Trade bills do not seem to be moving any faster through Congress than other legislation these days. But with an executive order on February 19, President Obama took a welcome step toward facilitating the freer flow of goods across the U.S. border. The White House order reduces supply-chain barriers to commerce that can inhibit the exchange of goods just as much as tariffs and quotas.

Specifically, the order directs administration agencies to implement, by the end of 2016, two crucial systems designed to fully automate the collection of import data: the International Trade Data System (ITDS), and the Automated Commercial Environment (ACE).

By the deadline date, the Executive Order requires that “participating agencies shall have capabilities, agreements, and other requirements in place to utilize the ITDS and supporting systems, such as the Automated Commercial Environment, as the primary means of receiving from users the standard set of data and other relevant documentation (exclusive of applications for permits, licenses, or certifications) required for the release of imported cargo and clearance of cargo for export.”

In The Spotlight

This may not sound as important as other major trade agreements now being negotiated, but in our 21st-century, globalized economy, an integrated and automated Customs system — like an open artery in a healthy human — allows the lifeblood of the nation’s commerce to flow more freely. When fully implemented, the ACE system will facilitate the timely collection and sharing of import data by U.S. Customs. ITDS shares that data among the dozens of other government agencies, such as the FDA and EPA, that play a role in regulating goods that enter the country.

Most other nations have realized the importance of trade facilitation. Last fall in Bali, Indonesia, the U.S. government joined other members of the World Trade Organization in signing a trade facilitation agreement. As the WTO describes it, “The final agreement contains provisions for faster and more efficient customs procedures through effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.”

Congress can do its part to facilitate trade by passing a Customs Reauthorization bill during its 2014 session.

Congress can do its part to facilitate trade by passing a Customs Reauthorization bill during its 2014 session. A bipartisan bill in the Senate, S. 662, would fully fund development of the ACE system through its completion date.

Competing Democratic and Republican bills introduced in the House, while differing on antidumping language, would both fully fund completion of ACE. Congressional leaders should find a way to work around their differences to pass a bill that would keep Customs automation on track to best serve the U.S. economy while protecting the nation’s security.

No sector is more eager for a fully integrated and automated Customs system than the thousands of U.S.-based companies and hundreds of thousands of U.S. workers involved in the U.S. Foreign-Trade Zones program. In recent decades, the FTZ program has become a key link in the nation’s supply chain. The program allows companies to operate in areas that are in the United States but considered outside U.S. Customs territory for purposes of regulating imports and collecting customs duties.

The FTZ program encourages companies to maintain production on U.S. soil and to employ U.S. workers by reducing, eliminating or deferring duties paid on key imported components. The program is utilized by more than 3,000 companies employing 370,000 workers in zones that are active across the United States and Puerto Rico. Major users of the program include the electronics, petroleum refining, automotive, pharmaceutical, apparel and footwear sectors.

The FTZ program has never been more important to the U.S. economy. In 2012, exports from FTZs reached a record $70 billion, more than doubling since 2009. Merchandise imported to FTZs account for more than 13 percent of overall U.S. goods imports.

While crude oil still accounts for two-thirds of FTZ imports, its share has been declining as domestic energy production ramps up. Meanwhile, the growth of other FTZ imports, such as manufacturing components, machinery, and consumer goods, has more than offset the decline in crude oil, so that overall FTZ imports continue to rise as a share of total U.S. imports.

The growing importance the FTZ program means that any advance in Customs automation must fully integrate the FTZ sector in a unified system. The FTZ community is looking to Congress to pass the Customs Reauthorization bill as soon as possible, with full funding for ACE and speedy inclusion of FTZ data elements in the final system.

Trade facilitation is too important to leave the Customs Reauthorization bill sitting on the shelf.

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Daniel Griswold
About The Author Daniel Griswold [Full Bio]
Daniel Griswold is senior research fellow and co-director of the Program on the American Economy and Globalization at the Mercatus Center.




www.mercatus.org


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