Attorneys: External Revenue Service Could Put Customs Functions Back Under Treasury
The creation of an External Revenue Service (ERS) to collect tariffs, duties and other foreign trade-related revenues could result in realigning CBP so that the agency would fall under the Department of the Treasury instead of DHS, according to two ArentFox Schiff attorneys.
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Although the U.S. Customs Service had initially been under Treasury before it was combined with Border Patrol and aligned with DHS in 2002 in response to 9/11, a return to the previous alignment raises economic and legal questions, trade attorneys Antonio J. Rivera and Mario A. Torrico say in a Jan. 27 blog post looking at the history of the U.S. Customs agency.
President Donald Trump proposed the creation of an ERS (see 2501140064) as part of a broader "America First" trade policy announced on Jan. 20 (see 2501200002). That executive order directs the secretaries of Commerce and the Treasury to recommend methods to implement an ERS.
Under the current configuration, Treasury delegates, but does not transfer, its authority related to revenue functions to DHS.
CBP under DHS is aimed at consolidating security functions, while an ERS appears to focus on economic sovereignty and revenue generation, the attorneys said.
But establishing an ERS comes with legal and operational obstacles, the attorneys said. For starters, it's uncertain whether the ERS would be a stand-alone agency.
"Any creation of a new federal agency requires congressional approval. Given the current makeup of a Republican-controlled Congress, Trump may have the necessary support to create such an agency," the attorneys said. "However, if it is not a stand[-]alone agency, Trump could potentially order the creation of the ERS via an executive order."
If this were the case, the ERS would need to be housed within Treasury to fit within the current legal framework, and it also would need "to navigate existing legal frameworks governing trade and tariffs, potentially leading to jurisdictional challenges at the US Court of International Trade," the attorneys said.
The efficiency of revenue collection and the enforcement of trade laws also could be impacted, as the creation of an ERS could run up against challenges that were encountered when Customs integrated with DHS, such as issues with inter-agency coordination and resource allocation.
"[W]ithout an expanded role beyond collecting tariffs from importers, the ERS’s functions -- whether it’s part of the Treasury or stand[-]alone agency or bureau -- would likely not be much different than what CBP does today. Ultimately, it is the importer of record, not the exporter, that has the legal liability to tender duties and fees associated with imports," the attorneys said. "However, if the ERS’ functions somehow were expanded to target foreign exporters, this could mean additional costs and more regulatory compliance, with an ultimately likely impact on higher consumer prices."