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Chinese Government Shipping Company Representative Sits On Customs & Border Protection's Industry Advisory Council
By Richard McCormack
editor@manufacturingnews.com
An economic and trade policymaking infrastructure in Washington, D.C., which is dominated by importers, retailers, foreign producers, foreign-owned shipping companies and the many legal and lobbying firms that represent them, is working against the interests of U.S. domestic manufacturing.
The U.S. Customs and Border Protection's (CBP) industry advisory committee that is in involved in major policies related to manufactured imports, has a roster of 20 members, none of whom represent U.S. industry or American manufacturing workers.
CBP's Advisory Committee on Commercial Operations (COAC) has been instrumental in shaping policies that have direct economic impact on domestic producers. The group has been given even more power since the 2006 passage of the Security and Accountability For Every (SAFE) Port Act.
COAC members exclusively represent the interests of importers and foreign shipping companies. One member of COAC, Christopher Koch, is president of the World Shipping Council. He is former chairman of the Federal Maritime Commission and former chief of staff to Sen. John McCain. The World Shipping Council says it represents 90 percent of the global liner vessel capacity in the world. Its board members include Sun Jia-Kang of COSCO, the China Ocean Shipping Co., which is owned and operated by the Chinese government. Other members of the World Shipping Council's board represented by Koch on the U.S. government CBP advisory committee include executives from foreign-owned shipping companies with headquarters in Hong Kong, Germany, France, Israel, Denmark, Singapore and Japan.
Another member of COAC, Earl Argon, is vice president of APL Global Transportation, which is described on its Web site as being "a wholly-owned subsidiary of Singapore-based Neptune Orient Lines." Other members include representatives from the country's largest importers and retailers: Wal-Mart, Hasbro, Hewlett-Packard, Limited Brands, Sears Roebuck, Boeing and Pfizer.
These domestic and foreign companies have early access to information and occupy a prominent seat at the U.S. government table for setting national policies. Every quarter, senior officials from Customs and the Department of Treasury provide COAC members in-depth briefings on proposed government policies that impact dozens of import-related security and commercial programs. At its May 9, 2008, meeting held in Washington, D.C., the group received a briefing from Brenda Smith, executive director of trade policy and programs at CBP, on the agency's proposed "Trade Strategy." As explained in the minutes: "The Trade Strategy had not yet been sent to Office of Management and Budget or Treasury for review..."
The COAC charter states that its members should be drawn from the trade and transportation community, including importers "and their agents" but that it should also include "other groups whose members are affected by Customs' commercial operations." This would presumably mean U.S. producer-related organizations or companies that are being impacted by cheap and many times illegally imported products into the United States. There are no such groups on the advisory committee. The charter also calls for members that represent "public interest organizations." There are no such members on COAC.
In response to questions submitted by Manufacturing & Technology News to Customs and Border Protection, the agency said that every two years a notice of recruitment runs in the Federal Register seeking COAC member applications from interested parties. The Department of Treasury then selects the board members from the applicants.
In selecting the current roster of industry representatives, "maritime security was a Departmental priority issue," according to CBP spokeswoman Lynn Hollinger in a written reply to the MTN inquiry. "Consequently, ensuring adequate representation from the liner shipping industry would be a factor in choosing a member such as Chris Koch of the World Shipping Council...for these particular items."
But the group has jurisdiction over more than 20 different customs and import functions, many involving the financial aspects of paying and collecting duties on imported goods. COAC provides CBP and the Treasury Department with input into country-of-origin markings, the sufficiency of bonds posted by importers to ensure payment of duties owed, and the issue of "deemed liquidation" for imported merchandise subjected to countervailing duties. COAC members are also involved in providing advice on ensuring the safety of imported food and toys, and determining the value of imports.
According to COAC's charter, the group is involved in supply chain security involving the safe movement of containers throughout American ports. In the SAFE Port Act, COAC was also given an oversight role in the "Reorganization of Customs Revenue Functions," as well as in the creation of the International Trade Data System. Many of these programs directly or indirectly impact the U.S. manufacturing community.
At its May 2008 meeting, COAC received briefings on import surveillance and import safety. According to the minutes from the meeting, CBP Commissioner Ralph Basham told the group: "We can't inspect our way out of this -- partnership and better information are critical." The group learned about the "Importer Self Assessment" program, and the "Medical/ Pharmaceutical Safety document."
Even some of the government officials overseeing the COAC in both Customs and Border Protection and the Department of Treasury seem to think the group is not representative of industry. For instance, a COAC subcommittee that is developing recommendations on intellectual property rights enforcement was told by Theresa Randazzo, CBP director of intellectual property rights policy and programs, that "the subcommittee needs broader participation to include more sectors of the industry." The property rights subcommittee presented 20 recommendations to the CBP on IPR enforcement issues. But Randazzo recommended "expanding the participation to non-COAC members to provide more diverse input." According to the minutes of the meeting, Tim Skud, deputy assistant secretary for tax, trade and tariff policy at the Department of Treasury, told the IPR subcommittee: "When we go outside to non-COAC members [it is] important to get those who would be affected by the rules to make sure the rules designed are balanced. We need to find some small- and medium-sized companies for participation."
Being on COAC gives importers, retailers, foreign producers and shipping companies early access to information that they can then use to shape public policy in their favor.
Members of COAC did this to great effect and to their own benefit by raising congressional opposition to the Customs and Border Protection's proposal to change the way duties are assessed on imports. In January, Customs proposed changing its so-called "first sale" rule to the "last sale." Such a change would have been beneficial to American producers competing against dirt-cheap imports because it would have raised the level of duties on imported products.
Currently, duties on imports are assessed on the value of the product as it leaves an overseas factory -- the "first sale." Customs said that first-sale value is difficult to verify and was not in line with world practices. The "first sale" value does not include the costs of middlemen and logistics, so importers can declare that their products have lower value than they would if those costs were included in a "last sale" value determination. A lower-valued goods means less duties to pay. Customs wanted to close down a legal construct that allowed importers to reduce duty payments, and it knew the proposal would be controversial.
Members of COAC went nuts over the proposal.
Sandler & Travis, one of the most powerful customs legal advisory firms in the country representing foreign producers and importers in Washington, D.C., has an executive on COAC: Samuel Banks. He was formerly assistant commissioner of Customs. Sandler & Travis immediately organized the "Save First Sale Coalition." Sandler & Travis was the law firm that was originally responsible for litigating the creation of the first-sale rule in 1988. The rule has saved importers having to pay the federal government perhaps hundreds of billions of dollars in duties.
According to the minutes of the COAC's meeting held on February 13, 2008, in Tucson, Ariz., COAC member Adrienne Braumiller, an attorney with Braumiller Schulz in Dallas, Texas, "asked CBP to withdraw the issuance" of the first-sale proposal and said that "COAC will send a letter/comment requesting withdrawal." She complained that COAC was not notified of the proposed change.
According to the minutes, Barry O'Brien, director of global trade and customs for Hasbro, said that if changes in the first-sale rule were approved "it would distort the price index for U.S. Census for the past five years."
Not long after that, 52 members of the House of Representatives, and 18 members of the Senate magically wrote letters to Customs and Border Protection demanding that it rescind the proposal. Shortly thereafter, in the first piece of legislation that had a chance of passing, a provision appeared in the Farm Bill scolding CBP for even considering the rule change and derailing any action until 2011.
What was so wrong with the proposal that it led to its being so derided? "Nothing, except for the fact that it will significantly increase the duties collected on finished goods," says one government official who keeps track of COAC. At the May 2008 meeting of the COAC, Braumiller "requested an update from Dan Baldwin on first sale, given that 18 senators and 52 congressmen were in agreement with COAC's position that the proposed interpretation be withdrawn," according to the meeting minutes.
The members of COAC might have been "in agreement," but there were submissions to CBP from the Alliance for Manufacturing Trade Action Coalition, which is made up of U.S. domestic manufacturers, and the AFL-CIO that supported the rule change. There is no mention of U.S. producers and workers supporting the CBP rule change in the COAC meeting minutes.
Members Of The Bureau of Customs and Border Protection's Advisory Committee on Commercial Operations (COAC)
Earl Argon, Vice President, APL Global Transportation, Oakland, Calif. "APL is a wholly owned subsidiary of Singapore-based Neptune Orient Lines, a global transportation and logistics company engaged in shipping and related businesses," according to the APL Web site.
Samuel Banks, Executive Vice President, Sandler & Travis Trade, Washington, D.C. Banks spent more than 28 years at the U.S. Customs Service, having served for four years as deputy commissioner and one year as acting commissioner. After leaving the Customs Service, Banks worked as a consultant to Lockheed Martin and United Parcel Service. Sandler, Travis & Rosenberg describes itself on its Web site as "an international trade and customs law firm concentrating in assisting clients with the movement of goods, personnel and ideas across international borders."
Christopher Koch, President of the World Shipping Council, Washington, D.C. Koch is the former chairman of the Federal Maritime Commission from 1990 to 1993 and was former chief of staff to Sen. John McCain. The council's members "represent over 90 percent of the global liner vessel capacity and transport approximately 100 million [20-foot container equivalents] TEU annually," says the organization on its Web site. Among the members on the World Shipping Council's board are:
- Sun Jia-Kang of COSCO, the China Ocean Shipping Group Co.;
- Rodolphe Saade, of CMA-CGM, the world's third largest container shipping firm, based in the Marseilles, France;
- Adolpf Adrion, Hapag-Lloyd Container Line based in Hamburg, Germany;
- Philip Chow of the Orient Overseas Container Line based in Hong Kong;
- Thomas Crowley, Crowley Maritime Corp., a maritime shipping logistics service firm based in Jacksonville, Fla.;
- Doren Godder, Zim Integrated Shipping Services, based in Haifa, Israel;
- Klaus Meves, Hamburg Sud (Südamerikanische Dampfschifffahrts-Gesellschaft KG), part of the Oetker Group of Hamburg, Germany;
- J.W. Park of Hanjin Shipping, Korea's largest shipping carrier which owns 200 vessels;
- Knud Pontoppidan of Moller-Maersk, based in Copenhagen, Denmark;
- Ron Widdows, CEO of container carrier APL, which is part of the Neptune Orient Lines based in Singapore; and
- Masakaza Yakushiji, Mitsui O.S.K. Lines, Tokyo, Japan.
Curtis Spencer, President, IMS Worldwide, Webster, Texas; The company says it helps companies manage their customs taxes "creating additional profits." It consults companies about locating in foreign trade zones, as a means to import parts and assemble them into finished products thereby reducing duty rates. "The FTZ program allows a manufacturer to import parts or components (for example, at a 5 percent duty rate) assemble the parts into a finished product (which, if imported directly, would have a 1 percent duty rate), and claim on the Customs Entry the part's value multiplied by the finished goods duty rate (a savings of 4 percent on the value of the part)," according to an article entitled "Manufacturing vs. Distribution" written by Trey Boring of IMS Worldwide, posted on the company's Web site.
Peggy Rutledge, Vice President, Maritime Solutions for GreenLine Systems Inc., Arlington, Va. Rutledge's bio notes that she has worked at Hapag-Lloyd and Hamburg-Sug, and P.P. Moller/Maersk. The company says it "delivers software and services providing supply chain stakeholders the ability to identify, evaluate and respond to the operational and financial risks associated with the movement of goods across borders."
J. Michael Zachary, Tompkins Associates, Lakewood, Wash. The company "designs and integrates global end-to-end solutions for companies that embrace supply chain excellence," the company states on its Web site.
Adrienne Braumiller, Attorney/Partner, Braumiller Schulz & Co., Dallas, Texas. Braumiller Schulz describes itself as a law firm that deals with CBP and other government agencies. On the Braumiller Schulz Web site, Braumiller's bio states in the second paragraph that she was appointed by Secretary of Treasury Henry Paulson and Secretary of Homeland Security Michael Certoff to serve a two-year term on the COAC. "In this role, Ms. Braumiller will serve as one of several members representing the interests of importers and their agents."
Jevon Jamieson, Manager, Administration & Customs Compliance, ABF Freight Systems Inc., Fort Smith, Ark. ABF Freight Systems describes itself as "one of North America's largest and most experienced motor carriers." It specializes in less than truckload shipments of general commodities freight.
Anthony Barone, Director, Global Logistics Policy, Pfizer, Peapack, N.J.
Bruce Leeds, Senior Export/Import Advisor, Boeing Co., Long Beach, Calif.
Barry O'Brien, Director, Global Trade & Customs, Hasbro Inc., Providence, R.I.
Geoffrey Powell, Vice President of Operations, C.H. Powell Co., a United States-based customs broker.
Alison Reichstein, Projects & Systems Manager, Hewlett Packard Americas Customs Operations, Chester, Penn.
Bethann Rooney, Manager, Port Security, The Port Authority of New York and New Jersey, New York, N.Y.
Lisa Schimmelpfenning, Vice President, Direct Imports Administration & Logistics, Wal-Mart Stores, Bentonville, Ark.
Leigh Schmid, Vice President International Trade and Customs Compliance, Limited Brands, Columbus, Ohio;
Carol Sheldon, Vice President, Customs & Regulatory Compliance North America, DHL, Southfield, Mich.
Bradley Shorser, Manager, Customs Compliance, Sears, Roebuck and Company, Huffman Estates, Ill.
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