The Airline Industry Blocked Disclosure of Trade Data, Helping Conceal the Airlift of N95 Masks From the US to China

By Lee Fang, The Intercept

30 June 20

 

n the first months of the Covid-19 outbreak — when U.S. hospitals faced a critical shortage of protective gear and exposed front-line medical workers to needless risk — hundreds of tons of medical face masks were loaded onto planes at U.S. airports and flown to China and other destinations for foreign buyers.

While the masks were shipped abroad, the U.S. government failed to address the growing crisis, leaving states to scramble to obtain medical gear as third-party distributors hiked prices and began selling what turned out to be defective masks. While the Trump administration moved slowly to secure needed supplies, some in the Commerce Department even encouraged the export of masks as the disease spread.

The full scale and scope of what happened — including the types of masks shipped, prices, and the destinations for the shipments — are still shrouded in mystery. That’s because detailed disclosures of the airlifts are hidden from public view by the federal government. U.S. Customs and Border Protection only allows public disclosure of detailed cargo data for shipments sent and received by sea, not by air. And almost every crate of face masks destined for foreign markets went by air freight, concealing the full picture of the flow of masks from public view.

The reason for the opaque trade rules? Little-known political maneuvering by the airline industry and its lobbyists on Capitol Hill, which slipped a provision designed to override disclosure requirements into a 1996 law on tariffs.

“Thanks to lobbying from the airline industry, U.S. air freight data isn’t public. In times of crisis, key supplies are almost universally shipped via air freight,” said William George, an analyst with ImportGenius, an import-export business intelligence firm.

Many controversial shipments, such as tear gas or overseas weapons sales, are made by air freight. The global arms trade escapes transparency, in part, because of gaps in disclosure.

ImportGenius and Panjiva, another firm that analyzes trade data, are now in federal court to try to force disclosure of the air cargo manifests, claiming that a plain reading of the law shows that the government is still required to disclose the forms.

CBP did not respond to a request for comment. Airlines for America, the trade group that represents the domestic air freight industry, declined to comment.

The disparity in transparency has gained new attention in recent months as acute shortages have raised questions about U.S. trade policy with respect to critical medical supplies, including N95 masks and other forms of personal protective equipment.

Rick Bright, a federal whistleblower, testified in May that federal agencies failed to take action to obtain masks as alarm bells went off about the Covid-19 pandemic. “We should have been doing everything possible, placing orders early, ramping up supply,” said Bright, who formerly served as a director of the Biomedical Advanced Research and Development Authority, an agency devoted to responding to pandemics.

Many countries, including Russia and China, allow public inspection of air freight cargo manifests, which include product details, the size of shipments, unit prices, and the destination for cargo. The U.S., on the other hand, does not.

Chinese customs disclosures obtained by The Intercept show that Chinese trading firms, municipal governments, and state-owned corporations such as oil giants Sinopec and CNOOC purchased key medical supplies involved in the response to the coronavirus from U.S. suppliers over the first few months of this year. Over 600 tons of face masks of left U.S. airports for China in February alone.

U.S. firms, such as Intel, W.W. Grainger, and Pfizer, also shipped masks from the U.S. to China in February, according to Chinese customs disclosures. The shipments, company representatives said, were made to help secure employees based in China.

Nearly identical data is collected by the CBP but concealed from the public. Air freight cargo imports and export disclosures are limited to anonymized aggregate disclosures of broad customs categories. Critics of the CBP say that the agency is withholding too much and is needlessly showing deference to air freight companies in refusing to release detailed manifests.

The aggregate data alone shows the scale and scope of the exports of protective equipment. In the first three months of this year, exports of masks and personal protective equipment from the U.S. to China grew more than 1,000 percent compared to the same period from last year. But beyond aggregate totals, little is disclosed, making a full accounting of the global PPE trade difficult to grasp.

Trade experts say that acute shortages of medical supplies could be limited in the future with a timely review of emergency medical equipment during the export process.

“Instead of having U.S. commerce officials boosting U.S. exports of masks, the proper approach should have been a needs-based assessment that took into account that the virus would be impacting the United States,” said Lori Wallach, director of Public Citizens’ Global Trade Watch.

“We needed the necessary supplies, and we need to be thinking about neighbors, like the many small Caribbean islands who have no production capacity domestically that would be totally reliant on retail supplies.”

The reason air freight manifests are treated differently than sea cargo goes back several decades to the boom in air shipping that began in the 1980s. Since the Tariff Act of 1930, the federal government has collected vessel manifest data, largely for tariff purposes.

During a revamp of the trade regulations in 1984, the airline industry defeated attempts to require public disclosure of manifest information. But pressure from a range of industries concerned with widespread counterfeiting led to reforms with the passage of the Anticounterfeiting Consumer Protection Act of 1996.

During congressional debate over the legislation, then-Sen. Orrin Hatch, R-Utah, backed a provision of the bill equalizing the public inspection of sea vessel and air freight cargo disclosures.

“This disclosure of air manifest data and trademark information will be of invaluable assistance in identifying counterfeit merchandise and the location of counterfeiters,” wrote David Biehn, then vice president of Eastman Kodak, in a letter backing the shift.

The ACPA was signed into law on July 2, 1996 and included a provision clearly mandating the public disclosure of aircraft manifests. But as soon as the bill became law, airline industry lobbyists raised objections.

The Air Transport Association of America — a lobby group now known as Airlines for America that represents the airline industry, including United Airlines, American Airlines, and FedEx — pushed back.

“[I]n the interest of cargo security and confidentiality of business data,” ATA claimed in a letter to then-Sen. William Roth, R-Del., “that air cargo manifests remain immune to publication of any form.”

Subsequent arguments were more blunt. One air freight industry lobbyist later told reporters that the industry supplies manifest data to CBP because they require the information. “No other party needs to know — despite the fact they would like to know.”

In a technical correction bill passed in October 1996 with little debate, a provision was added to attempt to delete the previous air freight disclosure requirement in the ACPA.

But the legislative text amended the wrong bill, leading to awkward phrasing left in the federal statute. The current Tariff Act, which has gone through nearly a century of revisions, currently contains a typo, with the phrase “vessel vessel” because of the incorrect legislative text of the October revision.

The federal government has since refused disclosure of air freight manifests, citing the legislative intent of the technical correction bill.

Sharon Yamen, an associate professor at Western Connecticut State University who has studied the issue and currently serves as counsel to the Panjiva-ImportGenius lawsuit, told The Intercept that a plain reading of the law still shows that air freight manifests must be disclosed.

“They amended off the original language and not the amended language from July,” said Yamen. “If you look at the actual statute itself, there is a footnote noting that it was amending incorrectly.”

The original argument by the airline industry, that disclosure of air freight manifests requires a higher level of scrutiny, she added, “falls flat.” Companies also maintain the right to seek exemptions to disclosure for a variety of national security and trade secret purposes.

“Ultimately the reason they gave for the October amendment was because someone stated it was in the interest of security which was a false argument because our waterborne shipping ports are less secure than our airports,” Yamen said. “Anything can come in on a shipping container.”

Yamen argued that there is little reason not to treat air cargo any differently than sea vessels. “This information should be available.”