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July 2003 - Issue #16

In This Issue:

Container Security Initiative Update - Phase Two
Operation Safe Commerce
C-TPAT Update
Customs Outlines Best Practices of Compliant Companies
U.S. Increases Inspections at Foreign Ports
Federal Maritime Commission - Navigating the Regulations
Bureau of Industry and Security - Red Flag Indicators
Procedures for Payment of Customs Bills
European Union vs. United States: Steel Tariffs
Transportation Update
C-TPAT Consulting Services
 

Trade Industry News
Container Security Initiative Update - Phase Two

In a recent speech at the Port of Newark, NJ, Department of Homeland Security Secretary, Tom Ridge, announced  a series of new port security initiatives intended to fortify security elements at strategic ports worldwide. International cooperation, new technology and additional funding are required in order to implement the security enhancements.
 
Secretary Ridge noted that "the Container Security Initiative (CSI), Operation Safe Commerce (OSC), the Maritime Transportation Security Act (MTSA), and new port security grants all provide added layers of security that build on a comprehensive port security" plan.

The four core elements of CSI are:

  • First, identifying "high-risk" containers, through the use of advance information, before they are loaded on board vessels destined for America. This cargo includes containers that may conceal - based on intelligence and risk-targeting principles - terrorist weapons...or even terrorists.
  • Second, pre-screening the "high-risk" containers at the foreign CSI port before they are shipped to the United States.
  • Third, using detection technology to pre-screen high-risk containers, including both radiation detectors and large-scale x-ray-type imaging equipment, so that the security inspection can be done quickly without slowing down the flow of legitimate cargo.
  • Fourth, using smarter, "tamper-evident" containers - containers at the port of arrival that indicate to U.S. Customs and Border Protection officers whether cargo has been tampered with after security screening overseas.

Phase One of CSI will soon be completed with operations in all of the original top twenty foreign ports. Phase Two of CSI will extend to ports in the Middle East, Turkey, and Malaysia. The U.S. is also working on agreements to include Sri Lanka, key ports in Africa and Latin America, as well as other major ports in Asia and Europe.
 
Sources: "Homeland Security Department Announces Launch of CSI Phase 2, Etc." appearing in International Trade Today, dated June 16, 2003; Speech by Secretary Tom Ridge is available at  http://www.dhs.gov/dhspublic/display?content=960 ; Remarks made by The Honorable Asa Hutchinson, Under Secretary for Transportation and Border Security, Department of Homeland Security, at the AAEI Convention held in New York City on June 16-17, 2003, Samuel Shapiro & Company, Inc. in attendance.
 

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Operation Safe Commerce

Operation Safe Commerce is a maritime pilot program designed by the Bureau of Customs and Border Protection (CBP) and the Department of Transportation (DOT) to engage the private sector, ports, and federal, state, and local governments in developing new technologies that can monitor the movement and integrity of containers as they move through the supply chain.

Current participants of the program include the Port Authority of New York and New Jersey and the Ports of Los Angeles, Long Beach, Seattle, and Tacoma, as well as Federal Agencies and members of the private sector. The participants' mission is to develop and recommend proven strategies that will eventually be incorporated into the security plans of other ports in the U.S.
 
According to remarks made at the American Association of Exporters and Importers (AAEI) convention and in recent congressional subcommittee testimony, Beth Rooney, Port Security Manager for the Port Authority of New York and New Jersey, indicated that "a chain of custody must be established that ensures the cargo's integrity and requires that complete and accurate data be provided to CBP well in advance of a ship's arrival." She also noted that "cargo is a major risk factor with regard to maritime security, and is perhaps the port authority's greatest challenge." The Port Authority Security Manager believes that "while Customs has made great strides with implementation of the 24-Hour Rule, Customs - Trade Partnership Against Terrorism (C-TPAT), and the Container Security Initiative (CSI), additional efforts must be taken to verify the contents of containers before they are loaded on a ship destined to the U.S." She stated further that "the process must include certification that the container was packed in a secure environment and sealed so that its contents cannot be tampered with and transported under the control of a reasonable party."

The Secretary of the Department of Homeland Security has slated $58 million dollars in funding for the OSC project.

Sources: Remarks made by Beth Rooney, Manager of Security for the Port Authority of New York & New Jersey, at the AAEI Convention held in New York City on June 16-17, 2003, Samuel Shapiro & Company, Inc. in attendance; "Homeland Security Department Announces Launch of CSI Phase 2, Etc." appearing in International Trade Today, dated June 16, 2003; Speech given by Secretary Ridge is available at  http://www.dhs.gov/dhspublic/display?content=960 ; "House Transportation Subcommittee Holds Hearing on the Implementation of the Maritime Transportation Security Act" appearing in International Trade Today dated June 6, 2003.
 

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    C-TPAT Update

    In recent congressional testimony, Bureau of Customs and Border Protection (CBP) Commissioner Robert C. Bonner stated that Customs is working to develop "the mechanism and strategy to enroll foreign manufacturers and shippers into the Customs - Trade Partnership Against Terrorism (C-TPAT). The intent is to construct a supply chain characterized by active C-TPAT links at each point in the logistics process." It will be interesting to follow this development in the months ahead.

    C-TPAT is a security initiative designed to protect the complete supply chain against potential exploitation by terrorists or terrorist weapons. Under C-TPAT, companies sign an agreement with CBP to conduct a comprehensive self-assessment of their supply chain security and to improve that security – from factory floor to foreign loading docks to the U.S. border and seaports – using C-TPAT security guidelines jointly developed with the trade community.

    C-TPAT is currently open to all importers, air, sea, and rail carriers, brokers, freight forwarders, consolidators, non-vessel operating common carriers (NVOCCs), and U.S. Marine and Terminal operators. As of October 1, 2002, C-TPAT eligibility for trucking companies along the U.S./Canadian border has been made available through the Free and Secure Trade Program (FAST). Participation in C-TPAT is a requirement for bringing goods from the U.S. into Canada through the FAST lane.

    According to remarks made by Robert Perez from the Bureau of Customs and Border Protection, at the recent American Association of Exporters and Importers (AAEI) convention, to date, over 3,422 companies are participating in C-TPAT. He also indicated that members of C-TPAT  include seventy-one of the top one hundred importers and thirty-two of the fifty largest ocean carriers. Customs is undergoing the following steps relating to C-TPAT:

    • A validation process where assessment is made strictly against the checklist that was presented to and accepted by Customs. This evaluation typically is completed within two to three week's time.
    • The creation and training of C-TPAT supply chain specialists.
    • C-TPAT training seminars, to provide a fresh perspective on threats, and with respect to what colleagues are doing.
    • C-TPAT Recognition and Benefits - certified members gain access to goods much faster, as well as become eligible for select programs offered by Customs.
    • Customs hopes to post to its website a list of all C-TPAT members (who gave consent); the list will be available to other C-TPAT members only.

    Commissioner Bonner noted that "Customs is developing expertise in supply chain security to make sure that C-TPAT realizes its promise." In December 2002, Customs began providing training in the security validation process. In January 2003, the  Customs validation process began; to date, over 50 validations have been initiated.
     
    Source: Remarks made by Robert Perez, Bureau of Customs and Border Protection, at the AAEI Convention held in New York City on June 16-17, 2003, Samuel Shapiro & Company, Inc. in attendance; “CBP Commissioner Bonner Testifies to Congress on Trade Security, Etc.” appearing in International Trade Today dated June 23, 2003; Commissioner Bonner's full testimony is available at http://hsc.house.gov/testimony.cfm?id=16 .
     

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    Customs Outlines Best Practices of Compliant Companies

    The Bureau of Customs and Border Protection (CBP) recently posted guidelines for “Best Practices of Compliant Companies” to its website in order to emphasize the need for regulatory compliance throughout the international trade community.

    The CBP has gathered this information over the years through its experience with highly compliant companies. These guidelines are useful tools for any organization that is looking to further develop and improve its compliance procedures.

    The best practices for compliant companies include:

    • Have management’s commitment:  Ensure that management has a strong commitment to compliance and empowers members of the organization to take compliant measures.
    • State compliance and cost goals: Identify and assess areas of risk and create internal controls to manage the risk.
    • Develop formal policies: Develop, implement, and continuously revise compliance procedures to assure that compliance goals are achieved.
    • Establish training programs: Develop training programs to ensure that employees are properly trained to be able to appropriately fulfill their job requirements.
    • Conduct internal control reviews:  Perform internal audits to review the quality and accuracy of the work and re-evaluate policies and procedures as needed.
    • Create a compliance group: Establish a compliance team to review and ensure accuracy of activities and modify policies as needed.
    • Access executives for needed resources:  Ensure that upper management raises the importance of the Customs compliance group and authorizes it to interact with the various departments as needed.
    • Develop compliance requirements for suppliers: Establish guidelines to select compliant suppliers and request service providers to provide regulatory reporting when necessary.
    • Establish a record-keeping program:  Establish and maintain a record-keeping program so that transactions are recorded appropriately.
    • Partner with CBP:  enhance the partnership with the CBP by participating in programs such as Customs-Trade Partnership Against Terrorism (C-TPAT), Container Security Initiative (CSI), Importer Self-Assessment (ISA), Free and Secure Trade (FAST), Automated Commercial Environment (ACE), etc.

    Shapiro’s Consulting Team is devoted to researching, analyzing, and communicating regulatory requirements on behalf of our importers.

    Our team’s experts can assist you in understanding and applying regulatory requirements for importing and exporting. Our Consulting Team can assess your current operational procedures and provide services to fit your specific needs.  Examples of some of the services we offer include:

    • C-TPAT Consulting
    • Classification
    • Binding Rulings
    • Customs Compliance and Reasonable Care
    • Drawbacks
    • Record keeping
    • Seminars – private and public.

    For more information please contact our Consulting Team at consulting@shapiro.com or at 800-695-9465, ext. 281.

    Source: “Customs Posts to its Web Site Guidelines on the “Best Compliant Companies” appearing in International Trade Today dated June 5, 2003.
     

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    U.S. Increases Inspections at Foreign Ports

    The Bush administration has implemented and outlined procedures of the second phase of its Container Security Initiative program, that further prevents terrorist attacks through the use of cargo containers. The first phase of the program began soon after the terrorist attacks of September 11, 2001, and focused on twenty major container ports in Europe and Asia.  The second phase of the program intends to strategically place teams of American inspectors at major ocean ports in Dubai, the Persian Gulf, Malaysia, Turkey, and other Muslim nations.

    Intelligence agencies have reported that Al Qaeda is believed to have considerable presence in Dubai and Malaysia.  In addition, it has been confirmed that Al Qaeda has repeatedly used containers to transport weapons, such as those used in the 1998 bombings of the two American Embassies in East Africa.

    The inspectors’ mission will be to prevent terrorists from using cargo containers to transport chemical, biological, or nuclear weapons into the United States. Inspectors will be equipped with radiation monitors, chemical detectors, and other necessary equipment to ensure that high-risk metal cargo is thoroughly inspected.

    Robert C. Bonner, the Commissioner of Customs and Border Protection, said that in the new phase of the program, the inspection teams would be placed in an additional 20 to 25 foreign seaports.  These ports will be selected based on terrorist threat and related cargo volume. Mr. Bonner also stated that foreign governments are willing to allow American inspectors into their ports since it would mean reduced delay time for cargo upon arrival at U.S. ports.

    Source: “U.S. Widens Checks at Foreign Ports” appearing on The New York Times website dated June 12, 2003. 
     

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    Federal Maritime Commission -  Navigating the Regulations

    The Federal Maritime Commission (FMC) held an informational seminar on June 20, 2003 at the Jacob Javitz Federal Building in New York City, NY. Emanuel Mingione, the New York Area Representative for the FMC, Bureau of Enforcement stressed to the trade community that all parties to a shipping service contract must be licensed or they are violating FMC regulations. Exporters can obtain a list of all licensed parties at www.fmc.gov.
     
    Mr. Mingione advised the trade community that complaints received by the FMC are investigated and violations/fines are assessed as warranted.  The FMC is relying on the trade community to identify any unlicensed party or other situations that may be in violation of the FMC regulations. You may register a complaint on the FMC website under the complaint section, or you may contact Mr. Mingione personally.  Please contact info@shapiro.com for direct contact information. All complaints will be kept confidential if that is desired.

    The FMC has also established Alternative Dispute Resolution Services (ADR), which addresses guidelines and procedures for arbitration, as well as provides for mediation and other ADR services.  This is available to all exporters, NVOCCs Freight Forwarders, and Carriers.  Many processes are used to resolve disputes; processes are varied and tailored to each specific case. Some of the services available include:

    • Mediation
    • Early Neutral Evaluation
    • Mini-trials
    • Fact Finding
    • Settlement Judge procedures
    • Facilitation
    • Ombudsman services

    Whenever a dispute arises between or among entities involved in international shipping, FMC’s services should be considered because it is typically less costly and less time consuming. For more detailed information about the FMC’s ADR services, please email adr@fmc.gov or info@shapiro.com .
    Source: FMC Seminar, held in New York, NY, Samuel Shapiro & Company, Inc. in attendance, June 20,2003.
     

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    Bureau of Industry and Security - Red Flag Indicators

    The Bureau of Industry and Security (BIS) has published a checklist of red flag indicators to look for in Export Transactions. The checklist alerts the exporter on how to identify possible violations of the Export Administration Regulations.
     
    Some examples of “red flags” alerts include:

    • Is your customer willing to pay cash for a very expensive item when the terms of sale would normally call for financing?
    • Is your customer or his address similar to one of the parties found on the Commerce Department's (BIS) list of denied persons? 

    To view the Red Flag Indicator checklist in its entirety please refer to the FMC website at: https://www.bis.doc.gov/Enforcement/redflags.htm.

    If you have reason to believe a violation is taking place or has occurred, you may report it to the Department of Commerce by calling the 24-hour hot line at 1 (800) 424-2980. A confidential form may be submitted over the internet.  This form can be accessed on FMC’s website at: https://www.bis.doc.gov/Forms/EELeadsNTips.html .  For more information about BIS Red Flag Indicators please contact info@shapiro.com.
     

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    Procedures for Payment of Customs Bills

    The Bureau of Customs and Border Protection (CBP) has posted to its website a notice that outlines the uniform Customs procedures, effective March 1, 2003, regarding the payment of Customs bills and other specific bill-related issues. By implementing these procedures, CBP states that it will ensure that bill payments and other bill-related processes are handled in an efficient and consistent manner.

    CBP states that these procedures are intended to provide importers, brokers, and sureties with a clear understanding regarding where to send bill payment (s), when importer sanctions will be closed or removed, why CBP may re-bill because of accrued interest, and where to direct inquiries regarding certain bill and entry issues.

    CBP’s uniform procedures for bill payments, importer sanctions, importer inquiries and surety inquiries are available at http://www.customs.gov/xp/cgov/import/communications_to_industry/bill_payments_sanctions/

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    European Union vs. United States: Steel Tariffs

    On March 26, a panel of the World Trade Organization (WTO) issued a preliminary ruling stating that the United States had violated international trade law by imposing temporary tariffs on European Union (EU) steel.  Losing a case with WTO does not mean a country has to change its ways; a losing defendant can instead compensate the successful complaining party by concessions in some other area – e.g., cutting duties on imports other than steel.  The defendant also has the right to do nothing.  In such circumstances, the winning complainant can get authority from the WTO to impose retaliatory duties.

    U.S. steel industry leaders have asked the Bush administration to leave “safeguard” steel-import tariffs in place for the full three-year term running until March 2005. The administration is due to decide by September 2003 whether market conditions warrant leaving the Section 201 tariffs in place for another year and a half.

    Source: "Defiance of WTO: A Growing Trend" appearing in The National Law Journal dated April 7, 2003”;  “US Steel Companies Want Full 3 yrs of Safeguard Import Tariff" appearing in Dow Jones Business News dated May 22, 2003.
     

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    Transportation Update - Rate Increases

    Ocean Transportation Rates

    On July 1,2003 Carriers from Northern Europe are expected to announce a Currency Adjustment Factor (CAF) of 3% on all exports from Northern European ports to the United States. Ocean carriers from Italy are expected to announce a General Rate Increase (GRI) of $ 200.00 per 20’ container and $250.00 per 40’ container to East Coast port. Some ocean carriers from Spain have announced a GRI of $150.00 per container to East Coast ports.

    There are rumors that carriers will try to increase freight rates from Northern Europe by $400.00 per container in October if volumes remain strong.  This is considered posturing by carriers; it remains to be seen if they will be able to implement this type of increase.

    Volume from Asian ports remained strong during May/June. Vessels are still sailing at near 100% capacity. Far- East - US trade does not seem to be affected by the weaken U. S. economy.

    Ocean rates to Europe will be increasing in the near future as carriers anticipate that exports are will pick up due to the weakening of the U. S. Dollar. The Shapiro Transportation Department will monitor the developments. Please contact us at Marketing@shapiro.com for more information.
     

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    Shapiro Products & Services
    C-TPAT Consulting Services

    Customs has intensified efforts to encourage all importers to voluntarily participate in the C-TPAT program. Samuel Shapiro & Company, Inc. offers comprehensive C-TPAT assessment and consulting services. For more information, please contact consulting@shapiro.com or 1-800-695-9465, Ext. 281, or visit our website at www.shapiro.com.

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