Incoming Administration Expected to Bring Greater Enforcement Focus to CBP

The incoming Trump administration could mean more funding and a greater enforcement focus for CBP, but the prospect of stricter trade enforcement could complicate day-to-day operations, analysts said in recent interviews. The presidential transition will cost the trade community mainly in terms of immediate uncertainty within industry and between the U.S. and its trading partners, as well as any regulatory “adjustments” that CBP might make, said David Aguilar, former CBP acting commissioner and current principal at Global Security and Innovative Strategies. But CBP’s trade funding and basic structures like the Commercial Customs Operations Advisory Committee will likely remain intact, he said.

Aguilar, Sidley Austin attorney Brenda Jacobs and Allen Gina, co-founder of CT Strategies and former CBP assistant commissioner for international trade, agreed that, despite President-elect Donald Trump’s acute stance against illegal immigration on the campaign trail, the agency’s trade and immigration functions will take the same level of precedence under his administration. “I think there will be concurrent efforts on that,” Aguilar said. “I believe that anything that might move in the trade environment is not going to be overnight. It’s going to be incremental; it’s going to be very procedural. I think it’s going to be taken very responsibly on the part of the [Trump] administration. It has to be.”

While Gina said he will pay attention to whether new executive mandates complement or partially contradict standing CBP policy, he added that Trump will likely avoid changing CBP’s enforcement focus, instead building off congressional intentions outlined in the Trade Facilitation and Trade Enforcement Act (TFTEA) signed in February.

Trump has reportedly tapped retired Marine Gen. John Kelly as the next Homeland Security secretary (see 1612070038). The pick could indicate an expansion of CBP trade enforcement initiatives beyond what 2016 has brought, Jacobs said, which has included several new processes enacted through TFTEA. “One has to worry that facilitation of trade could be compromised in the process,” she said in a Dec. 7 email. “It will be incumbent on the importer community to remind DHS of CBP’s dual mission.”

Gina also expects that CBP funding will increase under Trump. “If, through executive order, there’s a mandate to do more, they’re going to be very hard-pressed to rob from Peter to pay Paul,” Gina said. “I think the incoming administration was very strong in their rhetoric relative to all things that CBP does, so I can’t imagine them saying, ‘Well, we’re going to reinforce our immigration efforts, and CBP, you’re just going to have to eat the cost internally.’” House appropriators on Dec. 6 released the text of a continuing resolution that would avoid a government shutdown if Congress passes it by the end of Dec. 9, and fund the government until April 28 (see 1612070035).

Despite House passage of fiscal year 2017 appropriations legislation in July (see 1607080025) the House Appropriations Committee and chamber GOP leadership are drafting new fiscal 2017 legislation, which they hope to complete in April. The Homeland Security secretary has some authority to move discretionary funds earmarked by Congress for named programs, but that authority covers “maybe five percent or less” of overall DHS appropriations, Gina said. In light of this, CBP will likely need an increase through the standard congressional appropriations process, or will have to request out-of-cycle supplemental funding from Congress to address all the needs that Trump has highlighted. Trump will probably consider CBP a major priority, because his major policy approaches pertain to all operations in the agency’s portfolio, Gina said.

One option for generating CBP revenue without asking Congress could be expanding coverage of the merchandise processing fee (MPF), which generates revenue that is solely dedicated to CBP. MPF would have taken an expanded role under the apparently doomed Trans-Pacific Partnership by applying it to FTAs that are currently exempt, Jacobs said. She wonders if Trump and his partners will include MPF on the agenda for his expected NAFTA renegotiation. While Aguilar said CBP and ICE will likely grow their technological capabilities and officer forces under Trump, Jacobs predicted that the latter probably won’t happen unless CBP is able to capture more MPF revenue or antidumping duty revenue from general Treasury accounts. Considering that Trump finds CBP functions especially important, as well as his stated intent to impose a hiring freeze on all agencies, the agency probably will neither add nor reduce officers, Jacobs said.

Trump’s hard-line views on trade could ignite more administrative penalty proceedings, forfeitures, detentions, seizures, interdictions, border cargo screenings, and evasion and fraud investigations, gumming up business and raising the potential for reputational harm to importers, Jacobs said. She indicated that the incoming administration could follow several industry suggestions for CBP to publicize notices of antidumping and countervailing duty evasion investigations, in a move to drum up domestic industry credit for Trump’s trade enforcement stance. Comments by a shrimp industry group to CBP in October pushed the agency to issue public notices of its duty evasion actions (see 1610240014).

Importers would likely respond tentatively to public circulation of the notices, which could affect their business viability, Jacobs said. “They will have to do a lot more due diligence to protect themselves,” she said. “There are, clearly, reputational concerns and financial concerns, especially when you’re looking at the evasion process, which is backward-looking, and could affect imports going back a ways from the time of a final determination.” CBP is already taking a pretty tough stance on accepting mitigating factors in administrative penalty proceedings, but the new administration could bring more evasion and “Section 307” forced labor cases, as well as greater scrutiny of claimed entries, Jacobs said.

Furthermore, Trump’s preference for bilateral, as opposed to multilateral, free trade agreements could complicate the work of some importers. Importers are usually selective in the agreements they participate in, as they mainly work to avoid unintended compliance violations as experts of a handful of deals rather than take part in them all, Jacobs said. “Companies aren’t using the FTAs as much as they might because of a concern of unintentional compliance violations, and I think that could be further exacerbated if there’s even increased scrutiny of FTA entries and [it] slows the entries down, and undermines the value brought by bringing in duty-free goods,” she said.

As CBP and partner government agencies work to put ACE into full utilization by the end of 2017, trade will continue to press the executive branch to expedite functions and relieve some encumbrances of the system and its regulations, Aguilar said. But he indicated that signs given by Trump and his transition team that they will review and reassess existing trade agreements could be a bellwether that they will take the same sort of approach to improving ACE. — Brian Bradley

Article originally appeared in International Trade Today Vol. 32, No. 235