Trade Advisory Committee Embraces Regulatory Reform at D.C. Meeting

Revising and reforming regulations was the top priority when the Commercial Customs Operations Advisory Committee, known as COAC, met in Washington, D.C., on October 3. The meeting, which was held at the Dirksen Senate Office Building, was the first time new members of the current trade advisory committee convened in the nation’s capital.

“Let me welcome you and emphasize how important the ideas, insights, and recommendations are from this body to attain our success,” said U.S. Customs and Border Protection Commissioner Kevin K. McAleenan, who was one of the government co-chairs of the meeting. “Your valuable input will help us evolve our processes and technology, maybe even revolutionize them in some areas, to better serve our trade stakeholders and protect our supply chains.”

Two members of the COAC, Lenny Feldman and Lisa Gelsomino, were recognized as the new co-chairs of the advisory committee’s 15th Term. “We’re really hoping to engage in a lot of candid and transparent discussion,” said Feldman, a senior member of the Sandler, Travis & Rosenberg law firm. “You see a willingness not only on the government side, but on the trade side to talk through issues and talk about what our priorities are, what we’re passionate about. While recommendations are critical, at the end of the day, it’s the thought behind that recommendation.”

At the meeting, 14 recommendations were presented and passed to modernize Foreign-Trade Zone regulations. Foreign-Trade Zones are secure, geographical areas within the U.S. where merchandise may be held without being subject to customs duties or other added value taxes. “Updating our Foreign-Trade Zone practices and regulations is overdue, said Timothy Skud, the deputy assistant secretary of tax, trade, and tariff policy for the U.S. Department of Treasury, who co-chaired the proceedings with McAleenan. “In addition to finding ways to simplify the process, there are a lot of things that have changed in the Foreign-Trade Zone world that I think are important to grapple with.”

The significance of Foreign-Trade Zones was emphasized by Gelsomino, president/CEO of Avalon Risk Management, who presented the recommendations. “Foreign-Trade Zones are a very small percentage of entries into the U.S., but they really have an impact globally,” she said. “Right now, there are specific regulations that are outdated or they need to be modernized, and in some cases, they aren’t clear. We want to be very transparent so the trade community knows how they can use Foreign-Trade Zones in the correct way.”

Updating the regulations was a collaborative effort. “We had subject matter experts go section by section through the regulations and identify the pain points, the problems, the language, whatever the difficulty was,” said James Swanson, director of cargo, security and control in CBP’s Office of Field Operations. “This was a big effort. But it was important to industry and quite frankly, it was important to me. It makes it easier to enforce and easier to identify what the regulations are. We expect to reduce the overall size and text of the regulations by about 35 percent,” he said.

Emerging technologies was another area of discussion. “We’re looking at blockchain technology to see how it can be used in the supply chain arena,” said Vincent Annunziato, director of CBP’s Automated Commercial Environment Business Office. “We’ve produced a hybrid system that allows public sharing of data and also maintains the security of that data. It’s particularly important for keeping trade secrets and that’s what this architecture is designed to do.” Annunziato explained that CBP is currently testing blockchain as a proof of concept. “What we are looking to do is invest a small amount of money to see how we can progress,” he said. “If we find something that doesn’t work, we don’t invest anymore. If we find that it does work, then we move forward with confidence. This is new ground for us, so it’s exciting.”

According to Celeste Catano, a COAC member on the committee’s emerging technologies working group, the blockchain technology is now in the evaluation phase. “We just completed our testing last week on the blockchain solution for NAFTA and CAFTA verifications,” said Catano, the global product manager for supply chain software firm BluJay Solutions. “Tomorrow we are meeting with some of the technical folks who work on the project to assess how did it go, what did we learn, what can we do better, is this the right technology for these types of projects. We hope to have some recommendations by the December meeting.”

A restructuring of the COAC subcommittees also was announced. “We’ve reorganized the COAC subcommittees to align with our trade vision,” said Bradley Hayes, executive director of CBP’s Office of Trade Relations. The four subcommittees—Secure Trade Lanes, Intelligent Enforcement, Next Generation Facilitation, and Rapid Response—will focus on safety, critical targeting and enforcement, facilitation, and special projects that will help triage issues that arise.

The meeting also included updates on trade enforcement. “We’re looking to prevent the importation of goods made with forced labor,” said Deborah Augustin, executive director of CBP’s Trade Remedy Law Enforcement Directorate. “We’ve established a division to specifically focus on this issue. So far this year, we’ve issued two withhold release orders. One was for an infraction of toys from a Chinese manufacturing company. The other was issued on products produced with Turkmenistan cotton,” she said. “Since the issuance of that withhold release order, over $200,000 worth of goods have been re-exported or excluded at six different ports of entry.”

Other topics were discussed such as the revised minimum security criteria for the Customs Trade Partnership Against Terrorism, or CTPAT, supply chain security program. Over the last two and a half years, CBP and members of the COAC Trusted Trader Subcommittee worked intensely on strengthening the program’s minimum security standards. “There were 12 different work products for each of the different aspects of our membership within CTPAT—ocean carriers, importers, brokers, etc.,” said COAC member, Mike Young, vice president of process and system services for Orient Overseas Container Line USA, Inc. After careful study, three new security criteria areas were added-- agriculture, corporate responsibility, and cybersecurity. “From an ocean carrier perspective, there have been two major carriers that were impacted by cyber-attacks that significantly affected those organizations and their ability to continue business operations. So it’s a very real threat that we have and it’s long overdue that we added some of those additional elements to CTPAT.”

Young also encouraged CTPAT members to share their thoughts and concerns about the updated minimum security criteria. “Now is the opportunity for us to provide that feedback to ensure that we make the CTPAT program as effective as it can be to keep us secure.”

COAC is a 20-member advisory committee that was established by Congress in 1987. The committee provides advice and recommendations to CBP and the Department of the Treasury on the commercial operations of CBP and trade-related interdepartmental functions. Some of the issues that COAC focuses on include enhanced border and supply chain security, international efforts to harmonize customs practices and procedures, import safety, compliance, and modernization and automation processes used to facilitate trade.

The next COAC meeting is scheduled to be held in Laredo, Texas, in December 2018.