .................................................................................... 33 Trade Enforcement .................................................................................................................. 35 Import Security........................................................................................................................ 35 100% Scanning Requirement ............................................................................................ 35 Transportation Worker Identity Credential (TWIC) Card Readers ................................... 38 Customs Modernization .......................................................................................................... 38 Interagency Coordination ........................................................................................................ 41 Concluding Comments .................................................................................................................. 42 Figures Figure 1. The U.S. Import Process ................................................................................................ 17 Congressional Research Service U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Figure 2. CBP Enforcement Staffing, FY2004-FY2012 ............................................................... 34 Tables Table 1. Primary and Secondary Inspections of U.S. Containerized Imports, .............................. 24 Table 2. Trade Enforcement at U.S. Ports, FY2005-FY2013 ........................................................ 26 Table B-1. U.S. Merchandise Trade by Mode of Transportation, 2005-2014 ............................... 44 Table B-2. U.S. Gross Domestic Product and International Trade, 2005-2014............................. 44 Table C-1. Estimated Expenditures, Selected Cargo Security Programs, FY2004-FY2016 ......... 45 Appendixes Appendix A. Glossary of Trade-Related Acronyms ...................................................................... 43 Appendix B. Selected Trade Statistics........................................................................................... 44 Appendix C. Estimated Expenditures for Selected Cargo Security Programs, FY2004FY2016 ....................................................................................................................................... 45 Contacts Author Contact Information .......................................................................................................... 45 Congressional Research Service U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Introduction International trade is a critical component of the U.S. economy, with U.S. goods trade amounting to about $4 trillion in 2014, with merchandise imports of $2.4 trillion and exports of $1.6 trillion (see Appendix B).1 The efficient flow of legally traded goods in and out of the United States is thus a vital element of the country’s economic security. While U.S. trade in imports depends on the smooth flow of legal cargo through U.S. ports of entry (POE), the goal of trade facilitation often competes with two additional goals: enforcement of U.S. trade laws and import security. How to strike the appropriate balance among these three goals is a fundamental question at the heart of U.S. import policies. Striking the appropriate balance among competing import policy goals is made more difficult due to the volume and complexity of trade inflows. U.S. Customs and Border Protection (CBP), the agency charged with managing the import process at the border, admitted about 30.4 million import entries2 per year through over 300 U.S. POEs, in fiscal year (FY) 2013.3 The largest volume of imports comes through land (truck and rail) and maritime flows, which together account for over 25 million shipping containers per year. Air cargo consists mainly of lower volume, higher value goods.4 This report describes and analyzes CBP’s role in the U.S. import process. (The report does not cover CBP’s role in the U.S. export control system.) The first section of the report describes the three overarching goals of U.S. import policy and the tension among them. Second, the report summarizes recent legislative developments and provides a legislative history of customs laws, followed by an overview of the U.S. import process as it operates today. Third, the import process and CBP’s role in it are discussed. Congress has a direct role in organizing, authorizing, and defining CBP’s international trade functions, as well as appropriating funding for and conducting oversight of its programs. Thus, the final section highlights several policy issues that Congress may consider in its oversight role or as part of customs or trade legislation, including measures seeking to provide additional trade facilitation benefits to importers and others enrolled in “trusted trader” programs, to improve enforcement of intellectual property and trade remedy laws, to strengthen cargo scanning practices, and/or to promote modernization of customs data systems, among other issues. Overarching Import Policy Goals U.S. import policy seeks to balance three overarching policy goals. First, import policy promotes trade facilitation. Trade facilitation refers to efforts to simplify and streamline international trade procedures to allow for the easier flow of legitimate goods across international boundaries and 1 Bureau of Economic Analysis figures. “Entry” is the process of, and documentation required for, securing the release of imported merchandise from CBP. 3 Latest available data. Customs and Border Protection (CBP) FY2013 Performance and Accountability Report, p. 3, http://www.cbp.gov/newsroom/publications/performance-accountability-financial. 4 CRS calculations for FY2005-FY2013, based on data presented in Table 1. The value of imports in FY2014 was divided among sea (49%), air (23%), and land (26%) inflows, based on data presented in Table B-1. Although certain issues raised in this report apply to the import process in general, this report focuses on containerized (as opposed to bulk) goods, and does not address imports and exports in foreign trade zones. This report also does not address the Transportation Security Administration’s role in air cargo security, which is discussed in CRS Report RL33512, Transportation Security: Issues for the 114th Congress, by (name redacted), (name redacted), and (name redacted), and CRS Report R41515, Screening and Securing Air Cargo: Background and Issues for Congress, by (name redacted) . 2 Congressional Research Service 1 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security thereby to reduce the costs of trade.5 Trade facilitation includes the availability of advanced customs rulings, transparent and efficient procedures, elimination of “red tape,” clear information, effective communications, and cooperation between border agencies, among other provisions.6 Trade facilitation is a priority for CBP and the trade community because trade represents a key component of the U.S. economy. International trade accounts for about a quarter of the U.S. economy, with merchandise trade (i.e., cargo) accounting for more than three-quarters of all U.S. trade flows.7 Most economic research finds that while international trade may impose short-term costs on certain sectors and industries that compete with imports, in the long run, trade promotes efficiency, reduces costs to consumers, and increases economic growth due to competitive advantage.8 With the production of goods increasingly organized into global supply chains, in which the manufacture and final product assembly often occur in two or more countries, intermediate components during the manufacturing process are a significant percentage of total imports and exports in most countries, and a wide variety of U.S. manufacturers depend on the efficient import and export of these inputs.9 Partly for this reason, trade facilitation has been a priority issue for the United States and its international partners in organizations such as the World Trade Organization (WTO) and the World Customs Organization (WCO), and in free trade agreement negotiations (FTAs). Within the WTO Doha Development Round of multilateral trade negotiations, for example, the United States has pursued “the shared objective of a rules-based, transparent, and efficient approach to goods crossing the border.”10 In the WTO, the United States was instrumental in negotiating binding disciplines on trade facilitation included in the December 2013 multilateral “Bali Agreement.” The United States and other members of the WCO are encouraging the use of electronic systems to expedite the clearance of merchandise entries and to ensure effective customs controls, including the adoption of a “single window” data system through which multiple cross-border regulatory agencies can clear merchandise entries (see “Interagency Coordination”).11 There is an inherent tension between efforts to promote efficient trade flows, and a second goal of U.S. import policy: the enforcement of trade laws designed to protect U.S. consumers and business against illegal imports and to collect customs revenue. In general, U.S. trade laws seek to protect U.S. consumers by enforcing health and safety standards, and to protect U.S. businesses by enforcing patent, trademark, and copyright laws and by collecting anti-dumping and countervailing duties (AD/CVD).12 Trade enforcement policies also govern the collection of 5 Organization for Economic Cooperation and Development (OECD) definition, http://www.oecd.org. Moïsé, E., T. Orliac and P. Minor (2011), “Trade Facilitation Indicators: The Impact on Trade Costs,” OECD Trade Policy Working Papers, No. 118, OECD Publishing. 7 U.S. imports and exports of goods and services totaled $5.2 trillion in 2014. The overall U.S. gross domestic product was $17.4 trillion. See Bureau of Economic Analysis, “U.S. International Trade in Goods and Services, 1992-present,” http://www.bea.gov/newsreleases/international/trade/trad_time_series.xls. 8 See for example, CRS Report RL31932, Trade Agreements: Impact on the U.S. Economy, by (name redacted) . 9 Beltramello, A., K. De Backer and L. Moussiegt (2012), “The Export Performance of Countries within Global Value Chains (GVCs),” OECD Science, Technology and Industry Working Papers, 2012/02, OECD Publishing. 10 World Trade Organization, Introduction to Proposals by the United States of America, Communication from the United States, TN/TF/W/11, February 2005. 11 World Customs Organization, http://www.wcoomd.org. 12 For an overview of U.S. trade laws, see CRS Report RL32371, Trade Remedies: A Primer, by (name redacted). 6 Congressional Research Service 2 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security tariffs, fees, and taxes; CBP generated more than $36 billion in revenue in FY2013, including more than $31 billion in customs duties.13 The third overarching goal of U.S. import policy is import security, or preventing the entry of chemical, biological, radiological, and nuclear (CBRN) weapons and related material; illegal drugs; and other contraband. While customs agencies have always played a role in protecting public safety, including through narcotics enforcement in particular, the terrorist attacks of September 11, 2001 (9/11), caused many Americans to place even greater emphasis on transportation and port security. Thus, security measures enacted after 9/11 placed additional responsibilities on customs officials to pro-actively prevent weapons of mass destruction and other threats to the homeland from entering the United States and have made import security a central feature of U.S. trade policy (see “Major Post-9/11 Import Security Legislation”). Import security also has become an important feature of international efforts, and the United States and its partners in the WCO have adopted new security protocols for tracking, inspecting, and screening containerized imports and exports.14 Trade facilitation is in tension with trade enforcement and import security because trade facilitation involves promoting faster and more efficient trade flows, while trade enforcement and import security involve identifying and preventing illegal flows—tasks that often involve slower cargo flows and reduced efficiency for the importer. These competing pressures make the implementation of import policy a complex and difficult task, which CBP addresses through a process of risk management, as described below (see “The Import Process”). Many policy questions with respect to the import process concern how Congress and CBP balance these three goals. Some U.S. importers and some in Congress have criticized CBP for neglecting trade facilitation in favor of import security and trade enforcement. For example, some in the trade community view the paperwork and additional reporting requirements imposed on U.S. importers as overly burdensome, and they assert that these requirements run counter to U.S. interests by threatening America’s economic security.15 Others argue that infrastructure issues, scanning, and inspections at land ports of entry result in unacceptably long and unpredictable border wait times. Delays have been described as particularly onerous at the U.S.-Mexico border, where trade has increased more than sixfold since the North American Free Trade Agreement (NAFTA) was implemented in 1994.16 Several studies have estimated the economic consequences of border crossing delays, including a 2008 draft report by the Department of Commerce that estimated that crossing delays at the U.S.-Mexico border resulted in $5.8 billion in lost economic output, $1.4 billion in lost wages, 26,000 lost jobs, and $600 million in lost tax revenues—and would result in losses twice this size by 2017.17 A review of nine additional studies concluded that 13 FY2013 Performance and Accountability Report, p. 97, see http://www.cbp.gov/newsroom/publications/performanceaccountability-financial. 14 Joann Peterson and Alan Treat, “The Post-9/11 Global Framework for Cargo Security,” Journal of International Commerce and Economics, March 2008. 15 U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Customs Trade Facilitation and Enforcement in a Secure Environment, 111th Cong., 2nd sess. May 20, 2010, Testimony of Frank Vargo, National Association of Manufacturers. 16 U.S. imports from Mexico increased from $39.9 billion in 1993 to $280.5 billion in 2013, an increase of 603%. CRS Report R42965, The North American Free Trade Agreement (NAFTA), by (name redacted) and (name redacted) , http://grijalva.house.gov/uploads/ Draft%20Commerce%20Department%20Report%20on%20Reducing%20Border%20Delays%20Findings%20and%20 Options%20March%202008.pdf. 17 Ibid. Congressional Research Service 3 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security “one message comes through quite clearly—long and unpredictable wait times at the POEs are costing the United States and Mexican economies many billions of dollars each year.”18 At the same time, others in Congress and in the trade community assert that the United States may remain vulnerable to a terrorist attack against a port of entry—with potentially catastrophic results—and that CBP should place greater emphasis on import security, even if the economic costs are high. Some Members have expressed frustration, for example, that the great majority of cargo containers are not scanned or physically inspected prior to arrival at a U.S. port.19 Similarly, some manufacturers have alleged that CBP has not adequately investigated allegations of duty evasion, product mislabeling, fraudulent country of origin declarations, or deliberate misclassification of shipments;20 and some assert that their intellectual property rights (IPR) are being violated by ever growing imports of counterfeit goods, and that CBP efforts in collaboration with the private sector in identifying and enforcing IPR violations have been inadequate.21 In short, how Congress and CBP balance trade facilitation, trade law enforcement, and import security has important implications for homeland security, public safety, and virtually every sector of the U.S. economy. To varying degrees, this tension underlies most aspects of U.S. import policymaking. Legislation in the 114th Congress Several bills have been introduced in the 114th Congress to reauthorize CBP’s customs-related activities, including S. 1269, the Trade Facilitation and Trade Enforcement Act of 2015 (Hatch; introduced May 11, 2015); related bill H.R. 1907 (Tiberi; introduced April 21, 2015); and H.R. 1916 (Levin; introduced April 21, 2015). S. 1269 was reported by the Senate Finance Committee on May 13, 2015; and H.R. 1907 was marked up and ordered reported by the House Committee on Ways and Means on April 23, 2015. In the Senate, on May 14, 2015, the text of S. 1269 was incorporated into H.R. 644 (which was renamed the Trade Facilitation and Trade Enforcement Act of 2015) and subsequently passed by a vote of 78-20. On June 12, 2015, the House passed an amended version of H.R. 644 by a vote of 240-190. In a joint statement released June 17, 2015, Senate Majority Leader Mitch McConnell and House Speaker John Boehner stated their intent “to have a conference on the customs bill and complete that in a timely manner so that the President can sign it into law.”22 18 Erik Lee and Christopher E. Wilson, “The State of Trade, Competitiveness, and Economic Well-Being in the U.S.Mexican Border Region,” Woodrow Wilson International Center for Scholars and El Colegio de la Frontera Norte, Working Paper Series on the State of the U.S.-Mexico Border, Washington, DC, June 2012, http://www.wilsoncenter.org/sites/default/files/State_of_Border_Trade_Economy_0.pdf, p. 10. See also, U.S. General Accountability Office, U.S.-Mexico Border: CBP Action Needed to Improve Wait Time Data and Measure Outcomes of Trade Facilitation Efforts, GAO-13-603, July 2013, Appendix I, p. 45. 19 See, for example, Border and Maritime Security Subcommittee of the Homeland Security Committee, U.S. House, hearing “Balancing Maritime Security and Trade Facilitation: Protecting our Ports, Increasing Commerce and Securing the Supply Chain—Part I,” February 7, 2012. 20 U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Supporting Economic Growth and Job Creation through Customs Trade Modernization, Facilitation, and Enforcement, 112th Cong., 2nd sess., May 17, 2012. For example, see Testimony of Mr. John Williams, Executive Director, Southern Shrimp Alliance. 21 U.S. Congress, House Committee on the Judiciary, Subcommittee on Crime, Terrorism, and Homeland Security, Hearing on H.R. 4223, the “Safe Doses Act”; H.R. 3668, the “Counterfeit Drug Penalty Enhancement Act of 2011; and H.R. 4216, the “Foreign Counterfeit Prevention Act”, 112th Cong., 2nd sess., March 28, 2012, Testimony of Mr. Travis D. Johnson. 22 "Joint Statment by Speaker Boehner, Leader McConnell on Trade," press release, June 17, 2015. Congressional Research Service 4 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Title I of the House and Senate versions of H.R. 644 would require CBP to, among other things, work with the private sector and other federal agencies to ensure that all CBP partnership programs provide meaningful trade benefits to program participants; require CBP to establish key performance measures on modification; carry out facilitation and trade enforcement functions; require CBP and Immigration and Customs Enforcement (ICE) to establish joint educational seminars (with private sector input authorized) for enforcement personnel at POEs; and require CBP and ICE, in consultation with federal agencies, other law enforcement agencies, international organizations, and other interested parties, to develop and report to Congress on a biennial joint strategic plan for trade facilitation and enforcement. Title I would also authorize existing CBP programs, including customs modernization efforts such as the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS), the Commercial Customs Advisory Committee (COAC), the Centers of Excellence and Expertise (CEEs), and targeting and analysis groups to focus on each of CBP’s Priority Trade Issues (PTIs). The Government Accountability Office (GAO) and CBP would also be required to report on CBP improvements in areas including trade enforcement, tracking merchandise in-bond, and drawback simplification. In Section 111, the Senate version would authorize a Commercial Targeting Division (CTG) and National Targeting and Analysis Groups (NTAGS) to target priority trade issues (PTIs). The CTG would establish methodologies for assessing import risk and issuing Trade Alerts to port directors. Section 111 of the House version would authorize the National Targeting Center to perform similar functions. Both versions would allow a port director to determine not to conduct further inspections for certain reasons, provided that other Customs authorities are notified. Additionally, Title I of the House and Senate versions of H.R. 644 would require CBP to strengthen internal controls, in part, by developing criteria for assigning importerof-record identification numbers; and would provide CBP with the authority to strengthen enforcement controls over new importers, including ensuring collection of duties, fees, and penalties through risk-based bonding. The House-passed version would also require CBP to collect additional information on “nonresident importers” and would require customs brokers to collect information on the identity of importers. The House-passed version of H.R. 644 would also require CBP to establish priority trade issues (PTIs), including Agriculture, antidumping and countervailing duties (AD/CVD), Import Safety, Intellectual Property (IPR), Textiles and Wearing Apparel, and Preference Programs. Additionally, for purposes of the Title, the term “appropriate congressional committees” is specifically identified as the Committee on Finance and the Committee on Homeland Security and Governmental Affairs of the Senate; and the Committee on Ways and Means and the Committee on Homeland Security of the House of Representatives. Title II of both versions address import health and safety. Title II would establish an interagency import safety working group, chaired by the Secretary of Homeland Security. The group would be responsible for developing a joint import safety rapid response plan to establish protocols and practices that CBP, in conjunction with other federal, state and local authorities, must use when responding to cargo that poses a threat to the health or safety of U.S. consumers. Title II also requires joint exercises with these entities and training for CBP port personnel in enforcement of import health and safety laws. Title III of both versions of H.R. 644 addresses intellectual property rights (IPR) enforcement. First, Title III would amend customs laws to authorize and direct CBP (except in cases that would compromise an ongoing law enforcement or national security investigation) to share information with rights holders so that they could help to quickly identify whether a product entering the United States at a POE is in violation of a copyright or trademark. Second, CBP would be authorized to seize merchandise if it is found to be in circumvention of IPR laws, and would Congressional Research Service 5 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security require CBP to notify an injured right holder if they are included on an annually revised, CBPmaintained list. Third, the Secretary of DHS is directed to enforce copyrights on goods for which the owner has submitted a copyright application in the same manner as if the copyright were already registered. Title III would also establish a National Intellectual Property Rights Coordination Center within CBP. Title IV of S. 1269, and H.R. 1907, and Title V of H.R. 1916, address antidumping (AD) and countervailing duty (CVD) evasion. One major difference between the Senate and House versions is that even though both bills would require the investigation of allegations of AD and CVD evasion within specific deadlines and requirements, the Senate version would require CBP to investigate the allegations, while the House version would grant the Department of Commerce authority to carry out investigations.23 H.R. 1916 would assign primary investigative duties of AD/CVD evasion to CBP. Also related to AD/CVD laws, the House version would establish a Trade Remedy Law Enforcement Division in CBP, direct CBP to identify evasion, authorize increased data sharing between CBP, the Department of Commerce, and the U.S. International Trade Commission for enforcement actions against evasion, and direct CBP to enter into agreements with customs officials in foreign countries to increase cooperation in combatting evasion The House version would also require CBP to assign sufficient personnel to prevent and investigate evasion, require CBP to submit an annual report to Congress detailing evasion policies and activities, terminate the ability of new shippers to post bonds during new shipper AD/CVD reviews, and require the Government Accountability Office (GAO) to submit a report to Congress on the effectiveness of CBP efforts in investigating and preventing AD/CVD duty evasion. Title V of both versions of H.R. 644 seeks to amend AD and CVD laws, in part, by clarifying and expanding the methods that the International Trade Administration of the Department of Commerce (ITA) and the U.S. International Trade Administration (USITC) may use to make determinations in AD/CVD investigations. For example, Title V would clarify that the ITA, in cases in which an exporter, manufacturer or producer of the targeted merchandise fails to cooperate by providing information needed to calculate the duty rate, that the highest applicable dumping or subsidy rate may be used. The amendment would also clarify and expand the calculation methods that the ITA may use to calculate AD/CVD rates if there are particular market situations that may distort prices or costs. Title V would also clarify the authority of the ITA to limit the number of foreign exporters, manufacturers, or producers for which it calculates individual duty rates24 if it finds that an investigation is unduly burdensome due to the complexity of the issues or information presented, among other factors. With regard to the USITC’s injury phase of AD/CVD investigations, Title V would amend the definition of “material injury” to provide that a negative determination of material injury may not be found solely on the basis of domestic industry profitability or recently improved performance. The section would further expand the criteria that the USITC must use to evaluate the impact of competing imports to include the effects of “actual and potential decline in output, sales, market share, gross profits, operating profits, net profits, ability to service debt, productivity, return on investment, return on assets, and utilization of capacity.” Title V would also revise the “captive 23 Antidumping (AD) and countervailing duty (CVD) laws are found in Title VII of the Tariff Act of 1930 (19 U.S.C. 1671-1677n). The International Trade Administration of the Department of Commerce (the administering authority in the statute) investigates the existence and amount of dumping or subsidies, and the U.S. International Trade Commission investigates material injury with respect to the U.S. industry petitioners. 24 Foreign exporters, producer, and manufacturers often request that their individual U.S. sales be calculated because they could receive a lower duty rate than the overall AD/CVD rate. Congressional Research Service 6 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security production test” that the USITC must use to assess injury if the targeted product is a component used in a downstream finished good.25 Title V of both bill versions would also address additional trade enforcement priorities by requiring the Administration, in close consultation with Congress, to identify these priorities and to more regularly consult with Congress on enforcement strategies. The Administration would be directed to address trade enforcement issues that, if eliminated, would have the most impact on positive U.S. economic growth. The enforcement provisions in these bills would also authorize the Administration to reinstate the suspension of concessions under Article 22 of the WTO dispute settlement agreement under certain conditions. The bills would also require the USITC to provide an Internet-based database to provide information on the volume and value of imports; and would require the Department of Commerce to provide reports on quarterly changes in the volume and value of imports. Title VI of the Senate bill would also establish a Trade Enforcement Trust Fund to be used by the USTR and other agencies to enforce U.S. trade agreements and trade rights under the WTO and U.S. free trade agreements (FTAs). The trust fund could also be used for trade capacity building efforts. Title VI of the Senate version of H.R. 644 would also require CBP and ICE to institute certain measures to stop illegal honey transshipment; and require that the two agencies train and employ sufficient personnel to detect, identify, and seize cultural property, archeological or ethnological materials, and other fish, wildlife or plants that violate U.S. laws. Title VI would also codify the establishment of the Interagency Trade Enforcement Center (ITEC).26 Regarding IPR enforcement, the Senate version would add countries that deny adequate protection of trade secrets to the USTR’s priority watch list, and require the USTR to develop an action plan for each country that has been on the list for at least one year. S. 1269 would also establish at USTR a Chief Innovation and Intellectual Property Negotiator with the rank of Deputy USTR. Title VII of the Senate version addresses issues regarding currency undervaluation. Among other things, Title VII would require the ITA to investigate alleged currency undervaluation in AD/CVD investigations and would provide a method for calculating the amount of undervaluation. The bill would also require the Administration to actively engage with those countries found to manipulate exchange rates in order to urge implementation of monetary policies that would address the issue. The House version would provide for engagement with other countries on currency undervaluation, but contains no enforcement provisions. Both bills would also establish an Advisory Committee on Exchange Rate Policy to advise the Treasury Secretary on the impact of international exchange rates on the policies of the United States. Title VIII of the Senate version would provide a process for Congress, in conjunction with the USITC, to receive and consider a miscellaneous trade bill (MTB) containing proposed duty suspensions and reductions in 2015 and 2018. The process would require Congress to post on the Internet a process for submission and consideration of proposed duty suspensions for possible inclusion in the MTB, and also require the USITC to publish in the Federal Register and on the Internet a notice requesting MTB submissions from the public.27 25 Captive products are items designed specifically for use with another product. Many captive products are necessary to the function of the core product. For example, a razor cannot function without blades (a captive product). 26 The ITEC was originally established by Executive Order 13601. 27 See CRS Report RL33867, Miscellaneous Tariff Bills: Overview and Issues for Congress, by (name redacted). Congressional Research Service 7 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Title IX of the House and Senate versions of H.R. 644 address miscellaneous customs provisions. All three bills would raise the de minimis value (currently $200) for unaccompanied cargo to $800.28 The bills would also require DHS to consult with Congress no later than 30 days after proposing and 30 days prior to finalizing, any DHS policies, initiatives, or actions that would have a major impact on trade and customs revenue functions. Other provisions include adding committing or conspiring to commit an act of terrorism to the list of offenses that are grounds for removal of a customs broker’s license, amending Harmonized Tariff Schedule chapter 98 to reduce the record-keeping burden on U.S. goods entering without improvement abroad, and allowing for the subtraction of the value of U.S. components assembled in goods that are exported and returned after being improved abroad. Miscellaneous provisions also include making bulk cargo residue exempt from duty and implementing drawback simplification. All three bills would eliminate the “consumptive demand” exception to the prohibition on importation of goods made with convict, forced, or indentured labor.29 The Senate version of H.R. 644 would also provide offsets, in Title X, for the bill by temporarily extending an increased customs user fee, among other things. Legislative History of U.S. Customs and Trade Facilitation, Enforcement, and Import Security Policies The U.S. Customs Service (USCS),30 the agency historically responsible for trade facilitation and enforcement, was established by an act of Congress on July 31, 1789 (1 Stat. 29), and on September 2, 1789, was placed under the Secretary of the Treasury.31 At that time, the primary role of the service was to collect U.S. customs tariffs, which were the major revenue source for the U.S. government until the federal income tax was established in 1913. Key laws establishing and authorizing the trade functions of the USCS included provisions in the Tariff Act of 1930,32 the Customs Simplification Act of 1953,33 and the Reorganization Plan of 1965.34 More recent customs legislation can be categorized into two components. The first is focused on the Customs Service’s traditional role of trade facilitation and enforcement, and the second, which emerged following the 9/11 terrorist attacks, has focused on the issue of import security. The Homeland Security Act (P.L. 107-296) placed all or parts of 22 different federal departments and agencies, including the Customs Service, into the Department of Homeland Security (DHS).35 28 The de minimis value level (19 U.S.C. 1321, as amended), is the value threshold below which unaccompanied shipments may enter U.S. commerce without the need for formal entry procedures or payment of customs duties. 29 Section 307 of the Tariff Act of 1930 (19 U.S.C. 1307), as amended, prohibits the importation of goods made by convict labor, forced labor, child labor, and indentured labor. The law, however, excludes products that “are not mined, produced, or manufactured in such quantities in the United States as to meet the consumptive demands of the United States. 30 In this report, the U.S. Customs Service or USCS is used to refer to the legacy customs agency (before the Homeland Security Act of 2002 and the subsequent reorganization modification plan changed the name of the agency). When referring to legislation after 2002, Customs and Border Protection, or CBP, is used. 31 National Archives, Records of the United States Customs Service, 1749-1997. 32 46 Stat. 590, June 17, 1930. 33 68 Stat. 1136, September 1, 1954. 34 79 Stat. 1317, May 25, 1965. 35 On the creation of the Department of Homeland Security (DHS), see archived CRS Report RL31751, Homeland (continued...) Congressional Research Service 8 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security DHS’s bureau of Customs and Border Protection (CBP) has been the lead agency facilitating, enforcing, and securing trade flows since 2003. Major Trade Facilitation and Enforcement Legislation The last time that the then-USCS’s trade functions were fundamentally reorganized was in 1993, in Title VI of the North American Free Trade Agreement Implementation Act (P.L. 103-182), also known as the Customs Modernization and Informed Compliance Act, or “Mod Act.” Other major legislation addressing these functions was Title IV of the Security and Accountability For Every (SAFE) Port Act of 2006 (P.L. 109-347) that addressed trade facilitation and enforcement by reorganizing DHS’s trade functions, requiring increased interaction with the trade community, and providing for greater congressional oversight. The “Mod Act” of 1993 (Title VI of P.L. 103-182) The Mod Act, implemented on December 8, 1993, amended many sections of the Tariff Act of 1930 that applied to USCS’s role in trade enforcement. The law was the culmination of a multiyear effort among Congress, the USCS, and the Joint Industry Group (a coalition of private-sector firms involved in international trade), to develop legislation on Customs modernization.36 While the main purpose of the law was to streamline, automate, and modernize USCS’s commercial operations, the law was also intended to improve compliance with U.S. customs laws, and to provide safeguards, uniformity, and due process rights for importers.37 The Mod Act addressed the tension between trade facilitation and trade enforcement by replacing the historical “agency-centric” model of trade enforcement with a “shared responsibility” approach.38 Thus, whereas USCS previously had monitored imports and determined the level of customs duties owed by each importer, under the shared responsibility approach USCS (now CBP) is required to inform importers of their rights and responsibilities under the customs regulations and related laws; and importers of record are required to be aware of their legal obligations and to make their own duty determinations through the concept of “informed compliance.”39 Importers are also required to exercise “reasonable care” when classifying and determining the value of imported merchandise. If importers have questions about the country of (...continued) Security: Department Organization and Management—Implementation Phase, by (name redacted) ; and archived CRS Report RL31549, Department of Homeland Security: Consolidation of Border and Transportation Security Agencies, by (name redacted) . 36 U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Customs Modernization and Informed Compliance Act, Hearing on H.R. 3935, 102nd Cong., 2nd sess., March 10, 1992, Serial 102-85 (Washington: GPO, 1992), p. 86. 37 U.S. Congress, House Committee on Ways and Means, North American Free Trade Agreement Implementation Act, report to accompany H.R. 3450, 103rd Cong., 2nd sess., November 15, 1993, H. Rept. 103-361(I) (Washington: GPO, 1993), p. 106, (hereinafter NAFTA Report). 38 The previous model employed by USCS resembled utility companies’ billing model, which measures usage and sends customers a statement; while the current model resembles tax collection by the Internal Revenue Service, which requires businesses and individuals to estimate their own tax liabilities. 39 NAFTA Report, p. 106. In meeting the “reasonable care” standard, House lawmakers suggested that importers consider using assistance when bringing products into the United States. These aids could include seeking advance rulings from Customs, consulting with a customs broker or trade attorney, using in-house employees with a knowledge of customs laws, or obtaining analyses from accredited labs (NAFTA Report, p. 120). Congressional Research Service 9 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security origin, classification, or valuation of merchandise, they may apply to CBP for a binding determination (known as a customs ruling) prior to importation.40 The Mod Act placed a greater administrative burden on the importer, and shifted USCS’s focus to the collection of data and post-entry enforcement (i.e., audits) to ensure that all legal requirements have been met.41 By reducing USCS’s role in duty determination, the act freed up agency assets to modernize the import process and improve post-entry enforcement.42 Private industry stakeholders accepted these increased responsibilities because the law also provided for a quicker and more transparent import process through streamlined and automated customs operations. Title IV of the Security and Accountability for Every (SAFE) Port Act of 2006 (P.L. 109-347) Title IV of the SAFE Port Act addressed the organization, management, and oversight of CBP enforcement functions. Title IV required DHS to designate a senior official to ensure the coordination of the trade and customs revenue functions in DHS and with other federal departments and agencies; and that CBP’s trade functions were not diminished and kept pace with the level of trade entering the United States. Title IV also required additional consultation with representatives of the business community, including CPB’s Commercial Operations Advisory Committee (COAC) on DHS policies and actions that could have significant impact on international trade and customs revenue functions; and established an Office of International Trade (OIT) within CBP; required DHS, the U.S. Trade Representative (USTR) to work through the World Trade Organization (WTO), the World Customs Organization (WCO), and other international organizations to align customs requirements to the extent possible to facilitate the efficient flow of international trade. Title IV also authorized the establishment of the International Trade Data System (ITDS) as part of the Automated Commercial Environment (ACE), CBP’s interactive customs data management system. ITDS is an intergovernmental project to coordinate and standardize the collection of trade enforcement data by creating a single portal for the collection and distribution of import and export data to be used by all 48 federal government agencies that play a role in trade enforcement. The section required all federal agencies involved in trade enforcement to participate in the ITDS. Major Post-9/11 Import Security Legislation While previous customs legislation focused on the tension between trade facilitation and enforcement, the 9/11 attacks focused America’s attention on homeland security. With the attacks having been executed by foreign nationals traveling on commercial aircraft, an immediate priority was to reorganize existing law enforcement resources related to immigration, transportation, trade, and border security into a new federal Department of Homeland Security (DHS). At least six laws enacted between 2002 and 2007 included provisions related to the trade process and made import security a central feature of U.S. trade policy. 40 19 U.S.C. 1625, as amended. CBP, What Every Member of the Trade Community Should Know About: U.S. Customs and Border Protection Rulings Program, CBP Informed Compliance Publication series, http://www.cbp.gov. 41 19 U.S.C. 1509, as amended. CBP, Preface to Informed Compliance Publication series maintained by CBP, http://www.cbp.gov/xp/cgov/trade/legal/informed_compliance_pubs/. 42 19 U.S.C. 1411ff. Congressional Research Service 10 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Trade Act of 2002 (P.L. 107-210) Customs reauthorization legislation in the Trade Act of 2002 (Title III of P.L. 107-210, the Customs Border Security Act of 2002) authorized appropriations for a number of noncommercial and commercial CBP programs as well as CBP’s air and marine interdiction program. Funds were also authorized to be appropriated for the Automated Commercial Environment (ACE; see “PreEntry: Advanced Cargo Screening, Scanning, and Inspections”), for equipment and programs for drug enforcement, and for the detection of terrorists and illicit narcotics along the U.S borders with Mexico and Canada, and in Florida and Gulf Coast seaports. The Trade Act also included one of the most significant additions to the customs clearance process since 9/11: a requirement that importers and exporters submit advance cargo manifest information prior to cargo arriving at a U.S. port of entry (POE). The law authorized the Secretary of the Treasury to publish regulations requiring the submission of this information, and directed the Secretary to consult with a broad range of import and export stakeholders and to base the regulations on the Secretary’s determination of what is “reasonably necessary to ensure aviation, maritime, and surface transportation safety and security.”43 CBP uses this advance cargo information to conduct risk-based targeting through the Automated Targeting System (ATS; see “Automated Targeting System”). Maritime Transportation Security Act of 2002 (P.L. 107-295) The Maritime Transportation Security Act of 2002 (MTSA, P.L. 107-295) expanded DHS’s authority under the Trade Act of 2002 to collect and share advance cargo data, and took several steps to strengthen port security.44 Section 102 of the MTSA established a new chapter of the U.S. Code (46 U.S.C. 701) to establish DHS’s overall role in port security. Among other things, the law required DHS to assess vessel and port security and to develop national and regional maritime transportation security plans,45 required certain ports and vessels to develop security and incident response plans to be approved by DHS,46 and established a Department of Transportation grant program to help ports implement their security plans.47 The MTSA also established new security requirements for U.S. and foreign ports and for ships operating in U.S. waters. Within the United States, the law required DHS to establish regulations to prevent individuals from entering secure areas of vessels or ports unless the individuals hold security cards. The port security cards are known as Transportation Worker Identity Credential (TWIC) cards, and are administered by the Transportation Security Administration (TSA) along with the U.S. Coast Guard.48 With respect to foreign ports (where Congress has no direct authority), the law required DHS to assess port security at foreign ports and to notify foreign ports if they are found to lack appropriate counter-terrorism measures.49 DHS is authorized to 43 P.L. 107-210, §343(a), 19 U.S.C. 2071 note. On the Maritime Transportation Security Act, see archived CRS Report RL31733, Port and Maritime Security: Background and Issues for Congress, by (name redacted) ; also see U.S. Government Accountability Office (GAO), Maritime Security: Progress and Challenges 10 Years after the Maritime Transportation Security Act, GAO-12-1009T, September 11, 2012. 45 §102 of P.L. 107-295; 46 U.S.C. 70103(a). 46 §102 of P.L. 107-295; 46 U.S.C. 70103(b). 47 §102 of P.L. 107-295; 46 U.S.C. 70103(c). 48 §102 of P.L. 107-295; 46 U.S.C. 70105. See Transportation Worker Identity Card (TWIC) regulations at 33 C.F.R. §§101–106 and 49 C.F.R. §§1515, 1540, 1570, and 1572. 49 §102 of P.L. 107-295; 46 U.S.C. 70108. 44 Congressional Research Service 11 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security restrict the entry of vessels arriving from foreign ports that fail to maintain effective counterterrorism measures.50 With respect to ships and other vessels operating in U.S. waters, the law required that certain vessels be equipped with an automatic identification system while operating in U.S. waters, and that DHS also develop and implement a long-range automated vessel tracking system for certain vessels.51 Homeland Security Act of 2002 (P.L. 107-296) The Homeland Security Act of 2002 (HSA, P.L. 107-296) created a framework for the transfer of all or part of 22 different federal departments into the Department of Homeland Security (DHS), including the USCS and the U.S. Coast Guard.52 Title IV of the act created within DHS a Directorate of Homeland Security headed by the Under Secretary for Border and Transportation Security.53 The directorate was given responsibility for preventing the entry of terrorists and the instruments of terrorism into the United States, and for ensuring the speedy, orderly, and efficient flow of lawful traffic and commerce, among other things. Title IV also established the U.S. Customs Service and the office of the Commissioner of Customs within DHS.54 The act specified that certain customs revenue functions would be retained by the Secretary of the Treasury, who may delegate the authority to the Secretary of Homeland Security.55 Although the customs inspection and enforcement authority of the former USCS were transferred to CBP, Section 412(b) of the HSA mandated that DHS could not “consolidate, discontinue, or diminish” the trade and customs revenue functions of the USCS, or reduce staffing levels or the resources attributable to these functions.56 The HSA directed the President, no later than 60 days after enactment of the act, to transmit to the appropriate congressional committees a reorganization plan for the transfer of agencies, personnel, assets, and obligations to the new Department of Homeland Security.57 The President submitted an initial plan on November 25, 2002,58 and modified the plan shortly thereafter following consultation with then Secretary of Homeland Security designate Tom Ridge.59 In the modification plan, the USCS was renamed the Bureau of Customs and Border Protection (CBP), 50 §102 of P.L. 107-295; 46 U.S.C. 70110. §102 of P.L. 107-295; 46 U.S.C. 70114. 52 On the establishment of the Department of Homeland Security, see archived CRS Report RL31549, Department of Homeland Security: Consolidation of Border and Transportation Security Agencies, by (name redacted) ; and archived CRS Report RL31493, Homeland Security: Department Organization And Management—Legislative Phase, by (name r edacted) . 53 §401 of P.L. 107-296; 6 U.S.C. 201. 54 §411 of P.L. 107-296; 6. U.S.C. 211. 55 §412 of P.L. 107-296, 6 U.S.C. 212. In Treasury Department Order No. 100-16 (set out as an appendix to 19 C.F.R. §0), the Secretary of the Treasury transferred the customs revenue functions of U.S. Customs Service to the Secretary of Homeland Security, but in some cases retained sole authority to issue regulations concerning these functions. This document, along with 19 C.F.R. §0, outlines the framework by which the authorities of Secretaries of the Treasury and Homeland Security are divided with regard to customs revenue functions and enforcement. 56 Ibid. 57 §1502 of P.L. 107-296; 6 U.S.C. 502. 58 See U.S. Congress, House Committee on Homeland Security, Reorganization Plan for the Department of Homeland Security, Communication from the President of the United States, House Document 108-16, 108th Cong., 1st sess., January 7, 2003, http://www.gpo.gov/fdsys/pkg/CDOC-108hdoc16/pdf/CDOC-108hdoc16.pdf. 59 See U.S. Congress, House, Committee on Homeland Security, Reorganization Plan Modification for the Department of Homeland Security, Communication from the President of the United States, House Document 108-32, 108th Cong., 1st sess., February 3, 2003, http://www.gpo.gov/fdsys/pkg/CDOC-108hdoc32/pdf/CDOC-108hdoc32.pdf. 51 Congressional Research Service 12 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security and the Bureau of Border Security was renamed the Bureau of Immigration and Customs Enforcement (ICE).60 Coast Guard and Maritime Transportation Act of 2004 (P.L. 108-293) The Coast Guard and Maritime Transportation Act of 2004 (P.L. 108-293) contained a number of maritime security provisions that amended the MTSA. Title VIII of the law added security requirements to the import process provisions, including amendments to certain long-range vessel tracking system requirements.61 DHS was also required to submit a plan for implementation of a maritime intelligence system (previously authorized in the MTSA) to incorporate information on vessel movements and assign incoming vessels a terrorism risk rating.62 Section 808 of the law required the Department of Transportation to “conduct investigations, fund pilot programs, and award grants” to examine and develop certain equipment to enhance the investigative ability of CBP, including equipment to accurately detect nuclear, chemical, or biological materials; and tags and seals equipped with sensors that are able to track marine containers throughout their supply chains and to detect hazardous and radioactive materials within containers.63 The law also required DHS to report on several cargo import security issues, including the costs to the government of vessel and container inspections, plans for implementing secure systems of transportation, progress on the installation of radiation detectors at all major U.S. seaports, the willingness of foreign seaports to utilize non-intrusive inspection (NII) techniques to inspect cargo bound for the United States, and evaluation of the existing cargo inspection targeting system for international intermodal cargo containers.64 Security and Accountability For Every (SAFE) Port Act of 2006 (P.L. 109-347) On July 22, 2004, the National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) published its report on the circumstances surrounding the 9/11 attacks and made recommendations to guard against future attacks. The report expressed concern that the United States lacked “a forward-looking strategic plan” that devoted adequate attention to maritime and surface transportation.65 Congress responded by passing the Security and Accountability For Every Port Act of 2006 (SAFE Port Act, P.L. 109-347) and the Implementing Recommendations of the 9/11 Commission 60 Ibid. The reorganization plan consolidated customs, immigration, and agricultural inspection functions within CBP, merging certain USCS, Immigration and Naturalization Service (INS), and U.S. Department of Agriculture (USDA) functions within the new agency; USCS and INS officers previously had been cross-designated to perform both customs and immigration functions. S. 662 seeks to statutorily establish CBP and its sister agency, U.S. Immigration and Customs Enforcement (ICE) within DHS, rather than as a function of discretionary authority under the Homeland Security Act. 61 §803 of P.L. 108-293. The long-range identification and tracking (LRIT) of ships applies to all passenger ships including high-speed craft, cargo ships including high-speed craft of 300 gross tonnage and above, and mobile offshore drilling units. The U.S. requirements conform to an international system adopted by the International Maritime Organization (IMO). 62 §803 of P.L. 108-293, 46 U.S.C. 70113, as amended. 63 §808 of P.L. 108-293, 46 U.S.C. 70107, as amended. 64 §809 of P.L. 108-293. 65 National Commission on Terrorist Attacks on the United States, The 9/11 Commission Report (New York: W.W. Norton & Company, 2004), p. 391. Congressional Research Service 13 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Act of 2007 (The 9/11 Act, P.L. 110-53). Title I of the SAFE Port Act focused on port security. The act updated several deadlines from previous legislation, including a deadline of April 1, 2007, for DHS to implement a long-range vessel tracking system,66 and a deadline of January 1, 2009, for issuing TWIC cards and for all ports to implement TWIC readers.67 In addition, the act required by December 31, 2008, that all containers entering U.S. ports be subject to radiation detection scanning.68 Title II of the SAFE Port Act focused on international supply chain security, defined by Section 2 of the act as the “end-to-end process for shipping goods to or from the United States beginning at the point of origin (including manufacturer, supplier, or vendor) through a point of distribution to the destination.” The Title includes five main provisions with respect to maritime cargo security, which are summarized here and discussed in greater detail below:     Section 203 authorized cargo to be screened through CBP’s Automated Targeting System (ATS; see “Automated Targeting System”) and further authorized DHS to require advanced electronic cargo data (see “Advance Electronic Cargo Information”) as needed to improve ATS targeting.69 Section 205 authorized the Container Security Initiative (CSI; see “Import Security Scanning and Inspections”), designed “to identify and examine or search maritime containers that pose a security risk before loading such containers in a foreign port for shipment to the United States.” The section authorized DHS to designate particular foreign seaports to participate in the CSI, and directed DHS to establish criteria and procedures for nonintrusive inspection (NII) and for nuclear and radiological detection systems at CSI ports.70 Sections 211-223 authorized the Customs-Trade Partnership Against Terrorism (C-TPAT; see “Trusted Trader Programs”) and set forth C-TPAT program parameters. C-TPAT is a voluntary program that allows certain trade-related firms to be certified by CBP as having secured the integrity of their supply chains. The law established three tiers of C-TPAT membership, and described potential membership benefits associated with each.71 Section 231 directed DHS to establish pilot programs in three foreign seaports to conduct NII and radiation detection scanning of cargo containers. Beginning one year after enactment of the act (i.e., by October 2007), the section required that DHS scan 100% of containers destined for the United States loaded in the three pilot ports and that questionable or high-risk cargo be identified for further 66 §107 of P.L. 109-347; 46 U.S.C. 70105 note. The U.S. Coast Guard issued a final rule in April 2008 concerning long-range vessel tracking. See 73 Federal Register 23310; also see U.S. Government Accountability Office, Maritime Security: Vessel Tracking Systems Provide Key Information, but the Need for Duplicate Data Should Be Reviewed, GAO-09-337, March 2009. 67 §104 of P.L. 109-347; 46 U.S.C. 70105. DHS tested a TWIC card reader pilot program in seven ports between August 2008 and May 2011. As of August 2012, DHS has published a final report on the TWIC card reader pilot program, but has not published final regulations governing TWIC card readers. 68 §121 of P.L. 109-347; 6 U.S.C. 921. 69 §203 of P.L. 109-347; 6. U.S.C. 943.The Automated Targeting System (ATS) already was operational in 2006 as a pilot program without formal congressional authorization. 70 §205 of P.L. 109-347; 6 U.S.C. 945.The Container Security Initiative (CSI) was already operational in 2006 as a pilot program without formal congressional authorization. 71 §211ff of P.L. 109-347; 6 U.S.C. 961ff.The Customs-Trade Partnership Against Terrorism (C-TPAT) already was operational in 2006 as a pilot program without formal congressional authorization. Congressional Research Service 14 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security  inspection.72 The program is known as the Secure Freight Initiative (SFI; see “Import Security Scanning and Inspections”). Section 232 required that 100% of cargo containers originating outside the United States and imported into the United States be screened by DHS to identify high-risk containers. As enacted, the section required DHS to ensure that containers identified as high risk during the screening process also be scanned through NII and radiation detection equipment before they arrive in the United States (see “100% Scanning Requirement”).73 Implementing Recommendations of the 9/11 Commission Act of 2007 (P.L. 110-53) The 9/11 Act of 2007 included two provisions with respect to the import process. Section 1602 of the 9/11 Act required, by August 3, 2010, that 100% of air cargo bound for the United States or traveling within the United States be subject to scanning or inspection commensurate with standards established for passenger checked baggage.74 Section 1701 of the 9/11 Act amended the SAFE Port Act to require by July 1, 2012, that 100% of maritime containers imported to the United States—that is, whether or not they are identified as high-risk during the ATS screening process—be scanned by NII and radiation detection equipment before being loaded onto a vessel in a foreign port. The act authorized the secretary of DHS to extend the deadline by two years, and in additional two-year increments, by certifying that scanning systems are not available, are insufficiently accurate, cannot be installed, cannot be integrated with existing systems, will significantly impact trade and the flow of cargo, and/or do not provide adequate notification of questionable or high-risk cargo (see “100% Scanning Requirement”).75 The Import Process Under the Homeland Security Act of 2002 (P.L. 107-296) as amended in 2003, CBP is the lead agency charged with enforcing the trade laws under the Mod Act and the security measures under the MTSA, the SAFE Port Act, and the other post-9/11 laws. CBP’s trade strategy emphasizes risk management, which means that CBP collects advance information about shippers, importers, and cargo to evaluate cargo for potential import security and trade enforcement risks, and focuses enforcement efforts primarily on cargo and shippers identified as relatively high risk.76 Conversely, those deemed lower-risk imports (including, e.g., shipments of “trusted traders”) are less likely to be targeted for CBP enforcement and may be eligible for expedited processing— thus advancing CBP’s trade facilitation goal and freeing up resources for targeting higher-risk imports. 72 §231 of P.L. 109-347; 6 U.S.C. 981. §232 of P.L. 109-347; 6 U.S.C. 982. 74 §1602 of P.L. 110-53; 49 U.S.C. 44901, as amended. On air cargo security, see CRS Report R41515, Screening and Securing Air Cargo: Background and Issues for Congress, by (name redacted) . 75 §1701 of P.L. 110-53; 6 U.S.C. 982(b) as amended. The Secretary must certify to Congress that at least two of these conditions exist in order to extend the 100% scanning deadline. 76 See CBP, CBP Trade Strategy: Fiscal Years 2009-2013, Washington, DC, 2009. 73 Congressional Research Service 15 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Import Security and Trade Enforcement Terminology and Procedures As discussed throughout this report, cargo being imported to the United States may be subject to multiple and varied types of import security and trade enforcement reviews, including the following:  Screening: A risk assessment based on an analysis of data elements (e.g., cargo manifest, country of origin, shipper and consignee information) provided by an importer or carrier.  Scanning: An analysis of container contents based on non-intrusive inspection (NII) technologies, including x-ray and gamma ray imaging systems and other technologies. NII scanning produces a high-resolution image of container contents that is reviewed by law enforcement officers to detect hidden cargo and other anomalies that suggest container contents do not match reported manifest data. If an officer detects an abnormality, containers may be “cracked open” for a physical examination. Scanning may also refer to radiation detection.  Radiation detection: An analysis of container contents based on radiation portal monitors, handheld radiation detection monitors, and/or other radiation detection technology to detect nuclear material that may be part of a nuclear weapon or dirty bomb.  Examination: A physical examination of container contents (requires that the container be opened and, in some cases, unpacked).  Primary inspection: A review of entry documents to determine whether cargo may be admissible to the United States.  Secondary inspection: A review of container contents to confirm that cargo is admissible to the United States. Secondary inspections may include NII scanning and/or a physical examination of container contents.  Liquidation: The final assessment of import-related taxes and fees; typically occurs a year or more after cargo enters the United States. Source: CRS analysis of the SAFE Port Act of 2006 (P.L. 109-347) and CBP briefing materials. CBP’s trade strategy also emphasizes layered enforcement, meaning that risk assessment and riskbased enforcement happen at a number of different points in the import process, beginning well before cargo arrives at a U.S. port of entry, and continuing long after cargo has been formally admitted to the United States. CBP attempts to target high-risk flows as early as possible in the import process, but its ability to conduct enforcement activities at different stages of the import process is designed to create multiple opportunities to interdict illegal imports. The import process includes three main stages, as illustrated in Figure 1. First, prior to entry at a U.S. POE, importers and carriers file paperwork and provide advance electronic cargo information, and all imports are subject to risk-based screening. Based on the results of this screening, certain goods are subject to import security scanning and inspection in foreign ports and/or upon arrival at a U.S. port. Second, importers file “entry documents” when cargo reaches a U.S. port, and cargo may be subject to additional scanning and inspection for import security and trade enforcement purposes. Admissible cargo is released from the port, and importers file an additional set of “entry summary” documents, which CBP uses to calculate customs duties and to make an initial assessment of taxes, fees, and duties owed. Third, following cargo entry, importers may challenge the assessment for up to a year, or longer under certain circumstances, until the final assessment of taxes and fees, a process known as liquidation. Trade enforcement activities may continue through audits and other post-entry investigations. Congressional Research Service 16 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Figure 1. The U.S. Import Process Source: CRS presentation of information provided by CBP. Notes: Import security includes screening, scanning, and inspections to detect chemical, biological, radiological, and nuclear (CBRN) weapons, illegal drugs, and other contraband; trade enforcement includes screening, scanning, and inspections to detect trademark and copyright violations, unsafe products, and illegal agricultural products, and to ensure proper collection of tariffs, fees, and anti-dumping and countervailing duties (AD/CVD). Pre-Entry: Advanced Cargo Screening, Scanning, and Inspections The import process begins well before cargo arrives at a U.S. port of entry (POE). During the preentry stage of the process, importers of record submit electronic cargo manifests and other shipment data to CBP. This information may be submitted through CBP’s Automated Customs System (ACE) or its Automated Customs Environment (ACE; see “Text Box: CBP’s Data Management Systems,” below). CBP uses these advanced filing data to pre-clear cargo for admission, facilitate inflows, and target certain cargo for import security and trade enforcement. Cargo may be subject to import security scanning and inspections in foreign ports prior to being loaded on U.S.-bound ships and/or upon arrival at a U.S. port of entry (POE). Congressional Research Service 17 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security CBP’s Data Management Systems Each stage of the import process involves an ongoing exchange of information between CBP and importers. CBP manages two systems for tracking this information and for managing the collection of import duties and other traderelated fees: the Automated Commercial System (ACS) and the Automated Commercial Environment (ACE). Both of these systems serve as data management systems for CBP and as contact points for trade partners to submit electronic data to CBP, to receive information about the status of their shipments, and to make payments and manage customs accounts. The ACS began operating in 1984 and relies on mainframe computer hardware and software that are considered at least a generation out of date, factors which reportedly limit ACS functionality and reliability. The U.S. Customs Service created ACE in 2001 to begin replacing ACS, a transition known as “customs modernization.” The challenge in the customs modernization process is to create a new data management system that meets all of CBP’s trade enforcement and import security needs, while supporting a streamlined import process for legitimate importers, and to test and implement the new system without disrupting trade flows during the transition period. To this end, CBP has initiated ACE as a series of modules that encompass discrete phases of the import process. In general, as new ACE modules are introduced, importers initially are permitted to use either ACS or ACE for the affected task; and once the new ACE component has been tested and proven effective, importers are required to use the ACE components as certain ACS functions are disabled. CBP’s eventual goal is to eliminate the ACS, and for ACE to provide a single point-of-access and data management system covering the entire trade process for all U.S. importers. According to CBP’s office of legislative affairs, trade users may use their ACE accounts to pay duties and fees and to generate 125 downloadable and customized reports. As of March 2012, electronic manifest data for truck, rail, and ocean shipments may be filed through ACE at all U.S. POEs. Air and multi-modal integration is anticipated, but not yet planned. On September 29, 2012, ACE became the only CBP-approved Electronic Data Interchange (EDI) for submitting rail and sea manifests. On October 18, 2014, CBP added a new ACE Automated Brokers Interface (ABI) query capability to request entry record status, cargo and manifest information on file with ACE. On January 3, 2015, a series of new ACE capabilities were launched including the transmission of antidumping and countervailing duty entries; electronic bond processing for both Single Transaction Bonds and Continuous Bonds; and the deployment of an import air manifest. CBP plans on completing trade processing capabilities in ACE and decommissioning similar capabilities in its other system by the end of 2016. CBP is working to transition cargo processing to the ACE, which is being developed as the primary system CBP and all federal partner government agencies (PGAs) will use as a “single window” to track, control, and process all imported and exported goods. To that end, CBP has announced three key dates. On May 1, 2015, CBP will require mandatory use of ACE for all electronic manifest filing. On November 1, 2015, use of ACE will be mandatory for all electronic cargo release and related entry summary filing. On October 1, 2016, all remaining electronic portions of the CBP cargo process will be required to be completed through ACE. Source: U.S. Customs and Border Protection, Automated Commercial Environment/International Trade Data System (ACE/ITDS) “ACEopedia”, October 2012; 77 Federal Register 19030-19032, March 29, 2012; see also ACE Deployment D–January 2015 Release Capabilities for the Trade Community”. Trusted Trader Programs One of CBP’s primary tools for risk management is the use of trusted trader programs, including the Customs-Trade Partnership Against Terrorism (C-TPAT), which was established in November 2001, after the 9/11 attacks, and subsequently authorized as part of the SAFE Port Act of 2006 (see “Security and Accountability For Every (SAFE) Port Act of 2006 (P.L. 109-347)”). Trusted trader programs are voluntary public-private partnership programs that permit certain importrelated businesses to register with CBP, follow instructions prescribed by the agency to secure their supply chains, and thereby become recognized as low-risk actors and become eligible for expedited processing and other benefits. These programs are described in greater detail in the text box below. Congressional Research Service 18 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security CBP Trusted Trader Programs Customs-Trade Partnership Against Terrorism (C-TPAT)  C-TPAT is open to U.S. importers, customs brokers, and port and terminal operators; Mexican and Canadian manufacturers and certain other foreign manufacturers; rail, sea, air, and truck carriers; and U.S. consolidators and certain other logistics providers.  Businesses may apply to join C-TPAT by filling out an on-line application and submitting a supply chain security profile that meets or exceeds minimum standards established by CBP. The security profile includes a narrative description of measures in place to ensure the security of cargo at all stages of the company’s supply chain, including procurement, production, packing, storage, loading, and transportation of goods for import. CBP reviews profiles within 90 days and reviews company compliance histories. Upon a favorable review, the company is certified as a Tier I C-TPAT partner.  Within one year of a C-TPAT partner being certified, CBP conducts a physical examination of the company’s supply chain to validate that the security measures described in the profile are in place. Companies that meet minimum security criteria are validated as Tier II C-TPAT partners, and companies that show a sustained commitment beyond minimal security expectations are validated as Tier III partners.  Membership in C-TPAT reduces an importer’s ATS risk score, with greater reductions for Tier II and Tier III members. C-TPAT members are less likely than non-members to be selected for security or trade related scanning.  Certified C-TPAT members are also eligible for expedited processing at POEs and for expedited treatment when containers are selected for scanning or inspection. C-TPAT permits stratified exams, so that if an entry with multiple line items is selected for secondary inspection, only the selected container(s) are detained for inspection, minimizing importers’ storage costs. (For non-C-TPAT members, multiple containers may be delayed when a single container must be examined.) CBP’s business-resumption plans also call for C-TPAT members to have front-of-the-line privileges in the event of a future port closure.  As of September 30, 2013, over 10,662 trade partners were certified as C-TPAT members and 2,235 companies were validated or re-validated in FY2013, according to CBP. Free and Secure Trade System (FAST)  FAST is open to commercial truck drivers who have completed background checks and fulfill eligibility requirements and whose imports have supply chains that are fully C-TPAT certified.  FAST members are eligible to use dedicated FAST lanes at certain land POEs. FAST lanes generally have shorter wait times and faster processing.  More than 78,000 commercial drivers are enrolled in the FAST program, and 17 ports at the northern and southern borders have FAST lanes. Importer Self-Assessment Program (ISA)  The ISA is open to C-TPAT members who are residents of the United States, have a two-year import history, and are known importers that have businesses physically established, located, and managed within the United States.  Importers must demonstrate a willingness to maintain an ongoing, mutually beneficial trade relationship with CBP, the ability to manage and monitor their ongoing compliance with trade laws through self-assessment, and the willingness to demonstrate an ongoing compliance through internal controls and annual risk assessments.  Accepted ISA importers are assigned a National Account Manager who serves as a liaison between CBP and the importer, and identifies and resolves issues through consultation.  ISA members receive guidance from CBP upon request and are exempted from the comprehensive audit pool known as Focused Assessment Audit (single issue audits may be conducted to address specific concerns).  As of November 17, 2014, CBP reports that 308 companies participate in the Importer Self-Assessment Program, accounting for 23% of U.S. imports by value. Mutual Recognition Arrangements  As of June 27, 2014, CBP has established mutual recognition arrangements with Canada, the European Union, Israel, Japan, Jordan, Mexico, New Zealand, South Korea, and Taiwan.77 These arrangements allow C-TPAT members and trusted traders to receive similar benefits in partner countries as those in the United States. Sources: CBP Office of Legislative Affairs, CBP, “C-TPAT Overview,” “C-TPAT: A Guide to Program Benefits,” “FAST Fact Sheet,” and “Importer Self-Assessment Program.,” CPB Performance and Accountability Report, FY2013. 77 See http://www.cbp.gov/newsroom/national-media-release/2014-06-27-000000/us-israel-sign-mutual-recognitionarrangement. Congressional Research Service 19 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Advance Electronic Cargo Information Under the Trade Act of 2002, as amended, importers and carriers seeking to import goods to the United States must provide DHS with electronic manifest and other data prior to arrival in U.S. ports. Carriers are required to provide names and addresses of shippers and consignees, detailed descriptions of the goods being imported, information about the carrier, and information about the day, time, and port of arrival. Specific filing requirements differ by mode of entry (truck, rail, maritime, or air) and in some cases by country of origin (see text box below). Deadlines for Submission of Electronic Manifests and Other Shipping Data Air Cargo (North America, Caribbean, Central America, and South America north of equator): Prior to aircraft departure bound for the United States (wheels up) Air Cargo (Other countries of origin): 4 hours prior to arrival Rail Cargo: 2 hours prior to arrival Truck Cargo: 1 hour prior to arrival, or 30 minutes prior to arrival for C-TPAT members Maritime Cargo: Importer data due 24 hours before cargo is loaded on vessel bound for the United States; carrier data due 24 hours prior to loading in a foreign port for containerized and break-bulk cargo or 24 hours prior to arrival at the first U.S. port for bulk cargo, with updates as they occur. Source: 19 C.F.R. §§4, 122-123. Maritime Cargo: 10 + 2 Importer Security Filing Maritime cargo is subject to additional reporting requirements under Section 203 of the SAFE Ports Act and an interim final rule published by CBP on November 25, 2008.78 Under the rule, maritime vessels must submit Importer Security Filings (ISF) and Additional Carrier Requirements known collectively as “10 + 2” filings—so-called because they include 10 data elements to be submitted by importers of record, plus 2 data elements to be submitted by carriers. The 1079 data elements supplied by importers are 1. importer of record number; 2. consignee number; 3. seller name and address; 4. buyer name and address; 5. ship-to party name and address; 6. manufacturer (supplier) name and address; 7. country of origin; 8. Harmonized Tariff Schedule (HTS) 6-digit classification; 9. container stuffing location; and 10. consolidator (stuffer) name and address. The two data elements provided by carriers are 78 P.L. 109-347 §203; 19 C.F.R. §§4.7–4.7d; also see 73 Federal Register 71730. Ten data elements are required for all maritime cargo destined for U.S. entry. If cargo is transiting through the United States, only five elements are required: booking party name/address; ship to party; harmonized tariff schedule (HTS) classification; foreign port of unlading; and place of delivery. 79 Congressional Research Service 20 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security 1. the vessel stow plan; and 2. daily messages with information about any changes in container status.80 The first 8 importer data elements must be provided 24 hours prior to lading of the goods on a vessel. Information on the stuffing location and the consolidator must be filed as soon as possible, but no later than 24 hours before arrival in the United States. Regarding the carrier data, the vessel stow plan must be provided no later than 48 hours after departure, and container status messages must begin within 24 hours of creation or receipt of the container. Automated Targeting System Electronic manifests and other advanced data elements (including the 10+2 data elements mentioned above) are forwarded to CBP’s Automated Targeting System (ATS). CBP officers screen imports by comparing cargo and conveyance information against intelligence from CBP’s National Targeting Center (NTC) and other intelligence and law enforcement databases. The ATS assigns every incoming container a risk-based score related to weapons of mass destruction, narcotics, and other contraband, as well as for the potential for commercial fraud, and other customs violations.81 The rule-sets for assigning risk scores are designed to identify suspicious activity or behavior and are updated on an ongoing basis in response to changes in intelligence and previous enforcement records. Import Security Scanning and Inspections Abroad The SAFE Port Act of 2006 authorizes a pair of programs to conduct radiation detection and NII scanning in foreign ports: the Secure Freight Initiative and the Container Security Initiative. Secure Freight Initiative (SFI) The Secure Freight Initiative (SFI) is a pilot program to test CBP’s ability, working with international partners, to conduct radiation detection and NII scanning of 100% of cargo containers being loaded on U.S.-bound ships in certain ports. The SFI employs an integrated scanning system consisting of radiation portal monitors (provided by the Department of Energy) and NII imaging systems (provided by CBP) in a single location. CBP officers review the scanning data to determine which containers should be subject to secondary inspections. Secondary inspections, when called for, are conducted by host-state law enforcement agencies. In 2007, Section 1701 of the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act; P.L. 110-53) amended the SAFE Port Act to require that by July 1, 2012, 100% of maritime containers imported to the United States—that is, from all ports, whether or not they are identified as high-risk—be scanned by NII and radiation detection equipment before being loaded onto a U.S.-bound vessel in a foreign port. Pursuant to law, the program began operation operated in three foreign ports in 2007: Port Qasim in Pakistan, Puerto Cortes in Honduras, and Southampton in the United Kingdom. The pilot was also subsequently implemented on a limited 80 U.S.CBP, “Fact Sheet: New Cargo Security Requirements for Maritime Carriers and Importers,” November 24, 2008. Also see U.S. Government Accountability Office, Supply Chain Security: CBP Has Made Progress in Assisting the Trade Industry in Implementing the New Importer Security Filing Requirements, but Some Challenges Remain, GAO-10-841, September 2010, http://www.gao.gov/assets/320/311023.pdf. 81 The ATS includes modules for inbound cargo and conveyances; outbound cargo and conveyances; air, ship, and rail passengers; private vehicle land passengers; international cargo outside the United States; and a trend analytic module. Only the inbound cargo and conveyance module is discussed in this report, though some features of the ATS are common to more than one module. Congressional Research Service 21 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security basis in the larger ports of Port Salalah in Oman, Port Busan in South Korea, and Singapore. Following DHS’s evaluation of the program, however, the program was scaled back and currently operates only in Port Qasim.82 On May 2, 2012, however, then-DHS Secretary Janet Napolitano notified Members of Congress that she would exercise her authority under the 9/11 Act to extend the deadline for 100% scanning.83 In May 2014, DHS Secretary Jeh Johnson extended the deadline for an additional two years.84 In the May 2014 letter, Secretary Johnson added that “DHS’s ability to fully comply with this unfunded mandate of 100 percent scanning, even in [the] long term, is highly improbable, hugely expensive, and in our judgment, not the best use of taxpayer resources to meet this country’s port security and homeland security needs.”85 The Secretary also stated that he had instructed CBP to fulfill the underlying objective of 100% scanning by, among other things, making refinements to its layered-security/risk-management strategy86 Container Security Initiative (CSI) The Container Security Initiative (CSI) is a partnership program among CBP, Immigration and Customs Enforcement, and law enforcement agencies in CSI countries. Under the program, CBP officers and other federal agents at the National Targeting Center–Cargo (NTC-C) in Herndon, VA, review advanced sea cargo data and identify high-risk containers. High-risk containers are targeted for radiation detection and NII scanning within CSI ports. Host state law enforcement agents typically conduct physical scans in the foreign ports, and CBP personnel located in the port or in the United States evaluate the scan results. When an abnormality is detected, host state law enforcement agents conduct a physical inspection before the container is loaded on a U.S.bound ship. CBP officers and ICE agents participate in such inspections either remotely or as partners within foreign ports. According to CBP, the CSI is operational in 58 foreign seaports in 30 countries; approximately 80% of all U.S. incoming maritime containerized cargo originates in or transits through a CSI port.87 About 1% of all cargo passing through CSI ports bound for the United States is scanned using radiation detection technology and NII scanning prior to being shipped to the United States 82 CBP, Report to Congress on Integrated Scanning System Pilots (Security and Accountability for Every Port Act of 2006, Section 231). Also see DHS, Congressional Budget Justification–CBP Salaries and Expenses, FY2013, p. 48. 83 Letter from Janet Napolitano, Secretary of Homeland Security, to Hon. Joseph I. Lieberman, Senator, May 2, 2012. The 9/11 Act permits the Secretary to extend the deadline by two years and in additional two-year increments by certifying that two of the following conditions exist: that scanning systems are not available, are insufficiently accurate, cannot be installed, cannot be integrated with existing systems, will significantly impact trade and the flow of cargo, and/or do not provide adequate notification of questionable or high-risk cargo. In her notification to Congress, Secretary Napolitano certified that the use of systems to scan containers would have a significant and negative impact on trade capacity and cargo flows, and that systems to scan containers cannot be purchased, deployed, or operated at overseas ports due to limited physical infrastructure. 84 Letter from Jeh Charles Johnson, DHS Secretary, to Thomas R. Carper, Chairman, Committee on Homeland Security and Government Affairs, U.S. Senate, May 5, 2014. 85 Letter from Jeh Charles Johnson, DHS Secretary, to Thomas R. Carper, Chairman, Committee on Homeland Security and Government Affairs, U.S. Senate, May 5, 2014. See also Stephen L. Caldwell, Director, Homeland Security and Justice Issues, U.S. Government Accountability Office, testimony before the U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Evaluating Port Security: Progress Made and Challenges Ahead, 113th Cong., 2nd sess. June 4, 2014. 86 Ibid. 87 See CSI: Container Security Initiative, http://www.cbp.gov/border-security/ports-entry/cargo-security/csi/csi-brief. Congressional Research Service 22 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security (also see “100% Scanning Requirement”).88 CBP reported that in FY2013, CBP officers reviewed 11,228,203 bills of lading and conducted 103,999 examinations of high-risk cargo in cooperation with host country counterparts.89 Import Processing At Ports of Entry Imported goods are not legally entered until after the shipment has arrived within the port of entry, entry of the merchandise has been authorized by CBP, and all estimated duties have been paid.90 The importer of record (i.e., the owner, purchaser, or a licensed customs broker) has the option to enter the goods for consumption, enter them into a bonded warehouse at the port of entry, or to transport the cargo in-bond to another port of entry for processing. If goods are being entered for consumption (e.g., going directly into U.S. commerce) importers are typically required to file entry documents within 15 calendar days of a shipment arriving at a U.S. port of entry. These documents may include an entry manifest or other form of merchandise release, evidence of the right to make entry, commercial invoices, packing lists, and other documents necessary to determine admissibility. Since most cargo is released electronically, however, packing lists and invoices are rarely requested. Importers also must provide evidence that a bond has been posted with CBP to cover estimated duties, taxes, and charges that may accrue. If the goods are to be released from CBP custody, an entry summary must be filed and estimated duties deposited at the port within 10 days of the entry of the merchandise. Based on screening of the cargo and a review of the entry documents, CBP officers at the port make a preliminary determination about cargo admissibility and either release or challenge the shipment. For cargo that is challenged, importers may be required to provide additional documents or take other steps to prove admissibility. Import Security and Trade Enforcement at U.S. Ports Radiation Scanning The SAFE Port Act91 requires that 100% of cargo containers passing through U.S. POEs be scanned for radioactive material prior to being released from the port. Containers typically pass through drive-through portals at about five miles per hour, and radiation detection requires a few seconds per container, apart from congestion.92 Portals are often placed at natural choke-points, including near port exits or entrances to facilitate 100% radiation scanning. A radiation alarm may be triggered by naturally occurring radiation found in granite and other stone or by radioactive medical or scientific materials. When radiation is detected, further tests are conducted, including more sophisticated scanning or physical inspection, to match the radioactive profile detected against known radioactive materials in the shipment, or to identify and remove illegal radioactive material. 88 CBP Office of Congressional Affairs, August 23, 2012. CBP, FY2013 Performance and Accountability Report, http://www.cbp.gov/newsroom/publications/ performanceaccountability-financial. 90 CBP, Importing into the United States: A Guide for Commercial Importers, updated May 2011, http://www.cbp.gov/. 91 §121 of P.L. 109-347; 6 U.S.C. 921. 92 Maritime containers may be scanned prior to being loaded onto U.S.-bound ships, and are also scanned after being removed from a cargo ship onto a truck or train, but before exiting a U.S. POE. 89 Congressional Research Service 23 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security As of August 2012, CBP reported that 100% of containerized cargo entering through Northern and Southwest border land ports and 99.8% of containerized sea cargo is scanned through radiation portal monitors (RPMs).93 According to a 2012 GAO report, however, radiation scanning of international rail cargo mainly is conducted with less powerful portable, hand-held scanners; and scanning may only be triggered when NII scanning indicates a cause for alarm.94 Another GAO report found that CBP’s radiation portal monitors may not detect certain nuclear materials when they are lightly shielded, and that such shielding may not be detected in the absence of NII scanning.95 GAO also has identified problems with the acquisition of RPMs by CBP and by DHS’s Domestic Nuclear Detection Office.96 Non-Intrusive Inspection (NII) and Secondary Inspections in U.S. Ports Within each port, officers in CBP’s Advanced Targeting Unit use the ATS to select containers at a high risk for weapons of mass destruction, drugs, or other contraband for NII scanning. Containers with risk scores above a certain threshold are automatically selected for such scans, and officers also may select additional containers for NII scanning and/or physical inspection. Table 1 lists the number of rail, truck, and maritime cargo containers inspected by CBP between FY2005 and FY2013 (i.e., the total number processed for entry), and the number subject to secondary inspection, including NII scanning, physical inspection, or both. Table 1. Primary and Secondary Inspections of U.S. Containerized Imports, Number of Cargo Containers and Percentage of Secondary Inspections Fiscal year Rail Truck Maritime Primary Secondary % Primary Secondary % Primary Secondary % 2005 2,658,764 2,090,687 79 11,323,070 2,641,877 23 11,342,493 569,308 5 2006 2,735,335 2,277,447 83 11,593,554 2,771,266 24 11,621,658 578,628 5 2007 2,737,149 2,444,479 89 11,250,482 2,843,730 25 11,702,610 441,414 4 2008 2,747,259 2,499,399 91 11,012,928 2,773,995 25 11,357,442 354,908 3 2009 2,178,604 2,017,851 93 9,237,649 2,794,256 30 9,854,337 447,616 5 2010 2,430,873 2,305,656 95 10,002,606 3,279,851 33 11,116,791 489,340 4 2011 2,636,781 2,519,856 96 10,114,167 3,130,647 30 11,515,475 475,569 4 2012 2,936,270 2,833,518 97 10,367,841 3,222,136 31 10,975,111 763,564 7 93 CBP Office of Congressional Affairs, August 23, 2012. U.S. Government Accountability Office, Combatting Nuclear Smuggling; DHS Has Developed Plans for Its Global Nuclear Architecture, but Challenges Remain in Deploying Equipment, GAO-12-941T, July 26, 2012, p. 5, http://www.gao.gov/assets/600/593027.pdf. 95 U.S. Government Accountability Office, Supply Chain Security: Container Security Programs Have Matured, but Uncertainty Persists over the Future of 100 Percent Scanning, GAO-12-422T, February 7, 2012, pp. 10-12, http://www.gao.gov/assets/590/588253.pdf. See also CRS Report R40154, Detection of Nuclear Weapons and Materials: Science, Technologies, Observations, by (name redacted) , for a more comprehensive discussion of nuclear detection technologies. 96 Ibid; see also U.S. Government Accountability Office, Combating Nuclear Smuggling: Inadequate Communication and Oversight Hampered DHS Efforts to Develop an Advanced Radiography System to Detect Nuclear Materials, GAO-10-1041T, September 15, 2010. 94 Congressional Research Service 24 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Fiscal year 2013 Rail 3,060,933 2,888,860 Truck 94 10,567,332 2,834,469 Maritime 27 11,041,099 715,660 6 Source: CBP Office of Legislative Affairs, April 28, 2014. Notes: Data include inspections of empty and full containers. Secondary inspection includes non-intrusive imaging (NII) scanning and/or opening a cargo container for physical inspection. As Table 1 indicates, the majority of cargo containers between FY2005 and FY2013 entered by ship (about 101 million out of 220 million containers, or 46%) or by truck (about 95 million, or 44%), with the remainder entering by rail (about 24 million, or 11%). Secondary inspection rates vary greatly by mode of entry, with 91% of all rail containers being scanned or inspected, versus 28% of truck-mounted containers, and 5% of maritime containers. Overall, about 25% of all incoming containers (6.1 million out of 24.3 million) were subject to secondary inspection in FY2011. The different NII scanning percentages may reflect differences in port infrastructure and the shipping process, among other factors. While land ports are naturally structured as choke points with a relatively limited number of trucking or rail lanes, sea ports are larger facilities, and containers from any given ship may flow in multiple directions before being placed on another ship, rail, or truck conveyance. Truck and rail cargo also may be more regular than maritime cargo (i.e., one type of good per container), whereas maritime containers may be more likely to include multiple shipments bundled into a single container, making NII scanning more time consuming. The flow of maritime shipping is also less regular than land-based modes. Whereas truck and rail traffic arrives in a relatively steady stream at ports of entry, maritime cargo arrives in surges, with each incoming ship containing hundreds or thousands of containers that must quickly be processed. Some Members have expressed frustration that most cargo is not scanned before entering the United States, including the great majority of maritime cargo. However, while NII scans take less than one minute per container overall, evaluating NII images and comparing them to declared cargo manifests is a labor-intensive process that may involve multiple officers and may require up to several minutes per container, depending on the complexity of the cargo. Thus, substantially increasing the proportion of cargo scanned likely would be resource-intensive, and could slow the flow of goods in and out of the United States. Moreover, CBP estimates that the overwhelming majority of cargo entries are lawful,97 so that increased scanning may be of limited practical benefit (also see “100% Scanning Requirement”). Trade Enforcement Inspections CBP trade specialists at POEs also target certain containers for trade enforcement inspections based on ATS risk scores along with other intelligence and local enforcement considerations. 97 CBP projected the trade compliance rate (measured against transactional discrepancies) to be 98.9% in FY2012, and the compliance rate averaged 98.0% for FY2006-FY2012; see CBP, Import Trade Trends: FY2011 Year End Report, Washington, DC 2012, p. 17. Similarly, CBP’s audit of travelers at ports of entry found that about 99% of travelers at air and land ports in FY2006 were in compliance with all relevant rules, laws, and regulations; see GAO, Border security: Despite Progress, Weaknesses in Traveler Inspections Exist at Our Nation’s Ports of Entry, GAO-08-219, November 2007, p. 47. And in FY2007-FY2010, CBP’s Office of Field Operations made a total of 168,504 drug seizures at ports of entry—a figure which amounts to less than 0.2% of all cargo entries, and less than 0.01% of all cargo and travelers entering through POEs; see DHS Office of Inspector General, CBP’s Efficacy of Controls Over Drugs Seizures, OIG-11-57, March 2011, p. 3. Congressional Research Service 25 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Goods may be selected for trade enforcement examinations related to concerns about product safety, intellectual property violations (copyright or trademark infringement), counterfeit goods, labeling violations, or anti-dumping and countervailing duty (AD/CVD) circumvention, among other considerations. Trade enforcement inspections ensure that goods are correctly classified and accurately weighed for duty assessment, and administrative corrections are made as necessary. Trade specialists also look for evidence of trade-related fraud (e.g., false rules of origin labeling or valuation of merchandise), which may trigger an investigation by CBP trade specialists, ICE investigators, or other federal agents. CBP’s trade enforcement efforts are focused on five priority trade issues (PTIs), or “high risk areas that can cause significant revenue loss, hurt the U.S. economy, or threaten the health and safety of the American people.”98 The five issues are antidumping and countervailing duties; import safety; intellectual property rights; textiles and apparel; and trade agreements.99 According to CBP, these PTIs serve as the core of CBP’s trade enforcement strategy, and CBP focuses considerable resources and personnel on them. CBP’s Performance and Accountability Report, Fiscal Year 2013 reported gains in identifying “threats, challenges, and vulnerabilities in each step” of the duty collection process, and in targeting textile and apparel manufacturers overseas whose trade preference claims could not be substantiated. Trade enforcement examinations can be a time-consuming procedure, especially in the case of containers with diverse contents, because CBP officers must physically unpack the container and examine all of its contents or a sample of contents. In some cases, such as when containers include certain food, plant, or animal products, CBP officers may be required to bring in representatives from other federal agencies (e.g., the U.S. Department of Agriculture) to assist with physical inspections, and to determine whether or not a good may be admitted or how it should be classified. Any storage and transportation costs associated with trade enforcement examinations are borne by the importer, and may also occur outside the port at a centralized examination station. As noted, one benefit of C-TPAT membership is that large shipments subject to secondary inspection may be eligible for stratified exams, minimizing storage costs in these cases (see “Text Box: CBP Trusted Trader Programs”). As Table 2 indicates, about 2% (3.2 million out of 140.5 million) of all cargo containers seeking admission to the United States were physically examined at a POE in FY2005-FY2013; and slightly less than half (1.5 million out of 3.2 million) of physical examinations were trade-related (as opposed to security-related). These examinations resulted in a total of 157,905 trade-related seizures during this period, meaning that seizures occurred in about 10% of examined containers. Most seizures were related to intellectual property violations (122,355 cases; 77% of trade-related seizures) and import safety violations (24,503 cases; 16% of trade-related seizures). Table 2. Trade Enforcement at U.S. Ports, FY2005-FY2013 Number of Cargo Containers Fiscal Year 2005 98 99 Primary Inspections Examinations Trade-Related Seizures Total Total TradeRelated Total Intellectual Property 25,324,327 473,726 100,350 12,476 8,022 Import Safety NA CBP website, http://www.cbp.gov/xp/cgov/trade/priority_trade/. Ibid. Congressional Research Service 26 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security Fiscal Year Primary Inspections Examinations Trade-Related Seizures Total Total TradeRelated Total Intellectual Property Import Safety 2006 25,950,547 515,740 201,000 17,600 14,700 1,000 2007 25,690,241 400,805 219,064 17,195 13,656 1,296 2008 25,117,629 404,497 228,445 18,421 14,992 2,677 2009 21,270,590 376,256 178,204 19,218 14,839 2,744 2010 23,550,270 393,106 199,461 23,687 19,962 4,477 2011 24,266,423 384,226 200,916 30,911 24,823 6,607 2012 24,279,222 390,035 209,360 38,802 22,894 10,028 2013 24,669,364 423,534 255,262 33,702 24,361 7,763 Source: CBP Office of Legislative Affairs March 2, 2012, May 17, 2012, and April 28, 2014. Notes: Total inspections include the total number of loaded truck, rail, and maritime cargo containers inspected. Examinations include cases in which cargo containers were opened and their contents physically inspected. Cargo Release Cargo that is found to be admissible and cleared through security and trade enforcement inspections is formally released into U.S. commerce. In these cases, importers must file additional entry summary documentation within 10 days to provide detailed information about the shipment (including customs classification, weight, and duty rates) that CBP will use to determine that all import requirements have been satisfied.100 Importers must pay storage and transportation costs during the cargo release period, and must pay initial customs duties and fees assessed prior to taking possession of imported goods. Trade Facilitation Several CBP programs are in place that are designed to facilitate lawful trade during and after the entry process, including CBP “Simplified Entry” process, its Centers of Excellence and Expertise (CEE), and the in-bond transportation system. Automated Commercial Environment (ACE) Cargo Release (formerly “Simplified Entry”) In April 2011, CBP established a joint industry-CBP working group to establish a simplified entry process intended to reduce the administrative burden for importers, while providing the necessary documentation needed by CBP officials to do their jobs of identifying risks and collecting tariffs, taxes, and fees. The “Simplified Entry” process proposed to reduce the number of duplicative data elements required to obtain release of products for cargo. The process allows filers to submit 100 In certain cases, including certain produce and other merchandise from Mexico and Canada, shipments consigned to the U.S. government, and articles for a trade fair, shipments may be delivered immediately to the consignee, rather than being held between formal entry and delivery as in the standard procedure described above. In these cases, importers file entry documents and entry summary documents and pay estimated duties at the same time within 10 working days of the cargo’s release. Congressional Research Service 27 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security a streamlined data submission of 12 required and 3 optional data elements. These data may be filed early in the import process to allow an expanded window of opportunity to identify potential risks. Filers may also update entry information throughout the import process to provide CBP more accurate data.101 In December 2011, CPB began a simplified entry pilot program for air cargo. CBP selected 9 customs brokers (out of 40 applicants) operating out of 3 POEs (Chicago, Atlanta, and the Indianapolis Express Consignment Operation). In August 2012, CBP opened the program to all self-filers who hold a Tier-2 or higher C-TPAT status, and all importers who use customs brokers to file simplified entry information.102 As of September 2013, over 159,000 simplified entries had been filed for more than 1,100 importers.103 In November 2013, CBP re-named the program the “ACE Cargo Release Test,” and dropped the C-TPAT requirement to allow more importers to participate. Eligible applicants are now accepted on a first-come, first-served basis, but if the volume of applicants exceeds CBP’s administrative capabilities, CBP reserves the right to select individual participants to ensure a diverse pool.104 In February 2014, the test was expanded to cargo entries by ocean and rail; and to limited truck entries at 10 POEs on May 2014.105 Centers of Excellence and Expertise To facilitate post-entry processing, CBP has launched several Centers of Excellence and Expertise (CEEs or Centers) since October 2011 to serve as industry-specific single points of post-entry processing for certain businesses enrolled in the C-TPAT and ISA trusted trader programs.106 The Centers are designed as “one-stop-shops” to align customs practices with the demands of modern business and to facilitate trade in the targeted industries. CBP-integrated staff in the Centers process entry summaries, post-entry amendment and correction reviews, protests, and other administrative work.107 The 10 CEEs operating as of November 2012 are as follows:     Electronics in Los Angeles; Pharmaceuticals, Health and Chemicals in New York; Automotive and Aerospace in Detroit; Petroleum, Natural Gas, and Minerals in Houston; 101 CBP, Simplified Entry Overview, May 2012, http://www.cbp.gov/xp/cgov/trade/trade_transformation/ simplified_entry/. For trade facilitation initiatives, see also meeting announcements of the Advisory Committee on Commercial Operations of Customs and Border Protection (COAC), 76 Federal Register, 17143, 76 Federal Register 46312, and 76 Federal Register 58030. 102 77 Federal Register 48527, August 14, 2012. 103 CBP, FY2013 Performance and Accountability Report, http://www.cbp.gov/newsroom/publications/. CBP, CBP Announces Expansion of Cargo Release/Simplified Entry Pilot, October 2012, http://www.cbp.gov/trade/processimprovement-initiatives/simplified-entry/ac-se-expansion. 104 78 Federal Register 66039, November 4, 2012. 105 79 Federal Register 6210, February 3, 2014; CBP, 79 Federal Register 25143, May 2, 2014. 106 The first two CEEs began as pilot programs in November 2010 when CBP established an Information Technology and Consumer Electronics CEE in Los Angeles and a Pharmaceuticals, Health and Chemicals CEE in New York. After evaluation, these CEEs were established permanently in October 2011. On May 10, 2012, CBP announced the creation of two additional Centers: Automotive and Aerospace in Detroit, and Petroleum, Natural Gas, and Minerals in Houston. 107 CBP website, Centers of Excellence and Expertise, http://www.cbp.gov/xp/cgov/trade/trade_transformation/ industry_int/. Congressional Research Service 28 U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security       Apparel, Footwear, and Textiles in San Francisco; Agriculture and Prepared Products in Miami; Consumer Products and Mass Merchandising in Atlanta; Industrial and Manufacturing Materials in Buffalo; Base Metals in Chicago; and Machinery in Laredo.108 The Centers were designed so that the industries would receive fewer cargo delays, reduce costs, and enjoy greater predictability, while CBP would be able to shift its emphasis at the ports of entry to address higher-risk shipments and focus on trade enforcement issues. On a similar track, an Account Executive (AE) pilot was established to work with selected trusted partners in the electronics industry. At the end of these pilots, the two concepts were combined. The Centers also support improved information sharing between industry representatives and CBP staff to lead to more focused trade enforcement efforts.109 In-bond Transportation In-bond transportation facilitates the efficient flow of goods trade into the United States by allowing imported merchandise to arrive at one U.S. POE and be transported by a bonded carrier to another U.S. POE, where it officially enters into U.S. commerce (duties are paid upon entry), is exported out of the United States (duty payment is not required), enters a bonded warehouse (duties are paid upon release), or is brought into a free trade zone for further processing (duties are paid on the finished product upon entry).110 According to CBP, the four field offices that process the most in-bond shipments are Los Angeles, New York, Miami, and Seattle. Many in the trade community value the flexibility provided by the in-bond system as a way to avoid congestion and delays at U.S. seaports, but a 2007 GAO report raised concerns that CBP collects little information on in-bond shipments, does not know exactly how often th [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR43014. Public record. Not legal advice.