April 13, 2000
John T. Spotila, Administrator
Office of Information and Regulatory Affairs
Office of Management and Budget
17th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20503
Attn: Jefferson B. Hill (10202 NEOB)
Kim Luczynski (9215 NEOB)
Donna Rivelli (9215 NEOB)
Re: Census Bureau (RIN 0607-AA20) and Bureau of Export
Administration (RIN 0694-AB88) Proposed Rulemakings,
64 Fed. Reg. 53861 and 53854, respectively (October 4, 1999)
Dear Mr. Spotila:
Thank you for agreeing to hear the concerns of the members of the Joint Industry Group (JIG). JIG is a coalition of more than 160 companies, trade associations, professionals and businesses actively involved in international trade. We help to develop solutions to trade issues by working directly with federal agencies, such as the US Customs Service, US Commerce Department, US State Department, OFAC, and USTR, as well as with Congressional committees. JIG membership represents more than $350 billion in trade.
We are appealing to you because of your role in ensuring compliance with the Paperwork Reduction Act (PRA). We believe that the Notices of Proposed Rulemaking (NPRMs) issued by the Bureau of the Census (Census) and the Bureau of Export Administration (BXA) on the Shipper's Export Declaration (SED) impose an unnecessarily heavy burden on the trade community. Simply adding a new field to the SED for the "U.S. Principal Party in Interest" would substantially mitigate this burden.
As explained in detail below, our principal objections to the proposals are that they:
· Require information from a segment of the public not covered by the
current regulations in a way that appears to be beyond the scope of the underlying
statute;
· Substantially increase the burden on companies of providing the information;
and
· Fail to mitigate the burden on U.S. companies by creating a new field
on the SED for the "U.S. Principal Party in Interest."
We strongly disagree with the Census Bureau's assertion that the proposals "will not impact the current reporting-hour burden requirements" for the SED, as approved by the Office of Management and Budget (OMB) under Control Number 0607-0152. The proposed changes constitute both a substantive and material modification to the collection of information previously authorized by OMB.
First, the proposals require the submission of information from a segment of the public that is not covered by the current regulations: U.S. sellers and manufacturers. The proposed regulations do this by defining "exporter" as the "U.S. principal party in interest" (USPPI), which in turn is defined as the person in the United States that receives the primary benefit, monetary or otherwise, of the transaction. The proposed regulations further indicate that the USPPI is generally the U.S. seller or manufacturer. See proposed 15 C.F.R. § 30.7(d)(1). Defining the U.S. seller or manufacturer as the exporter in ex works (EXW) transactions contravenes the well-established meaning of exporter: the person who controls and determines the sending of the goods out of the country. In an EXW transaction, the U.S. seller loses control over the goods once they leave the seller's loading dock. A U.S. seller in an EXW transaction does not contract with the freight forwarder or the carrier and usually does not even know when the goods will be exported, or if they will be modified by a third party before leaving the United States. A U.S. seller in an EXW transaction is not an exporter and under the current regulations is not responsible for preparation of the SED.
Secondly, the burden on companies of complying with the proposals would be substantial. Many of the companies that commented on the NPRMs cited increased costs for re-programming and re-training, as well as ongoing cost increases resulting from lost efficiencies, confusion the proposals would cause, and inquiries from law enforcement agencies.
Caterpillar Inc., a leading manufacturer of construction equipment, engines,
and engine electrical power systems, with exports totaling over $6.0 billion
annually, estimates that if the proposed regulations are enacted, it will incur
an initial cost of $250,000 to re-program its automated system, re-train its
employees and re-write its procedural directives. In addition, Caterpillar estimates
it will incur an ongoing cost of $10.00 per SED for routed transactions. This
$10.00 includes the cost of providing information in a paper environment to
freight forwarders contracted by the foreign buyer, a cost Caterpillar does
not incur in reporting information to its exclusive freight forwarder, Air Express
International (AEI), with whom Caterpillar maintains a completely automated
relationship worldwide. The $10.00 also includes the cost of ensuring the buyer's
freight forwarder correctly reports the information, record-keeping responsibilities
(once again, in a paper environment), and costs incurred in responding to inquiries
from law enforcement agencies.
The DuPont Company, the largest chemicals manufacturer in the United States,
and one of the largest exporters of goods, has also cited increased costs from
interacting with freight forwarders with which it has no relationship and with
whom it must therefore interact in a paper environment. Notwithstanding that
DuPont has relatively few EXW shipments, it estimates that it will incur additional
costs of approximately $100,000 for training and issuing guidelines on how to
meet the new regulatory burden.
Another major exporter of consumer household goods estimates that the proposed regulations will cost it between $3-5 million. Once again, a significant portion of this sum will result from the company being required by the regulations to provide information to numerous freight forwarders with which it has no relationship, in a non-automated environment. Moreover, this exporter believes that the proposed definition will cause confusion during U.S. Customs compliance audits, thereby requiring it to produce records demonstrating that it is not actually the exporter, as that term is commonly understood, but rather the U.S. seller. Such proof will involve expanded record-keeping, at an additional cost to the company. The $3-5 million sum also includes the cost of a full-time person that the company estimates it would need to respond to law enforcement inquiries.
3M, an exporter of technological products, estimates it will expend $150,000 to re-program its automated system and train its employees regarding the new regulations. 3M further estimates it will incur an on-going cost of $50,000 a year to generate and mail special documents to numerous freight forwarders with whom it has no regular relationship. The company also expects to incur $25,000 a year as a result of the proposed regulations in the form of tracking, record-keeping and regulatory compliance.
Weyerhaeuser Co., a U.S. exporter of forest products such as lumber and paper, indicates that changes to its computer system that would be required by the regulations could cost several hundred thousand dollars. Weyerhaeuser emphasizes the confusion the proposed regulations would cause, by redefining "exporter" in a manner contrary to years of established practice. The company is convinced that this new definition will require it to expend large sums to respond to inquiries from law enforcement agencies and freight forwarders who should actually be contacting their foreign principal, not the U.S. seller, regarding the shipment. Weyerhaeuser stresses that the regulations should be structured in a way that permits all parties involved with an export transaction--freight forwarders, carriers, and law enforcement agencies--to distinguish between the U.S. seller and the party who has title to the goods and controls the sending of the goods out of the country, i.e., the exporter.
This sampling of estimated costs by major U.S. exporters belies the Census
Bureau's assertion that the proposed regulations "will not impact the current
reporting-hour burden requirements." If the additional costs reported by
these major exporters are multiplied by the number of U.S. companies that sell
EXW, it becomes apparent that the proposals would in fact impose a substantial
additional burden on companies that sell EXW.
There is a broad consensus in the trade community that simply adding a field
to the SED for the USPPI could substantially mitigate the additional burden
of the proposals. Nine of the eighteen comments on Census' NPRM included this
suggestion, as did five of the twenty-seven comments filed with BXA. The JIG
agrees that adding a new field to the SED would be much less burdensome than
redefining "exporter" to include U.S. sellers in EXW transactions.
This suggestion permits the exporter, as that term is commonly understood, to
continue to appear in field 1a of the SED. While the USPPI would be responsible
for providing certain information regarding the product to either the exporter
or the exporter's agent in an EXW transaction, the exporter would be responsible
for filing the SED and maintaining records related thereto. In addition, the
USPPI would not have to give its EIN number to an unrelated freight forwarder,
since the actual exporter's EIN number would be used. Furthermore, it would
be apparent to law enforcement officials, carriers and freight forwarders that
inquiries should be directed to the exporter appearing in field 1, not to the
USPPI, who does not have title to the goods or information regarding their export
from the United States.
The alternative of creating a new field for the USPPI permits both agencies to achieve their stated program objectives in a way that minimizes the burden on the reporting public. Yet Census officials have inexplicably stated that industry's suggestion will not be adopted. Thus, in order merely to avoid the additional delay associated with adding an extra field to the SED, Census has ignored this simple, non-controversial suggestion to minimize the reporting burden, and in so doing has ignored its obligations under the Paperwork Reduction Act.
We urge you to withhold OMB approval of the proposed regulations until Commerce has given more serious consideration to the reporting-hour burden. We would be happy to meet with you at your earliest convenience to provide any further details you may need regarding this matter.
Sincerely,
Robert Kimbrel
Chairman
Joint Industry Group
Export Process Committee
Cc: Roger Majak, Bureau of Export Administration
Amanda DeBusk, Bureau of Export Administration
Harvey Monk, Bureau of the Census
Material Copyright © 2000 Joint Industry Group