A little over a month ago the U.S. Census Bureau published a notice of proposed rulemaking for the elimination of the Electronic Export Information filing requirement for shipments between the United States and Puerto Rico and the U.S. Virgin Islands. While for the most part this notice has flown under the radar, the negative implications it poses over Puerto Rico’s economic data merits our attention.
Businesses that ship products to and from the U.S. and Puerto Rico may already be familiar with the extra requirement. For the benefit of those that are not, it is required by federal law that any shipment valued at over $2,500 or requiring an export license be reported to federal authorities. The information required – which includes data related to the shipper, product information, and destination – is known as Electronic Export Information (EEI) and is used for export monitoring and data processing.
Federal enforcement agencies use the data to prevent unauthorized shipments from being exported and the U.S. Census Bureau uses it for its calculation of monthly trade data. All of which begs the question: If this information has substantial effects on the soundness of economic data, then why is the federal government seeking to remove this requirement for Puerto Rico?
The answer to this question brings to the surface, once again, the issue of Puerto Rico’s political status. That is because even though filings are not required for shipments between the states, EEI filings are required for shipments between Puerto Rico and the U.S. mainland. For this reason, and in line with campaign promises, former Governor Ricardo Rosselló issued Executive Order 2017-030 on April 24, 2017 calling for the establishment of an Interagency Working Group to ultimately eliminate the federal EEI requirement.
The pro-statehood political party in Puerto Rico has long argued this unequal treatment perpetuates the perception that Puerto Rico is not a part of the U.S. economic market. Beyond that, since U.S. mail carriers are also held responsible for reporting this information, large delivery service providers opine that small to medium-size businesses are unable to comply with federal regulation.
To fulfill the mandatory requirement, carriers provide the service and pass through the associated costs to clients, which results in higher shipping costs for products purchased from the U.S. This ultimately results in an additional burden on Puerto Rican businesses and consumers. However, it must be noted the information required by federal authorities is submitted online at no additional cost to the shipper.
While the concerns raised by opponents and the Executive Order are valid, it is also true that Puerto Rico has benefited from a rich level of detailed data provided by the EEI filings. Because Puerto Rico does not participate in many other Census Bureau surveys, the implication of losing valuable trade data is significant. Without the data compiled by the U.S. Census Bureau, economists cannot determine the correct mix of goods and services produced, which can then lead to significant distortions in measures of real GDP.
Real GDP removes the effect of price changes and is widely recognized as the “gold standard” for measuring the performance of the economy. The so-called burden on businesses to report data on shipments will only be exacerbated if Puerto Rico loses the data that is currently captured. Government officials, policymakers, and business executives will be forced to rely on less robust sources of information to guide their economic decisions. At such a crucial time in Puerto Rico’s economic history, there is no margin for error. Puerto Rico desperately needs reliable statistical information. Belittling the value of the data we currently use on the basis of political status is simply too dangerous.
When this issue was before the Bipartisan Congressional Task Force on Economic Growth in Puerto Rico established by the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), lawmakers stated that:
The Task Force has been advised by federal officials that elimination of the EEI requirement may (1) negatively impact the ongoing, joint federal-local effort to modernize the methodology used to calculate Puerto Rico’s gross domestic product (GDP) and other macroeconomic statistics, and (2) make it more difficult to measure trade between the states and Puerto Rico.”
They further urged federal and local officials to “conduct a thorough evaluation of its regulations requiring EEI filings for shipments between the states and Puerto Rico”. This concern is shared by many economists on the island that rely on the trade data to study and make recommendations on the economy of Puerto Rico.
Congressman José Serrano has raised this issue in Congress and has been successful in including language in two consecutive House Appropriations Committee Reports. The most recent report language concludes:
Interstate Commerce.–The Committee remains concerned about the Electronic Export Information (EEI) requirements located in 15 CFR Part 30, which mandate reporting for certain goods between the States and Puerto Rico and the U.S. Virgin Islands, and understands that the Commerce Department, in coordination with the Government of Puerto Rico, will stand up a working group to explore alternative options, and that the Census Bureau will be issuing a Federal Register Notice soliciting stakeholder insights. The Committee believes that the EEI imposes undue costs and burdens on companies seeking to do business in Puerto Rico, and serves as a disincentive to investment. The Committee reminds the Department that the 2016 Bipartisan Congressional Task Force on Economic Growth in Puerto Rico recommended the Department conduct a thorough evaluation of its regulations requiring EEI filings and assess alternative data sets, including Puerto Rico’s SURI system (Sistema Unificado de Rentas Internas) that could be used without modification. The Committee directs the Department, within 90 days of enactment of this Act, to submit a report to the Committee with an analysis of alternative methods of developing GDP data for Puerto Rico without using EEI information, and to provide a plan to phase out the use of EEI data, including a timeline for implementation of these changes.
While these are all steps in the right direction to ensure that policymakers and the public at large have the most accurate and reliable statistics possible for Puerto Rico, any efforts to substitute key economic data must be carefully studied and overseen. Despite years of promises from government officials to develop an alternate means to capture this data, the new source has not materialized.
There is little doubt that reliable data is necessary to push forward a sound economic plan for Puerto Rico. While the downside risks of distorting economic data are grave, the benefits claimed from eliminating the data collection survey come at an uncertain gain.
Regardless of whether you are positively or negatively affected by this federal regulation, it is important to weigh in the debate. Written comments to the Census Bureau must be received on or before November 16, 2020 and can be submitted electronically at http://www.regulations.gov/.