CUSTOMS UPDATE:PORT SECURITY MOVING AHEAD
Published in the Journal of Commerce
9/4/02

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.