The National Bonded Warehouse Association was formed in August 1984, specifically to protect bonded warehouse proprietors and other inbond traders from the increasing problems developing under a recently adopted U.S. Customs users fee system. The National Bonded Warehouse Association was formed in August 1984, specifically to protect bonded warehouse proprietors and other inbond traders from the increasing problems developing under a recently adopted U.S. Customs users fee system. The National Bonded Warehouse Association's membership consists of more than 180 of the largest bonded warehouse and dutyfree shops in the United States and its territories. Although our major focus is on fees and procedures relating to bonded warehouses, many of our members are also container freight station operators, foreign trade zone operators, duty-free shops, bonded cartmen, freight forwarders, and customs brokers. In addition to representing the National Bonded Warehouse Association, today we are speaking on behalf of the Bonded Store Dealers of America-which includes duty-free shops and suppliers across the United States-the United Export Trading Associationwhich includes border stores in the southwestern United Statesthe International Association of Airport Duty-Free Stores; the Wine and Spirits Wholesalers of America Association; and the National Association of Beverage Importers. Each of these associations opposes the imposition of user fees under the President's proposed budget plan. In support of our position, we will detail our unfavorable past experiences with Customs under the current users fee system. The system has resulted in increased costs which threaten the existence of many in-bond traders across the United States. We will demonstrate why an expanded program of users fees would more than double the burden on bonded warehouse proprietors, put most duty-free operations out of business. Our past experience clearly indicates that users fees do not improve government services to the import and export communities, and generally result in dramatically increased costs to importers and exporters for enforcement and policing activities which accrue to the benefit of the general public, or more specifically, to the protected domestic industries of the United States. For the past 3 years, Customs has supervised bonded warehouses through an audit inspection program. Under this program, Customs imposes an annual users fee on bonded warehouses, calculated by adding the total cost of the audit inspection program and then dividing those costs by the total number of bonded warehouse proprietors in the country. The annual fee in 1984 for operation of a bonded warehouse was $650. With no prior explanation or justification, Customs more than doubled the annual fee in 1985 to $1,400. Stunned by the fee increase and provided absolutely no explanation by Customs, the National Bonded Warehouse Association filed a Freedom of Information Act request to uncover the basic statistics used in the calculation of the annual fee. Our initial request for information was flatly denied by Customs. On administrative appeal, Customs reversed itself and provided cost information used to calculate the annual fee. Information con tained in the documents released by Customs indicates that Customs has included entire salaries of personnel not directly related to the audit inspection program into the calculations of the annual fee. This is but one of many apparent abuses revealed by the disclosed statistics. We cannot determine all the problems because of the vague manner in which Customs disclosed the information on which they based the user fee. For example, the New York region attributed $136,650 in costs to spot checks of bonded warehouses; $44,301 in expenses to audits; and an incredible $576,678 to miscellaneous costs, unsubstantiated in detail and charged directly to bonded warehouse proprietors under the users fee system. Although our research is only in its preliminary stages, it appears likely that under the guise of reimbursing the Government for its expenses, bonded warehouse proprietors pay the full salary of some Customs officers, while being charged again under specific users fee statutes for estimated time spent by the same officers in performing a number of different tasks related to warehouses. Bonded warehouse proprietors are charged administrative overhead charges under the users fee statute as well as charges for overtime incurred by Customs officers whose salaries have already been accounted for in other charges. Because there is no accountability and no direct focus for funds under a broad users fee system, users fees inevitably end up compensating for overall fiscal measures, completely in violation of the user statute and General Agreements on Tariff and Trade. As a result of this system of fees, bonded warehouses and other in-bond traders are systematically being taxed out of existence for enforcement efforts which provide no service whatsoever to the bonded community and serve only to police bonded warehouses for the benefit for the general public. Aside from our association's fear of abuse, imposing fees on a broad range of Customs transactions is economically unrealistic. Just one small group of border stores in Texas processes in excess of 33,000 entries and withdrawals in 1 year. This does not even include in-bond transit, drawback filings, or many of the other specific transactions for which users fees have been suggested. Users fees would destroy border store profitability on our southwestern and northern borders. Alcoholic beverage importers and wholesalers, likewise, would be severely damaged by these charges. A users fee would, in effect, tax these operators for simply complying with the enforcement procedures required by Customs and other Federal taxing authorities. Duty-free shops, which process literally thousands of in-bond transactions on a daily basis, would be virtually taxed out of existence by users fees. Despite the fact that most duty-free Customs transactions are routine in nature, requiring only a few minutes of a Customs officer's time, a uniformly set users fee would impose a significant cost on each transaction, regardless of its complexity. This would cost many duty-free operators millions of dollars. One member estimated it would cost him over $4.5 million in user fee charges per year. Obviously this threatens the whole duty-free business. The loss of these valuable vehicles of international commerce would have wide-ranging impact on revenues generated by airportrelated industries. In conclusion, Mr. Chairman, our extensive experience with users fees have shown us that although under a users fee system we can expect costs to rise dramatically, the quality of service to the importing and exporting community provided by U.S. Customs, the importing and exporting community provided by U.S. Customs, actually decreases. The reason for this is that Customs has never been able to implement users fees in a way that fairly reimburses the Government for actual expenses and services provided to the international trading community. Users fees inevitably have been turned into fiscal taxing measures which render U.S. companies less competitive in the export market, while destroying many local service industries which earn their living by transshipping merchandise through the use for foreign consumption. Accordingly, we oppose the Customs plan. Chairman ROSTENKOWSKI. Thank you, Mr. Travis. [The prepared statement follows:] Presented by Thomas G. Travis, on behalf of the National Bonded Warehouse Association; the International Association of Airport Duty-Free Stores, Mr. Chairman and Members of the Committee, my name is Thomas G. Travis. I am a partner in the law firm of Sandler & Travis, P.A., and chief counsel to the National Bonded Warehouse Association. I am accompanied today by Mr. Lawrence Gross, President of Van Brunt Warehouses, Inc. of New Jersey, who is also president of the New York/New Jersey Warehousemen's Association and a member of the Board of Directors of the National Bonded Warehouse Association. I am also accompanied today by Mr. David Bernstein, President of Samuel Meisel & Company, Inc. of Glen Burnie, Maryland, and president of the International Association of Airport Duty-Free Stores. The National Bonded Warehouse Association was formed in August of 1984, specifically to protect bonded warehouse proprietors and other in-bond traders from the increasing problems developing under a recently adopted U.S. Customs users fee system. The National Bonded Warehouse Association's membership consists of more than 180 of the largest bonded warehouse and duty-free shops in the United States and its territories. Although our major focus is on fees and procedures relating to bonded warehouses, many of our members are also container freight station operators, foreign trade zone operators, duty-free shops, bonded cartmen, freight forwarders, and customs brokers. In addition to representing the National Bonded Warehouse Association, today we are speaking on behalf of the Bonded Store Dealers of America (which includes duty-free shops and suppliers across the United States), the United Export Trading Association (which includes border stores in the Southwestern United States), the International Association of Airport Duty-Free Stores, the Wine and Spirit Wholesalers of America Association, and the National Association of Beverage Importers. Each of these associations, opposes the imposition of users fees under the President's proposed budget plan. In support of our position, we will detail our past experiences with Customs under the current users fee system, and demonstrate how the impracticability and inevitable abuses of the users fee system have resulted in increased costs which threaten the existence of many in-bond traders across the United States. We will demonstrate with hard facts, why an expanded program of users fees would more than double the burden on bonded warehouse proprietors, put most duty-free operations out of business, significantly decrease the profitability and advantages of foreign trade zones, |