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Trump Pitches External Revenue Service to Collect Tariffs: What to Know

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Trump Pitches External Revenue Service to Collect Tariffs: What to Know

President Trump has promised to generate a “massive” amount of revenue with tariffs on foreign products, an amount so big that the president said he would create a new agency — the External Revenue Service — to handle collecting the money.

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Mr. Trump said on Monday in his inaugural address, where he reiterated a promise to create the agency. “It will be massive amounts of money pouring into our Treasury coming from foreign sources.”

Much about the new agency remains unclear, including how it would differ from the government’s current operations. Trade experts said that, despite the name “external,” the bulk of tariff revenue would continue to be collected from U.S. businesses that import products.

Here’s what you need to know about what Mr. Trump has proposed.

Tariff revenue is currently collected by U.S. Customs and Border Protection, which monitors the goods and the people that come into the United States through hundreds of airports and land crossings.

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This has been the case nearly since the country’s inception. Congress established the Customs Service in 1789 as part of the Treasury Department, and for roughly a century tariffs were the primary source of government revenue, counted in stately customs houses that still stand in most major cities throughout the United States, said John Foote, a customs lawyer at Kelley, Drye and Warren.

With the creation of the income tax in 1913, tariffs became a minor source of government revenue, and after the Sept. 11 attacks, the customs bureau was moved from the Treasury Department to the Department of Homeland Security.

Customs officials today collect tariff revenue, but also monitor food safety, enforce intellectual property rights, inspect crops for pests and screen imports for goods made with forced labor, Mr. Foote said.

Creating a new agency is the provenance of Congress, not of the president, so it is not clear how the administration might go about establishing the new unit.

In an executive order issued on Monday evening, the president directed the leaders of Treasury, Commerce and Homeland Security to “investigate the feasibility of establishing and recommend the best methods for designing, building, and implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues.”

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The money that the United States collected from tariffs grew significantly as Mr. Trump imposed levies on foreign metals, solar panels and thousands of goods from China in 2018 and 2019. The government collected $111.8 billion in trade duties, taxes and fees in 2022, up from $41.6 billion in 2018, according to Customs data.

That number could increase by multiples if Mr. Trump follows through on his promises to tax all American imports, and impose even higher levies on products from China. On Monday evening, Mr. Trump said that he planned to move forward with a 25 percent tariff on Canada and Mexico on Feb. 1, and was considering a universal tariff on all foreign products.

Mr. Trump and other Republicans are eagerly looking to tariff revenue to help to finance tax cuts. Still, tariffs are likely to earn just a tiny slice of what the United States takes in through income taxes. Economists say revenue from even very substantial tariffs would likely max out in the hundreds of billions of dollars, while the United States took in $4.2 trillion in income and payroll taxes last fiscal year. Tariffs would also decrease U.S. deficits, lower growth and raise consumer prices, the Congressional Budget Office calculated last month.

Mr. Trump insists that foreign countries pay the tariffs but it’s actually so-called importers of record — the companies responsible for bringing products into the United States — who pay tariffs to the government. Most importers sign up for a government electronic payment system, and the tariff fees are automatically deducted from their bank accounts as they bring products into the country.

Importers of record can be of any nationality: U.S. companies, U.S.-based divisions or branches of foreign companies, or foreign companies directly importing, without a business presence within the United States, Mr. Foote said.

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But Richard Mojica, a customs lawyer at Miller & Chevalier, said U.S. importers “are usually U.S. companies.” He said that Mr. Trump had created confusion by saying that the External Revenue Service “would collect duties and tariffs ‘that come from foreign sources’ — a term that nobody understands.”

“I don’t see how the E.R.S. could collect tariff payments from a foreign manufacturer who is not also the U.S. importer of record,” Mr. Mojica added.

The question of who pays the tariff to the government is somewhat distinct from the issue of who ultimately bears the tariff’s costs. The importer can pass the cost of the tariff on to American consumers in the form of higher prices, or it could try to force its foreign factories to sell its goods more cheaply.

Every case is different, but several economic studies have found that American consumers mostly bore the brunt of Mr. Trump’s previous tariffs on China.

Some trade analysts say that the name “External Revenue Service” is an effort to disguise who really pays for tariffs.

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Scott Lincicome, the vice president of economics and trade at the Cato Institute, which supports free trade, called the agency’s name “more branding than substance — and misleading branding at that.”

“Trump could call it the ‘Foreigners Pay the Tariffs Agency,’ and it still wouldn’t change the fact that Americans really are,” he said.

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Amazon MGM Studios’ ‘Project Hail Mary’ rockets to the top of the box office

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Amazon MGM Studios’ ‘Project Hail Mary’ rockets to the top of the box office

The Ryan Gosling-led “Project Hail Mary” rocketed to the top of the box office this weekend, marking a big win for Amazon MGM Studios.

The film — which stars Gosling as a science teacher who embarks on a space mission to save humanity — hauled in $80.5 million in the U.S. and Canada, making it the biggest domestic debut of the year so far. Globally, “Project Hail Mary” brought in $140.9 million.

The movie is an adaptation of a novel by Andy Weir, author of “The Martian” — another successful book-to-screen adventure. The big opening weekend for “Project Hail Mary” is a boost for Amazon MGM Studios, which had heavily promoted the film as an example of the big blockbusters it could produce.

“We believe deeply in the Hail Mary, and it’s clear audiences do as well,” Kevin Wilson, head of domestic theatrical distribution for Amazon MGM Studios, said in a statement. “What we’re seeing in theaters —the energy, the exit scores, the word of mouth — is everything we believed this film would deliver.”

Walt Disney Co. and Pixar’s “Hoppers” came in second at the box office this weekend with a domestic total of $18 million. The original animated film has now garnered $120.4 million in the U.S. and Canada since it debuted in theaters earlier this month.

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Indian action film “Dhurandhar The Revenge” came in third with $10 million, followed by Disney-owned Searchlight Pictures’ horror film “Ready or Not 2: Here I Come” and Universal Pictures’ romance “Reminders of Him” rounding out the top five.

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Testing for toxins in smoke-damaged homes could be mandatory. What to know

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Testing for toxins in smoke-damaged homes could be mandatory. What to know

When the January 2025 firestorms swept through Altadena and Pacific Palisades they not only burned down homes but left thousands still standing riddled with smoke damage.

The disaster set the stage for lawsuits by fire victims who alleged their homes were filled with toxic contaminants, yet insurers refused to do hygienic testing and properly clean and make them habitable again.

This week, a much-anticipated bill was unveiled in the Legislature that would establish first-in-the-nation limits for smoke-damage contaminants, require testing and force insurers to restore homes to their prior condition.

The proposed law specifically applies to homes damaged in urban or “wildland-urban interface” fires — such as those in January 2025 — where burning structures, cars, utilities and other items generate more toxins than a rural wildfire.

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Authored by Assemblymember Mike Gipson (D-Carson) and sponsored by Insurance Commissioner Ricardo Lara, Assembly Bill 1795 follows similar legislation introduced by Assemblymember John Harabedian (D-Pasadena).

That bill would apply to homes, schools and workplaces — and their properties — requiring insurers to meet existing health standards for lead and asbestos cleanup, while having the state develop additional ones for other contaminants.

Lara’s bill also follows a report issued last week by a smoke-damage task force he established last year, which established the framework for the bill. However, consumer advocates said it was stacked with members tied to the insurance industry.

Lara, who has been asked to step down by critics over his handling of insurers’ claims practices, has defended the task force and his handling of the wildfires, noting his department is investigating insurers.

Here’s what to know about the legislation, which still must go through legislative hearings before an Assembly vote.

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Why is this bill a big deal?

Under the current system, insurers are not required to pay for expensive hygienic testing for toxins in smoke-damaged homes. That has been a big source of friction with fire victims, fueling the ongoing litigation over the matter.

Under the bill, however, insurers would be required to cover testing for lead, asbestos and other contaminants that have been found in soot, char and ash inside homes after a wildfire. Such testing would be required both before and after any cleanup work has begun to ensure the home is left in “preloss” condition. Additionally, it sets timelines for claims payments and prohibits insurers from halting payments for temporary housing until a home is cleared as safe, if a state of emergency has been declared.

Who will determine what levels of various contaminants are safe?

The bill requires the California Environmental Protection Agency to develop minimum sampling, testing and chemical screening levels by June 30, 2027. The requirements would be most rigorous in a “high-impact” zone within six miles of a fire perimeter, with potentially lesser requirements for residences as they get further away. The zones and testing requirements could be adjusted for specific fires.

The agency also is required to establish training standards and certification requirements for inspectors and others involved in the testing and restoration of properties.

How does this help the January 2025 fire victims?

More than 40,000 insurance claims have been filed as a result of the Eaton and Palisades fires, with more than 13,000 for smoke damage.

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The bill allows the EPA, state and local agencies to establish expedited “interim” standards. Insurance department spokesman Michael Soller said this provision was written with the January 2025 fires in mind.

What do consumer advocates say?

They generally support the proposed changes. Amy Bach, executive director for United Policyholders in San Francisco, who sat on the smoke task force and was critical of its makeup, said she was pleased that the bill “acknowledges the perspectives of the homeowners and will advance their interests in an important way.” But she expects insurers will complain it’s too costly and threaten to leave the state if the bill is not toned down.

Attorney Dylan Schaffer, who has sued the California Fair Plan, the state’s insurer of last resort, over its smoke-damage practices, said the bill was a “very strong nod in the right direction” though it will be the final standards established by the state for testing and cleanup that will be most important. “It always gets down to the details,” he said.

What is the industry’s reaction?

The insurance industry is expected to lobby for changes to the bill, suggesting it could impose burdensome costs on companies.

Karen Collins, a vice president of the American Property Casualty Insurance Assn., said that “insurers support science‑based approaches to evaluating smoke damage and guiding appropriate remediation” but want to “help ensure the bill strikes a reasonable balance — protecting consumers while preserving insurance affordability, availability, and market stability.”

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Rex Frazier, president of the Personal Insurance Federation of California, an industry group representing state property and casualty insurers, also said the bill lacks analysis of the “tradeoffs” between the higher claims payments that will result from it and and its effect on consumer premiums.

He also was concerned that the bill appears to bypass traditional rule-making procedures and allow the state EPA to establish the toxic contaminant and other standards without public hearings.

Soller said the intent of the bill is to allow the agency to forgo hearings only in developing interim standards.

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San Diego County agency selling water to keep its high rates in check

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San Diego County agency selling water to keep its high rates in check

San Diego County’s water agency is selling some of its water to another Southern California agency to help limit increasingly high water costs for 3.3 million people.

The water is going to Western Municipal Water District, which serves a growing area of nearly 1 million people in Riverside County, including Corona, Riverside and Temecula.

The San Diego County Water Authority will transfer at least 10,000 acre-feet of water per year over the next 21 years, enough for about 30,000 typical households.

The agencies said the deal will be worth about $100 million over the first five years.

The San Diego County agency has invested heavily to get more water in recent decades. In 2003, it struck an agriculture-to-urban transfer deal and it also buys water from the Carlsbad desalination plant under a 30-year agreement. These actions have brought San Diego County plentiful water — also some of the most expensive in the state. At the same time, conservation efforts in San Diego County have reduced water needs.

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The San Diego County Water Authority delivers water to 22 cities and other agencies. Last year its board approved raising wholesale water rates 8.3%, which drew criticism from residents who said they were already struggling to afford their water bills.

Board Chair Nick Serrano said the deal “allows us to maximize the value of the investments San Diego County residents made over decades, strengthen water reliability, and do so in a way that is mindful of affordability.”

The two agencies said in a joint statement on Thursday that for Western Municipal, the additional water will help during drought and ensure reliable water without the cost and time involved in developing new water infrastructure projects.

The water will move from one area to the other through the pipelines of the Metropolitan Water District of Southern California, the regional wholesaler that imports water from the Colorado River and Northern California. Both San Diego County and Western Municipal are members of the MWD.

An agreement between the MWD and the San Diego County Water Authority last year ended a 15-year legal battle over water costs and cleared the way for San Diego County to start selling some of its excess water to areas that need it.

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