With the coronavirus still going strong, U.S. Customs and Border Protection hosted its third virtual public meeting of the Commercial Customs Operations Advisory Committee, known as COAC, last week. Despite a myriad of challenges presented by the pandemic, the trade advisory group convened on Wednesday, October 7, with all 20 of its members in attendance.
CBP Acting Commissioner Mark A. Morgan, who co-chaired the virtual meeting, welcomed those attending and thanked everyone for navigating the challenges of holding the meeting online. “Even if we can’t see each other, the fact that we’re all here talking, that’s the most important thing,” said Morgan. “I know that everybody fully understands and appreciates just how much the COAC relies upon active participation from both U.S. government agency participants and our private sector colleagues. We all know that it’s foundational to our overall collective success.”
In his opening remarks, Morgan briefly spoke about a few of the agency’s significant accomplishments during fiscal year 2020, including CBP’s strict enforcement of goods made with forced labor. “We are not going to tolerate illicit and inhumane practices of sending goods that have been produced by forced labor in the U.S. supply chain,” said Morgan. “Personally, I couldn’t be more proud of the men and women of CBP in this area. They’ve shown a continued and steadfast devotion to address this horrific scheme that’s being played out in multiple countries.”
Brenda Smith, CBP’s executive assistant commissioner for the Office of Trade elaborated further. “One of the reasons we are so passionate about this issue is because of the statistics,” said Smith, noting the International Labour Organization, a United Nations agency whose mandate is to advance social and economic justice through setting international labor standards, estimates that forced labor affects 25 million people and generates $150 billion in profits each year. “The companies that use unfair labor or forced labor to manufacture goods have an unfair advantage over American companies because they can produce goods at a lower cost. In some cases, we also see that the use of forced labor opens the door for safety issues, and our commitment to the safety and security of Americans as well as economic prosperity means we take forced labor issues very seriously,” she said.
Smith explained that in fiscal year 2020, at the U.S. ports of entry, CBP had issued 13 withhold release orders to detain and seize goods produced with forced labor. “It has been a tremendous lift and we have focused our efforts around the world, but primarily on the information that we’ve been able to gather on the mistreatment of the Muslim and ethnic minorities in the Xinjiang Uyghur Autonomous region in China,” said Smith, sharing that many media stories have been generated, which have bolstered communication on the issue. “That’s really critical to ensure that foreign companies understand what it means to be compliant, U.S. importers understand compliance responsibilities, and U.S. consumers can leverage their buying and economic power to make sure that supply chains are clean and that they’re only buying from a fair supply chain.”
At the meeting, Morgan also introduced Diane Sabatino, CBP’s new deputy executive assistant commissioner of the Office of Field Operations. Sabatino, who began her federal career as an immigration inspector in 1998, at John F. Kennedy International Airport and has held numerous leadership positions within CBP, most recently served as the director of field operations for Miami/Tampa.
Sabatino spoke to the audience about Operation Mega Flex, a CBP-led, interagency effort that was initiated in July 2019 to measure compliance and assess illicit networks at international mail facilities and express consignment hubs through periodic enhanced inspections. “We routinely conduct special operations that use enhanced targeting and high-intensity inspections,” said Sabatino. “There isn’t an environment in which we operate where bad actors aren’t trying to exploit legitimate trade or travel pathways and these types of targeted operations are really important to further develop our business models and strategies.”
Sabatino explained that over the last 15 months, Operation Mega Flex has been executed monthly throughout the country in close cooperation with Homeland Security Investigations and the U.S. Postal Inspection Service. “As of September 2020, we examined 75,970 parcels and identified about 9,500 discrepancies that ultimately resulted in just over 4,200 seizures and almost 2,500 agriculture interdictions. And those were just violations identified under Operation Mega Flex,” said Sabatino. What that translates to, she said, is “approximately 12.5 percent of all the parcels examined were found to have some violation of the law, almost 78 percent were for intellectual property rights violations.”
Sabatino also noted that on average CBP processes more than 600,000 parcels from China a day. “With the volume of parcels that arrives daily from China, it’s critical that we protect the health and safety of the American people as well as our economic security through operations such as Mega Flex,” she said. “All of this is possible thanks to our CBP officers, agriculture specialists, and import and entry specialists who remain committed to carrying out their mission despite the personal health risks that they face in doing so.”
COAC co-chair Lenny Feldman, a senior member of the Sandler, Travis & Rosenberg law firm, gave an overview of some of the topics that were discussed in the meeting. Among them was the new United States-Mexico-Canada trade agreement, or USMCA, which went into force on July 1, 2020, replacing the North American Free Trade Agreement or NAFTA. “We know that a lot of you in the trade still have questions and are still trying to pull the newness of it together,” said Feldman.
Also speaking on behalf of the COAC, Brian White, the director of global logistics and trade compliance for The J.M. Smucker Company and an advisory committee co-chair, spoke about the importance of education and agility during this time when everyone has shifted into a virtual trade world. “It’s clear to all of us, COVID has left an indelible mark on how we all approach and manage our international supply chains,” said White.
In terms of education, White said, “we would all be foolish to think that any one of us has all the answers related to the rapid changes that we are seeing in trade today.” Later adding that “it’s more important now than ever that we all stay connected with our peers, we participate in trade organizations, and that we get engaged in COAC, in the working groups, to raise concerns and do our best to stay ahead of the curve and continue to educate ourselves.”
When speaking about agility, White pointed out that “in the last six months there has been a pivot in terms of trade and supply chain management. Many importers have high velocity, just-in-time inventories that have shifted in response to COVID to establish reserves that make sure they can continue to meet consumer demands,” he said. “International cargo, both the air and ocean networks, are at capacity right now. Air freight is struggling because of the absence of passenger planes that previously helped to support cargo needs. On the ocean side, carriers have truly improved capacity management. They’re leveraging blank sailings [empty ships] and deploying them on a regular basis, which further reduces the capacity and drives costs in the system,” said White. “So despite the total trade volumes being down eight percent from last year, we are seeing unprecedented freight rates just to secure the space to keep commerce moving. As trade members, it’s important that we all remain agile in this environment.”
The meeting, which also was co-chaired by Timothy Skud, the U.S. Department of Treasury’s deputy assistant secretary of tax, trade, and tariff policy, included updates on trade programs and COAC subcommittee work. Eight recommendations were presented and unanimously passed. Four of the recommendations pertained to forced labor, and the remaining four focused on in-bond and export modernization.
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 via webinar on December 16, 2020.