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    May 2002 - Issue #2

    In This Issue:

    Customs - Trade Partnership Against Terrorism (C-TPAT)
    Focus Assessment Program
    Update on GSP Renewal
    Transportation Security Administration
    Electronic SED Requirements
    Shapiro Recordkeeping Seminar
    Transportation Notes

    Trade Industry News
    Customs-Trade Partnership Against Terrorism (C-TPAT)

    U.S. Customs recently announced a program that hopes to engage the business sector in the fight against terrorism. The program, Customs-Trade Partnership Against Terrorism (C-TPAT), is a joint government-business initiative to build cooperative relationships that strengthen the overall supply chain and border security. C-TPAT recognizes that Customs must have close cooperation with the owners of the supply chain in order to provide the highest level of security. The supply chain includes importers, carriers, brokers, warehouse operators and manufacturers. The intention is that businesses ensure the integrity of their security practices and communicate their security guidelines to all of their business partners within the chain.

    Businesses must apply in order to participate in the program. Participants agree to assess their internal procedures using certain guidelines. These guidelines are available on the U.S. Customs website and cover the following areas: Procedural Security, Physical Security, Personnel Security, Education and Training, Access Controls, Manifest Procedures, and Conveyance Security.

    Applicants will submit signed agreements to Customs, which will represent their commitment to the C-TPAT security guidelines. Applicants will also submit a supply chain security questionnaire at the same time they submit their signed agreements.

    Low-risk importers will be accepted into the C-TPAT program upon submission of the agreement. Applications will be expedited, since these companies have already been evaluated for risk. For other companies, Customs will complete a company risk assessment covering both security and trade compliance. Customs plans to complete these evaluations within 30-60 days after the supply chain security questionnaire has been submitted.

    As of April 17, 2002 the program is open to all importers. C-TPAT offers businesses an opportunity to play a vital role in the war on terrorism. By participating, companies will ensure a more secure international supply chain and environment for their employees, suppliers, and customers "in exchange for expedited treatment at borders and seaports", additionally "more than 20 low-risk importers have committed to the program" as stated by The Journal of Commerce Online Archive - Monday, April 15, 2002.

    For details, more information, or application instructions on the C-TPAT program, please refer to the U.S. Customs website (http://www.customs.treas.gov).

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    Focus Assessment Program

    The U.S. Customs Service is conducting a series of seminars on its new Focused Assessment (FA) Program, which provides audit steps, technical guides and policies for assessing a company’s import systems.  The Program’s goals are to identify and reduce risk and to promote importer compliance.

    The Program consists of two phases: the Pre-Assessment Survey (PAS) and the Assessment Compliance Testing (ACT). The PAS phase is directly related to the importer’s internal control processes.  During this phase, Customs will review risk factors and the importer’s own control over their operations concerning Customs-related transactions. Regardless of the volume of imports, Customs stresses the need for internal controls.  It is Customs’ position that, with adequate control, there is more reliable data reported to Customs, the operations are more efficient, and there is a higher percentage of compliance. In addition, an importer may reduce duty liability, decrease the risk for penalties, and may reduce the actual testing of transactions during the PAS, or ACT phase. Adequate controls may also eliminate the requirements for the ACT phase of the Focused Assessment Review. Customs has determined that importers without adequate internal controls were significantly non-compliant with much higher duty liability. If Customs’ review during PAS indicates increased risk, they will implement the ACT phase to assess the importer’s compliance and determine loss of revenue.  

    Customs has identified five interrelated components of effective internal controls.  Each component is noted below, followed by a list of some of the highlights on that component.

      Control Environment

      • Does the firm have an organizational chart?
      • What are the tone, structure, and the discipline of the organization?
      • Is management support established?
      • What are the assignments of responsibilities?
      • Does the firm have a training program? How is training documented?

      Risk Assessment

      • Does the company look internally, and review its current processes?
      • Does the company identify, analyze, and manage risks related to Customs activities?
      • What controls exist that will prevent misstatements or unsupported claims?
      • Is there a restructuring or new personnel?
      • Are there any new product lines?

      Control Activities

      • What techniques are there to ensure that management’s directives are carried out?
      • Does one manager, with knowledge of Customs matters, have the authority to assure internal controls are established and followed by all departments?
      • Are there written policies and procedures for the purchase and payment of foreign merchandise?
      • Are procedures documented to report the correct transaction value and classification determinations?
      • How are assists identified and reported to Customs? Does a specific manager coordinate all assists?
      • Are procedures in place to verify that the correct quantity was received? Does the firm maintain receiving reports and were overages or shortages reported to Customs?
      • How are discrepancies reconciled?
      • Are there any special trade agreements?
      • Are records maintained to support special duty provisions, such as those under chapter 98 of the Harmonized Tariff Schedule, the chapter for US goods returned and articles assembled abroad?
      • What documents are maintained to support that material qualifies for the Generalized System of Preferences? Is information provided to support direct shipment and the 35% cost requirement?
      • Are antidumping/countervailing duties declared?

      Information and Communications

      • This component supports the other control activities.
      • How are the areas of control communicated to other managers and staff?
      • Does the Import Department participate in the planning processes involving importation activities?
      • How does the Import Department receive and disseminate information to other departments? For instance, does the Engineering Department or the Design/Research Department communicate any changes to your Compliance Import Department and Purchasing Departments? How is information within all departments communicated to other department managers?
      • Can the accounting system link specific purchase orders, invoices, and payment records to Customs entries?
      • Who is responsible for the areas of control?
      • Is information provided in a form and timeframe that allows the staff to execute their duties?

      Monitoring

      • This process should be a continuous evaluation of performance and should occur during the course of “normal”  operations.
      • Are internal audits conducted? Are results used to correct entries and change internal controls?
      • Are Customs matters monitored by management?
      • Does the control ensure that deficiencies are promptly resolved? Were corrective actions taken internally?  Were corrective actions filed with Customs?
      • Does the importer monitor the work product of the broker?

    Customs points out that internal controls should be an on-going continuous program that provides “reasonable” assurance that the importer is reviewing their own processes.  People must implement the controls. Written procedures alone, without execution and internal review, do not afford the importer an opportunity to identify, assess, or control risks.

    Listed below are “Red Flags” that Customs may perceive as indicators of noncompliance or a need for better internal controls:

    • Are claims insufficiently documented or poorly defined?
    • Is there reliance on one employee to process Customs issues without management oversight?
    • Is there a high turnover of people in key positions?
    • Does staff lack knowledge?
    • Does importer offer unreasonable explanations?
    • Does importer fail to cooperate or respond?

    The PAS Internal Controls Technical Guides that explain the objective, background, best practices, documents to review, suggested testing, and worksheets for evaluating internal controls are located on the Customs web site along with the entire Focused Assessment Program.  This information can be accessed at the following address: http://www.customs.gov/imp-exp1/comply/fap.htm#top

    The following U.S. Customs representatives may be contacted for additional information on the Focused Assessment Program:
    Patricia Goldman, Field Director (954) 327-2819
    Howard Spencer, FA Program Manager (770) 994-4143
    Cheryl Harbison, Trade Liaison (972) 550-4833
    Gina Wong, Trade Liaison (562) 980-3220, ext. 125

    If further assistance is required, please contact Shapiro Consulting Services consulting@shapiro.com.

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    Contact Your Senators In Support of GSP Renewal

    The pressure continues for Congressional attention on the renewal of the GSP program, which expired over six months ago. The Senate is expected to begin debate on Trade Promotion Authority in late April or early May - the plan is to add GSP to that trade measure. The vote on the trade package is expected to be very close.

    Now is the time to write your two Senators to express your support for GSP renewal. Emphasize the importance of this program to U.S. companies, particularly small businesses who rely on the duty savings from GSP to remain competitive. Explain also the importance of a longer renewal period to avoid the frequent lapses in this valuable program. Send your letters today! To find your Senators, go to www.senate.gov.

    Source: NCBFAA Monday Morning e-Briefing - April 15, 2002

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    Transportation Security Administration - TSA

    We have received many queries asking who or what is the TSA. Simply stated, the TSA - Transportation Security Administration - is a newly created organization that has assumed all Civil Aviation Security functions previously performed by the Federal Aviation Administration (FAA). It is now responsible for airport and cargo security. 

    For more information regarding the TSA, please visit their web site at: http://www.tsa.dot.gov.

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    Electronic Shipper’s Export Declarations (SEDs) Required for the CCL and USML Lists

    Effective September 3, 2002, items identified on the Department of Commerce, Bureau of Export Administration's (BXA) Commerce Control List (CCL) or the Department of State's United States Munitions List (USML), currently requiring an SED, must be filed electronically via the Automated Export System (AES).  In order to accommodate the requirements of the International Traffic in Arms Regulations (ITAR), the Census Bureau is adding the following data elements to the AES record:

    • 1)       Office of Defense Trade Controls (ODTC) Registration Number
    • 2)       ODTC Significant Military Equipment (SME) Indicator
    • 3)       ODTC Eligible Party Certification Indicator
    • 4)       ODTC USML Category Code
    • 5)       ODTC Unit of Measure
    • 6)       ODTC Unit of Quantity
    • 7)       ODTC Exemption Number
    • 8)       ODTC Export License Line Number

    These additional data items requested by the State Department will not be incorporated on the paper SED since the items must be filed electronically through AES.  The incorporation of these data items into AES will allow for the elimination of the requirement for USPPIs (United States Principal Party of Interest) or authorized filing agents to submit paper SEDs to the State Department. Please refer to the Federal Register Notice dated March 4, 2002 on the U.S. Census Bureau web site at: http://www.census.gov/foreign-trade/regulations/index.html#fedreg. 

    Shapiro will be able to transmit for your company all of the required information above. Please contact your local export manager for more details.

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    Shapiro Products & Services
    Shapiro Recordkeeping Seminar

    Samuel Shapiro and Company will be hosting half-day seminars conducted by the U.S. Customs Service on Recordkeeping Regulations. The seminars will be held in the Baltimore and Atlanta areas. Many people have already responded with great interest. If you have not responded, please contact consulting@shapiro.com if you are interested.

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    Transportation Notes

    Ocean freight rates from the Far East to the USA will increase on May 1, 2002 due to increased volume and reduced capacity. We are monitoring the situation closely.

    The Alameda Rail Corridor officially opened in April, after 20 years of planning and construction. Cargo will move faster to and from the ports of Los Angeles and Long Beach, California and from the main rail terminals west of Los Angeles to inland destinations in the U.S.

    All shipments moving inbound through the Ports of Long Beach and Los Angeles via rail will have a surcharge of $15.00 per 20' container and $30.00 per 40' container and 40' High Cube.

    The Bunker Surcharge from Northern Europe to the USA will increase May 15th from $47.00 per TEU to $88.00 due to the higher cost of bunker fuel.

    Samuel Shapiro & Company, Inc. can provide ocean and air transportation service to and from anywhere in the world. Please contact Marketing@shapiro.com for more information.

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