fees would reimburse the government for services rendered to importers and exporters. Here, we must ask ourselves who is really served by Customs? Primarily, Customs acts as an

enforcement agency, enforcing the rules and regulations of agencies such as the Food and Drug Administration and the Bureau of Alcohol, Tobacco and Firearms. Indeed, the domestic industry, not the importer, is served by Customs enforcement of such areas as country of origin and marking requirements, textile quotas, anti-smuggling and counterfeiting regulations, and collection of anti-dumping duties. The Commissioner of Customs reportedly has even gone so far as to suggest that Customs should change its name back to a "Bureau" instead of a "Service" because it is an enforcement agency, not an agency which provides services for importers and exporters. In our experience with the bonded warehouse program, bonded warehouse proprietors have not been served by Customs; they have been investigated and policed to protect the public and the laws of the United States. The government is thus proposing to tax importers and exporters in order to make certain they are being properly taxed. Again, our experience has shown us that unbridled and unimpeded by Congressional scrutiny, the bonded warehouse annual fee, which was never meant to fund fraud investigations against proprietors, hạs turned into a means for funding an army of duplicative enforcement teams who seriously impede the operation of warehouse

proprietors.

When enacting the Users Fee Statute in 1950, Congress, with great care, undertook an extensive study to determine the

difference between enforcement services accruing to the benefit of the general public, and services to individuals provided by the That study produced concrete examples indicating that

government.

it is not in the public's benefit for users fees to support enforcement efforts. Because Customs users fees will, judging by past experience, be used for overall policing and fiscal measures, and will not in any way represent a specific reimbursement for services rendered, Customs users fees would constitute nothing more than a taxation of imports or exports for fiscal purposes, completely in violation of the General Agreements on Tariffs and

Trade.

In conclusion, Mr. Chairman, our extensive experiences 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, 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 United States for foreign consumption.

Users fees would essentially provide Customs with a carte blanche to tax the import-export community without any scrutiny over Customs' own fiscal inaccuracies. They would significantly negate the Congressional purpose behind foreign trade zones, would put many small bonded warehouses out of business, would devastate the border stores of the United States, and would cost many duty-free shops and liquor wholesalers millions of dollars, threatening their continued existence. In short, most in-bond traders of the United States could simply not survive an expanded use of users fees as we have known them in the past.

On behalf of all our associations and in the interests of the ultimate consumers and the labor force of the United States, who would bear many of the consequences of these costs, we urge the Committee to abandon the concept of users fees, and concentrate on the abuses in the current system which cause Customs to operate inefficiently and ineffectively. Members of the Committee, we wish to thank you for this opportunity to comment on what we view as the most serious threat to the in-bond community in recent history.

Mr. Chairman,

Chairman ROSTENKOWSKI. Mr. St. John, you may proceed. STATEMENT OF WILLIAM ST. JOHN, JR., PRESIDENT, NATIONAL CUSTOMS BROKERS & FORWARDERS ASSOCIATION OF AMERICA, INC., ACCOMPANIED BY WILLIAM CASEY, THE MYERS GROUP, INC., AND CHAIRMAN OF THE BOARD, NATIONAL CUSTOMS BROKERS & FORWARDERS ASSOCIATION OF AMERICA, INC.

Mr. ST. JOHN. Mr. Chairman, thank you for the opportunity to testify before your committee. I appear today as president of the National Customs Brokers & Forwarders Association of America, a nationwide organization of licensed customs brokers and freight forwarders, including 29 affiliated regional associations.

I am accompanied by William Casey, chairman of the board of our organization.

Customs brokers provide the interface between the importing community and the Customs Service, establishing the necessary supporting documentation, ensuring that all necessary Federal laws are observed, collecting duties in the correct amounts from the importers, and then passing these funds to the customs authorities.

It is clear that customs brokers will have a fundamental and substantial part in the implementation of any Customs Service user fee scheme enacted by the Congress.

We must state our unequivocal opposition to customs user fees at this time. These charges are being packaged to the public and the Congress as user fees, a misnomer that is deceptive and bears correction. User fees were conceived as charges for special Government services voluntarily requested and resulting in a particular benefit flowing to an entity. The filing of documentation and payment of duties is not in any sense voluntary nor does it result in a benefit to the importer.

It is the public benefitting from the Customs Service that generally pays for revenue collection and that is why funding for Customs has always come through general revenues. For Customs to seek these fees is comparable to the IRS levying a fee on each individual taxpayer for the privilege of filing his income tax form

every year.

Indeed, this is not a user fee. It is, quite simply, a tax. But why not admit it? Why not call it a duty or a tax? First, the administration has foresworn any tax increase and the semantics of user fee avoid that conflict. And second, if it were admitted to be a tax, it would most assuredly run afoul of the GATT.

In today's testimony, the Joint Industry Group, to which NCBFAA belongs, will comment more fully on our view that this proposal would violate the GATT in any event. Suffice it to say that: "A rose by any other name is still a rose." This is a tax.

Underlying this proposal too is the suggestion that customs duties do not pay for themselves and that therefore there is an extraordinary need to supplement our duty revenues to help pay for those costs. Last month, however, a Ways and Means subcommittee, the Subcommittee on Trade, heard Customs discuss the question of additional staffing and admit that there is a 20- to- 1 return

for every dollar that is spent in this area. To suggest now that a special tax or user fee must be charged to justify the cost of collecting duties is contrary to the facts and to Customs' statements in this room.

And the burden will be inequitable. While this tax is posed as a means of underwriting the actual costs of operating customs services, there is no relationship between these fees and the actual cost of service.

The intrinsic shortcomings in the application of individual fees is magnified, however, by structural deficiencies in the fund itself. From an economic perspective, it is inefficient; from a congressional perspective, it lacks accountability. Here is our point: Customs conceives of these fees going into a revolving fund from which they can be freely withdrawn for Customs' services.

They want, therefore, to ensure that user fees are only used to support Customs operations. Yet, what Customs envisions is an open-ended fund, managed by the Customs Service, wherein fees would be adjusted to meet work load and demand. There would, however, be no pressures within this system to keep fees down and service up.

Treasury's proposal does not offer any standard of service and Customs is free to make management decisions to apply additional or intensified resources to the process, requiring that more cost per unit be passed on to the public. They may decide to place attention on enforcement activities which, no matter how ill conceived, will simply be underwritten by the public.

Or, Customs may spend funds unwisely on staff that make little contribution to reducing workload and know that the funds will be there.

In other words, the control of costs that make up the fee would be removed since these costs are a pass through to an entity that cannot look to the marketplace to set price or level of service. And, Congress has been eliminated from this equation.

Use of these funds would be offbudget.

While the Congress have been ill disposed in recent years to micro-manage Customs, this step places Customs even further beyond your purview. As long as this fund constitutes a wash-expense is balanced by assessments-there is less reason than ever for Congress to want to review ordinary operations except when a particular circumstance demands.

It is NCBFAA's view that Customs can realize its objectives through greater attention to making its operations more efficient than by trying to establish a special operating fund which offers a barrier to trade, taxes the public, discriminates against particular economic and geographic sectors, and insulates Customs from congressional scrutiny and budget constraints.

Tremendous sums have been invested by government and the private sector to advance this effort. More needs to be done to expedite Customs' conversion to a more modern system of operations— not only through machines, but through manpower and management attention.

Our future and Customs' are intertwined: streamlining Customs is to our mutual advantage. Bearing this in mind, please understand our concern about the Customs' proposal and its contradic