tions. At best, this proposal is ill advised and we hope that the committee will reject it.

On behalf of our organization, thank you for the opportunity to present our views on the user fees. We are happy to respond to any questions you might have.

STATEMENT OF WILLIAM ST. JOHN, JR., PRESIDENT, NATIONAL CUSTOMS BROKERS & FORWARDERS ASSOCIATION OF AMERICA, INC.

Mr. Chairman:

Thank you for the opportunity to testify before your committee. I appear today as President of the NCBFAA, a nationwide organization of licensed Customs Brokers and Freight Forwarders, including 29 affiliated regional associations. I am accompanied by Mr. Sigmund Shapiro of Samuel Shapiro Co., Baltimore, and Mr. William Casey of The Myers Group, Inc., Rouses Point, New York, who is also Chairman of the Board of NCBFAA.

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 have grave reservations about the user fee scheme being promoted by OMB and Customs and must state our unequivocal opposition to Customs user fees at this time.

First, 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. 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 a service that

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inures to the general welfare of the balance of the population of the United States the generation of revenues. 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 I.R.S. levying a fee on each individual taxpayer for the privilege of filing his income tax form every year. This is not to say that there may not be special circumstances where Customs may provide extra service to suit the convenience of an importer and should therefore appropriately seek compensation. Here, however, Customs has framed its request around funding for competent, efficient enforcement of the law something the public should expect, not

force a small segment of the trading community to pay extra for.

Indeed, this is not a "user fee". It is, quite simply, a tax. OMB and Customs have offered this charge for one purpose alone: to raise revenues. Faced with a massive budget deficit, its architects see an opportunity to make a contribution to deficit reduction. 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, 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. That is, for each dollar spent on a Customs agent, clerk or import specialist, the Treasury sees a $20 return through duty collections. To suggest now that a special justify the cost of collecting

tax (or "user fee") must be charged to

duties is contrary to the facts and to their statements in this room.

For a moment, however, let us take a look at the impact of these so-called user fees. They will not fall on the backs of the foreign nations or manufacturers. The burden will be borne fully by importers, brokers and the ultimately consuming public. The assessment of this tax is in fact inflationary in that the fees will add to the final cost of the product. As part of the cost, this tax will receive the markup for overhead and profit not only by the importer, but throughout the pipeline to the consumer. So the public will not only pay for the direct cost of Customs, but also the added markup caused by the assessment.

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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 relationship between these fees and the actual cost of service. The cost of clearances at border states is significantly lower than at seaports. (Broker fees reflect that and are currently almost 1/4 that at the

seaports.) User fees would be equal however under the scenario offered by Customs. The tax is discriminatory against small businesses which, limited by capital, out of necessity have smaller quantities in their importation. Firms better capitalized, on the other hand, can change their distribution and transport in such a way as to minimize this assessment. In-bond shipments, which have appreciably lower demands on Customs, are taxed more than their share under Customs' proposed fee schedule, at the expense of the inland ports and the commerce of those cities. Additionally, it results in product discrimination: tities, per transaction, such as vessel loads of oil, will be assessed on the same basis as a container load of nails or possibly a pallet of chemicals. The inconsistencies continue and we are led to the same conclusion as the Joint Industry Group: it is probably impossible to make the fees equitable and non-discriminatory.

raw products or products imported in large quan

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 see quite clearly that these funds will lose their earmarking if they go into general revenues and they know that the contributing public is distrustful of "trust funds" which can be invaded for other purposes. They want therefore to ensure that user fees are only used to support Customs operations. Yet what Customs envisions is an open