Customs funding proposal heads for a showdown

By Staff -- Logistics Management, 5/1/2000

Will the federal Fiscal Year 2001 budget finally be the one? U.S. Customs Service officials, importers, customs brokers, carriers, retailers, manufacturers-all of the parties that want to see imported merchandise flow efficiently into the United States-believe that the next federal budget will include funding for the Customs Service's Automated Commercial Environment (ACE) system. After years of unsuccessfully seeking money to replace the Automated Commercial System (ACS), a 16-year-old information system that is groaning under the weight of more than 21 million electronic entries each year, it looks as if industry organizations have at last gotten Congress's attention. Still at issue, though, is whether industry and Congress together can dissuade the Clinton administration and the Treasury Department from their plan to assess a new user fee to pay for the ACE.

Change is clearly in the air. The General Accounting Office last year issued a scathing report criticizing the ACE system's design and questioning the Customs Service's ability to build it. Under the leadership of Chief Information Officer S.W. "Woody" Hall Jr., the Customs Service has redesigned the ACE project as well as its plans for managing the system. Now that the GAO has approved those changes, Congress is willing to consider funding.

Another change is that industry groups like the Coalition for Customs Automation Funding (CCAF), an organization of more than 100 trade organizations, importers, exporters, freight forwarders, customs brokers, and carriers, have rallied around the issue. They have pressed Congress and the Clinton administration to begin overhauling the Customs Service's information system this year. Meanwhile, Customs Commissioner Raymond Kelly shook things up by announcing in March that he would shut down the successful ACE prototype now being tested on the northern and southern borders due to lack of funding. (Treasury later found $3 million to keep that project alive for several months.)

CCAF Chair Robin Lanier says she believes there is sufficient support on both sides of the aisle in Congress to provide the $338.4 million that the Customs Service is requesting for automation programs in FY 2001. That money includes $210 million for ACE, $123 million for ACS "life support," and $5.4 million to fund a program that will collect international trade data and disseminate it to all government agencies.

Although Congress appears ready to support automation funding, where that money will come from is at the root of a tense debate in Washington. The Clinton administration included the $338.4 million in its FY 2001 budget proposal but tied that money to a new "user fee." Importers, who want ACE funding to come out of user fees they already pay, were outraged by that proposal. "A new user fee is a non-starter," says Lanier. "We already pay close to a billion dollars a year in Merchandise Processing Fees that go into the general revenue. There's enough there for $200 million to come out of general revenues," she says. CCAF sent a letter to Treasury Secretary Lawrence Summers urging him to abandon the fee proposal.

In testimony before the House Appropriations Subcommittee on Treasury, Postal Service, and General Government in April, Ronald Schoof, manager of customs and export regulations for Caterpillar Inc. and chairman of the Joint Industry Group trade coalition, urged members to fund customs automation out of the Merchandise Processing Fee's annual revenues. Schoof also reminded them that when the government asked importers to take on many of U.S. Customs' responsibilities under the Customs Modernization Act, it promised in return a more efficient process for releasing goods and paying duties. Importers and customs brokers kept their end of the bargain, he said. "Now it's time for Congress to ensure that the Customs Service keeps its part of the deal. ... Unless we give our business community and our Customs Service the tools they need to compete in this information age, we're on the path to a Third World operating capability."