Today yet one more anti-competitive cost is being imposed on American manufacturing by the U.S. government. U.S. Customs and Border Protection (CBP) is starting its full-scale enforcement of the new customs rule, 10+2, even though businesses have struggled to meet the requirements during a one-year phase-in period.
Manufacturers have spent the last year diligently developing the compliance systems to meet the law’s requirements, and yet only 50 percent of all submissions have managed to meet the standards. Indeed, very few companies are able to comply 100 percent of the time. Yet despite the good-faith efforts to comply with these burdensome demands, companies now face financial penalties.
Burdensome is a mild description. The new regulation requires importers to submit 10 types of detailed information to the customs agency 24 hours before U.S.-bound cargo is loaded at a foreign port. (The submissions are known as ISFs, or Import Security Filings.) The NAM and our allies in the Customs and Border Coalition surveyed its members and found serious disruptions of supply chains caused by the regulation’s requirements:
- The effort has imposed additional permanent operational costs on firms and will continue to do so: An estimated $3.5 billion additionally every year.
- Also, the effort is expected to add on average 2.8 days of permanent delay to the importing process, with a total estimated cost of $17.2 billion a year.
- The annual cost of the ISF requirements will total more than $20 billion a year.
Another study by a group of business associations and organizations came to the same conclusions: 10+2 disrupts supply chain.
The NAM has offered viable alternatives such as the Universal Importer Profile (UIP) that would improve national security without unduly burdening legitimate trade. Unfortunately, save for a few additional flexibilities, the Customers and Border Protection agency has ignored the concerns voiced by industry on the cost, impact to supply chains, and difficulties in collecting the information.
Yet, even before an interagency team has met to discuss any additional changes to the interim final rule, CBP is moving ahead with enforcement. Customs officials could begin issuing $5,000 penalties per violation just as companies are beginning to pull out of the recession.
While we appreciate the graduated approach to enforcement, the NAM firmly believes greater attention must be paid to the shortcomings of 10+2. There must be a better way to implement the program that does not slow the supply chain by three days and add $20 billion in costs to industry, even as half of those affected cannot comply.
What next? The NAM can only hope the realities of 10+2 implementation will be addressed when an interagency team meets this year. The NAM looks forward to working with the interagency team to address the short-comings, to make improvements to the regulation, and to create a program that works to strengthen national security and promote U.S. trade.
For more information about 10+2 graduated enforcement please contact Catherine Robinson at email@example.com.
Catherine Robinson is the NAM’s director for high technology trade policy.
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