NCBFAA Customs Committee
draft Meeting Notes – April 22, 2006
the Westin Diplomat Resort and Spa
3555 South Ocean Drive
Hollywood, FL 33019
NCBFAA Customs Committee Roster
Voting / Name / Position / AttendingArea 1 / Amy Magnus / Member / Yes
Area 2 / Cary Weinberg / Member / Yes
Area 3 / Ken Bargteil / Chairman / Yes
Area 4 / Myra Reynolds / Member / Yes
Area 5 / Marie Armelagos / Member / Yes
Area 6 / Gary Ryan / Member / Yes
Area 7 / Darrell Sekin / Member / Yes
Area 8 / Russ Jones / Member / Yes
Area 9 / John Peterson / Vice Chairman / Yes
Non-Voting
Advisor / Harvey Isaacs / General Counsel / No
Advisor / Harold Brauner / Senior Counselor / Yes
Advisor / Art Litman / Senior Counselor / No
Automation Subcommittee / Bob Perkins / Chairman / Yes
CESAC Representative / Stewart Hauser / Chairman / Yes
Regulatory Agencies Committee / Cary Weinberg / Chairman / Yes
LB&F Subcommittee / Chip Bown / Chairman / Yes
President / Kiko Zuniga / ex-Officio / Yes
Carrier Best Practices Subcommittee / John Hyatt / Co-Chairman / Yes
NOTE: The Chairman wishes to acknowledge and thank all members of the Customs Committee for their dedication and voluntary efforts over the last four years in moving this Committee’s agenda forward on behalf of the NCBFAA membership.
08:30 – Call to order
Opening Remarks and Introductions
Welcoming remarks, attendees introduce themselves. A sign-in sheet was circulated. Upon noting that all voting members of the Committee were present, and in view of the need to frame and decide upon certain pressing and important issues on its agenda, the Chairman called the meeting to order as a formal meeting the NCBFAA Customs Committee.
ESAR Requirements
To follow-on discussions at the January 14, 2006 Committee meeting, the challenge of how the Customs Committee can serve to prepare NCBFAA members for the exigencies of ESAR was taken up. A document prepared by Art Litman and Celeste Catano advising what will be necessary to prepare for ACE, and available on FABnet, was at the focus of the Committee’s considerations. Bob Perkins, Amy Magnus and Art Litman are Trade Ambassadors. ESAR remains a work in progress. Minutes of Trade Engagement meetings with CBP and eCP are posted on CBP’s web site and should be reviewed and commented on by members. Customs brokers should become familiar with, and know how to use Reconciliation Entries. In ACE, all entry lines for goods on which antidumping duty apply will be automatically moved onto Reconciliation Entries.
Members were invited to ask questions about the ESAR documentation provided in advance of the meeting. There was discussion about the concept of the Post Summary Correction noting that the filer will have to transmit a reason code for any change, and the fact that CBP could document and track all changes. Eventually these might be done by a customs broker, importer or their attorney. There will be no "full replace" functionality comparable to what is currently allowed. Another concern relates to the filing and acceptance of entries, i.e., at which point is an entry considered accepted. Questions regarding liquidation, how that would work and be notified were answered, and the new concept of line liquidation was explained.
The problem with correcting an error involving an ADD/CVD case to facilitate a refund prior to liquidation of the entry was raised. The systematic removal of all ADD/CVD lines to a reconciliation entry might permit for post summary corrections in a similar fashion to what will be possible for lines involving only regular duties. This is an issue that must be taken up with the TSN Entry Committee to make sure there is a trade requirement for such a mechanism in ACE.
Bob Perkins urged the group to come forward with their concerns and issues as CBP has not resolved all issues relating to the ESAR releases. Ken Bargteil reinforced the need for this group to bring questions and concerns forward to the Trade Ambassadors. Everyone in attendance, and Committee members in particular were encouraged by the Chairman to attend the Annual Conference Wednesday session at 08:30 – 10:00 on ESAR.
Expansion of Nationally Permitted Customs Business
The Committee considered the apparent intention of CBP to expand the scope of the national permit in the context of an NCAP pilot. Art Litman prepared his White Paper for Federal Express Trade Networks (FTN) with the intention of sharing it with the Large Broker & Forwarder Subcommittee. The plan was to have that Subcommittee review and comment on the concept for the benefit of this Customs Committee. In discussions with CBP, Art Litman learned that there was already interest in such an initiative at the CBP Broker Management Branch, and he was encouraged to help inform that development by submitting a copy of his White Paper to CBP HQ at the earliest possible moment. This issue has been on the Large Broker Subcommittee since December 7, 2000. Ken Bargteil recalled that this matter (Should District Permits Be Eliminated?) was the proposition for the first Annual Conference debate on March 19, 2003.
The Chairman asked that each member of the committee in turn express whether or not he or she was for or against the position taken in the FTN concept paper, and to briefly state their reasons. Amy Magnus, representing Area 1 was opposed, believing that implementation of the proposal might serve to commoditize customs brokerage, ala Wal*Mart. Cary Weinberg, representing Area 2 opposed any degradation of the current permitting scheme, believing that the proposed expansion of customs business that might be conducted on the basis of a national permit to be coincident with the district permit would benefit only a small fraction of our membership. The Chairman observed that it could also be argued, by permitting small or regional customs brokers to extend the reach of their services through such a national permitting scheme it would tend to expand market access for those member firms and equalize competitive advantages currently enjoyed by national firms. Ken Bargteil did not see the proposal as necessarily designed for the benefit of any segment of our membership, and suggested that among other issues recommending such a test, recruitment of licensed individuals in some customs broker districts is very challenging.
Ken Bargteil, representing Area 3 opposed any change in the current district permitting scheme, stating that over 16,000 licenses have been issued since he received his in 1981, a nearly fourfold increase. This growth in our profession is largely due to the current district permitting scheme, creating a demand for licensed individuals. That demand increases the value of the customs broker license, which in turn makes the profession more attractive as a career path. That encourages talented and motivated individuals to choose customs brokerage as a profession. The greater numbers and elevated quality of those entering our field enhances our presence and political influence. It is also critical to sustaining our recent inauguration of the CCS program and dedication to continuing education. Any change, such as that proposed in the White Paper under discussion, will inevitably, and possibly very abruptly reduce demand for individually licensed customs brokers. At least some families will lose their incomes. The simple operation of supply and demand will over time have a depressing effect on salaries, making the career path less attractive and marginalize our profession.
Myra Reynolds, representing Area 4 opposed the proposal for testing the expansion of customs business conducted by virtue of a national permit and agreed that it will diminish the importance of our licenses. Marie Armelagos, representing Area 5 was also in opposition to the position taken in the White Paper, and was of the opinion that its implementation would hurt our association and have an adverse effect on the NCBFAA educational initiatives. Gary Ryan, representing Area 6 opposed the test recommended in the White Paper, recalling the days before the current permitting system he suggested that such a change would facilitate NVOCC’s, carriers, and even banks opening national customs brokerage businesses on the cheap. Gary Ryan believes that the impact on local and regional customs broker association would also be harmful, and he advised that the associations in his area stand in opposition. Gary Ryan opined that should such a change take place it would enable outsourcing of entry work offshore.
Darrell Sekin, representing Area 7, also stated his opposition, believing it will cause a decline in professionalism. Darrell Sekin commented that our license raises our status to a level comparable to that of an attorney, and that the Mod Act created additional responsibilities in our business conduct. Enabling a customs brokerage firm to offer services without proximate responsible supervision would run counter to our interest in generally improving the level of services provided by our sector. Darrell Sekin argued that from a security perspective, each customs broker involved in the supply chain brings another trained insight to the transaction. In written comments, Darrell Sekin also indicated that the intermediary of a designated licensee for providing responsible supervision over the customs business conducted by a customs brokerage firm serves as a buffer between FP&F officers and qualifying corporate officers.
Russ Jones, representing Area 8 opposed the prospect of replacing the current CBP management of customs brokerage firms by means of a district permit with a national permit as a bald expedient for their obligation to control the licensee at all levels. Russ Jones suggested that replacing the current system with a national permit would change the practice of customs brokerage and analogized the character of delivery of our services in the ports from what one expects when hiring a CPA to those services hired from a bookkeeper.
John Peterson prefaced his remarks by explaining that he was not prepared to speak for Area 9, and was not representing the views of C.H. Powell, he thought the proposal was interesting, and worthy of further consideration. He said his firm is already using RLF to clear shipments at ports where C.H. Powell has no office or district permit. He observed that large national customs brokerage companies like FTN already have processing centers. John Peterson drew attention to the fact that while the Committee was correct in its concern for the value of individual licenses, the proposal in no way changes the licensing of individuals. He suggested that the change contemplated would not result in large customs brokerage firms laying-off all their individual license holders. John Peterson said that NCAP testing of customs broker management through a national permit would parallel our industry's experience with RLF, which worked to improve the competitive posture of smaller customs brokerage companies vis-à-vis the large national and regional customs brokerage firms. John Peterson concluded his comments by saying that he was as yet undecided on the merits of the position expressed in the White Paper.
Ken Bargteil restated his belief that the apparent complexity of issues in this question really resolved into a simple matter of supply and demand. If there is a dramatic decrease in the number of individual licensees required to support a regional of national customs brokerage operation, then the licensee becomes less valuable. Ken Bargteil said the argument should not center on compliance, because it could be demonstrated that concentration of expertise and management control in centralized processing operations could improve compliance over a system that inevitably included weak links and sub par operations inherent in the current highly distributed supervision required by a district permitting scheme. He also urged the Committee to think this through dispassionately. The Chairman then invited non-voting members of the Customs Committee to indicate their position and summarize their reasoning.
Harold Brauner opposed the position expressed in the White Paper. He posed the rhetorical question, "What will happen to your company?" and answered, "The company you represent will be diminished." When you say, "We’re "licensed customs brokers." importers will say, "So what". Harold Brauner does believe that this development may be inevitable, and if our Association doesn’t work with CBP to build in some safeguards, every NVOCC across the country will get into the customs brokerage business. The major integrators may be more at risk from this proposition than any of our other members. Bob Perkins, having been involved with ACE development knows that ACE really anticipates that entry preparation will be more electronically based and more centralized. ACE is just going to make it happen. Bob did not state whether he was pro or con. He did say, "We need to have a means which will show a continuation of our profession. We need to look at where we are today, look at the infrastructure, and get ready for tomorrow. Let’s not be short sighted. If we don’t take that initiative, we may get left behind." Bob Perkins was undecided.
Stewart Hauser expressed his strong opposition to the White Paper proposal. He advised the Customs Committee that the New York/New Jersey Foreign Freight Forwarders and Brokers Association met and unanimously opposed what they understood to be the position espoused in the White Paper. Stewart Hauser forecast that replacing district permitting with a national permit would devalue the customs broker license based on the economics involved. Stewart Hauser expressed dismay that the white paper had already been sent to CBP. He took notice of a change in the letter from expressing the position of the writer and his company at its beginning to representing the customs brokerage community in its subsequent development.