The topic of the Subcommittee’s hearing was “Supporting Economic Growth and Job Creation through Customs Trade Modernization, Facilitation, and Enforcement”.  See Committee website:  http://waysandmeans.house.gov/Calendar/EventSingle.aspx?EventID=294864

Other prominent witnesses included Mr. David Aguilar, Acting Commissioner of U.S. Customs and Border Protection (CBP); Mr. Kumar Kibble, Deputy Director of U.S. Immigration and Customs Enforcement (ICE); and Mr. Timothy Skud, Deputy Assistant Secretary for Tax, Trade and Tariff Policy of the U.S. Department of the Treasury.

A primary focus of Mr. Williams’s testimony was anti-circumvention legislation recently introduced by shrimp industry champions Congressman Charles Boustany (R-LA) and his Louisiana colleague Congressman Cedric Richmond (D-LA).  Read joint Press Release from Congressmen Boustany and Richmond:  http://www.shrimpalliance.com/new/?p=1861 Read SSA Press Release:  http://www.shrimpalliance.com/new/?p=1855

Congressman Richmond also submitted an excellent statement for the record to the Ways & Means Committee today in which he states:   “International trade will be critically important to US economic growth going forward, especially in my district. I am especially concerned about protecting Louisiana and American firms from unfair trade practices pursued by foreign competitors.” Read Mr. Richmond’s full statement:  http://www.shrimpalliance.com/new//wp-content/uploads/2012/05/5-17-12RepRichmondStatement.pdf

The bipartisan bill, H.R. 5078, the Preventing Trade Evasion and Circumvention (PROTECT) Act, was developed with substantial input from SSA based on its extensive expertise and experience with this issue. Read copy of the bill:  http://www.gpo.gov/fdsys/pkg/BILLS-112hr5078ih/pdf/BILLS-112hr5078ih.pdf

This legislation is designed to provide CBP with a suite of new tools and responsibilities to substantially strengthen their effectiveness in preventing antidumping duty evasion as well as investigating and prosecuting violations that do occur.

Mr. Williams’s testimony provided the Subcommittee with a detailed account of SSA’s extensive experience in working with CBP and other federal agencies to investigate a number of violations of the antidumping order issued by the Department of Commerce on shrimp from Brazil, China, Ecuador, India, Thailand and Vietnam in 2005, as well as how such circumvention has injured the domestic shrimp producing industry.

Antidumping duty evasion has cost US shrimpers untold millions of dollars in lost income because unpaid duties translate into lower prices paid to US fishermen for their catch.  Such schemes also have cost the US Treasury hundreds of millions of dollars in uncollected duties at a critical time in this Nation’s financial history.  Other testimony indicated that when combined with other industries, this loss in revenue climbs well into the billions of dollars.

Mr. Williams’s testimony also provided a stepwise explanation of how the PROTECT legislation will help CBP combat this illegal practice with respect to imported shrimp.   There follows an excerpt from his spoken testimony presented at the hearing today:

“The PROTECT Act makes circumvention a priority trade issue that Customs must address.

The toughest part of our early interactions with Customs was the lack of continuity of those officials responsible for enforcement.  Reorganizations within the agency just made it worse.  The PROTECT Act simplifies this.  If enacted, Customs would have a Trade Remedy Law Enforcement Division with a Director that reports to an Assistant Commissioner.

Because high-level enforcement positions have sat vacant within Customs, some have questioned whether the agency considers the enforcement of trade remedies to be a priority.  I know from my own experience that Customs takes enforcement seriously, but there is little public record to support that.  Under current law, Customs provides very little accounting of these activities.  Under the PROTECT Act, Customs is obligated to give a detailed accounting of its enforcement efforts in an annual report to Congress.

The PROTECT Act also makes addressing circumvention a principal negotiating objective of the United States in trade agreement negotiations.  Malaysia has become an obvious transshipment point for all kinds of products evading antidumping duties.  From our work with Customs, I understand that the Malaysian government has refused to cooperate with investigations.  At the same time, we are negotiating with Malaysia to join the Trans-Pacific Partnership.  Circumvention must be addressed in these negotiations.

The PROTECT Act also instructs Customs to seek to negotiate and enter into bilateral agreements to prevent circumvention.  Like with trade remedy enforcement, if Customs declines to use this authority, the agency must explain inaction to Congress on an annual basis.

The PROTECT Act substantially increases Customs’ capacity to address circumvention by removing restrictions on the information available for use in commercial targeting.  The Act also encourages enforcement by authorizing the sharing of confidential information between various federal agencies.

The PROTECT Act also improves Customs’ capabilities by enhancing its ability to collect information and authorizing Customs to make adverse inferences against non-cooperating parties.  This bill also prevents the abuse of the new shipper review process and promotes better application of single entry and continuous bonds to ensure duty collection.”

Prior to the hearing Mr. Williams met with Congressman Boustany and his senior staff to thank him personally for his leadership and to discuss plans for the hearing and future legislative action.  It was largely Mr. Boustany’s profile on the Ways & Means Committee that provided the impetus for the Committee to undertake this important initiative and he later introduced Mr. Williams at the hearing.  Mr. Williams was advised that the bill is likely to be included in a larger Customs and Border Protection Authorization bill to be sponsored by the Committee Chairman Congressman David Camp (R-MI), and which is expected to be adopted by the Committee and the full House of Representatives later this year.

Following the hearing, Mr. Williams also had the opportunity to share SSA’s expertise on various issues addressed by the legislation with Subcommittee Chairman Kevin Brady (R-TX) and his senior Committee staff.  Mr. Williams explained SSA’s positive experiences in working with CBP on a number of circumvention investigations while also noting frustrations experienced by both SSA and Customs officials with how slow and difficult circumvention enforcement can be.  Reiterating his testimony, Mr. Williams told Chairman Brady that based on his experiences, he is convinced that CBP will do the job if given the right tools provided in the PROTECT Act.  Mr. Brady was very receptive to this input and also expressed a great deal of pride in the Texas shrimp industry.

Also released at the time of the hearing was a new report to Congress by the U.S. Government Accountability Office entitled: “Antidumping and Countervailing Duties; Management Enhancements Needed to Improve Efforts to Detect and Deter Duty Evasion”. http://www.gao.gov/products/GAO-12-551

In many ways, this report serves to confirm Mr. Williams’s testimony and that the provisions of the PROTECT Act will address many of the specific problems identified by the GAO that limit CBP’s effectiveness in preventing and enforcing against duty evasion.

More specifically the report publicly confirms that the Malaysian government has refused to allow CBP officials to visit purported shrimp (and honey) producers in the country and has provided no explanation for its unwillingness to cooperate.  The report also confirms the pervasive nature of circumvention of antidumping orders and the growing complexity of circumvention schemes.  Finally, the report underscores a problem that has plagued the shrimp industry:  fly-by-night importers that spring up out of nowhere exploiting the ease of becoming an importer of record under existing law.

SSA will continue to work with the Congressmen Boustany and Richmond and other House Members, the Ways & Means Committee and SSA’s champions in the Senate to secure enactment of this crucial legislation before the end of the 112^th Congress in December.  While this will be a difficult challenge during an election year, enactment of this legislation will provide enormous benefits to the domestic shrimp producing industry and is well worth the investment of SSA’s time and hard work.

SSA’s testimony described how wide-spread, illegal schemes have allowed importers to avoid paying hundreds of millions of dollars in duties on dumped shrimp.  The PROTECT Act, recently introduced by Rep. Boustany and Rep. Richmond, would substantially strengthen the enforcement capabilities of the U.S. Customs and Border Protection (CBP) agencies to prevent the evasion of antidumping duties and create new investigative authority for other federal agencies to facilitate the prosecution of violators.

Read the full testimony: 5-17-12 John Williams Testimony re duty evasion.

Washington, DC – Congressman Charles W. Boustany, Jr., M.D. (R-South Louisiana), released the following statement after introducing H.R. 5078, the Preventing Recurring Trade Evasion and Circumvention Act, or “PROTECT Act,” with Congressman Cedric Richmond (D-New Orleans). This legislation seeks to increase communication between agencies within the federal government and give them new tools to combat the evasion of import duties:

“Importers of international goods must follow the law and pay the applicable duties. Not doing so creates an unlevel playing field putting American goods and workers at a distinct competitive disadvantage. Agricultural producers on the Gulf Coast, especially in South Louisiana, have been victimized by the trade evasion problem this Act seeks to remedy. This bipartisan legislation increases cooperation between government agencies to efficiently combat import duty evasion while keeping responsiveness to American companies the highest priority,” said Boustany.

“We have a duty to protect our American businesses and workers against unfair trade practices that distort the market and promote anti-competitive behavior,” said Congressman Richmond. “Our shrimpers have demonstrated their resilience after Hurricanes Katrina, Rita and the Deepwater Horizon oil spill. This legislation shows that the nation cares about shrimper’s livelihoods and is committed to the continued success of their business.”

House Ways & Means Committee Chairman Dave Camp (R-MI) stated, “This bipartisan bill will address a significant problem that Congressmen Boustany and Richmond see firsthand in Louisiana and we see in ports around the nation.  Schemes to evade paying U.S. antidumping and countervailing duties significantly undermine the effectiveness of our trade remedy laws and hurt U.S. businesses and workers.  This bill will give U.S. Customs and Border Protection and other agencies the tools to investigate and prevent evasion of these laws.  In addition, it will ensure that the Administration gives its full attention to combating evasion and coordinates with the American businesses that are harmed.  I look forward to considering this legislation in the Ways & Means Committee.”

House Ways & Means Subcommittee on Trade Chairman Kevin Brady (R-TX) added, “This bill would give U.S. Customs and Border Protection the modern tools it needs to stop cheaters who violate our laws by avoiding paying what they owe.  It would increase our ability to address — at the border — imports that violate our trade laws, rather than just chasing them after they have entered the American market.  The bill would also require Customs to be more responsive to U.S. industries that are harmed by imports that evade our laws while reinforcing Customs’ ability to combat such evasion.  I support this bipartisan bill and congratulate Congressman Boustany and Congressman Richmond for their efforts.”

“Few things, if any, have done more damage to our shrimpers than the failure of importers to pay duties. This hurts every shrimper in Louisiana every time they land their catch. We are deeply grateful to Rep. Boustany and Rep. Richmond for taking such definitive action to combat this problem on behalf of the shrimp industry in Louisiana and throughout the region.” said John Williams, Executive Director of the Southern Shrimp Alliance.

Contacts:

Representative Boustany’s Office

and

Representative Richmond’s Office

Editor’s Note:

Read SSA’s press release on the PROTECT Act here.

U.S. importers and foreign exporters have implemented a wide variety of illegal schemes to circumvent U.S. trade laws, resulting in the nonpayment of hundreds of millions of dollars to the U.S. Treasury in antidumping duties on imported shrimp alone.  The bill seeks to substantially strengthen the enforcement capabilities of the U.S. Customs and Border Protection (CBP) agencies to prevent the evasion of antidumping duties and create new investigative authority for other federal agencies to facilitate the prosecution of violators.

“All U.S. shrimpers get significantly less value for our shrimp at the dock when importers illegally avoid paying the duties applied to dumped shrimp imports. We are still competing against products that fail to reflect their full cost of production,” explained John Williams, the executive director of the Southern Shrimp Alliance.  “The scope of this legislation is very impressive and its enactment will help stop the illegal trade practices that harm every shrimper in Louisiana and throughout the Gulf and South Atlantic.  We are deeply grateful to Rep. Boustany and Rep. Richmond for taking definitive action that gets to the heart of circumvention.”

Examples of Shrimp Duty Evasion

The U.S. treasury has lost billions of dollars in uncollected duties on unfairly traded imports because of a wide variety of circumvention schemes. It is ironic that much of this illegal activity originates in China, where the U.S. government borrows money to cover the US budget deficit.

The Southern Shrimp Alliance works hand in hand with a number of federal agencies to investigate the evasion of trade laws and has helped to uncover a number of illegal schemes that resulted in the avoidance of hundreds of millions of dollars in shrimp duty payments.

For example, CBP estimated that the misclassification of shrimp as a product excluded from the antidumping duty orders resulted in the evasion of $132 million in antidumping duties.

A separate investigation by U.S. Immigration and Customs Enforcement and NOAA Law Enforcement concluded that over $42 million in shrimp that should have been subject to antidumping duties was falsely identified as a product of Cambodia, a country without a significant commercial shrimp exporting industry.

CBP also found that shrimp from China was illegally transshipped through Malaysia to avoid duties and the U.S. Food and Drug Administration’s Import Alert on Chinese seafood imports.  The Southern Shrimp Alliance estimates that transshipment through Malaysia resulted in the evasion of nearly $280 million in antidumping duties over a five-year period.

Finally, CBP found significant illegal transshipment of Chinese shrimp through Indonesia, with tens of millions of dollars of antidumping duties evaded through such schemes.

“With a discouraging economy and large unemployment, Rep. Boustany’s and Rep. Richmond’s  legislation comes at a vital time for the shrimp industry and our nation,” continued Mr. Williams.  “The Southern Shrimp Alliance strongly urges every Member of Congress representing the shrimp industry from North Carolina to Texas to lend their support to this crucial effort by cosponsoring the PROTECT Act.  We really need your help.”

Contact: Deborah Long, 804.360.0074

• Read the joint release of Rep. Boustany and Rep. Richmond on the PROTECT Act
• Read a summary of the bill

Deployment of New Turtle Excluder Devices in Shrimp Fisheries

For the purposes of this project cost estimate analysis, there are three potential categories of shrimp vessels to which this project may apply from the 8 shrimp producing states (NC, SC, GA, FL, AL, MS, LA, TX).  This analysis assumes the average cost of a TED is $375.00* for each category:

1)      Shrimp vessels federally permitted to operate in the ‘offshore’ fishery in the Exclusive Economic Zone (EEZ) using regular shrimp trawls.  This project estimates that approximately 1,500 vessels would fall into this category.  It is assumed that each of these vessels fishes 4 TED-equipped nets simultaneously and maintains on board 2 additional TED-equipped spare nets for replacing damaged nets while at sea.

1500 Vessels  x 6 TEDs = 9000 TEDs @ $375.00 =                                  $   3,375,000

2)      Shrimp vessels not federally permitted to operate in the ‘offshore’ fishery in the Exclusive Economic Zone (EEZ) but which operate entirely within State waters (NC, SC, GA, FL, AL, MS, LA, TX) using regular shrimp trawls.  This project estimates that approximately 1500 vessels* would fall into this category.  It is assumed that each of these vessels fishes 4 TED-equipped nets simultaneously and maintains on board 2 additional TED-equipped spare nets for replacing damaged nets while at sea.

1500 vessels*  x 6 TEDs =  9000 TEDs @ $375.00 =                                               $   3,375,000

3)      Shrimp vessels not federally permitted to operate in the ‘offshore’ fishery in the Exclusive Economic Zone (EEZ) but which operate entirely within State waters (NC, SC, GA, FL, AL, MS, LA, TX) using skimmer trawls.  Skimmer trawls are not currently required to be equipped with TEDs, but NOAA has initiated a scoping process to consider a requirement for all skimmer trawls to be equipped with TEDs.  This project estimates that approximately 3600 vessels* fall into this category based on available State permitting data.  It is assumed that each of these vessels fishes 2 skimmer trawl nets simultaneously and maintains a third TED-equipped spare net on board for replacing a damaged net while at sea.  If NOAA required skimmer trawls to use TEDs, the cost estimate of this category is:

3600 vessels* x 3 TEDs = 10,800 TEDs @ $375.00 =                                          $  4,050,000

TOTAL ESTIMATED PROJECT COST* =                                                                                                $  10,800,000

*  TO BE REVISED AS MORE DATA BECOMES AVAILABLE.