The events of September 11, 2001, the recent war in Iraq and the threats of future terrorism have forced Americans to identify and eliminate vulnerabilities. In doing so, our trade and transportation systems have become a major focus.

The Maritime Industry’s Challenge

An integral link in our transportation system and supply chain, the maritime industry is crucial to U.S. economic success. The impact of a terrorist attack on our waterway system could be enormous. Why? More than $738 billion or 7.5% of U.S. gross domestic product is derived from waterborne cargo.

The maritime industry already has implemented several important security measures. One of the most sweeping is the U.S. Customs’ 24-hour manifest information rule. Initiated on December 2, 2002, it requires sea carriers or non-vessel operating common carriers (NVOCCs) to electronically provide detailed descriptions of U.S.-bound sea container contents 24 hours before containers are loaded at foreign docks. This is designed to help Customs better analyze container content and identify terrorist threats.

Non-Compliance Will Not Be Tolerated

On February 2, 2003, after a 60-day phase-in period, Customs began fully enforcing the 24-hour advance manifest regulation. According to U.S. Customs Commissioner Robert C. Bonner, “all parties who have implemented the rule seriously deserve commendation, but for those who have not, U.S. Customs will not tolerate non-compliance.”

Although an important step in preventing terrorism, the rule is likely to impact your imports and supply chain. As a result, it’s necessary to become familiar with the regulation’s requirements and carefully implement them in order to prevent supply chain disruptions.

You Must Utilize AMS

All cargo declarations are required to be sent to Customs via its automated manifest system (AMS). If you are not set up on this system, you can utilize a service provider or a port authority who is, or you can provide paper documents to your carrier for input into AMS. Visit www.cbp.gov/xp/cgov/import/carriers/ams_ports/for a list of entities using the direct interface system.

Common Terms No Longer Accepted

The use of common cargo descriptions such as “said-to-contain,” “general merchandise” or “freight-all-kinds,” are no longer accepted. Instead, a precise narrative description of the cargo or its six-digit tariff number must be supplied. In short, Customs must be able to identify physical characteristics and packaging so irregularities can be determined. The cargo’s description also must be precise enough to identify any goods which may emit radiation. For example, “electronics” is not an acceptable description, but “CD players” or “computer monitors” are.

Beware of Do Not Load Messages

As of the phase in period, Customs Service ports began to issue “do not load” messages to sea carriers and NVOCCs not in compliance with the 24-hour rule. In fact, between February 2 and April 29, 2003, Customs reviewed more than 2.4 million bills of lading, and approximately 260 containers with inadequate cargo descriptions were denied loading for violation of the 24-hour rule. However, most of these violations were resolved in time for the shipment to make its original voyage.

If carriers or NVOCCs are found in non-compliance, they may be fined between $5,000 and $10,000, their container may not be allowed to be unloaded at the port of destination, or the vessel may even be denied docking privileges. And although an error may arise because of false information provided by the shipper, Customs will still pursue the party it regulates — the sea carrier or NVOCC.

In addition, if a container is examined by Customs, either at home or abroad, and the manifest description of the contents is in Customs’ opinion inaccurate, carriers can be held liable for penalties and NVOCCs can be held liable for liquidated damages.

Greater Shipper Disclosure Required

In the past, Customs may have only received information that identified the shipper as a carrier, importer or even a bank, which didn’t allow Customs to track specific shippers. Today, specific information about the shipper is required, including the shipper’s full name and address. If shippers don’t comply, they run the risk of closer scrutiny and increase the likelihood that their container will be examined. Furthermore, Customs may be more inclined to issue do not load messages.

Other Important Issues at Hand

Because more detailed information is now included in the manifest, shippers are concerned that their information could be obtained by competitors or criminals. And, if competitors learn of a new foreign source or identify a strong U.S. buyer by reviewing the data, the shipper could lose its competitive advantage. To prevent this, shippers should request confidentiality. They also should talk with their customs broker or freight forwarder to protect themselves from potential misuse of information.

Truck or Rail Cargo Is Exempt

The 24-hour rule does not apply to cargo that is shipped to Canada or Mexico and then brought into the U.S. by truck or rail. However, if Customs suspects goods are being routed in an attempt to evade scrutiny, those goods will likely be treated as high risk.

C-TPAT Membership Offers Benefits

It is expected by Customs that members of the Customs-Trade Partnership Against Terrorism program (C-TPAT) will provide the required 24-hour information as a regular part of their security-related procedures.

Although C-TPAT participants will not be excluded from advance reporting requirements, their participation in the program may assist them during the targeting process. Furthermore, C-TPAT participation by the carrier or NVOCC may be a mitigating factor in the case of penalties.

Keep Operations Running Smoothly

Supply chain managers should note that other modes of transportation, such as air, rail and truck, soon will be subject to advanced notification requirements from Customs, too. So what can companies do to ensure successful business operations as a result of the new 24-hour rule?

To begin with, each company must contact Customs and review all the details. Importantly, firms need to reevaluate their supply chain to ensure that every involved organization, starting with the overseas exporter, understands the rules and is complying. Then, it is vital to determine where changes need to be made and to quickly implement them. The traffic departments of both exporters and importers should work closely together and with all intermediaries to build in the necessary lead times and prepare the required information accurately.

Keep Abreast of New Requirements

The 24-hour rule, along with a variety of others, likely will change over time. As a result, it is vital to keep abreast of changes and new requirements. For more details about the 24-hour rule, go to www.cbp.gov/xp/cgov/import/carriers/24hour_rule/ or contact your local U.S. Customs office.

This article appeared in Impact Analysis, May-June 2003.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, competitive strategies and the latest economic trends. He also is chair of the Upstate New York District Export Council and founder of the ManzellaReport.com and Manzella Trade Communications Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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