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JFK AIRPORT PORT AUTHORITY AND SIMILAR QUASI-GOVERNMENT ENTITY FEES / JFK AIR CARRIER FEES – ARE THEY REASONABLE?

By Carl Soller
Soller Law Intl

 

As a business resident at JFK Airport for 40 years and with clients nationwide, I have seen and discussed many a controversial issue regarding the reasonableness of the fees assessed by the Port Authority of New York and New Jersey (“Port Authority”), particularly on air carrier gross revenues and fees assessed and charged by air carriers or their container station agents on consignees and importers of cargo.  Interestingly, the air carriers as well as the importers/consignees have registered similar complaints:  “the fees charged have been instituted without proper discussions and are either unreasonable or discriminatory.”

The U.S. Statutes at Title 49 discuss the authority of both air carriers and airports to assess fees and charges as well as provide the mechanism for air carriers to issue complaints against the Port Authority; and importers, or others employing air transportation, to file complaints against air carriers.  Years ago, the Department of Transportation in Order No. 2005-6-11 decided June 14, 2005, heard a complaint filed by 13 airlines against the Port Authority “challenging increased fees charged at Newark Liberty International Airport.”  It was alleged that the Port Authority did not engage in meaningful consultations prior to assessing a number of different fee increases, and that the increases were discriminatory.  The determination made by the Administrative Law Judge, after a hearing, was that certain refunds to the airlines were inappropriate, but that the Port Authority fees were not unreasonable with regards to the issues raised.

Frequently, there are complaints asserted by airlines and other users of JFK Airport and elsewhere that the percentage fees assessed are excessive and unduly burdensome on the conduct of business at that Airport.  These issues have been raised by one or more air carriers and other users of JFK Airport, frequently falling on either deaf or unhearing ears.  This is not to pass judgment on the reasonableness of those fees, but it is suggested that the management of the Port Authority should review the impact of the fees being charged and collected on those that regularly use JFK Airport and similar facilities, and whether these fees keep others away from JFK Airport.  Many of these complaints raise the issue of the fees at JFK Airport being substantially greater than those at other competing airports.  It has been said that at JFK airlines are losing market share of air cargo entering and leaving the United States, although volume continues to increase.  It is only reasonable for our legislators and Port Authority administrators to review the fee structure, and make a determination as to whether a change in that structure might have a positive impact in attracting new and additional business to those who are or would be using the airport, if the Port Authority were more user-friendly.

In the same vein, those same air carriers that say the fees and rates of the Port Authority have been implemented without proper dialogue and are unreasonably high, seem to have, according to importers, implemented similar unreasonable fee amounts, particularly in those instances where the air carriers, or their container station agents, are assessing storage fees for cargo after “free time” has expired.  Similar to the airlines’ complaints, brokers and importers have been heard to register their objections to the unilateral implementation of storage fees without the necessary dialogue with the users of the services of air carriers and their related container stations.  As with complaints against the Port Authority, the U.S. Code at Title 49 authorizes complaints to be lodged against air carriers if it is claimed that prices or fees are unreasonable as related “to international air transportation.”  Perhaps those air carriers and container stations who have unilaterally increased the storage fees and are subject to complaints should review those practices to determine whether air traffic in the cargo sector is being diverted to other ports because of those increased costs.

JFK Airport has long been recognized as the premier airport in the United States for fast and efficient recovery of imported cargo.  The processing by Customs and other government agencies is without peer.  It would be unfortunate if the volume of cargo to and from that airport as well as other equally costly facilities diminishes because of the controversial fee amounts.

Carl R. Soller, Customs, International Cargo and Regulatory Compliance Attorney is counsel to companies engaged in all elements of the import/export supply chain and a recognized expert in his practice areas.  He and his firm concentrate their International, Regulatory and Cargo Practice in all business and regulatory matters on a nationwide basis.  He offers advice on supply chain security and its related Government Regulations to the Cargo Community as well as advice and a vast range of assistance to importers and exporters of all kinds of consumer goods.  He can be reached at (516) 812-6650 or (212) 643-6650 or

The Uncomplicated Truth: Net Quantity vs. Gross Weight

By Roger Ericsson
Bureau of Dangerous Goods

When shipping by air, an often confusing topic that we sometimes address with shippers of dangerous goods is the use of net quantity vs. gross weight on their Shipper’s Declaration for Dangerous Goods. It may seem difficult to determine whether to indicate a net quantity or a gross weight on shipping paperwork, but it is actually quite simple. IATA DGR §8.1.6.9.2(a) (Step 6) states that the Second Sequence of the DGD must indicate the number of packages and the net quantity of dangerous goods in each package (by volume or weight as appropriate). It further states that for Limited Quantities, where the letter “G” follows the quantity shown in Column H of Subsection 4.2, the gross weight of each package must be indicated, with the letter “G” added following the unit of measurement. Let’s start with some definitions.

            The IATA regulations, in the Appendix A Glossary, define “net quantity” as the weight or volume of the dangerous goods contained in a package excluding the weight or volume of any packaging material. It may also be defined as the weight of an unpackaged article of dangerous goods. The term “dangerous goods” here refers to the substance or article as described by its proper shipping name. For example, for UN 2795, batteries, wet, filled with alkali, the net quantity refers to the net weight of the batteries themselves. Some shippers may make the mistake of assuming that the net quantity is the volume of liquid electrolyte contained within the battery, but this would be failing to acknowledge that the proper shipping name describes “batteries” – which are articles. The same goes for UN 1044, fire extinguishers; the net weight is the weight of the fire extinguisher, which is the article described by the proper shipping name. But what about UN 3481, lithium ion batteries contained in equipment? We must first ask ourselves what is being described by this proper shipping name. In this case, it is the lithium ion batteries (again, articles) which are contained in the equipment. Therefore, the maximum permitted net quantity refers to the net weight of only the lithium ion batteries in the package, and this is subsequently the quantity to be reflected on the DGD.

            Gross weight is a bit more straight-forward than net quantity. It is defined as the total weight of the package as presented for transport. But when would we need to declare the gross weight of a package as opposed to a net quantity? The answer is, again, quite simple…all you have to do is follow the regulations! When a gross weight limitation is indicated in Column H of the list of dangerous goods, a gross weight must be shown on the shipping paper. A gross weight will be indicated using a capital “G” following the quantity (in kg) indicated. Many shippers may recall seeing this in relation to ID 8000, consumer commodity. For dangerous goods being sent as consumer commodity, the maximum allowable quantity is given as 30 kg G or 30 kilograms gross. This tells the shipper that when documenting this shipment, they will indicate the gross weight of the package instead of the net quantity of the dangerous goods contained within.

            The difference between net quantity and gross weight may seem like a small one, but it is imperative to utilize these terms correctly when preparing and documenting dangerous goods shipments. Accurate communication on documentation is an important part of maintaining safety during the process of transporting dangerous goods. And if you ever find yourself confused and unable to determine whether a gross weight or a net quantity should be indicated, just give a member of our customer service team a call at 1-844-LEARNDG for some friendly assistance from the Bureau of Dangerous Goods.

Roger Erickson has been a customer service representative at the Bureau of Dangerous Goods for the past year. In his time with BDG, he has developed an appreciation for the intricacies of the dangerous goods regulations. He hopes to expand his knowledge of the hazmat industry while continuing to work closely with the incredible team of specialists employed by the Bureau of Dangerous Goods. Roger can be reached at 609.860.0300 or at www.BureauDG.com  

 

CBP happenings: ACE Enhancements deployed; Annual Carrier and Customs Bonded Facility Meetings in Detroit are June 13

By Debbie Dent
Director, Program Services
Border Connect, Inc.

 

ACE Enhancements Announcement

In February 2018, U.S. Customs and Border Protection (CBP) deployed the last of the seven major scheduled core Automated Commercial Environment (ACE) deployments, and all phases of cargo processing are now in ACE.  Looking ahead, CBP is focused on sustaining all deployed ACE capabilities and ensuring ACE operates as a highly available and reliable system.

2018 ACE enhancement funding will be used for the following:

  • Section 321/Trade Facilitation and Trade Enforcement Act enabling automation
  • Electronic CBP Form 5106
  • Modernizing Foreign Trade Zone (e214) process in ACE
  • Creation of Unique Identifiers for Centers of Excellence and Expertise
  • Transitioning to Broker National Permit
  • Modernizing vessel management, via Vessel Agent Account Type
  • Streamlining and modernizing truck processing, via a non-intrusive inspection
    program
  • Updating Generalized System of Preferences (GSP)
  • Manifest update to include shipper phone number
  • Electronic Vessel manifest confidentiality request

CBP Detroit Meetings June 13, 2018.   Meeting Location: 300 River Place Drive, Suite 5900, Detroit

CBP in Detroit, Michigan invites highway carriers to attend the annual carrier meeting to discuss issues. Topics will include:
– New In-Bond Regulations
– Instruments of International Traffic Requirements
– Section 321’s
-Agriculture Operations

To register to attend this meeting please contact Andrew J. Archer at by Friday, June 1, 2018. Customs Bonded Facility Meeting is being held that same day from 9 to 11 a.m. and please send a separate e-mail to

Debbie Dent, can be reached at 1-800-596-5176 or by e-mail

CHINA STRIKES BACK ON U.S. TARIFFS

By Mark Ludwikowski
Clark Hill, PLC

WHERE IS TRADE HEADED?

China did not take long to announce its own unilateral retaliatory action in response to tariffs the U.S. plans to impose on over 1,300 products worth about $50 billion as a result of its Section 301 investigation into China’s intellectual property practices. On April 4, 2018, a day after the U.S. pronounced the Section 301 decision, Beijing vowed to levy 25% tariffs on U.S. products ranging from soybeans to airplanes to cars and chemicals should the United States follow through with its implementation of the Section 301 tariffs.

Section 301 Tariffs

China’s threat came shortly after the Office of the U.S. Trade Representative (USTR) proposed on April 3 to impose 25% tariffs on a multitude of imported goods from China under the Section 301 investigation. The covered products span over 1,300 separate tariff classification lines including chemicals, mechanical and electrical machinery, rubber, pharmaceuticals, as well as steel and aluminum products among others. This is in addition to any import duties and fees already in place. This means that an imported product on the Section 301 list that was also covered by the Section 232 steel and aluminum tariffs announced in March could be subject to 50% or 35% duties, respectively.

The Section 301 action is directed solely against China and comes in response to the findings by the USTR on Chinese unfair trade practices related to its intellectual property policies. The list of products was prepared by several U.S. government agencies and identifies goods that allegedly benefit from Chinese industrial policies while sparing products that would cause disruption to the U.S. economy and consumers. A complete list of the products identified by their eight digit tariff classification can be found here

The Section 301 tariffs have not yet been imposed, but may be implemented at the conclusion of the proceeding which could be as early as July 2018, but more probably would be in September or later.  In the meantime, interested parties will have an opportunity to provide written comments by May 11 which can address the removal or inclusion of products from the list, or the amount of the tariff rate.  There will also be a public hearing on May 15 in Washington, DC and parties will be able to submit post-hearing rebuttal comments due on May 22.

U.S. importers may be considering ways to avoid the 301 tariffs by having products with Chinese components assembled in third countries or in a foreign trade zone (FTZ).  With the former, the determination will hinge on whether the operations performed in third countries are sufficient to have “substantially transformed” the Chinese components into a new and different article of commerce which has a different name, character or use than the components imported into the third country. If the Section 301 tariffs are ultimately imposed, U.S. Customs and Border Protection will certainly be paying attention to potential evasion and to make sure third country operations are sufficient to confer origin upon the goods. Hence due diligence by importers regarding the country of origin of products sourced this way will be critical.  

With regard to FTZ usage, the USTR notice instructs that “{t}o ensure the effectiveness of the action, any merchandise subject to the increased tariffs admitted into a U.S. foreign trade zone on or after the effective date of the increased tariffs would have to be admitted as ‘privileged foreign status’ as defined in 19 CFR 146.41, and would be subject upon entry for consumption to the additional duty.” Accordingly, whether tariffs will apply will depend on when the article enters the FTZ, how it is transformed and what happens to it once it exits.

China’s Threatened Retaliation

Shortly after China’s announced retaliatory tariffs, Commerce Secretary Wilbur Ross noted in a CNBC interview that the U.S. stock market should not have been surprised by the U.S. actions or the Chinese response. “This has been telegraphed for days and weeks,” he said.  Indeed, traditionally any action taken to raise tariff levels on imports from a trading partner creates the distinct risk of retaliation by that trading partner, most likely in the form of tariff increases, and often targeted strategically to cause maximum effect on key U.S. exports, in order to create pressure to reverse the U.S. action.

The Chinese plan does exactly that. It targets the biggest American exports to China including soybeans and airplanes, while many other goods on its list such as sorghum or beef intentionally impact the U.S. farm states which supported President Trump.

China has also challenged the U.S. Section 301 tariffs at the World Trade Organization (WTO) through a consultation request which alleges that U.S. actions violate the WTO’s most-favored nation principle, run counter to WTO dispute settlement proceedings and exceed U.S. bound tariff rates. If the WTO agrees with China, it could authorize its retaliation against U.S. exports.

The tit for tat may yet continue. A couple of days after China’s retaliatory pronouncement the White House asked the USTR to consider adding another $100 billion in Chinese goods to the $50 billion already targeted through the Section 301 action.  “Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” the Administration’s press release noted.

The Big Picture

Over the summer months the trade community may hold its collective breath while the Section 301 process works itself out. By September, the Administration is expected to make a decision whether Section 301 tariffs will be applied. In the meantime, negotiations with China over trade, intellectual property and possibly geopolitical issues such as North Korea, may factor into the decision making.

Treasury Secretary Steve Mnuchin is expected to lead a delegation to China shortly to discuss the Section 301 tariffs and other trade issues.  There is speculation that China may propose a pledge to purchase $100 billion in U.S. products so that the Section 301 tariffs are dropped. However, such a proposal is likely to face opposition from U.S. businesses that want to sell in China and see the Section 301 as mechanism to make the Chinese market more accessible.  If negotiations do not resolve the issue, it may come down to which side faces greater pressure to impose tariffs and countermeasures.  While China is the more export-dependent country, it is unlikely to face the same sort of industry protests or lobbying aimed at the Trump Administration.

It is interesting to consider what implications these actions may have on the overall U.S. trade policy and positions by various industries. Will domestic producers be less inclined to file the traditionally more popular and surgical antidumping (AD) and countervailing duty (CVD) petitions against imports? Will they instead rely on the Department of Commerce to self-initiate such petitions on behalf of U.S. industry as it did last November for the first time in over 25 years against Chinese aluminum sheet? Or will they count on the President to continue to use broader tariffs, such as those under Section 201, 232 or 301 as a tool in his trade and investment agenda?

AD and CVD cases can run up high legal bills and domestic producers may indeed be inclined to hold off filing these actions in the hopes the Trump Administration can provide the needed relief through tariffs.  Over the years U.S. industry has also complained that filing of AD and CVD cases can sometimes feel like a game of whack a mole as the targeted products relocate manufacturing to third countries or are simply transshipped. From that standpoint, global tariffs under the Section 201 or 232 investigations would seem to offer broader relief to affected industries.  In fact, in his testimony before Congress in March, Commerce Secretary Wilbur Ross addresses precisely this point: “if we’ve designed the 232s right, there should be somewhat fewer {AD/CVD} cases in the future because it covers such a wide range of products. Between the two cases {steel and aluminum}, I think it’s some 700 odd products that are – that are covered. So our hope is that this kind of omnibus thing will reduce, somewhat, the flow of cases.”

So how does the Trump Administration’s use of trade remedies thus far compare to its predecessors? In his Congressional testimony, Secretary Ross noted that the Commerce Department had “been much more active than any prior administration. We have been running 70-80 percent more cases initiated than had been true in the prior administration.” While that number of cases may be higher than a comparable period during the Obama administration, it has not been without hurdles. Some of those cases have been terminated by the bi-partisan International Trade Commission which has the power to block Commerce’s AD/CVD determinations. In fact, the Commission has terminated several cases during the Trump presidency so far, including on imports of aircraft from Canada, titanium sponge from Japan and Kazakhstan, gluconate and gluconic acid from France and rubber bands from Sri Lanka. Still these are only a handful of negative AD/CVD findings by the Commission. Overall, the agency has been overwhelmingly supportive of the domestic industry in recent months, disregarding even the fact that some products like aluminum foil may already be covered by Section 232 tariffs.

In this climate importers may find themselves nostalgically recalling the relatively serene prior decade when AD/CVD duties were the trade remedy of choice. 

Mark Ludwikowski is a partner in the International Trade Practice Group of Clark Hill, PLC and is resident in the firm’s Washington D.C. office. He can be reached at 202-640-6680 and

BLAST FROM THE PAST: STEEL AND ALUMINUM IMPORTS FACE TARIFFS AND QUOTAS UNDER A REVIVED TRADE REMEDY

By Mark Ludwikowski
Clark Hill, PLC

On Feb. 16, 2018, the Department of Commerce (DOC) put to use a cold war era trade law to recommend new tariffs and quotas on global imports of steel and aluminum. In both cases, DOC found that imports are weakening the U.S. internal economy, and threaten to impair national security. The DOC’s reports are currently under consideration by President Trump who has until April 11 and April 19, 2018 respectively to decide whether to follow DOC’s recommendations. If the President decides to impose restrictions, he would need to implement such actions within 15 days after making the determination.

The recommended tariffs and quotas could pose serious problems for importers and companies involved in downstream projects that rely on foreign steel and aluminum. Many of the targeted products are already restricted by existing U.S. antidumping (AD) and countervailing duty (CVD) orders. The proposed tariff rates would apply in addition to those orders.

The basis for the DOC’s report to the President is a cold-war era provision known as Section 232 of the Trade Expansion Act of 1962. This law was intended to address perceived weaknesses in the U.S. industrial base at the start of World War II and the Korean War. Until these two actions, the DOC has previously conducted 26 Section 232 investigations since 1964. Section 232 has been invoked only twice since the U.S. joined the World Trade Organization in 1995 – on crude oil imports in 1999 and on iron and steel imports in 2001.

Under Section 232 the President has discretion to adopt the DOC’s proposed remedies or to impose alternatives. For example, other relief considered in the past has included voluntary restraint agreements, implementation of Buy American requirements and research and development funding for the affected industry. In lieu of restrictions, the President also has the option to pursue negotiations with exporting countries to curtail excess capacity (under the law, he has 180 days to reach such an agreement). The President may also determine that no action is necessary to adjust imports because on balance the costs to the economy of an import adjustment outweigh the benefits.

Below are summaries of the recommendations from the DOC’s two reports. According to the reports, the proposed remedies are intended to increase domestic production of steel and aluminum to the minimum operating rate needed for the long-term viability of the industries.   

Recommendations of the Steel Report: Commerce has recommended to the President the following alternatives to address steel imports:

Broad Tariff:  A global tariff of at least 24% on all steel imports from all countries, or

Targeted Tariff:  A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam), with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States, or

Quota:  A quota on imports from all countries equal to 63% of each country’s 2017 exports to the United States.

The scope of the steel report covers the following products defined under the Harmonized Tariff Schedule (“HTS”) 6-digit level as: 720610 through 721650, 721699 through 730110, 730210, 730240 through 730290, and 730410 through 730690, including any subsequent revisions to these HTS codes.

Recommendations of the Aluminum Report: Commerce has recommended to the President the following alternatives to address aluminum imports:

Broad Tariff: A global tariff of 7.7% on imports of unwrought aluminum and the other aluminum product categories listed in the scope; or

Targeted Tariff: A tariff rate of 23.6% on imports of aluminum products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100% of their 2017 exports to the United States, or

Quota: A quota on imports from all countries equal to a maximum of 86.7% of their 2017 exports to the United States.

The scope of the aluminum report covers several HTS subheadings under chapter 76, including aluminum ingots and a wide variety of finished products.

The DOC recommends an appeal process by which U.S. companies could seed an exclusion from the tariff or quota imposed. The DOC will lead the appeal process in coordination with the Department of Defense and other agencies as appropriate. The DOC would grant exclusions based on: 1) lack of sufficient U.S. production capacity of comparable products; or 2) specific national security-based considerations.

The appeal process would include a public comment period on each exclusion request, and would be completed within 90 days of the application’s filing with the DOC. There is no set duration for exclusions.  The DOC determines the duration and can terminate the exclusion.  If exclusion is granted, the DOC will consider whether the quota or tariff for remaining covered products needs to be adjusted. 

Countries also will be able to seek exemptions from the recommended quotas. According to the reports, the President is able to exempt specific countries from the proposed quota (by granting those countries 100% of their prior imports in 2017 or exempting them entirely). Reasons for exemption can include the country’s willingness to work with the United States to address global excess capacity and other challenges facing the U.S. aluminum industry. The DOC recommends that any exemption should be made at the outset and a corresponding adjustment be made to the final quota or tariff imposed on the remaining countries.

Unlike many U.S. trade relief statutes, Section 232 has comparatively little precedent. For instance, if tariffs and quotas are imposed, it is unclear from the DOC’s reports how they will be administered and enforced. Also, there is no set duration period for how long tariffs or quotas would be in place. The DOC, in consultation with other agencies, will monitor the status of the U.S. steel and aluminum industries to determine if the remedies should be terminated or extended. These issues are expected to be further clarified if the President concurs with the agency’s recommendations in April.

Any adopted restrictions are likely to be applied starting on the effective date of the President’s action. Of the two proposed remedies, quotas may have a more immediately felt impact, particularly for products with already limited domestic availability (for example, in the case of aluminum, ultra-thin foil). Most quotas are set on an annual schedule. The DOC and the Bureau of the Census collect specific monthly import information that could serve as reference for establishing such a quota. Customs and Border Protection’s Quota Administration is responsible for tracking quotas. Once the quantity permitted under the quota is filled, no further import entries of products subject to the quota are permitted for the remainder of the quota period. Importers may hold shipments in excess of a specified absolute quota limit until the opening of the next quota period by entering the goods into a foreign trade zone or bonded warehouse. The goods may also be exported or destroyed under CBP supervision.

Given the potential disruptions in supply, U.S. aluminum and steel imports during the next few weeks may very well spike as traders and consumers rush to stockpile inventory before the President’s announcement in April.  

The crucial question now remains whether the President will impose restrictions as recommended by Commerce or take a different course. His recent policy positions may provide some insight. Indeed, during his campaign, then presidential candidate Trump was clear that his administration would make expanded use of trade enforcement tools to curb imports, particularly in disputes with China over steel and aluminum. Since he was elected, the DOC has self-initiated these Section 232 proceedings, the first since 2001, and also a separate AD/CVD case on aluminum sheet. The latter marked the first time in over two decades that the agency has brought its own case against foreign imports. (Typically, it is the domestic industry that files AD/CVD actions).

These cases, as well as the campaign promises and the Administration’s policy positions would seem to suggest that the President may be inclined to implement import restrictions in these Section 232 cases. However, over the next several weeks the President will certainly be advised by experts and stakeholders on both sides of this issue, including those within his Administration. This will involve an ideological battle between protectionists and free-traders. Proponents of the restrictions will cite increased imports as reasons for declining capacity utilization and deterioration of U.S steel and aluminum industries crucial to national security.  Opponents will argue that the DOC’s reports do not properly account for the negative consequences the tariffs and quotas would have on jobs in downstream businesses such as auto suppliers, construction firms or aluminum packaging producers as supplies tighten. They will claim that consumers too will suffer due to increased prices.  

Foreign countries, including the steel and aluminum associations of key exporting parties in the European Union, Japan and Brazil are also expected to voice their disapproval of the proposed measures. South Korea and the EU have already indicated that they will consider challenging any remedies stemming from the Section 232 cases to the WTO. China has also publicly warned that it could retaliate.

So what actions can domestic stakeholders take to help their position? Section 232 proceedings differ in this respect from the AD/CVD cases which were initiated by specific petitions from domestic industry against a limited number of countries. The AD/CVD cases provide interested parties a formal opportunity to participate in the DOC’s decision-making process through written submissions and oral argument. Those parties can also seek judicial review of the agency’s AD/CVD decisions. By contrast, the Section 232 cases arose out of national security concerns and rely on a different process with more limited opportunities for parties to challenge or influence the decisions. However, since Section 232 cases are to some extent politically driven, domestic stakeholders may turn to industry associations and Congressional representatives for support of their positions, as well as to using public relations for broader outreach.  If restrictions are ultimately imposed in April, U.S. companies dependent on imports are encouraged to seek exclusions from the scope of these cases using the appeal process which should be further defined at that point.

Mark Ludwikowski is a partner in the International Trade Practice Group of Clark Hill, PLC and is resident in the firm’s Washington D.C. office. He can be reached at 202-640-6680 and

THE GOOD THE BAD AND THE UNKNOWN – CBP “RECENT” INITIATIVES

By Carl Soller
Soller Law Intl

 

Customs and Border Protection (CBP) has continued to proceed with new initiatives to improve both commercial and security goals. The long-term outcome is yet to be determined.

Reimbursable Services Program (RSP)

The Cross-Border Trade Enhancement Act of 2016 authorizes agreements between Customs and the private sector. In its reasoning for this program the Government has acknowledged what the trade has known for some time. Because of a lack of sufficient personnel and infrastructure resources there is an “increase in cargo backups” and thus equivalent delays in the delivery of that cargo to the U.S. purchaser. “The RSP enables partnerships between CBP and private sector or government entities to address these challenges.”

The services impacted are all elements that CBP provides or additional services upon “the request of stakeholder,” but won’t “unduly impact existing services.” The costs may include and cover salaries, benefits, overtime expenses, administration and transportation costs. Airport services, except for “small airports,” can only be used for “overtime and agriculture services.” 

Although in this article we are only concerned with cargo, the RSP also applies to passenger activity.

There is no “formal application,” but a detailed list of required application information is available from CBP.

Thus far the program has resulted in over 60 agreements scattered among large and small air and seaport locations as well as warehouse facilities across the country.

Due to certain geographical restrictions on Customs Port oversight abilities, it is expected that Bonded facilities outside those geographic locations will be permitted to thrive because of this “Public-Private” partnership program.

CBP Centers of Excellence and Expertise (CEE)

CBP has long sought the ideal methodology to capture and incorporate expertise and experience in centralized locations. More than 20 years ago CBP initiated a program to centralize commodity groups reviewing particular classes of imports (oil, shoes, wearing apparel, machinery, et al) in specific locations throughout the US. It was deemed by CBP to be transparent for the trade as only review of import “entries” would occur after the importer or its Customs Broker filed the entry. The program was “junked” because it was determined that experienced “commodity specialists” and inspectors could only do their jobs effectively if they could “examine freight” at the actual location of the freight. As a result, those “centralized locations” were eliminated and the expertise was restored to the individual CBP port locations.

Forward to 2015: a seemingly similar rationale, which was debunked as explained above, is now in place as CEE’s.

As you are all aware CBP has implemented the CEE concept. There are distinctive CEE centers placed throughout the country. Conceptually each is located in a geographic district that is a center for import of a specific commodity: e.g. oil in Houston; wearing apparel in San Francisco. Each is required to have the requisite knowledge and experience to advise the trade on the sometimes complex and esoteric concepts and procedures attendant to the importation of that commodity.

The concept makes sense; however, as a practical matter the delegation of authority often creates further confusion. As an example, an importer files an entry at the port of arrival in California of automotive devices. The entry is detained by CBP. Often that merchandise remains at the pier for days or weeks because the entry has no CBP official “owning” or responsible for the review and resolution of the problem and the CBP ACE/automated program is regularly unable to direct the importer or even the local Port Director to the CEE official authorized to review and resolve the issue.

What is created is often very costly to the importer, as storage and demurrage charges accumulate because of processing delays and not because of any error in the import process. It is predicted by some that the CEE program will either be discontinued or revamped so that the required experience is again available at all ports of entry.  

Protest: Who has it and how to get a copy

This last issue is the prototypical result of implementing a system before all of the legal or technological kinks are removed. CBP and the trade often disagree on the correct “classification or appraisal” of imported goods stated on the filed CBP entry.

The procedure in place by statute is for the importer, its agent or attorney to contest the CBP decision by filing a “protest” after the final decision by CBP is rendered (the liquidation). Under the CBP Automated Commercial Environment (ACE) System, CBP has authorized submission and filing of the protest via the ACE system. This sounds great and consistent with modern technology enhancing the efficiency of both the trade’s and CBP operations.

What’s missing? CBP is not able to electronically create a copy of the protest with attachments to send to the filer. It is essential to be certain that what you have submitted has been properly filed and stored by CBP. If your protest is denied, the option is to appeal to the Court of International Trade. Can you imagine the Court’s reaction if told by CBP or the involved party that a copy of the protest is unavailable because CBP did not implement automated procedure necessary to produce documents required by the Court?

Currently there is only one secure option: Continue to submit protests manually.  

Carl R. Soller, Customs, International Cargo and Regulatory Compliance Attorney is counsel to companies engaged in all elements of the import/export supply chain and a recognized expert in his practice areas.  He and his firm concentrate their International, Regulatory and Cargo Practice in all business and regulatory matters on a nationwide basis.  He offers advice on supply chain security and its related Government Regulations to the Cargo Community as well as advice and a vast range of assistance to importers and exporters of all kinds of consumer goods.  He can be reached at (516) 812-6650 or

In-Bond Shipments: Evolving Changes at U.S. Border

By Debbie Dent
Director, Program Services
Border Connect, Inc.

 

The in-bond process allows imported merchandise to be entered at one U.S. port of entry without payment of duties and transported by a bonded carrier to another U.S. port for entry or export. The new requirements apply to Immediate Export (IE) bonds, Immediate Transportation (IT) bonds, and Transportation & Exportation (T & E) bonds.

A moving target date for implementation has been occurring. On Jan. 4, 2018 U.S. Customs & Border Protection (CBP) announced the time frame for initial implementation for these regulatory changes will now be July 2, 2018. On that date paper forms will no longer be accepted for input into the ACE system by CBP Officers.

The changes to be expected:

  • Paper in-transit bond applications will no longer be allowed and an electronic in-bond application must be filed for in-bond merchandise transported by ocean, rail or truck, except for merchandise transported by pipeline and truck shipments transiting the U.S. from Canada. It is expected that air in-bond shipments will eventually be fully paperless, but CBP is not amending those applicable regulations at this time
  • The HTS classification number (to the six digit) will be required on the in-bond application
  • The quantity must be declared on the in-bond application at the smallest external packing unit
  • Diversion to an alternate port of destination or exportation must be electronically requested for approval by Customs
  • The preparer of the in-transit bond application, or any other party that is permitted to file the in-bond application, must electronically report the arrival date and location within two business days of arrival at the destination or exportation port. CBP has clarified that the party whose bond is obligated is the party that is responsible for ensuring the in-bond record is up-to-date

On Aug. 6, 2018 electronic reporting for all transactions will be mandatory. CBP will no longer accept copies of CBPF 7512 to perform arrival or export functions. These responsibilities will be the requirement of the carrier. Additionally, a diversion to a port other than reported on the original in-bond will be required. An ACE edit will reject arrival if not performed. Electronic reporting of bonded cargo location (FIRMS Code) will be required.

At this time no date is set for implementation of the provision requiring the 6-digit Harmonized Tariff Schedule requirement for Immediate Transportation Movements.

Further details regarding the final rule can be found in the Federal Register Notice dated Sept. 28, 2017 at the following link: https://www.gpo.gov/fdsys/pkg/FR-2017-09-28/pdf/2017-20495.pdf

The only thing consistent at the border is change”

Debbie Dent, can be reached at 1-800-596-5176 or by e-mail

Reshipping of Packaged Hazardous Materials

By Sonia Irusta
Dangerous Goods Bureau

It is a common practice in the transportation industry to reship packaged hazardous materials, most commonly for distribution purposes. Is this acceptable?  Yes, it is, provided the reshipper fully complies with all Federal and International regulations applicable to the mode(s) of transportation being utilized (highway, air, vessel or rail). 

As noted in Title 49 of the U.S. CFR, a person who either receives hazardous materials from another company and reships them (reshipper/offerer), or accepts a hazardous material for transportation, and transports that material (carrier), is responsible for ensuring that the shipment complies in all respects with Federal hazardous materials transportation law. In both cases, the reshipper or carrier independently may be subject to enforcement action if the shipment does not comply.

Reshipping a package of hazardous materials that was received as damaged, mis-declared, undeclared or simply not prepared in full compliance with the regulatory requirements is a violation of the law if the shipment is not brought to full compliance by the reshipper prior to it being offered for transport.   Appendix A to Subpart D of Part 107—Guidelines for Civil Penalties sets forth the guidelines PHMSA uses in making initial baseline determinations for civil penalties. The first part of these guidelines is a list of baseline amounts or ranges for frequently-cited probable violations. Following the list of violations are general guidelines PHMSA uses in making penalty determinations in enforcement cases.

Violations of the Federal hazardous materials transportation law are preventable!

Proper training in compliance with the  49 CFR Subpart H-Training requirements is the solution.

Think before you RESHIP!

Sonia Irusta is a highly accomplished business and technical professional instrumental in domestic and international transportation solutions for shippers, freight forwarders and carriers.  She can be reached at Bureau of Dangerous Goods (609) 860.0300 Ext. 327  or via E-mail

 

2018: What Is on the Horizon for Ocean/Air Intermediaries?

By Carlos Rodriguez, Partner
Husch Blackwell LLP

On the Federal Maritime Commission (“FMC”) side, there are two developments expected early in 2018. One has to do with deregulation of Negotiated Rate Arrangements (“NRAs”) and NVOCC Service Arrangements (“NSAs”) for NVOCCS pursuant to Docket No. 17-10, and the other with hearings scheduled to review information and data raised in FMC Petition P4-16 by the Coalition for Fair Port Practices related to issues resulting in detention, demurrage, and per diem charges which have been deemed as unfair when they occur during situations or events which are not attributable to the shipping public. Lastly, we think it is relevant, even at this early stage so close to the holiday season, to note that the e-commerce explosion will continue in full force and will in the natural course of events bring intermediaries more into the 3PL space in the delivery of fulfillment services.

The future of e-commerce. The extended and most recent seasonal experiences dictate that this is an area that intermediaries cannot easily overlook. The numbers are too compelling, and the phenomena involves the large scale movement, storage and distribution of cargo across international borders and domestically, which is the traditional arena for the forwarder, NVOCC, Customs Broker, IAC and other intermediary entities. These numbers should not be overlooked:

  • Per the U.S. Department of Commerce, U.S. purchasers buy at the pace of $1.2 billion a day online;
  • This number has doubled in the last five years;
  • It is projected to double again in the next five (we think that this projection may be too conservative);
  • During this last (2017) Black Friday/Thanksgiving Day $7.9 billion worth of goods were sold via e-commerce;
  • Alibaba Global “Singles Day” Sales (2017), which is a day selected by them for special sales events, reached $25 billion in e-commerce sales for that day;
  • The Industry has forecast $107.4 billion in holiday sales for online orders this year, making 2017 the first to reach the $100 billion mark.

The value of these numbers is not just the raw dollar data, but rather the fact that these numbers represent the movement of substantial quantities of cargo which normally would be handled through more traditional channels which are now moving and being handled through a growing number of fulfillment centers. These fulfillment centers here and abroad are being developed not only by Amazon and large multi-national logistics companies, but also by smaller mid-sized companies, many of which are providing 3PL services that previously were being handled by ocean and air intermediaries. There are also a lot of 3PL newcomers to the field specializing as fulfillment center providers which do not come from the forwarder/broker ranks. The last mile delivery functions are also becoming more and more varied, creative and competitive. This new environment puts a large premium on efficiencies and cost-consciousness. Our firm, which traditionally provided services to the larger intermediaries in this arena, is now also providing these same services to many mid-sized and smaller entities who are also now engaging in this relatively new field of fulfillment services. IT companies are also fast developing software platforms which address the integration of order and inventory management, shipping delivery platforms and customer transparency, all important components for fulfillment service centers.

In any case, keep an eye on developments in this arena so that your company can take appropriate steps in this competitive area which is only growing. 

FMC Deregulation: NVOCC NRAs and NSAs/Docket No. 17-10. The FMC is getting closer to effecting the following changes to NRAs and NSAs:

1) That NSAs be continued as a basic agreement between NVOCCS and their customers for more comprehensive longer termed ocean transport agreements with provisions similar to those included in ocean carrier service contracts, with two basic differences:

  1. that the NSAs and amendments not be filed with the Commission as they are now required in order to take effect; and
  2. that the Essential Terms no longer be required to be published in an Essential Terms tariff.

2) That NRAs terms be allowed to include:

  1. that Shippers accept NRA quotes without a writing as it is now required by regulation; Shippers will be able to now accept NRA terms by merely booking/tendering cargo after an agreement is reached on the quotations made by the NVOCC;
  2. that NRAs would be now amended when commercial factors change by agreement of the parties without having to terminate them and initiating new ones; and
  3. that additional services and other terms be allowed in NRAs to expand their service scope with respect to “non-rate economic terms” (this last qualification appears to still have some regulatory tone to it);

This acceptance of an NRA via a booking and the amendment of same are major departures from prior regulatory positions taken by the Commission staff, and are welcomed.  

Next Steps: The Commission has proposed a Notice of Proposed Rule Making (“NPRM”) for issuance and publication of these regulation changes in the Federal Register. Acting Chairman Khouri also directed that the NPRM be amended to allow for supplementary information and has solicited additional  public comments on whether, as requested by various petitioners, the Commission should expand the NRA exemption in order to allow inclusion in NRA’s of “non-rate economic terms.” Final comments are due Jan. 29, 2018. We expect that these new regulations will be in place by the Spring. 

FMC Petition P4-16 by the Coalition for Fair Port Practices. The FMC published a notice identifying 26 individuals scheduled to testify as witnesses on one of six different panels at next month’s hearing exploring issues related to detention, demurrage, and per diem charges raised in a petition filed by the Coalition for Fair Port Practices (Petition P4-16). The following witnesses for the Intermediary Panel have been named by the FMC:      

  • Richard J. Roche, Vice President of International Transportation, Mohawk Global Logistics, and NVOCC Sub-Committee Chairman at NCBFAA
  • Charles Riley, Chairman, Board of Governors, New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (NYNJFFFBA), and Vice President, Steer Company
  • Jeanette Gioia, Vice President Exports, NYNJFFFBA, and President, Serra International, Inc.
  • Cameron W. Roberts, Esq., representing Roberts & Kehagiaras LLP and the Foreign Trade Association
  • Joseph T. Quinn, President, Sefco Export Management Company, Inc.

These are important hearings to the extent that in the recent past we have seen the application of demurrage, detention and per diem charges applied in circumstances wherein the shipping public had no involvement with the causes which gave rise to these charges such as labor actions, weather conditions, chassis dislocations and other such phenomena not under the control of the shipping public.

Carlos Rodriguez is a partner at Husch Blackwell LLP in Washington, D.C. He concentrates his practice on international and domestic transportation law, admiralty, regulatory maritime law, international commercial transactional law, transportation litigation and export licensing and compliance matters. He is also involved with transport and security issues involving the U.S. Customs and Border Protection and the Transportation Security Administration. He is transportation counsel to the New York/ New Jersey Foreign Freight Forwarders and Brokers Association. Mr. Rodriguez can be reached at (202) 378-2365 or via email at