The House Ways and Means’ Subcommittee on Trade held a hearing on May 25 to discuss modernization of customs policies for securing supply chains and protecting American workers. Five witnesses testified for the hearing:

• Brenda Smith, Global Director of Government Outreach, Expeditors International | Witness Statement
• Michael Kanko, Chief Executive Officer, ImportGenius | Witness Statement
• Fred Ferguson, Vice President of Public Affairs, Vista Outdoor | Witness Statement
• Michael Stumo, Chief Executive Officer, Coalition for a Prosperous America | Witness Statement
• Martina Vandenberg, Founder and President, Human Trafficking Legal Center | Witness Statement

Trade Subcommittee Chair Adrian Smith (R-NE) stated the importance of the hearing for ensuring that the Customs and Border Protection (CBP) has the right policies in place to enforce laws effectively, facilitate legitimate trade, and provide clarity to the private sector. He said that it has been 30 years since the last comprehensive policy overhaul and the intervening decades have seen the rise in e-commerce, China emerging as a major global player, and the COVID-19 pandemic. “The policy updates must reflect current reality,” he added. He expressed hope that the members can agree on a bipartisan legislative product that minimizes unnecessary red tape, addresses supply chain bottlenecks., holds China accountable, and stop illegal trade practices across the border.

Ranking Minority Member Earl Blumenauer (D-OR) said that both parties must work together on a number of issues, particularly clarifying the role of Congress in dealing with the trade policy. He highlighted the efforts of House Democrats to support American workers and combat China’s trade practices by attempting to pass the America COMPETES Act last Congress.

The witnesses highlighted challenges impacting American trade and competitiveness and discussed strategies to tackle illegal trade and forced labor practices in other countries through improved accountability. There was broad agreement on the following issues:

Close the de minimis loophole: Michael Stumo said that de minimis (exempting small, one-time shipments with a value from duties, below a threshold that was raised to $800 in 2015) was created in 1930 by the Congress to admit small or trivial merchandise free of duty or any tax. The assumption behind the rule was that the revenue collected would not be worth the time of the officer performing that assessment. He said that China has been the biggest user of de minimis as most counterfeits arrive to the U.S. from China via Express Consignment and International Mail. He specifically highlighted CBP’s concern that the proliferation of e-commerce environment and the increase of small packages is permitting bad actors to operate with relative impunity. He contrasted U.S. policies with those of other countries that have resisted de minimis and said that Congress should end the de minimis exemption or at least ban China from using it.

Increase transparency of trade data: Brenda Smith spoke about the importance of digitizing all government agency requirements for supply chains and minimizing redundancies in data collection. She said the focus should be to collect the most important data at the right time from the right party, adding that quality of data is more important than the quantity of data. Michael Kanko’s testimony focused on the need to increase supply chain transparency by requiring publication of air data. He said that air and truck cargo comprise 46.5 percent of U.S. import value. “By failing to publish air and land data, we are missing half the picture, including many high-value products,” he said. He also caveated his proposal by stressing the need for privacy protection. The bipartisan Moving Americans Privacy Prevention Act, passed in the Senate earlier this month, is a good step in that direction, he added, as it can reduce the risk of disclosing personal information among commercial trade data.

Improve capabilities of CBP: Smith said that the level of CBP’s non-uniformed trade personnel has not materially increased since CBP was established in 2003. She said that these personnel need to be well trained in both modern business practices and in traditional competencies such as classification, valuation, and enforcement. Martina Vandenberg stressed on the need for ensuring resources needed to expand CBP’s forced labor division to tackle the existing case load and providing adequate funding to CBP for its enforcement efforts. Rep. Blumenauer said that CBP has the “authority” but not the “ability” to implement trade policy. He added that, with increasing customs, CBP doesn’t have the capacity to carry out its operations. The significant budget cuts and dramatic reduction of resources being proposed as part of the debt ceiling could impact CBP, he added.

Curbing forced labor: Vandenberg said, “Forced labor is not an aberration. It is a feature, not a bug, in global supply chains.” She said that the U.S. government and its trade partners must enforce prohibitions on forced labor. While she applauded CBP’s robust enforcement efforts that have helped transform forced labor from a corporate public relations matter to a corporate compliance matter, she drew attention to the multiple forced labor petitions that have been pending with CBP for years. “Section 307 Tariff Act and UFLPA enforcement has netted only a fraction of the billions of dollars worth of forced labor-tainted shipments entering U.S. markets each year,” she said. She stressed on the need for resources and funding. “It is time for a paradigm shift: the perpetrators of forced labor must understand that they face real risk – risk of criminal prosecution, risk of financial harm, and risk of inability to import goods into the U.S. market,” she said.