Statement of the International Mass Retail Association, Arlington, Virginia

    This statement is submitted on behalf of the International Mass Retail Association (IMRA), the world’s leading alliance of retailers and their product and service suppliers. IMRA is committed to bringing price-competitive value to the world’s consumers. IMRA improves its members’ businesses by providing industry research and education, government advocacy, and a unique forum for its members to establish relationships, solve problems, and work together for the benefit of the consumer and the mass retail industry. IMRA represents many of the best-known and most successful retailers in the world, who operate thousands of stores worldwide. IMRA equally values among its members hundreds of the world’s top-tier product and service suppliers, working with their retailer partners to further the growth of the mass retail industry.

    Most of IMRA’s retail members import products into the United States or rely upon imported products to fill out their merchandise assortments. Several of IMRA’s retail members and many of its supplier members also export products from the United States. For this reason, IMRA has a strong interest in seeing an efficient Customs service that reflects the needs of businesses in the 21^st Century.

    Unfortunately, the commercial operations of the U.S. Customs Service struggles under the weight of obsolete technology and a vision that IMRA strongly believes is obsolete as well. Two-hundred years ago, when Congress first created the Customs Service, the main goal of the agency was to collect revenue. Indeed, the Customs Service was the nation’s principal revenue collector for more than a hundred years before the Internal Revenue Service.

    Today, Customs collects only about $20 billion in tariff revenue each year, and if the current Administration’s goals for expanding world trade bi-laterally and multi-laterally come to fruition, that revenue is likely to decline steadily.

    More to the point, Customs’ official standards were set when goods arrived on sailing ships and no one concerned themselves with slight quantity variances that don’t affect revenue. Now, with the miracles of the electronic age, Customs has access to a level of detail never before available and sets standards that are unrealistic and capture immaterial variations. Importers often feel as if Customs’ compliance efforts devolve into nit-picking for the sake of information that is of no particular consequence, even to the revenue.

    IMRA would respectfully suggest that the Customs Service’s role is far more complex. In commercial operations, Customs is on the front line in enforcing consumer protection and intellectual property laws as well as protecting our borders.

    For these reasons, we are uncertain that the current body of U.S. Customs law and regulation is tailored to today’s environment where duties average just three percent and where just-in-time delivery is critical.

    IMRA believes Congress should begin an immediate and serious review of the U.S. Customs Service and its commercial operations with a view toward developing a strategic plan that will carry the agency through the next ten to fifteen years. As part of this plan, Congress should seriously re-evaluate Customs’ main missions and funding for those missions, accordingly. While we recognize that this hearing covers only the next few years of funding needs, we implore the Subcommittee to take a longer-term look at the agency and the enforcement mechanisms and penalties it brings to bear on various types of infractions. Duty collections should be enforced post-entry. Data collection and accuracy standards should be reevaluated. We believe this longer-term review of the Customs Service is related to several issues raised at this hearing.

    IMRA has long supported and even led the industry efforts to fully fund the development of ACE over the shortest possible time frame. We urge the subcommittee to authorize whatever sums are necessary to keep this project on a four-year basis and to use its influence with House appropriators to fully fund ACE development. We support this step because the current Automated Commercial System (ACS) cannot move the Customs Service to an "account based" approach to managing import enforcement. Under ACS every transaction is a separate record. The system cannot aggregate these records. In order to move toward a new approach to revenue collection which places enforcement on the post-entry phase, we must have technology that will treat importers and exporters–such as IMRA’s members—as single entities. Without this technology, we cannot hope to make progress on many other issues.

    IMRA strongly encourages Congress to remain closely involved with the development of ACE. Indeed, it’s critically important that Congress exercise ongoing oversight into the development of the system to ensure that it is scalable and is designed with a clear vision for where the agency is going in the next ten to fifteen years. For this reason, IMRA reiterates that a single authorization hearing is not sufficient to ensure that ACE is developed properly. On-going oversight is needed and a strategic plan for the future ought to be developed.

    To take the Customs Service into the 21^st Century where tariffs will increasingly be irrelevant, we need more than a mere "revision" of the entry process. We need some bold thinking that will allow for the main enforcement of revenue issues to occur post-entry. We need a reevaluation of the data we collect at entry and that we maintain through the process that addresses both the data elements and the basic issues of accuracy. Finally, and most important, we need a thorough review of Customs’ auditing abilities and approaches. With enforcement in the commercial arena moving to the post-entry phase, auditing is a critical issue. Too often, importers feel as if auditors are nit-picking on immaterial statistical issues. A thorough examination of the issue of data accuracy is needed. Guidelines must be set.

    It is also timely to note that, while not a subject specific to this hearing, the Merchandise Processing Fee (MPF) is slated to expire in 2003. Congress will shortly have to decide if this fee should be extended. IMRA strongly opposes its extension unless it is specifically tied to commercial operations funding.

    Currently, the fee is supposed to offset the cost of commercial operations. However, Customs has not demonstrated this fact to the trade community, which pays approximately $1 billion each year in MPF fees. Indeed, over time the MPF could become as important as the actual duties. Unless these fees are tied to commercial operations they are potentially subject to WTO challenges. More important, it’s a matter of fairness to companies like IMRA’s members, who must pay a fee for the privilege of paying a tax.

    In previous years, Congress has used the MPF extension as a pay-go offset for a variety of programs having nothing to do with Customs Commercial operations. Indeed, at this writing, the Senate has suggested using the MPF to offset costs associated with Patients' Bill of Rights legislation. IMRA strongly opposes these uses of the MPF and urges the Subcommittee to either end the fee or create a trust fund for Customs Commercial Operations using MPF fees.

    On a separate, but related issue, IMRA takes strong exception to Customs’ interpretation of the statutory language contained in the African Growth and Opportunity Act with respect to knit-to-shape garments. In its rules on this new law, Customs has chosen to interpret the statute to mean that no knit-to-shape garments wholly made in the qualifying Sub-Saharan countries are eligible for special access to the United States. IMRA was deeply involved in the crafting of this legislation, as was the Customs Service, it was well known at the time of the law’s enactment that Congress intended to provide special duty-free access to knit-to-shape garments made in the Sub-Saharan African region. We do not understand why Customs has chosen to take this contrary view, especially since we believe the agency is well aware of the legislative history. More important, there is no earthly reason to exclude these garments, which is why they were never subjected to the import cap.

    We know that members of the Trade Subcommittee have expressed their views to the Customs Service, but we believe that only additional legislation will solve this problem. We urge the Subcommittee to quickly move such legislation, along with other technical corrections to the bill. We believe that such legislation would not expand the scope of AGOA, as it is clear that Congress intended to provide special access to these types of garments.