JIG Comments to OMB on SEDs

June 27, 2000

Linda Engelmeier
Departmental Forms Clearance Officer
Department of Commerce
Room 5033
14th and Constitution Avenue, NW
Washington, DC 20230

Re: Shipper's Export Declaration Program (Comment Request), 65 Fed. Reg. 24,912 (April 28, 2000)

Dear Ms. Engelmeier:

The Joint Industry Group (JIG) welcomes the opportunity to comment on the Census Bureau's ("the Bureau") proposed revisions to the Shipper's Export Declaration (SED) and its electronic equivalent, the Automated Export System (AES), as published in the Federal Register on April 28, 2000 (65 Fed. Reg. 24,912).

JIG is a coalition of more than 160 companies, trade associations, professionals and businesses actively involved in international trade. JIG represents over $350 billion in trade annually. We both examine and reflect the concerns of the business community with respect to international trade matters. We undertake to improve policies and procedures through dialogue with government agencies and the Congress.

JIG strongly opposes the Bureau's proposed revisions to the "Exporter" box to include a reference to the U.S. principal party in interest (USPPI) (box 1a of Form 7525-V and box 2 of Form 7525-V-ALT) and to the require the USPPI to provide its Exporter Identification Number (EIN) or ID number (box 1b of Form 7525-V and box 7 of Form 7525-V-ALT). As detailed below, we oppose these proposed revisions because they:

· Collect information from a segment of the public that is not permitted by the authorizing statute;
· Unjustifiably and unnecessarily increase the burden on the public; and
· Require the USPPI to disclose its confidential EIN number to an unrelated freight forwarder with which the USPPI has no contractual relationship.

The Bureau can address these concerns, and mitigate the burden on the public without compromising the Bureau's legitimate information collection needs, by adding a new box to the SED for the USPPI and by continuing to use existing boxes to identify the exporter and the exporter's EIN (IRS) or ID number.

ARGUMENTS

1. The Proposed Revisions Collect Information from a Segment of the Public that is Not Permitted by the Authorizing Statute

The Bureau lacks statutory authority to collect information from the USPPI in ex works (EXW) transactions, since the USPPI in such transactions is not the exporter. Section 301 of Title 13 of the United States Code, the underlying statute authorizing the collection of export statistics, authorizes the Bureau to "collect information from all persons exporting from, or importing into, the United States … or from the owners or operators of carriers…." The legislative history of the statute makes clear that it only authorizes the collection of data from these limited categories of persons.

The Bureau attempts to avoid this difficulty by creatively defining "exporter" to include the USPPI, which in turn is defined as the person in the United States that receives the primary benefit, monetary or otherwise, of the transaction. However, in EXW transactions, the USPPI does not hold title to the goods when the SED is completed, does not control and determine the sending of the goods out of the country, and therefore is not the exporter. In an EXW transaction, the seller/manufacturer often has no details regarding export of the goods, such as when the goods will leave the United States and in what quantity. In an EXW transaction, the seller is simply selling goods that may ultimately be exported by another person.

To arbitrarily define the USPPI as the exporter in EXW transactions defies the long-standing and well-established meaning of the term "export," a meaning grounded in the Constitution of the United States. "Exportation in the complete sense consists of two essential ingredients--the sending of merchandise from this to a foreign country and its landing in such country." United States v. Chavez, 228 U.S. 525, 530 (1913). "[B]oth the courts and the customs officials have uniformly defined the legal notion of exportation as a severance of goods from the mass of things belonging to this country with an intention of uniting them with the mass of things belonging to some foreign countries." United States v. Nat'l Sugar Refining Co., 39 C.C.P.A. 96 (1951) (noting that this definition dates back to an 1883 Solicitor General opinion and was cited with approval by the U.S. Supreme Court in Swan & Finch Co. v. United States, 190 U.S. 143 (1903)). The Fourth Circuit has recently ruled that "export" is a clear term and that the ordinary meaning of "export" and "exportation" is manifest. United States v. Ehsan, 163 F.3d 855, 858 (4th Cir. 1998). Citing numerous definitions, the Fourth Circuit concluded that while the various definitions vary in specificity, "all make clear that exportation involves the transit of goods from one country to another for the purpose of trade" and that "[c]ommon-law usage confirms this ordinary definition." Id.

The terms "export" and "exportation" are unambiguous. When Congress granted the Census Bureau authority to collect information from "all persons exporting … from the United States," it did not grant authority to collect information from all persons who, though not exporting, stand to receive the primary benefit, monetary or otherwise, from a transaction. The extensive jurisprudence on the meaning of "export" makes clear that the Bureau exceeds its statutory authority in attempting to collect information from the USPPI in EXW transactions. The Bureau cannot through regulation create an authority to collect information that it lacks by statute.

2. The Proposed Revisions Unjustifiably Increase the Burden on the Public

The Bureau's proposed revision to the "Exporter" box to include a reference to the USPPI has the effect of requiring the submission of information from a segment of the public that is not covered by the current regulations: U.S. sellers and manufacturers in EXW transactions. JIG members have indicated that they will incur significant costs if this revision is adopted. These additional costs include re-programming of their automated systems, re-training employees, lost efficiencies caused by having to provide information to multiple freight forwarders with which the USPPI has no relationship, confusion, 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 revisions are adopted, 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 definition of exporter.

Another major exporter of consumer household goods estimates that the proposed revisions will cost it between $3-5 million. Once again, a significant portion of this sum will result from the company being required 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 of USPPI 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, a leading manufacturer of industrial and consumer products, estimates it will expend $150,000 to re-program its automated system and train its employees regarding listing the USPPI as the exporter. 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 proposed revisions would cost several hundred thousand dollars. Weyerhaeuser emphasizes the confusion the proposed revisions 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 SED 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.

It is untenable to suggest that the proposed revisions "will not increase response times." If the revisions are adopted, there will be a minimum of three parties involved in preparing the SED in EXW transactions: the USPPI, the freight forwarder, and the foreign principal party in interest. Response times are bound to increase when a freight forwarder is required to obtain some information need for the SED from an unrelated seller/manufacturer. 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.

3. The Proposed Revisions Require the USPPI to Disclose its Confidential EIN to an Unrelated Freight Forwarder with Which the USPPI Has No Contractual Relationship

A direct result of the Bureau's redefinition of "exporter" is that the USPPI would be required to provide its EIN to an unrelated freight forwarder for inclusion on the SED. The EIN is the business equivalent of the Social Security Number and should be accorded the same confidentiality. Understandably, many companies do not want to provide their EINs to freight forwarders with whom they have no contractual relationship, that they had no role in selecting, and whose level of expertise and professionalism is unknown to them. The JIG's proposal, described below, to create an additional box for the USPPI would permit the true exporter's EIN to continue to appear in the appropriate box.

JIG's PROPOSED ALTERNATIVE

A broad consensus exists in the trade community that the additional burden of the Bureau's proposed revisions could be significantly mitigated by simply adding a new field to the SED for the USPPI. Nine of the eighteen comments received in response to the Bureau's October 4, 1999, Notice of Proposed Rulemaking (relating to the SED) included this suggestion, as did five of the twenty-seven comments filed with Bureau of Export Administration. 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 on the SED (in box 1a of Form 7525-V and box 2 of Form 7525-V-ALT). While the USPPI would provide 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. Furthermore, it would be apparent to law enforcement officials, carriers and freight forwarders that inquiries should be directed to the exporter appearing in the "Exporter" box, 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 the Bureau to collect the information it needs to formulate statistics, but in a way that minimizes the burden on the public. Indeed, the creation of a separate box for the USPPI would enhance the utilitarian value of the SED by providing the identities of both the seller/manufacturer and the exporter, rather than just one under the Bureau's proposal.

JIG urges the Bureau to adopt this simple, non-controversial suggestion instead of the proposed revisions to the "Exporter" and "Exporter EIN" boxes on the SED.

Respectfully submitted,

Robert Kimbrel
Chairman, Export Process Committee
Joint Industry Group