What if it all fails? There is a tariff IT czar and I have questions

Meet the Anthony Fauci of tariffs: Sanjeev “Sonny” Bhagowalia is the guy who has to run the collection systems that will ultimately bring $3 trillion into the treasury. Or not.

I want to get into the nuts and bolts of tariffs today. I think President Trump wanted to do this tariff thing for a very long time. To him, it’s not as much about the money, as it is about respect in the world. Other nations disrespect the United States if they restrict our goods, or tax our goods, selling into their markets, while promoting goods made in their own nations to sell to us. That’s the gist of it. But money is the reason for tariffs, because that’s how they are paid. So I want to look at that, from the practical side. I found the person who has to make it happen, and I have some questions.

Like the billboard paid for by the Canadian government says, “tariffs are a tax.” Indeed, they are. They are collected by the U.S. Customs and Border Protection agency, which operates under the Department of Homeland Security. Tariffs are set under the authority of Congress, which has delegated it to the executive branch, meaning the president. Under a confusing series of laws, the president and U.S. Trade Representative have authority to impose tariffs for trade enforcement or national security. It’s under these laws that President Trump made his Liberation Day announcement.

“I'd throw a tax on every Mercedes-Benz rolling into this country and on all Japanese products, and we'd have wonderful allies again.” — Donald J. Trump, 1990.

Tariffs are charged on various goods entering the U.S., which relies on the Harmonized Tariff Schedule (HTSUS), which is kept by the U.S. International Trade Commission. That classifies goods by exporter, type of goods, etc. so the correct tariff can be ascertained. Then the importer submits a “declared value” (which anyone crossing a border knows), that is checked against various valuation rules to ensure that the declared value is in line with market value for those goods.

Goods cannot enter the U.S. market until tariffs and duties are paid. These are calculated and paid through a computerized system known as the Automated Commercial Environment (ACE). ACE is run by the CBP. As of 2020, it was the last remaining legacy system still running on a mainframe system, but then it got a $15 million technology investment from Congress via the General Services Administration (GSA)’s Technology Modernization Fund (TMF). [Editor note: The government loves three-letter acronyms.]

The man who runs ACE has the longest job title I’ve ever seen in the government: “Assistant Commissioner, Office of Information and Technology and Chief Information Officer, U.S. Customs and Border Protection, Department of Homeland Security.” His name is Sanjeev “Sonny” Bhagowalia, and he was tagged in 2024 as a “top cyber exec to watch” by WashingtonExec.com. As my brother Jay told me, there’s got to be a 70-year-old somewhere who understands all these systems and can tell everyone what needs to get done. I don’t know how old Sonny is, but he fits the bill.

From his bio at CBP’s website:

Mr. Bhagowalia has over 39 years of senior technical, managerial, and executive leadership experience in private industry, the U.S. Government, and state government. Mr. Bhagowalia has spent over 22 of those years in senior executive capacity, including over 21 years as a member of the Senior Executive Service (SES), one year as a Senior Level (SL) in the Federal Government, and three years as a Senior Executive in State Government.

Sonny oversees the ACE platform and its associated contracts. One of these is a $10 million slice of the $44 million “ACE and ATAP Platforms Application Development and O&M Support bridge contract.” That was awarded this year to Dev Technology Group, Inc, out of Reston, Virginia. Dev is headed by Sanjeev Duggal, and is a growing government contractor that supports various systems in the DoD and other agencies. In 2022, Sonny published an update in LinkedIn on how the technology upgrade to ACE was going. It seemed to be going well. You can read the whole thing if you like. Sonny is a smart guy.

So I thought I’d ask him some questions. I’d have called him myself, except I don’t have his phone number (which is not published), and I would presume he’s too busy a guy to take phone calls from random bloggers (even one who is a cybersecurity professional) like me.

1. How big a job is it to implement all of Trump’s new tariffs?

I mean, there was already a giant matrix of tariffs as part of the HTSUS, various trade agreements, and the like, existing in ACE. Now, effective all at once, this new list, which seems as if it could have been generated by Grok, has to go into effect. How big a lift is this? A day, a week, a month, six months?

2. What happens during the time when the new tariffs are in effect but not implemented in ACE?

Goods that are currently in customs hold, will they have to be re-priced and collected in the tariff system? Will this create a backlog of goods at ports and other entry points? How will this affect large importers, or middlemen like Amazon? Can ACE handle the work and catch up?

3. What happens when something is not coded correctly? How many protests do you expect as a result of sloppy classifications given the speed of Trump’s implementation?

ACE has a mechanism for protests. I am no expert on any of this, but it would seem that protests can hold up the work and cause backlogs. Is this accounted for in the plan and how much of an effect is this to the overall implementation?

4. What about countries and isolated islands that have tariffs but don’t necessarily exist in the trade system? How will that affect our ability to deal with collection?

I think Trump’s announcement includes some island in the sub-antarctic ocean where nobody but penguins live. Is it silly to have to implement these things when ACE is designed for the current global trade system, which is highly automated?

5. Can ACE handle the additional volume due to these massive tariff changes? Will it crash?

Even with the modernization and an additional $10 million for support, is this an example of, say, President Obama’s healthcare.gov, which failed due to unanticipated demand? What happens if ACE crashes and nobody can pay their tariffs?

6. How much “extra” money will come into the treasury from additional tariff payments? Since ACE is better equipped, can this be reported in real time?

It’s great to be able to see all this wealth and tribute rolling into the treasury. If President Trump requested a monitor in his office, showing real-time receipts as it happens, can ACE do that? If Trump could see it, can’t that be posted publicly? We want to see the fruits of our sacrifice and “tough love.”

7. Will the new tariffs kill the Customs Bond market? How are surety companies that deal with the Treasury Department reacting?

Goods coming into America require an importer. For goods with values over a certain threshold, Customs Bonds are required to ensure the tariffs and duties are paid. The DOJ handles the surety companies that issue these bonds. But the bonds are payable to CBP and administered through ACE for imports that are bonded. What happens if bonds are revoked or companies can no longer obtain bonds? What will that do to the system? Can ACE handle that?

8. Are you personally proud to be part of this effort?

Mr. Bhagowalia has decades of government service in the IT area. If there’s an expert on the level of Dr. Anthony Fauci, who ran NAIAD since the administration of President Ronald Reagan, Sonny is in the running for that honor. I would want to know if he’s proud to put ACE forward as the “rubber meets the road” solution supporting the president’s plan to return America to a “Golden Age” of wealth, respect, and power.

9. What is the risk that the whole thing won’t work? When will we be able to see if it does?

I think the markets tanking is as much market mechanics as it is a reaction to the tariffs. When the move downward starts, the AIs and algorithms that chase profits begin looking for the “bottom” to get the best deals, and those who buy “puts” (or short options anticipating a drop in value) want to ensure they get their profits. The downward momentum is sustained by that pressure to get the last penny of deal money and profit. I think all the talk of recession is a bit premature.

After all, if the government brings in a trillion dollars in tariff money (or the estimated $700-$835 billion), the resulting drop in deficits could generate enough to spark the economy into growth mode. (Not that anyone believes it, but it’s still too early to sign a death certificate.)

But without ACE, and the good work of Sonny, Dev Technology and other government contractors, none of that money will show up. So, Mr. Bhagowalia, what’s the real risk here? If ACE fails, are we, as the kids say, cooked?

If we’re already cooked, then it’s good to know it now. If anyone reading this knows Sonny, please forward this to him. I’d love to know his answers.

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