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CUSTOMS AND INTERNATIONAL TRADE
CARGO SECURITY
C-TPAT Best Practices Published by Customs
04/06
http://www.customs.ustreas.gov/xp/cgov/import/commercial_enforcement/ctpat/
TRUCK E-MANIFEST UPDATE
04/06
On April 18th, Customs issued a bulletin announcing a May
15 deadline for advance notice of shipment if the port is ACE implemented. Truck e-manifest, PAPS or QP must be filed in advance of arrival. If not, the truck will not be permitted to proceed
or unlade.
For a list of ACE deployed port as of March 24, 2006, click here.
C-TPAT SURVEY
02/06
Stepping in where
few have had success, the NIT League is sponsoring a survey about C-TPAT. It seeks feedback from importers and their service providers about the program. You are not required to be a member
of the NIT League or C-TPAT to participate.
One of the more intriguing questions is “What would convince you to participate in C-TPAT” and asks respondents to rank their reasons.
Participants are also asked to rank the barriers, as well as to articulate the advantages and disadvantages they perceive in the program, for their own companies and from their experiences.
Throughout the survey, parties are also asked to identify issues about which Congress should be informed regarding the various topics.
The survey can be found at http://survey.lbjlivewire.com/index.php?sid=3. Now is the time to weigh in!!
MORE C-TPAT STATISTICS
01/06
In recent public comments, Customs advised that 1,300
security audits have been completed and 400 companies are now certified. Another 2,460 companies are under review, and 136 companies have been granted Tier 3, or lowest risk, status.
The C-TPAT best practices publication is due sometime in January, while the next C-TPAT seminar will be held in Costa Mesa, CA, March 1 through 3, 2006.
The long promised web portal, with communication and self-help tools, is now expected to be launched at the end of March.
Customs Update: Security and Compliance
(Published in the JOURNAL of COMMERCE OnLine July 26, 2005)
 to view document in printable format
Given the current climate, it is almost impossible to write a regular column without hitting one of two
subjects -- security or compliance. Well, here is an attempt to address both topics in the same column!
There are numerous requirements facing financial institutions when it comes to knowing customers and
reporting their financial transactions. Immigration and Customs Enforcement (ICE) recently published
criteria it calls "red flags." Given the agency's generally secretive nature, it is remarkable that ICE publicly
announced anything of a compliance nature. As you read through these criteria, think about substituting
your customers and bear in mind, the USA Patriot Act requires that companies -- even international
traders and their brokers, forwarders, truckers, carriers and other service providers -- know their
customers and the source of the funds with which they are getting paid. Whether you are a seller of goods or services, ask yourself, do any of the following sound familiar?
ICE's "red flag" indicators include:
Any evidence of structuring, including:
-- Frequent transactions or purchase of negotiable instruments $10,000 or under in order to avoid filing a Currency Transaction Report (CTR).
-- Customers making cash deposits $10,000 or under at multiple locations or cash deposits made to one account at the same location by multiple individuals.
-- Customer depositing $10,000 or under after being told of CTR reporting requirement.
-- Splitting large currency deposits among several accounts.
-- Frequent/unusual use of night deposit drops or ATM machines for deposits.
-- Purchase of any monetary instrument by a non-customer with large amounts of currency.
--Transactions involving a high volume of incoming or outgoing wire transfers, with no logical or apparent
purpose, that comes from, goes to, or transit[s] through locations of concern ([e.g.,] sanctioned countries, sympathizer nations, non-cooperative nations).
-- Wire transfers by charitable organizations to companies located in countries known to be bank or tax havens.
-- Using multiple accounts to collect funds that are then transferred to the same foreign beneficiaries.
Cash debiting schemes in which deposits in the U.S. correlate directly with ATM cash withdrawals in countries of concern, and vice-versa.
-- Issuing checks, money orders, or other financial instruments, often numbered sequentially, to the same person or business, or to a person or business whose name is spelled similarly.
-- Reluctance or refusal of individuals to provide identifying information to bank employee.
-- Transactions inconsistent with usual and customary business or personal practices ([e.g.,] wire
transfers that do not coincide with the type of business or activity in which customer is normally engaged;
negotiation of third party checks inconsistent with type of business customer is involved in).
-- Sudden, unexplained change in banking habits or activity.
-- Transfer of funds to a commercial account with no logical relationship or connection to the sender of the funds ([e.g.,] jewelry store account wiring money to auto parts exporter)."
ICE goes on to state:
Certain types of financial transactions serve as indicators, or "red flags" that call for further scrutiny by the
financial, commercial, trade and transportation sectors. The[se] indicators...may, either by themselves or
in conjunction with other factors, raise the level of suspicion regarding a transaction. These indicators are characteristic of the kinds of activity that Cornerstone targets.
Recognizing that these red flags are dynamic and evolving, Cornerstone will continue to appraise the
U.S. financial and trade sectors of newly identified indicators through the Cornerstone Report, a quarterly
newsletter published by ICE, designed to share information between ICE and the financial and trade community.
Notice the three references above by ICE to the trade community! When international traders look at
these criteria, they should sound familiar. We've all been faced with the potential customer whose shipment just gives us a "bad feeling." If not, consider:
-- Payments with negotiable instruments of less than $10,000 which are obviously designed to avoid the Currency Transaction Report requirements.
-- Payments for goods or services with more than one wire transfer, check, money order or other negotiable instrument.
-- Requests for invoices issued at less than the full value of the transactions, such as for the balance due
only, or a percentage of the value because of the claimed high rates of duty which apply in the destination country.
-- Customers who decline to give all the details needed to determine the proper classification of the goods or their license status.
-- Customers depositing funds on account at just under $10,000.
-- Paying in cash.
-- Frequent/unusual requests for special services.
-- Customers who request special services and do not question the price for those services.
-- Payment of a customer's bill by a third party.
-- Transactions involving incoming or outgoing wire transfers that come from, go to, or transit through countries of concern.
-- Wire transfers from companies located in countries known to be bank or tax havens.
-- Using multiple accounts to pay bills.
-- Repeatedly sending shipments to consignees often numbered sequentially, to the same person or business, or to a person or business whose name is spelled similarly.
-- Repeatedly sending shipments to the same consignee located at addresses which are only slightly different.
-- Reluctance or refusal of individuals to provide identifying information to employees.
-- Transactions inconsistent with usual and customary business or personal practices.
-- Sudden, unexplained changes in shipping habits or activity.
-- Transfers of funds to a commercial account with no logical relationship or connection to the sender of
the funds (e.g., an electronics store shipping and paying for cigarettes).
If there remains doubt anyone can get taken, one need only keep in mind the cases which arose in the
New York area shortly after the Berlin Wall fell. An anomaly was discovered when New York Customs
noticed a huge spike in the value of goods being imported as American goods returned (AGR). [If
American-made goods are returned in their original condition and not advanced in value in any way, they
enter duty-free.] An investigation was opened when it became clear the scheme was widespread and impacted many industries.
The way it worked: Previously unknown buyers (the first red flag) would contact well-known American
corporations seeking to buy product for cash (the second red flag) which, it was said, would be sent to
one or another of the former Eastern bloc countries. Since these were cash sales, they were processed
outside the usual channels (the third red flag) of financial and due diligence processing. The goods were
delivered to the outbound carriers which took them to their European ports of discharge.
Unbeknownst to the American sellers, these purchases were actually being used to launder money.
Once the goods arrived in Europe, they were shipped back to the States, entered as American goods
returned and cheaply sold in the open market, often to the original sellers' regular customers. In fact, one
way industry learned about the problem was its purchasers refused order renewals because they could
get product elsewhere for less, but the American companies did not have other sales outlets.
Can you imagine being in the pharmaceutical or candy business and finding out your product is on the
market but you weren't the one selling it! How could you be sure there was no product tampering? How
would you defend a lawsuit if someone was injured or got sick? Further complicating the matter is the
likelihood that many of these American sellers were claiming drawback on the exports and now those
goods were being reimported without duty being paid, when it was clearly due. Of course, many of these
goods may in fact not have been U.S. made, so they would not be eligible for an AGR claim in any case!
The way the mystery was solved was through cooperation between industry and government, but it
wasn't a matter of observing likely culprits or other good investigative techniques which brought the
problem to a head. The case was solved by relying on the inherent interest of most people to get
something for free. Some of the affected companies put serially numbered postcards in with their
products inviting consumers to return them for a free cap or t-shirt. When the postcards arrived, they
could be traced to specific shipments and so the culprits were caught. Try explaining that turn of events to your management!
PIERPASS COMING SOON
06/05
Beginning on July 23, 2005 (although collection is put off until the 25th), most cargo exiting terminals at
Los Angeles and Long Beach ports will be required to pay a Traffic Mitigation Fee (TMF). PierPass is the organization set up by the area container terminals to manage the TMF program.
Peak hours are defined as 3 a.m. to 6 p.m. If cargo is picked up during off hours, the TMF will not be
assessed. The fee is $40 per TEU/$80 per FEU and applies to imports and exports. It is due from the
cargo owner (consignee or shipper), not the trucking company or other carrier. For more details, see https://www.pierpass-tmf.org/PierPASS .
Cargo owners must register to participate. Originally, to qualify for credit, a cargo owner had to move a
minimum of 2,000 containers per year. Objections from the trade have reduced that number to 500
containers per year. If you do not meet that minimum, what arrangements have you made with your service providers? Time is running out!
C-TPAT UPDATE
06/05
On March 25, 2005, Customs announced new security criteria for importers. New applicants must incorporate these criteria into their security programs and importers already part of the program must
apply these requirements on a phased-in basis. They consist of:
PHASE 1 – HARDENING OF THE PHYSICAL SUPPLY CHAIN: Under the first phase, importers have until
May 24, 2005 to accomplish the following:
Container Security (seals, inspections, storage).
Physical Security (fencing, lighting, parking, building structure, locking devices and key controls, lighting, alarm systems, video surveillance cameras).
Physical Access Controls (employees, visitors, deliveries, challenging and removing unauthorized persons).
PHASE 2 – INTERNAL SUPPLY CHAIN MANAGEMENT PRACTICES: No later than July 23, 2005
importers must review and enhance the following internal or procedural security elements:
1. Personnel Security (pre-employment verifications, background checks, personnel termination
procedures).
2. Procedural Security (documentation processing, manifest procedures, shipping and receiving, cargo discrepancies).
3. Information Technology Security (password protection, accountability).
4. Security Training and Threat Awareness.
PHASE 3 – BUSINESS PARTNER REQUIREMENTS: During the final phase, importers will have until September 21, 2005 to address the Business Partner Requirements. In order to do so, importers must
have written and verifiable processes for the selection of business partners, including manufacturers,
product suppliers, and vendors, and documentation substantiating that business partners throughout
the supply chain are meeting C-TPAT security criteria, or equivalent supply chain security program criteria administered by a foreign Customs administration.
During Customs’ C-TPAT training which took place in Miami between April 25 and April 28, 2005, Customs placed a great deal of emphasis on container inspections and integrity. One of the steps
Customs expects importers to implement with each of their foreign vendors is a seven-point container
inspection plan. In the words of Customs: “[c]ontainer integrity must be maintained to protect against the
introduction of unauthorized material and/or persons. At point of stuffing, procedures must be in place to
properly seal and maintain the integrity of the shipping containers. A high security seal must be affixed to
all loaded containers bound for the U.S. All seals must meet or exceed the current PAS ISO 17712 standards for high security seals.”
As noted, Customs also announced a seven-point container inspection program which consists of checking the front wall, left side, right side, floor, ceiling/roof, inside/outside doors and
outside/undercarriage. Customs expects business partners and importers to have in place procedures
which verify the physical integrity of the container structure before stuffing. That process is also expected
to insure the reliability of the locking mechanisms of the doors, plus vendors are also expected to have in place written procedures dealing with how seals are controlled and affixed.
Existing C-TPAT members will not be required to submit new documentation to Customs, but can expect
when validated to have these criteria checked. Similar minimum requirements will soon be announced for other categories of C-TPAT members, with carriers likely to be the next group impacted.
Commissioner Bonner has also spoken publicly and again at the training session about a tiered
approach. The first benefits (credits in the targeting system) arise when a company submits its
application and security plan Executive Summary. A higher level of benefits will apply once a company is
validated, but the greatest benefits are promised for those companies which are validated and whose
security measures exceed the minimum standards announced by Customs. Part of this package of
benefits is the so-called “green” lane, which promises there will be no inspections for security reasons and only random checks.
During its C-TPAT training, Customs explained it is validating the highest risk trade lanes first, but there
is no agreement between the U.S. and China, so U.S. Customs Supply Chain Security Specialists are
not allowed inside China to conduct validations. On a hopeful note, there were representatives from 22
foreign countries in attendance at the training session, including the Chinese. Perhaps the situation will change in the near future?
Customs Update: Best Practices
(Published in the Journal of Commerce OnLine May 2, 2005)
for a printable version of this article.
Much has been said in a variety of fora, including this column, about how the various programs being
energized by Customs have little, if any, applicability to small- and many medium-size companies.
However, to its credit, at least one Customs' publication offers a blueprint for companies of any size to
follow. Entitled "Best Practices of Compliant Companies," in it, Customs lays out a roadmap that companies of any size can and should follow.
1. Have management commitment. Customs' proposal talks in terms of a written corporate policy and
board buy-in, but a company of any size can be committed to compliance. Any owner can set the tone of
"we will do it right the first time!" It just makes good business sense to not have unpleasant financial
surprises. They always come long after the product is sold and far exceed any profit made on that sale.
2. State compliance and cost goals. Here Customs talks in terms of identifying and analyzing risk and
establishing ways to manage that risk. Customs goes on to suggest conducting post-entry reviews and
resolving control weaknesses in a timely manner. Every good owner interested in making money -- and
who isn't? -- does this on a daily basis. Most small companies say they rely on their broker and forwarder
for compliance. While a typical response, knowing your own product line and the attendant requirements
is still the best medicine for making sure your goods are quickly and inexpensively imported and exported. Doing your homework is not a new idea!
3. Develop formal policies. As we have all heard in other contexts, here, too, Customs talks in terms of
documented internal controls and verifying their accuracy. Well, every company has policies and
procedures. The only real difference between the small and big time operators is the larger the company,
the greater the need for written policies and procedures. The smaller the company, the more likely you get trained by the owner who also sets the policies.
4. Establish training programs. Customs identifies a best practice as making sure all employees
"receive appropriate training and guidance to effectively discharge their responsibilities." While framed by
Customs in the context of import activities, employees having the right tools to do their jobs efficiently should be the goal of every well-run company.
5. Conduct internal control reviews. Customs recommends internal and external testing of controls. Well,
this is done all the time by companies of all sizes in the tax context when the outside accountant reviews
the books, even if it is only once a year at tax time. Why not adopt the same approach with trade issues?
On a daily basis, we all read e-mails. How difficult is it to be in regular contact with your broker and
forwarder to get the latest information about regulatory changes which affect your products? It's also easy
to check the Web sites of your favorite news services for information about political issues which impact
your marketplaces, domestic and foreign. As one who has been in the international trade field for a very
long time, one of the most remarkable changes in recent years is the now routine coverage of trade issues by the general press.
6. Create compliance groups. Customs here is focused on fostering communication between departments and establishing controls and testing processes to verify the accuracy of the company's
internal controls system. Regardless of the size of the company, an owner can certainly set a tone of
compliance and foster open communications between employees. Obviously, as noted, the larger the
company, the greater the need for formalized written procedures, but even a small company owner can
foster cooperation rather than silence or competition between employees. While open communication
does not mean everyone knows the financial state of the company, it does mean that everyone knows
generally what is going on and everyone feels free to contribute. In the end, the boss makes the call, but
if everyone knows what is going on, studies have shown employees are much happier and stay longer.
Employee turnover is one of the greatest problems in industry today, it just plain costs money. Why wouldn't a good boss want to put steps in place to lessen that problem?
7. Access executives for needed resources. Customs addresses the practice of elevating the importance
of the trade function within a company. Frankly, in all companies now, if product doesn't get to market in a
timely and cost-efficient fashion, the company doesn't survive and that is true, regardless of size. So, open communication in a small company is just that much more important.
8. Develop compliance requirements for suppliers. Customs has made clear it wants U.S. companies to
use their buying clout to influence how their foreign partners behave. It is also clear that Customs is
doing this because, frankly, to get the type of buy-in for security measures needed at the international
level just takes too long. We are three-years-plus from September 11 and only now is the World Customs Organization perched to enact agreed upon security guidelines!
The Fortune 500 companies of the world will, of course, be able to use their buying clout in the intended
manner, but the littler guys are left in the dust in this context. Nonetheless, there are things even little
guys can do. Competition is tough and the market place is price driven, but that doesn't mean even a
one-person brand can't have a set of criteria to which each vendor must adhere. Every vendor already
adheres to criteria having to do with quality, price, delivery time and the like. How about adding simple
things such as, does the seller belong to any local professional organizations? While Chambers of
Commerce in the U.S. are not seen to be much more than social organizations, in foreign countries, they
are professional organizations. Do your suppliers belong to the local American Chambers of
Commerce? If not, why not? If you met your supplier at a trade show, what background information were
you given about the company beyond a slick brochure? Did you check their Web site? Did you check with
colleagues and competitors to get references? How did you confirm the financial viability of the supplier?
If the company isn't viable financially, how can you be sure it will make and deliver your product?
If you can afford the time and cost to visit vendors, have you visited this vendor? Can you do so before you
place an order? If not, use the Internet and e-mails and perform some due diligence. Slick brochures are
nothing more than a sales tool. Where is the substance to the supplier? Without due diligence, how do
you know your order will be properly filled? Dishonest people can put highly sophisticated scams
together. One of our clients was even shown a factory during an in-country visit. However, because he
didn't speak or read the language, that visitor did not realize he was being shown a factory at an address
which was completely different from that stated on the commercial documentation. It was all a scam and
now millions of dollars in duty differences are in question and the very survival of his business is at stake!
9. Establish a record-keeping program. Customs intends to audit companies. Even small companies
keep records, so it is not a great leap of procedure to make sure your trade records are in order. Can you
find documents based upon an entry number? Transport document? If not, why not? How do you track
shipments into your records? If by P.O. number, can you go from that number to the entry number? Air
waybill? Bill of lading? Think for one minute about how you would respond if you were asked by
Customs, Commerce, State, or any other agency to find a shipment and justify its processing. My broker
or forwarder handled it for me is not a defense, so how do you track shipments? How do you make sure they are being properly processed?
10. Partner with Customs. Here again, the big guys have the advantage as Customs looks to provide
extra benefits to those who participate in C-TPAT, CSI, ISA, FAST, ACE and similar programs. Frankly,
with the exception of ACE, CSI and FAST, few of these programs are even accessible to the little guy, but that doesn't mean you shouldn't keep trying.
Accessing ACE, Customs new automated entry system, has nothing to do with size and everything to do
with the benefits expand dramatically for the larger companies. FAST, the expedited clearance program
at the land borders, is more accessible for small companies simply due to geography; the closer you
and your supplier are to the actual point of crossing, the more likely you are to be able to participate,
regardless of size. As a generality, the big guys are able to take advantage of the program from further
geographic reaches. However, CSI is accessible to all, provided you ship from one of the CSI-approved ports. The list changes frequently so check the Customs Web site for the latest list.
ISA, or self-auditing, only works for the big guys, but clean and accurate books is a good practice for any
company. Then we come to C-TPAT. If there ever was a program which needs help, it is this one. It is
perfectly formed for the big companies and completely inaccessible for the little guys. True, there are
exceptions which arise due either to geography (nearness to the land border port), or luck (your supplier
also happens to service the big guys), but basic due diligence can be performed by any company of any
size. Until there are agreed-upon international security standards and they have been implemented, the
little guys are shut out of this program and it is all the more disappointing because the basis for C-TPAT is heightened security and there are few who don't think that is a good idea.
So we are left with the fundamental question every company owner or head should be asking,
regardless of size: what are my current due diligence practices and how they can they be improved in the short and long term?
SECURITY UPDATE
06/05
On June 23 and 24, 2005, the World Customs Organization will meet to discuss and likely approve a proposed set of international security standards. The effort has been led, not surprisingly, by CBP
Commissioner Robert Bonner. However, he and WCO Secretary Michel Danet have been traveling to many countries to drum up support. Recognizing that not all countries have the same capability to
implement these standards, the proposal includes incentives such as funding and technical assistance. For more details about these standards, visit the CBP website at www.customs.gov.
CHERTOFF DESCRIBES SECURITY
05/05
DHS Secretary Michael Chertoff has been delivering speeches saying combining advance information
and sophisticated risk assessment creates “security envelops,” meaning trusted people and cargo will
move more quickly. Commissioner Bonner refers to this same concept as the “green lane.” Either way,
for it to really work, somebody will first have to address the biggest hurdle – what about infrastructure limitations?
INT’L SECURITY STANDARDS
05/05
On June 23 and 24, 2005, the World Customs Organization will meet to discuss and likely approve a proposed set of international security standards. The effort has been led by CBP Commissioner Robert
Bonner. Recognizing that not all countries have the same capability to implement these standards, the
proposal includes incentives such as funding and technical assistance for lesser developed countries.
Key components to these standards are advance electronic cargo information, risk analysis and
targeting, with the goal of identifying potentially dangerous shipments and focusing inspectional efforts on them.
For more details about these standards, visit the CBP website at www.customs.gov.
FAST CARDS REQUIRED
04/05
FAST cards are now required for all BRASS shipments. Until May 15, non-compliance will be penalized. Thereafter, shipments will be refused.
FDA's Version of C-TPAT
for a printable version of this article
3/05
With passage of the Bioterrorism Act, FDA gained additional authorities related to food safety and
security. See e.g., Bioterrorism Act §§ 303-309. More significantly, the Bioterrorism Act amended the
Food Drug & Cosmetic Act (FDCA) to require FDA to focus its imported food examinations on shipments
where the agency is more likely to discover intentional adulteration of food. Specifically, section 302(a) of
the Bioterrorism Act amended section 801 of the FDCA, adding new subsection (h)(1), which states:
The Secretary shall give high priority to increasing the number of inspections under . . . section [801] for
the purpose of enabling the Secretary to inspect food offered for import at ports of entry into the United
States, with the greatest priority given to inspections to detect the intentional adulteration of food. 21 USC 381(h)(1) (emphasis added).
Furthermore, Congress has mandated that FDA facilitate importation of certain foods into the U.S. BTA section 302(a) also added new subsection (h)(2) to FDCA section 801, which states:
The Secretary shall give high priority to making the necessary improvements to the information management systems of the Food and Drug Administration that contain information related to foods
imported or offered for import into the United States for purposes of improving the ability of the Secretary
to allocate resources, detect the intentional adulteration of food, and facilitate the importation of food that is compliance with this Act. 21 USC 381(h)(2) (emphasis added).
Under section 302, foreign food manufacturers and exporters, and U.S. importers, have an argument
available to them for the first time to pursue reduced FDA screening rates of their shipments crossing
U.S. borders. Quality, safety and security management programs reducing the risk that imported foods violates the FDCA become the basis for seeking facilitation of the importation.
Documenting Food Safety/Security Compliance
Many foreign food companies are already in substantial compliance with FDA's requirements in sourcing
raw materials, implementing manufacturing standards, routinely assessing and mitigating food
security-related risks, and have developed relationships with shipping and transportation companies
that enable distribution through secure supply chains. Documenting these controls can provide the basis
for FDA to pass over shipments from such companies, as long as the agency is able to distinguish their
shipments from unknown shippers/manufacturers or from those shipments for which the agency can clearly articulate a higher risk.
Documentation may be accomplished through a combination of:
- third party certification by accredited international third party inspection companies to confirm
conformance to regulatory requirements;
- verification of compliance through inspections by other U.S. federal agencies (e.g., Department of
Defense or USDA);
- integration of independent private laboratory testing as validation of food GMPs, HACCP, and
Sanitation SOPs; and
- inspection reports from home government inspectorates.
For example, a 302 program might evaluate:
- a foreign manufacturer's receipt, testing and acceptance of raw materials;
- implementation of food GMPs, Codex Alimentarius standards and guidelines, or HACCP, as applicable;
- review of internal laboratory analysis procedures and quality control systems;
- SSOP and documentation review;
- pre-shipment inspection for quality and security at point of origin prior to export to the U.S.;
- use of C-TPAT certified shippers and transporters;
As these steps are documented and the agency shifts from a transactional import model (reviewing and
evaluating entry data or prior notice data only) to a life-cycle risk mitigation approach, FDA will have more
reliable data to demonstrate compliance with food safety and security requirements and guidances to justify expedited release upon entry.
While it is true section 302 is focused strictly on food importations, the very elements of FDA's version of
C-TPAT can be brought to bear on other products subject to the agency's jurisdiction.
.
C-TPAT UPDATE
3/05
Despite well-founded concerns by the trade, on March 25th, Customs published the latest C-TPAT requirements for importers on its website and they take effect immediately. Existing C-TPAT members
now have 120 days to upgrade their internal controls over employee background checks, supply chain
documentation, information technology and security training. A shorter time frame of 60 days applies to
implementing container seals, facility security and access controls. There is also a 180 day phase-in
period so that existing members will have sufficient time to enhance their business partner requirements.
Those whose C-TPAT applications are pending can expect the new criteria to be applied to those
applications. Given the fact that Customs is overwhelmed with applications to the point they are being
sent to field offices for approval, one can only imagine how much more confusion will arise surrounding the question of who qualifies and how?
IT JUST ISN'T SAFE
11/04
An unfulfilled promise of C-TPAT is the sharing of intelligence between Customs and the members.
Despite this shortcoming, there are announcements from numerous federal agencies which can easily be used to sort out the most dangerous countries with which to trade.
The Coast Guard issued a list of countries which failed the MTSA/ISPS standards: Albania, Benin, Dem.
Rep. of Congo, Equatorial Guinea, Guinea, Guinea-Bissau, Kiribati, Lebanon, Liberia, Madagascar, Mozambique, Nauru, Nigeria, Serbia and Montenegro, Sierra Leone, Solomon Island and Suriname.
Presidential Determination No. 2004-47 identified major drug-transit and illicit drug producing countries:
Afghanistan, the Bahamas, Bolivia, Brazil, Burma, China, Colombia, Dominican Republic, Ecuador, Guatemala, Haiti, India, Jamaica, Laos, Mexico, Nigeria, Pakistan, Panama, Paraguay, Peru and
Vietnam.
These notices and others send a message to the trade - if you insist on shipping goods to or from these
countries, you must take extra precautions in order to minimize the risk of your shipment being compromised.
USDA GETS IN THE ACT -
11/04
There has been extensive coverage of the efforts by Customs and FDA in the area of enhanced security
practices. However, little notice has been paid to recent action by USDA which has joined with the
American Trucking Association to issue a report containing security practices recommendations when transporting agricultural and food commodities.
Customs Update: How will the 9/11 Report affect traders?
(Published in the Journal of Commerce on September 29, 2004)
Click Here to view article in printable format
Still on the bestseller list after its initial publication in July, the 9/11 Commission Report makes for
interesting reading even now. Its greatest strength and its biggest weakness is that it is focused
exclusively on the events of 9/11. As such, the report really only provides a snapshot, and a myopic one at
that, for international traders of things to come. It is replete with references to air travel because, of
course, this is the context in which that terrible day is framed. The Commission's hearings did raise
issues about cargo and all modes of transportation, but little is said about that in the report itself.
Of interest to international traders are the countries and regions identified by the Commission as being on the front lines of terrorism:
* Western Pakistan and the Pakistan-Afghanistan border
*
Southern or western Afghanistan
* The Arabian Peninsula, especially Saudi Arabia and Yemen and the nearby Horn of Africa,
including Somalia and extending southwest into Kenya
* Southeast Asia, from Thailand to the southern Philippines to Indonesia
*
West Africa, including Nigeria and Mali
* European cities with expatriate Muslin communities, especially cities in central and eastern
Europe where security forces and border controls are less effective.
In looking at this list, one is struck that what most of these regions have in common is they are remote
and not particularly developed, either economically or, by Western standards, socially. Of course, cargo
does arrive in the U.S. from Southeast Asia and Europe, especially the Philippines, which is known in the
trading community as a high security risk area. The same has not necessarily been true for other
locations in Southeast Asia, such as Thailand and Indonesia. Similarly, Americans do not generally think
in terms of security risks when dealing with European sellers and ports. Taking the Commission's
recommendations to heart will require us all to rethink our business alliances and how we deal with our business partners.
Despite mentioning the Middle East as a hotbed for terrorism, the Commission nonetheless recommends a Middle East Free Trade Area by 2013.
Just as international traders have consistently said that securing the supply chain requires international
agreements and accommodations, so, too, the Commission recommends the U.S. engage other
countries to develop a "comprehensive coalition strategy against Islamist terrorism...[t]he most important
policies should be discussed and coordinated in a flexible contact group of leading coalition
governments," with the proposal that this is a proper forum in which to "develop joint strategies to target
terrorist travel." Of course, international traders would add, "and to target terrorist activities as they relate
to cargo, as well as to formulate and implement cargo, conveyance and trade infrastructure security measures."
The report goes on to recommend targeting terrorist money and travel, but also that "every stage of our
border and immigration system should have as a part of its operations the detection of terrorist
indicators on travel documents." Here traders would add, "and commercial documents (which for these purposes includes carrier and bank documents, too)."
Echoing what many traders feel, the Commission also reported, "[t]he current efforts do not yet reflect a
forward-looking strategic plan systematically analyzing assets, risks, costs, and benefits. Lacking such a
plan, we are not convinced that our transportation security resources are being allocated to the greatest risks in a cost-effective way.
"Major vulnerabilities still exist in cargo and general aviation security. These, together with inadequate
screening and access controls, continue to present aviation security challenges.
"While commercial aviation remains a possible target, terrorists may turn their attention to other modes.
Opportunities to do harm are as great, or greater, in maritime or surface transportation. Initiatives to
secure shipping containers have just begun. Surface transportation systems such as railroads and mass transit remain hard to protect because they are so accessible and extensive."
The report goes on to recommend exactly what international traders have been urging from the
beginning - that elected representatives must make the hard choices to allocate limited resources
through priorities which are risk-based and should partner the public and private sectors together. The
report also acknowledges that every state and city have some "minimum infrastructure for emergency
response. But the federal homeland security assistance should not remain a program for general
revenue sharing." The Commission recommends "a panel of security experts be convened to develop
written benchmarks for evaluating community needs..." and that Congress be obliged to allocate funding in accord and local communities be required to abide by those benchmarks.
Further, the government, according to the Commission, needs to invest in technology designed to screen
cargo transported by plane, ship, truck or rail and improve methods of identifying and tracking high-risk
containers, operators and facilities. Customs has led this effort, most recently with its recommendations regarding container seals.
Reiterating what has been said from the outset by Customs and Border Protection, the report goes on to
recommend a layered security system and tasks the Transportation Security Administration (which by
law oversees cargo security) with identifying for Congress the "array of potential terrorist attacks, the
layers of security in place, and the reliability provided by each layer." TSA would then also need to identify
and develop plans to improve weak individual layers as well as the "effectiveness of the layered system it
deploys." The report charges TSA with needing to "intensify its efforts to identify, track and appropriately
screen potential dangerous cargo in both the aviation and maritime sector." Traders would take that statement to include all modes of transportation.
Much has been made in the general press about the Commission's recommendation for a national
intelligence director, and the establishment of a National Counterterrorism Center for joint operational
planning and intelligence, with staffing from many agencies. Perhaps alarming to international traders is
the Commission's point that the Customs and immigration databases should be considered sources of
intelligence information. While certainly everyone wants to contribute to the security of the country, it is
becoming increasingly clear that when a shipment is held for any reason by Customs, it is more and
more difficult to find out why. This early on, we are seeing individuals ignore Customs' detention policy,
even in circumstances where there are no security concerns. What safeguards will be put in place to distinguish between real national security concerns and simple trading questions?
Commenting about the Department of Homeland Security, the report concludes that the agency "should
identify those elements of our transportation, energy, communications, financial, and other institutions
that need to be protected, develop plans to protect that infrastructure, and exercise the mechanisms to
enhance preparedness. This means going well beyond the preexisting jobs of the agencies that have been brought together inside the department.
"Recommendation: The Department of Homeland Security and its oversight committees should regularly
assess the types of threats the country faces to determine (a) the adequacy of the government's plans --
and the progress against those plans -- to protect America's critical infrastructure and (b) the readiness
of the government to respond to the threats that the United States might face. "
In testimony before the Commission, Randall Yim quoted Comptroller David M. Walker's points in setting
an agenda for the General Accounting Office. From Walker's perspective, the key questions are:
1. How may we sustain our homeland security efforts in light of fiscal, human capital and other
constraints upon resources at all levels of government and in the private sector?
2. How will we balance priorities to improve homeland security with other important national
priorities, such as education security, health care security, environmental security and economic security?
3. How will we integrate homeland security measures into underlying public and private business processes and government agency missions to balance priorities and sustain efforts?
4. How will we hold governments, not-for-profits, and private sectors accountable, both for the
prudent investment of money, and for maintaining and enhancing the capabilities for which they are responsible?
Acknowledging the need for government to work closely with the private sector to be successful in these
efforts, Walker posed other questions.
1. What are the likely threat scenarios homeland security must address?
2. Who is in charge and who should be in charge under various scenarios where specific responsibilities are vital?
3. What should be done and who needs to do it?
4. Who pays for it, including how much does it cost and how is it paid for?
5. How do we assure accountability both in use of funds and meeting agreed upon
responsibilities under the various scenarios.
Walker and Yim focused on guiding principles and standards. Whether you agree with their approach or
not, these questions are equally valid for the public and the private sector. With the goal of moving
forward a public dialog on these issues, the 9/11 Commission has begun its Public Discourse Project
aimed at public education and a national conversation about the most serious issue of our times. What
has your company done to be prepared? What do you think the federal government should do that has not already been done?
ADVANCED TRADE DATA INITIATIVE
07/04
Customs Comm. Bonner has introduced a new program - the Advanced Trade Data Initiative - which is
designed to identify the true port of origin and all intermediate stops; learn all the parties associated with
the shipment; determine the veracity of commodity descriptions; and improve risk targeting and anomaly analysis.
While the principles have been articulated, little was said about how this program will work. Certainly
many of these facts will be much easier to gather once ACE is in place, but what happens in the meantime?
EXPORT DATA CONFIDENTIAL
7/04
Settling the issue with Costa Rica and making clear Shippers Export Declarations (SED) may not be
given to anyone but the exporter, Census issued a July 5, 2004 letter stating SEDs copies could be given
to the U.S. Principal Party in Interest or its agent only when needed for legal and/or regulatory export
control requirements. Nonetheless, Census acknowledges the need to give Mexican authorities the ITN number.
At the same time, under the smart border accord, it has been agreed that Census will confirm to Mexican
authorities whether or not the quantity or value of a Mexican import matches the related U.S. export data on a yes/no - match/no match basis only.
MORE SECURITY HEADACHES
5/04
The Maritime Transportation Security Act requires all ships to be ISPS compliant by July 1st. The Coast Guard states American ports and vessels will be ready, but there is enormous doubt that foreign ports
and vessels will be able to timely comply. Will the Coast Guard really deny entry to vessels which are
non-compliant? Will the Coast Guard really deny entry to compliant vessels from non-compliant ports? Stay tuned for more details.
Highlights of C-TPAT Program
- Benefits of C-TPAT Enrollment
- Reduced inspections - C-TPAT participation is considered in targeting system used by
Customs to select shipments for inspection at both CSI ports overseas and upon arrival in the U.S.
- Participants become eligible for other Customs programs such as Importer Self Assessment and monthly payment of duties.
- Two-Part Application Process
- Sign and submit Memorandum of Understanding (MOU) agreeing to participate in the program
- Review security procedures and draft security profile for submission to Customs
- Applicants receive minimal benefits, such as reduced inspections, upon signing and submitting Memorandum of Understanding.
- Full benefits available when Customs approves the security profile and counter-signs the MOU.
- There are currently 6,000 enrolled participants in the C-TPAT program but less than 200 companies have been verified as of June 2004.
- GAO REPORTS:
- Homeland Security: Summary of Challenges Faced in Targeting Oceangoing Cargo Containers for Inspection GAO-04-557T
- Homeland Security: Preliminary Observations on Efforts to Target Security Inspections of Cargo Containers GAO-04-325T
- Container Security: Expansion of Key Customs Programs Will Require Greater Attention to Critical Success Factors GAO-03-770
SEVERE DELAY PENALTY
04/04
The Maritime Security Act (S. 2279) currently under consideration contains a provision calling for a fine of
$5,000 per bill of lading for cargo left on the pier more than five (5) days. Such a provision is, of course, at
odds with the Customs regulations regarding general order. To avoid the penalty, the bill also allows
cargo movement to a public store or general order warehouse for inspection, which is clearly contrary to the requirement placed on importers to file an entry before moving cargo.
MEXICAN INFO EXCHANGE
04/04
The Mexican and U.S. governments have agreed to an exchange of limited information which is intended
to assist the Mexicans in reducing commercial fraud. Mexico has also signed an agreement for
assistance with SGS. Traders are reminded that under Mexican law, the confidentiality which applies to
document submissions to the government does not apply when providing those same documents to a
private party. To overcome this dilemma, what many in Mexico are doing instead is arranging meetings with government officials to satisfy any concerns which may exist
MARITIME SECURITY DEADLINE
04/04
July 1, 2004 is the date on which the International Ship and Port Facility Security Code and the Maritime
Transportation Security Act require ports and vessels to control access, monitor activity and screen personnel, baggage, cargo and vehicles.
If ports or vessels fail in implementation, the Coast Guard has authority to require individual vessels to
take additional security precautions or may deny them entry into the U.S., which begs the question - if you
have a security program and/or are a C-TPAT member, what steps does your company have in place to make sure all the vessels on which you ship cargo are in compliance?
What happens if the Secretary announces a port has failed to implement proper security measures and
so all vessels departing from that port are barred entry into the U.S.? Is your company ready for such an event?
Customs Update: Seeking smarter inspections
(Published in the Journal of Commerce Mar 9, 2004)
to view document in printable format
Did you see it? Were you shocked? Could you believe the timing?
No, not the "costume malfunction" at the Super Bowl. The statement by the Transportation Security
Administration that it was considering asking importers to provide invoice information about the goods
they are importing because, in the view of TSA, manifest information as relied upon by Customs and Border Protection is inadequate.
While any reasonable international trader must agree that the veracity of manifest data is questionable
when it comes to accurately describing the goods being shipped, is requiring the filing of invoice data the answer?
No!
While certainly shippers should have the option to provide transaction details to Customs as a means of
expediting the release of their goods, it doesn't take a genius to figure out that those who want to bring
items into the U.S. which are a threat will simply buy off someone at the receiving end or use the cover of
their own American company so that invoice data will correspond with the mis-description on the manifest.
Democrats, in this election year, clamor for 100 percent examination of cargo, but don't explain how it will
be paid for or staffed. One hundred percent examinations of any sort are not the solution. The cost and
delay are simply not acceptable. Customs also has a long history proving the examination of an arbitrary
amount of cargo is a wasted effort. The statute requiring physical examination of 10 percent of all cargo
was done away with through the Mod Act, primarily because the agency was wasting time looking at a set
amount of cargo without finding irregularities. Why look at all cargo when you can identify higher risk
shipments and focus on them? One large company recently estimated that if 100 percent of its cargo
was examined, it would require an additional 180,000 man-hours at a cost of $1.7 billion dollars per year, never mind the loss of use of the money involved.
To anyone who is an international trader, in being realistic, we surely must admit the current system is
based on the good faith of the person who fills out the paperwork. Certainly such an approach doesn't
really make the U.S. any more secure now than it was before Sept. 11. We all support the efforts of
Customs to collect more information to support its risk analyses. We all want to be safe in our everyday
lives. Quite properly, Customs recognizes the need to distinguish between cargo which does and cargo
which does not pose a threat to national security. Obviously, one way to do that is through programs such
as the Customs -Trade Partnership Against Terrorism (C-TPAT) and the Container Security Initiative (CSI), but more really does need to be done and now. But what?
What is needed is a national consensus that terrorism is an international problem and so requires
international solutions. But those of us who have been around international organizations also know that
takes time. In fact, often it seems the time required is interminable, but that is how government by consensus operates. So, what to do in the meantime?
Well, how about mixing things up? Right now, through CSI, Customs picks and chooses the containers
to examine at the port of origin based on intelligence it gathers from a variety of sources. How about
adding another source of intelligence? Many of the large freight forwarders are willing to consider
investing in X-ray equipment. The idea behind this concept is the equipment would be installed at origin.
The necessary personnel would be hired and trained and then 100 percent of the cargo that forwarder
transports would be X-rayed prior to loading. The equipment standards, along with the standards which
apply to the hiring, retentions, and training as well as operating the equipment would have to be agreed
upon, plus the criteria for reporting and record-keeping. The results would, of course, be shared with
Customs. For those forwarders not in a position to invest the $1 million or more for each piece of
equipment, there are discussions about forming consortia. What is holding up implementation? Well, in
exchange for such an investment, these forwarders want something in return, namely, expedited
clearance of their cargo upon arrival in the U.S. Trust but verify must naturally remain the guiding
principal, so periodic inspections of this pre-screened cargo is expected. The stumbling block to this idea taking hold is the quandary faced by Customs regarding implementation.
While there is no question that any shipment could be compromised, the fact remains that the industry
security programs in place right now all favor large corporations which are, quite properly, already
committed to protecting their brand names. The single biggest shortcoming in the current structure is
none of these programs are geared to smaller companies, where the real risk presents itself. If
forwarder X-raying were available, even through consortia, C-TPAT would be a meaningful program for the little and midsized companies.
Maybe we in industry can come up with some realistic means for this to work. Is forwarder X-raying a
good idea? How should it be implemented? How should the results be integrated into Customs' scoring
of shipments for inspection? What would your company be willing to do if it was a forwarder and could
join a consortium? If you are a shipper or importer, would you be willing to pay an additional amount to
have your goods X-rayed by your forwarder if you received expedited release upon arrival? If so, how much?
Send your comments and ideas to rodriguez@rorlaw.com and we'll consider the options together.
MORE SECURITY DEMANDS
9/03
Wal-Mart is reported to be demanding that its 100 key suppliers use radio-frequency identification to track goods through the supply chain.
Customs Update-Security Tops AAEI Agenda
[Published June 23, 2003 JOURNAL of COMMERCE ONLINE]
CLICK HERE for a printable version of this article.
NEW YORK — At a time when many traders complain there are too many important issues to manage,
the American Association of Exporters and Importers held its annual conference June 16-17 and focused
on the biggest issue of the day - security. However, rather that "just" talk about Customs-Trade
Partnership Against Terrorism or the Container Security Initiative, AAEI structured its program to deal with
security issues from both the regulatory and the physical security perspective and by so doing encompassed all of the current hot-button issues.
The theme heard at all the sessions was that to be truly successful, companies will have to figure out on
their own how to secure their supply chain. Any question about whether government understood the
shipment of goods was answered with a resounding "no" when Customs rolled out its advance manifest
rules and the Food & Drug Administration proposed its bioterrorism regulations. Equally important, there
is no coordination of anti-terrorism activities by the federal government between the agencies.
One session reinforced the point further when an FDA representative described C-TPAT as focused on
container security! Another session underlined the lack of communication between the agencies when
another panelist described a situation of importing a line of products subject to the jurisdiction of several
different agencies. Representatives of two of those agencies with offices down the hall from each other had never met until something came up on one of the speaker's company's shipments!
Further efforts by the government to insert itself into the process were evident when the idea of licensing
shippers export declaration filers was described in some detail as focused on requiring one licensed person at each filing location!
While the requirements of the Sarbanes-Oxley Act of 2002 - broad-based legislation affecting corporate
governance, financial disclosure and the practice of public accounting - were touched upon as they
impact publicly-traded companies and how that level of structured risk management will be expected
from other companies by the government, perhaps the most useful parts of the program were the tips
given by the speakers who represented various import and export companies as to how they were able
to successfully implement C-TPAT and other meaningful security measures. In each instance, it is clear
a team assembled from the various disciplines within the company was necessary, but more than
anything else, the most successful programs were the result of active support from upper management.
There has been much criticism by business of C-TPAT as a make-it-look-good paper chase, what
became quite clear from the many presentations at AAEI is that private industry has taken to heart the
need to develop its own security methods and to have those efforts result in ensuring that what goes into
the packages which are stowed into the container, railcar or trailer are what actually arrives at
destination. The process is pushing documentation, security and all the other shipping formalities away from destination and toward origin.
C-TPAT Seminar
4/03
"C-TPAT and Related Security Issues" was the title of a well-received seminar presented in February in Los Angeles. If you were unable to join us but would like to purchase the handouts and presentation
materials, please send us a $25.00 check per set requested and we’ll be happy to make arrangements for you to receive the materials.
Our next security seminar will be held in Houston, Texas on June 26, 2003. Look for more details in the near future on our website.
Customs Update: 24-Hour Rule Yields Chaos
Published in the Journal of Commerce Online
3/24/03
In carrying out the provisions of the Trade Act of 2002, U.S. Customs put into force the requirement that
all ocean shipments must be reported 24 hours prior to loading. While enacted with the best of
intentions, the manner in which Customs went about putting the requirements in place has been little short of a disaster in terms of the movement of cargo.
The rule of thumb at the Port of Los Angeles-Long Beach was that a container moved every 11 seconds
24 hours a day, seven days a week! Since the 24-hour advance manifest filing rule took effect Feb. 2, what took hours to move now takes on average of five to seven days.
To his credit, Customs Commissioner Robert Bonner recognized there were problems and dispatched a
team from Customs Headquarters to meet with the trade community in Los Angeles during the week of
March 10 in order to get a better handle on the problems. Those of us involved in those meetings
reached out to various constituencies in order to get as complete a picture as possible regarding the impact of what has come to be called "the 24-hour rule."
It seems clear Customs unwittingly stepped into the middle of the love-hate relationship between the
vessel operators and NVOCCs without fully understanding either the dynamics of that relationship or
what was really involved in implementing the changes mandated. Put another way, there was a lot of
homework Customs needed to do prior to proposing the regulations which, because it did not occur, made the whole situation much more painful than necessary.
Customs failed to comprehend that carriers are by law required to comply with the descriptions in their
tariffs or service contracts. As such, descriptions on bills of lading are designed to meet that
requirement. By changing the rules, carriers ran directly into the problem of bill of lading descriptions
which did not match manifest descriptions, which did not match tariff/service contract descriptions, a
situation further compounded by letters of credit which had to be amended and reprocessed since the resulting documents did not match the original letter of credit requirements.
Despite the way in which the rules are written that mandate the carrier must transmit shipping details
unless the NVOCC is Automated Manifest System-certified, we still hear stories about carriers refusing
to accept cargo from non-AMS NVOCCs. In fact, we continue to hear stories about carriers even refusing loads from AMS-certified NVOCCs!
Perhaps the two areas causing the most delays in cargo movement are in-bonds and permits to
transfer. What seems to be missing from the dialogue is a logical explanation from the carriers as to why
they can't continue to file in-bonds. The explanation we have heard relies on the excuse that the carriers
can only transmit in-bond documents for shipments transmitted through AMS using their own codes.
Well, that's all anyone is asking them to do. Move the goods on the master bill of lading to destination!
Perhaps in response to this column, a carrier organization will provide a better explanation, but for right now, there seems to be only chaos and finger-pointing.
Beyond just the question of who prepares the in-bond documents, there are other problems confounding
the situation. For example, there are carriers who change master bill of lading numbers, sometimes
adding suffixes and other times creating completely new numbers, and not conveying those changes to
anyone else a party to the transaction. Additionally, in-bonds cannot be pre-filed. As a result, NVOCCs
are having a difficult time consistently getting accurate arrival information. They must also identify on a
per shipment basis the truck company or railroad a given steamship wants to use for a specific shipment on a through bill of lading.
The same confusion exists with shipments arriving at destination. To move them from the terminal/pier
to a devanning station, each NVOCC having a shipment in the container is required to prepare a Permit
to Transfer (P/T). Why is that necessary as opposed to the master co-loader preparing the P/T? Another
headache has to do with piece counts. Apparently with some degree of regularity, when each NVOCC
issues its P/T and the piece counts are tallied, they don't match the master bill of lading, but no one has a satisfactory explanation for why or how that is occurring.
Recognizing these problems need to get fixed, Customs is looking at changing procedures so the
master co-loader will be allowed to prepare the P/T for the entire shipment. Customs also was slated to
roll out a programming change to AMS on March 22 which is said to allow each NVOCC to report the
master bill of lading and list the master carrier as the second-notify party. Customs hopes this change
will allow the necessary relationship between transactions that is currently missing from AMS.
Customs is also working with the carriers to see if it is possible to assign the bill of lading number at
time of booking. As things stand right now, two transmissions are required from NVOCCs, one to comply
with the 24-hour rule, and a second to associate the first transmission with a carrier's (steamship line
and NVOCC) bill of lading number. Clearly one transmission is preferable to all parties.
Customs is also looking at another change involving a procedure whereby the steamship lines might not
transmit their master bill of lading data but rather only transmit the master NVOCC's bill of lading. While
some may see this and the other proposed changes as siding with the carriers at the expense of the
NVOCCs, Customs' perspective is it is seeking to provide as many options as possible so the cargo moves.
In the end, the solutions to the delays caused by the 24-hour rule are several-fold:
1) Getting the carriers and NVOCCs in one room for a set of serious negotiations. Previous meetings
have apparently been civil but unproductive. Why not use the model employed for reform of the drawback regulations? Get a professional mediator in the room and get the issues resolved!
2) Implement the recommendations of COAC (the Treasury Advisory Committee on Commercial Operations of U.S. Customs) which are due to be released shortly and will deal with all modes of
transportation.
3) Work to get AMS upgraded so that releases are input in a timely fashion and not force brokers to
provide copies of signed-off entries to terminals in order to get shipments moved.
4) What about outreach and training sessions? There is mass confusion within Customs and equally in
the trade over how the rules are supposed to work and what data elements are reported where. Training sessions would be helpful.
5) The Frequently Asked Questions posted on Customs Web site at www.customs.org are great, but take
too long to read. Charts and graphs would be helpful to simplify things and make the rules easier to comprehend.
Bonner is now focused on getting the cargo moved. Are there other solutions? Let's hear them.
Customs Update: Homeland Security a Reality, but Are We Any Safer?
Published in the Journal of Commerce Online
2/5/03
CLICK HERE for a printable version of this article
President Bush, in establishing the new Department of Homeland Security, submitted a reorganization
plan to Congress this past November. The plan itself is a summary, but the contents make for interesting reading and beg the question: are we really any safer?
For traders, one possible scenario was illustrated in an article in the Dec. 4 Wall Street Journal. The
newspaper reported on war games conducted under the aegis of The Conference Board and consultant
Booz Allen Hamilton that attempted to gauge the economic consequences of terRodriguez O’Donnell attacks on the U.S. supply chain.
The games envisioned a series of attacks by road, rail and sea that would force the eventual closure of
all U.S. ports of entry. Full recovery, the gamers estimated, would take 66 days and cost the economy $60 billion in lost revenue!
The main questions facing the participants were:
1) Who is in charge, and
2) What steps are necessary to ensure the economy keeps running?
Shutting the ports was easy, but figuring out who made the decision or identifying the process to reopen
them was clear as mud. Bush expects that Homeland Security will answer both questions. However, the
initial summary submitted to Congress leaves much to be desired. Participants in the war games
consisted of private and public sector representatives, from carriers, border operations, federal
policymakers and supply chain/business, to the Ports of Los Angeles and Savannah, and a control group. The war gamers quickly concluded:
1) Public-private partnerships are essential
2) Port security begins at origin
3) Security must be a part of the process, not something added on
4) There is no one size fits all approach which works for the entire system
5) The federal government needs to coordinate and unify its efforts
Key players in Homeland Security
The Department of Homeland Security opened for business Jan. 24. Of particular interest to international
traders is Under Secretary for Border and Transportation Security, Asa Hutchinson, and Customs
Commissioner Robert Bonner. By March 1, Customs, the Coast Guard, the import/export functions of the
Department of Agriculture, and the Transportation Security Administration will be transferred to the new
department. By Sept. 30, 2003, transfer of all the personnel, assets, and liabilities of the various entities and agencies is to be completed.
A to-be-named Assistant Secretary for Information Analysis will identify and assess the nature and scope
of terrorist threats; integrate relevant information, analyses and vulnerability assessments, and review,
analyze and recommend improvements in the policies and procedures of sharing law enforcement
intelligence. This individual is also required to solicit information from the private sector regarding
terrorism. Unfortunately, there is no mandate to share information with the private sector, only collect it.
There will also be an Assistant Secretary of Infrastructure Protection who job it will be to assess the
vulnerabilities of key resources and critical infrastructure; identify priorities for protective and support
measures; and develop a comprehensive plan to secure and recommend measures to protect these
assets. Here again, there is an obligation to the private sector, this time to warn. Again, there is no obligation to consult or work with the private sector.
The Under Secretary of Science and Technology has jurisdiction to assess and test homeland security
vulnerabilities and possible threats and also, to establish priorities for directing, funding, and conducting
national research, development, testing and evaluation and procurement of technology and systems to
prevent the importation of chemical, biological, radiological, nuclear and related weapons and material and for detecting, preventing, protecting against and responding to, terrorist attacks.
The Undersecretary for Border and Transportation Security is responsible for preventing the entry of
terrorists and instruments of terrorism; to secure the borders and ports of entry, plus the ports, terminals,
waterways, air, land and sea transportation systems; administer the customs laws except as otherwise
provided (again raising the unanswered question of just where Customs agents and inspectors fit into
Homeland Security, and to whom they report), and ensure the speedy, orderly and efficient flow of lawful traffic and commerce.
Stakeholders' interests key to success
The major problem confronting the war gamers was that critical government functions were splintered
between various agencies. We can all agree that with the formation of Homeland Security, it is now more
likely that government will be in a position to better coordinate its efforts and, down the road, may actually
be able to speak with one voice. Most also agree that security begins at origin, but in the absence of a
vehicle through which industry can actively participate with government in a two-way exchange of
information, the experiment is doomed to failure. The new department will not succeed unless the interests of all its stakeholders are considered from the outset.
One good example of an experiment which could well be doomed to failure is the Customs-Trade
Partnership Against Terrorism (C-TPAT). While it is true Customs has agreed to allow a certain amount
of private sector input, it is equally true that the agency wants to limit the number of participants, despite
the private sector making clear that if the program is truly designed to provide national security, that
means it needs to be expanded, not contracted. The European Union has the right idea: unless everyone can play in the same game, Customs has erected a trade barrier.
If the Bush Administration truly believes what it says, that economic security means national security,
then all security-related programs must be available to all who want to participate. A strong public-private
partnership always works better than one side dictating to the other. Just look at the mess Customs got
itself into with the 24-hour advance manifest rule. Carriers and consolidators are mandated to use the
process but few of the basic operational questions were worked out in advance. Why? Because
Customs insisted the program be put in place right away, and in so doing, failed to coordinate with the
private sector. Hopefully Homeland Security will learn from these mistakes and consult before, rather than after, imposing new rules and/or regulations.
Business Proprietary Information Is Publicly Available
1/03
With the introduction of the 24 hour advance manifest rule and its requirement for even more shipment
detail on the manifest, importers and exporters are more concerned than ever about cargo theft and
industrial espionage. Customs has assured the public that it intends to deal with the fact that manifest
details are public documents which are used by private companies for sale to buyers. Yet, to date nothing has been done to change the regulations.
For exports, data such as the shipper’s name and address, the general character of the cargo, the
number of packages and gross weight, name of vessel or carrier, foreign port of destination, U.S. port of
exportation, and country of destination is gathered and sold. For imports, the data includes name and
address of shipper and consignee, plus port of unlading, foreign port of lading, quantity, units, weight, shipper name and address, consignee name and address, and a description of the goods.
Obviously, making this sort of information publicly available could useful to competitors. Some relief is
possible under current law. For imports, confidentiality may be obtained over the importer’s name and
address, the name and address of the foreign shipper, and any identifying marks and numbers. For
exports confidentiality may be affixed to the exporter’s name and address. Confidential treatment is
obtained by filing requests with the Customs Service which must be renewed every two years. As a
service to our clients, we will obtain such confidential treatment for your import and export shipments for
a single charge of $200, provide you with a letter from Customs confirming that such confidential
treatment has been granted, and will notify you 90 days prior to the expiration of the two year period so
that you will have ample time to renew your claim for these exemptions. For more details, please contact Tom O'Donnell at 312-372-7000
24 Hour Advance Manifest Rule - What Does It Mean?
1/03
On February 2, 2003, Customs will begin imposing penalties on carriers (including consolidators) who
fail to follow the newly enacted 24 hour advance manifest rule for ocean shipments. An outgrowth of the
heightened concern about cargo and supply chain security, the advance manifest rule takes effect first on
ocean cargo, although there are regulations proposed with different lead times for the other modes of transportation.
Traders have already seen the impact of the new rule which took effect on December 1, 2002 (although
enforcement through penalties was delayed to allow a learning period for all involved). In its simplest
form, the new rules require foreign exporters to report to the exporting carrier information about each
shipment due for the U.S. so the carrier is able to transmit the data electronically to U.S. Customs at
least 24 hours prior to that shipment being loaded on the outbound vessel. As a practical matter,
exporters are reporting the need to provide data to carriers as much as 72 hours prior to loading.
While the cargo itself is not required to actually be delivered in advance, the bill of lading contents is what
must be reported. Customs is then taking that information and determining which, if any, shipments it
considers risky. Inspection is then carried out by foreign Customs officials who share the results with
U.S. Customs. In some cases, there are U.S. Customs personnel stationed overseas as part of the
Contain Security Initiative, but, for the most part, the information is exchanged electronically between the governments involved.
Customs reports a current erRodriguez O’Donnell rate of about 60%. Perhaps the erRodriguez
O’Donnell rate is so high due to the confusion surrounding the new regulations but it is clear, the burden
will fall on carriers if they fail to follow the rules. Since carriers are at risk, we have begun to see more demands placed on shippers.
First of all, the requirement to transmit advance manifest data falls on the carrier (whether vessel
operator or consolidator), not the exporter or importer. It is possible the high erRodriguez O’Donnell rate
is the result of so many consolidators new to manifesting at the level of detail required, but at the same
time, we are hearing silliness as part of the process. Recognizing that many issues remain to be
resolved, Customs has assured the trade that enforcement through the imposition of penalties will start
on February 2 against only egregious errors. The example most often cited is those carriers who type
commas into each data field or leave them blank or try similar stunts! In those circumstances, Customs has said it will refuse to allow the cargo to be loaded plus impose penalties.
We are also hearing that carriers/consolidators have begun to charge to transmit the data. The figures
most often cited are $100 to transmit and $25 for each correction. If your shipment suffers such a charge,
the first thing to do is make sure that charge is allowed by the carrier/consolidator’s service contract or tariff rates on file. If not, complain to the Federal Maritime Commission.
In addition to the amount of time in advance of loading the data must be reported, the impact on
importers/exporters is complicated. For example, Customs will no longer accept "Order of Shipper" as a
consignee name. Similarly, Customs will no longer accept the name of a bank, consolidator or forwarder
as the consignee. This is causing confusion amongst the carriers. In some cases, exporters are being
told bills of lading may no longer be consigned Order of Shipper which is, of course, mandatory for a
letter of credit shipment. Similarly, if the name of the consolidator or forwarder is no longer acceptable
and the shipment is truly a mixed load, given the limits of Customs’ computer system, how does the consolidator/forwarder report a long list of shipper and consignee names?
Similar confusion surrounds the use of the standard phrase "said to contain," a term of art which
appears on a bill of lading each time the shipper stuffs the container and was designed to relieve the
carrier from liability in case the actual number of packages delivered was less than what the shipper
originally reported. Carriers have gotten confused and so have told some shippers that phrase may not
appear on a bill of lading. In fact, it may and should in order to protect the carrier. However, when the
manifest is reported electronically, that phrase should be omitted or shippers’ load and count inserted in its place.
Similarly, there is still mass confusion about what constitutes an acceptable cargo description. Catch-all
descriptions such as "freight all kinds," "consolidated cargo" or "general merchandise" are no longer
acceptable. While such descriptions are still needed in order to comply with the Federal Maritime
Commission rules regarding tariff filings, carriers are required to report actual cargo descriptions as part
of this new process. If one ships a container of t.v. sets, DVD players and AM/FM radios, it is still not clear
whether each class of goods must be reported or whether it will be acceptable to state "electronic
products." A similar question exists with wearing apparel. Is an acceptable cargo description to state
"ladies suits, men’s shirts, etc.," or may one simply state "clothing?" Is produce enough or must each
type be listed? Customs is expected to shortly publish a list of examples of acceptable cargo descriptions. In the meantime, no one is sure what is satisfactory.
From the point of view of many importers, the biggest concern in the advance manifest reporting context
is the lead time. The shipment data must be reported at least 24 hours prior to loading. There are many
points in the Western Hemisphere where the transit time from origin to destination is less than 24 hours,
e.g. the Caribbean, Canada or Mexico. Of similar concern to carriers is the fact that all cargo coming to
the U.S. must be reported, even if it is remaining on the ship to be delivered in another country. As of this
article, Customs has grant 47 exemptions to break-bulk carriers because their cargo is not containerized. Otherwise, all carriers and all shipments are subject to the rule.
Another area causing confusion has to do with in-bond shipments. Right now when a container lands in
Los Angeles for in-bond movement to Miami, generally it is the vessel operator who prepares the in-bond
entry (7512) and arranges transport via rail to destination. Under the new rules, carriers are taking the
position they are no longer the carrier if the consolidator reports the manifest information and so are
insisting the consolidator has the responsibility to move the cargo in-bond to destination. This position is
causing additional headaches because in many instances the consolidator does not have an office at
the first port of unloading and so has no one located there to prepare the 7512. Another factor
complicating things is a properly bonded carrier (one recognized as a common carrier by Customs)
must appear on the 7512 in order for the cargo to move. Few consolidators have a common carrier bond
so they themselves will not be able to appear as the carrier on the 7512. Therefore, in order to move the
goods, they will need to work out an arrangement with a Customs approved common carrier. It is
expected vessel operators will not give permission to put their bonds at risk, so one has to question what delays will result as this issue gets worked out?
Of equally practical concern to importers is what happens if a container is loaded despite the carrier
being told "Do Not Load." Customs has said it will not allow Do Not Hold cargo to be off-loaded in the
U.S. If such a container is loaded, it may be moved out of the way only long enough to allow approved
cargo to be off-loaded and then must be placed back on the ship and removed from the U.S. One can
imagine what will happen if a hot shipment mistakenly gets loaded and has to be returned to origin!!!!
Looked at from a security perspective, Customs has yet to work out how it will insure that a consolidator
reported all the shipments in its containers. Absent that sort of verification, a gaping security loophole exists.
Against this backdrop of heightened security, the best thing importers can do is stay in close contact with
their suppliers, obtain a copy of the advance manifest information when it is provided by the supplier to
the carrier. and then work closely with the delivering carrier to make sure things flow as smoothly as
possible AND keep in mind that longer leads times will become the norm. U.S. exporters should also
keep in mind, it is only a matter of time (the deadline is October 2003) before the 24 hour rule is imposed
on exports. The current discussions involve having the booking reported 72 hours prior to loading and the manifest reported 24 hours prior.
While just in time delivery may still be possible, the definition of timeliness is obviously being expanded
from hours to days and perhaps a week. Incorporating these delays into the planning for future orders should start now.
Customs Update: Security Everywhere - but What's Really Going On?
Published in the Journal of Commerce
11/ 12/ 02
CLICK HERE for a printable version of this article.
You cannot pick up a newspaper today, even the general press, and not see articles about security, what
may happen and everybody's guess as to the next step. While security is indeed important and should be
addressed, for those engaging in international trade, we cannot afford to guess. We need hard facts and they are sparse.
At a recent conference, a high ranking official of the Transportation Security Administration characterized
the activities of his agency as trying to determine threat levels. What he meant was that in each mode of
transportation, the agency needed to determine the proper parameters so it knows when it should act
and how. No one disagrees with that goal. Where most take exception is over the question of why there
is no formalized manner in which the private sector is participating in that decision-making process?
There is no doubt, some of the TSA's efforts are true law enforcement in the traditional sense of that
phrase. Nonetheless, international traders are the ones who know how cargo moves and how the international trading system works. We are the ones who can provide the practical approaches to
accomplishing the security of our borders. With no offense meant to the management of the agency, they
do not currently understand the supply chain and, frankly, the threat is too great for them to be able to
afford the luxury of time to get up to speed. We keep hearing about tangible and imminent Al-Qaeda
threats. What sense does it make for the government to take its time, when the expertise is there for the calling?
By way of example, TSA has declared its rules about known and unknown shippers in air freight to be
subject to national security. As a result, when an air freight consolidator (indirect air carrier) is visited by a
Customs official who is not familiar with TSA's rules, that consolidator is prohibited from giving the
Customs' official a copy of those rules! Who does TSA think it is kidding? It is common knowledge that
becoming a known shipper is contingent on shipping a set number of shipments (the precise number
has been stated in other articles) with a given indirect carrier or passing a site visit. What's the big deal?
Why make life complicated for the very folks who can help the agency heighten security? Why not
concentrate on important issues like making the Automated Export System more useful for security purposes?
We have heard enough from various high-ranking U.S. Customs Service officials to know that the agency
is working to enhance national security by relying on the Customs-Trade Partnership Against Terrorism
(C-TPAT), the Container Security Initiative (CSI) and Operation Safe Container. All three programs are
designed to involve the private sector in making the supply chain more secure. In other words, Customs
is relying on the very folks who know the business to help it accomplish its goal. Customs is fond of
saying good information at the right time equates to good targeting. Again, in general, the private sector agrees. Where we have concerns is in the implementation.
Again by way of example, it is reasonable to expect that Customs will verify the information being
provided by C-TPAT members. The private sector said from the beginning that verification or assessment
should not be performed via regulatory audit for the simple reason that the auditors are not security
experts. In October, one Customs official announced there would be audits (when he meant verifications)
and that multi-disciplinary teams (including special agents) would handle those procedures. A week later, Customs Commissioner Robert Bonner was quoted as saying special agents would not be
included on those teams. Similarly, we now hear rumblings from lower level Customs personnel that
they have been told security will be a component of compliance measurement examinations, but no
particulars are available. Why not? Customs generally does a good job keeping the trade information. What's going on? Why all the contradictory stops and starts?
Then there is the 24-hour rule. Customs wants advance manifest information for ocean shipments at
least 24 hours before loading. It is certainly logical to conclude that if Customs has information before
cargo is loaded, it can minimize the likelihood of risky cargo coming to American shores. When the rule
was first talked about, Customs seemed to ignore the fact that requiring advance delivery of goods causes more harm than good.
To begin with, the longer cargo sits on a dock, the more vulnerable it is to theft and damage. For some
shipments, such as perishables, adding another day to the delivery cycle endangers the usefulness of
the product. To Customs' credit, when the ocean advanced manifest final rule was announced on
October 30, Customs made clear it wants the data; the cargo can be delivered at a later time. Some will
say that separating cargo delivery from data delivery leaves room for compromise of the cargo. That
statement is undoubtedly true. On the other hand, none of us is naive enough to think that Customs will ignore the potential risk.
Here is a perfect opportunity for Customs to make C-TPAT really meaningful to American companies.
While always subject to verification through inspection, why not allow C-TPAT members to be placed into
a lower threat level in the context of cargo delivery in light of this new rule? So far the benefits of C-TPAT
are more spiritual than tangible. Here is an opportunity to make those benefits truly tangible.
C-TPAT - A Hands On Tutorial.
11/02
Jointly sponsored by Pinkerton Security, Roanoke Trade Services, and Rodriguez O'Donnell, we are
presenting a comprehensive workshop to help companies establish and develop a long-term program for C-TPAT participation and compliance. The program takes place on November 14, 2002 from 8:30
a.m. to 1:30 p.m. at the Doral Golf Resort and Spa in Miami, FL at a cost of $30 per person. For more information and registration materials, please visit our website at www.rorlaw.com
CUSTOMS UPDATE:PORT SECURITY MOVING AHEAD
Published in the Journal of Commerce
9/4/02
CLICK HERE for a printable version of this article
Finally, we are starting to see Washington address some of the tough shipping security issues.
On Aug. 8 Customs proposed regulations which will dramatically change the way carriers submit ocean
manifest information. Non-vessel operating common carriers (NVOCCs) have long complained they are
recognized as carriers under the law and so should be treated as such when it comes to submitting
manifest information. Customs has obviously listened. The proposed regulations allow NVOCCs to
submit manifest information electronically provided they are properly licensed by the Federal Maritime Commission and have on file an International Carrier Bond.
Carriers (NVOCCs and vessel operators) will now be required to provide the following information at least 24 hours prior to loading:
1. Foreign port of departure
2. Carrier (SCAC) code
3. Voyage number
4. Date of scheduled arrival at the first U.S. port of call
5. Numbers and quantities from the bills of lading (master or house)
6. First port of receipt of cargo by the inward foreign ocean carrier
7. A precise description (or HTS number(s) if received from the shipper) and weight
or, for a sealed container, the shipper's declared description and weight; generic
descriptions such as freight all kinds, general cargo or said to contain are
specifically mentioned as unacceptable
8. Shipper's name and address or an identification number for all bills of lading
9. Consignee's name and address, the owner's or owner's representative's name
and address or an identification number for all bills of lading
10. Notice that the actual boarded quantities are not equal to the quantities
indicated on the relevant bills of lading (except with shipper's load and count
shipments)
11. Vessel name, national flag and vessel number
12. The foreign port where the cargo is laden on board
13. Hazardous material indicator
14. Container number where applicable
15. The seal number affixed to each container
If the carrier fails to present the required information 24 hours prior to lading, Customs reserves the right
to assess monetary penalties, but may also delay issuance of a permit to unlade the entire vessel until
all the required information is received. Alternately, Customs may decline to issue the permit to unlade for specific cargo.
Customs has framed these regulatory changes under the authority of the Container Security Initiative
(CSI), in which Customs forms partnerships with foreign governments in order to station U.S. Customs
inspectors at foreign ports to pre-screen U.S.-bound cargo. The public has until Sept. 9 to submit
comments. Customs particularly wants comments as to the clarity of the proposed rule and ways in
which to make it easier to understand. Part of this proposal is a change to the International Carrier Bond
conditions to include NVOCCs as a carrier and also provides for a $5,000 fine for each violation.
Still left open is the question of manifest confidentiality. Sen. Dianne Feinstein (D-Calif.) has introduced a
bill, the Comprehensive Seaport and Container Security Act of 2002 (S. 2895), which addresses that elusive goal, but still leaves open a number of critical questions.
The bill defines a "common carrier" as anyone who provides to the general public transportation by
water, land or air whether or not that person operates the vessel, vehicle or aircraft, but makes no specific mention of rail.
And while stating that a common carrier may offer many different modes of transportation, in defining a
shipment, that term is limited to goods traveling on a bill of lading. Does that exclude air shipments as there is no mention of air waybills?
Of particular interest to service providers is the bill's provision which would transfer the licensing of
ocean transportation intermediaries (OTI) including forwarders and NVOCCs, from the Federal Maritime Commission to Customs.
The bill also calls for inspectors from Customs, other federal agencies or the private sector to be
stationed at the foreign facilities of manufacturers or common carriers to profile shipments and inspect
merchandise and their containers for U.S.-bound goods. Customs is called upon to develop procedures
to ensure the security of those goods and, to Feinstein's credit, the bill specifically states that any
merchandise inspected at the foreign facility or port is to receive expedited inspection upon arrival in the U.S.
The legislation also calls for the submission of manifest information at least 24 hours prior to departure
and stipulates that information be available only to individuals with federal government security responsibility. As to the manifest data elements, they are listed as:
1. Ports of arrival and departure
2. Carrier code assigned to the shipper
3. Flight, voyage or trip number
4. Dates of scheduled arrival and departure
5. A request for a permit to proceed to destination, if required
6. Numbers and quantities from the carrier's master air waybill, bills of lading or ocean
bills of lading
7. The cargo's first port of lading and the city in which the carrier took receipt of the cargo
8. Description and weight (including the HTS) or, for a sealed container, the shipper's
declared description and weight
9. Shipper's name and address or an identification number from all air waybills and
bills of lading
10. Consignee's name and address or identification number from all air waybills and
bills of lading
11. Notice of any discrepancy between actual boarded quantities and quantities stated
on any air waybill or bill of lading (except those shipments which are shipper's load
and count)
12. Transfer or transit information while the cargo has been under the carrier's control
13. The location of any warehouse or other facility where cargo was stored while under
the carrier's control
14. Name and address or identification number of the carrier's customer, including the
forwarder, NVOCC and/or consolidator
15. Conveyance name, national flag, tail number, vessel number or train number [but
why is rail included here and not elsewhere? And what about the voyage number?]
16. Country of origin and ultimate destination
17. Carrier's reference number including the booking or bill number
18. Shipper's commercial invoice and purchase order numbers
19. Hazardous material indicator
20. License information, including the license code, number or exemption code
21. Container number where applicable
22. Empty container certification
23. Any additional information as required
While the data elements in this bill and in Customs proposal are quite similar, there are some
noticeable differences. Customs' regulatory change seems limited to the ocean environment, while the
Feinstein bill seeks to make the change universal to all forms of transportation but misses in a few
technical ways as suggested above. Further, Feinstein includes criminal penalties for inaccurate or false
information, but the difference is unclear. With a fine of $50,000 or one year in prison or both, one would
hope the law would make clear the incorrect information is significant and goes to the heart of Customs' efforts to profile cargo and shippers/consignees.
The bill also provides civil and criminal penalties for violating the arrival reporting requirements. The
proposed civil penalty is $25,000 for a first violation and $50,000 for each subsequent one, plus the
conveyance is subject to seizure and forfeiture. The proposed criminal penalty is a fine of not more than
$50,000, one year in jail or both. However, in the case of prohibited goods, the fine does not change but the jail term stretches to five years.
Shipment profiling
Customs is also required to develop a shipment profiling plan to track containers and shipments for
threat assessment. To assist in that endeavor, common carriers, shippers and forwarders/NVOCCs are
required to provide the manifest data elements articulated in this bill, plus shippers are required to use
standard international bills of lading detailing 19 specific fields of information which differ slightly from
the list above. Cargo screening is also mandated with Customs required to consider whether the shipper regularly ships to the U.S. and the specificity of the description of his shipments.
Customs is further directed to insure that the Automated Commercial Environment (ACE) is developed to be compatible with the shipment profiling plan described in the bill.
While not directly impacting shippers and consignees, the bill also requires security cards for anyone
regularly employed at a U.S. seaport or by a common carrier who transports goods to or from the U.S. As
worded, it appears NVOCCs will now be required to issue security cards to their personnel even if not
operating at the seaports through which they ship. Not playing favorites, the bill also defines the
minimum security requirements to be met by ports and finds that if a port fails to meet those minimum requirements, it will be prohibited from handling dangerous cargo and cruise ships.
Container seals
Of final interest to traders is the bill's requirement for the development of minimum standards for secure
container seals. Once those standards are published, carriers will have 180 days to comply. Failure to
use satisfactory seals will result in the vessel being denied entry. Additionally, all shipments to or from the U.S. are to be assigned a universal transaction number.
While there are many provisions in S.2895 which are open to interpretation, there is no question the
manifest confidentiality provision will be a rallying point even as other points create disagreement. Far less encompassing and much less controversial is Customs' proposal.
Traders should take the time to keep track of the homeland defense issue as it works its way through the
process as it is clear that the way we are all used to doing business is in for dramatic changes.
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