2007 NCBFAA Annual Report

President’s Report
by Mary Jo Muoio
        Common wisdom says that there is strength in numbers. At the NCBFAA we believe this to be true. The mission statement of the NCBFAA reads: 
NCBFAA will be the U.S. national organization representing the common businesses of Customs brokers and forwarders as transportation facilitators and logistics professionals in their dealing with government, industry and each other. 
        NCBFAA will advocate for, and provide leadership to, its members; provide education to promote professional growth; provide legislative activities; and be a forum for the exchange of ideas. 
        Along with growing membership comes a multitude of dividends and opportunities to practice our mission. An increase in membership increases our clout with government legislators and regulators, and increases our stand in the marketplace. With every new member comes a larger percentage of the market represented by the NCBFAA. 
        New members also bring new opportunities for networking, exchanging of ideas and perspectives and making friends. Each of these offers fellow members benefits of NCBFAA membership. Over the last year our efforts to build membership have been so successful we have grown to our largest membership ever. I say the more the merrier!
        Through conscious efforts we have increased our membership in customs brokers, forwarders and most notably our NVOCC and airfreight members. 
        Through the efforts of leadership and our Customs Committee, we have enhanced our relationship with Customs and Border Protection at the executive and operational levels. Recognizing the value of an open dialogue with Customs, we have had frequent informal meetings with CBP management. Our objective is to have a relationship of mutual respect with CBP, to have them turn to us as a valuable resource, and to disagree and promote our interests when warranted. 
        Of course the regulatory requirements and challenges we face extend well beyond CBP. Our Regulatory Agencies Committee keeps us working with agencies such as FDA, EPA and most recently CPSC. Our Committee chair and our Washington advocate quickly caught unexpected language in proposed CPSC legislation, which provided for revocation of a broker’s license in connection with imports of violative product. We launched a very successful letter writing campaign to alert the Senate as to the inappropriateness of this provision and worked with staffers to suggest alternate remedies.
        Efforts on the export and transportation side have involved our Freight Forwarding Committee, NVOCC and Carriers’ Best Practices Committees, which have addressed numerous challenges facing our members. Their agendas included tackling forwarders’ tariff publication burdens, mitigating air forwarders liability for cargo loss and damage claims, monitoring state efforts to impose gross receipts taxes and devising strategies for minimizing unnecessary demurrage and detention expenses. 
We have made investments, which allowed us to play a more prominent role in airfreight issues over the last two years—underscoring the benefit of membership to existing airfreight members and new members alike.
        Likewise our NVOCC members are well represented by an active committee. Initially organized as a subcommittee of the Freight Forwarding Committee, the NVOCC committee has been designated as a Principal Standing Committee along with the Freight Forwarding and Customs committees. These committees represent the interests of their respective industries and join forces on issues of common interest. A real life example of the intersection of these discrete and cooperative efforts has been the NCBFAA dialogue on the Notice of Proposed Rulemaking on the importer security filing and submission of comments. NCBFAA leadership including the committee chairmen took an active role in soliciting member input on this important proposal. 
        Of primary concern was that the NCBFAA present comments and suggestions to CBP, which are beneficial to our diverse members. The exercise reminded me of my former boss Dennis Colgan. Dennis was a very skilled negotiator. What impressed me from my first days observing him was that he always sought to negotiate a deal that was good for all parties. Inevitably, one party may get the best deal, but no one got a bad deal. It occurred to me that while the 10 + 2 proposal impacted our brokerage, forwarding and NVOCC members, the potential impact was not equal with the brokers having both the greatest risk and greatest opportunity. It was important to me that the different segments of our membership feel represented in our comments.
        Responding to the accelerating role of automation and technology in our industry, we have reinvigorated the Customs Committee Automation Subcommittee. Their guidance and counsel in the coming months will prove invaluable as the demands of ACE implementation and the technological needs of international security require more and more of our attention.
        The NCBFAA Educational Institute (NEI) continues to provide superior educational opportunities by understanding users' professional needs and developing marketing strategies to drive participation in the NEI certification programs. 
        These committees—your committees—have worked hard to promote business opportunities for our members. If you are unsure of how your area is represented on the NCBFAA committees or would like to get more involved, all you have to do is ask. Our staff can put you in contact with the chairs and members of the committees, all of whom can be found on the NCBFAA Website under the "About NCBFAA" tab on the homepage, www.ncbfaa.org. A listing of our Principal Standing Committees is also available in the 2008 NCBFAA Annual Directory.
        Mitchell Caplan, CEO, E*Trade Group Inc. is quoted as saying "To succeed as a team is to hold all of the members accountable for their expertise." Applied to our association, we will position ourselves to succeed as individual businessmen and women when we pool our collective passion and expertise into the NCBFAA. 
        Spread the word to attract additional members and take advantage of the many opportunities to be involved. Come on in, the water is fine! 

Chairman’s Report
by Federico "Kiko" Zuniga

        In addition to my role as Chairman of the NBCFAA, I am also the USA Managing Director for the International Federation of Customs Brokers Associations (IFCBA). Along with the other six IFCBA Managing Directors, I have strongly endorsed the role of our customs brokerage community in international commerce and have been especially vocal in recommending that world customs regulatory organizations rely as extensively as possible on the members of that community when it comes to improving trade security and facilitation.
        Ever growing globalization has affected all aspects of international commerce and the role of America’s customs brokers is no exception. Standing as they do astride trade flows, the customs broker’s involvement has gradually evolved from that of cargo clearance to the nation’s gatekeeper of trade.
        Dispelling any question of our relevance to, and participation in, the supply chain, this evolving environment of cross border trade has presented us with an array of ongoing challenges and opportunities during 2007. The challenges come from various sources: regulatory, technological, financial, and cultural just to name a few. But the opportunities are single sourced: the exploding international market place.
        As to the challenges, the regulatory aspect grows increasingly complex as new and more extensive requirements are added by the many agencies that are responsible for oversight of international trade. Though we are only one part of the supply train our efforts ripple through the entire continuum of commerce as we assist clients with advice on transportation options, types of carriers, and shipping routes as well as exchange rates, appraisals, and proper classifications and duties, among others. As the regulations intrude into more facets of our business, we face new challenges but so to do our clients as they struggle to understand and comply with the new and changing rules.
        This is where the customs broker as educator becomes important. Our clients will look to us for guidance as we must also possess a thorough knowledge of tariff schedules and Customs regulations and keep abreast of the amendments made through constant changes in the law and administrative regulations. Going beyond Customs, our work calls for contact with more than 40 other government agencies, such as the U.S. Department of Agriculture (USDA) on meat importation, the Environmental Protection Agency (EPA) on vehicle emission standards or the Food and Drug Administration (FDA) on product safety. 
        We have also reached the point with globalization that our knowledge of foreign government’s customs regulations is becoming a valuable asset in attracting clients. With the risk associated with failure to comply with requirements and consequences for that failure becoming so severe, our clients will look to us to help protect them from the pitfalls of international commerce.
        Technologically, the customs broker’s job is rapidly becoming fully automated and the ability to manipulate data electronically is essential for everyone involved in international trade from the long range policy planner in the home office down to the employee working the cargo lifter and all those in between. This journey through the virtual world we are constructing is unrelenting and accelerating, especially when one considers that for every shipment entering the United States there are 100s of pages of Customs regulations and thousands of tariff items to consider. Add to that new security and compliance initiatives and it is hard to imagine customs brokers not playing a key role in commerce.
        As importers feel the pinch of economic slowdowns and trim staff they will come more and more to depend on their customs brokers to provide the competencies that they can no longer afford to maintain in house. This means a greater role for managing trade data on behalf of our individual clients, providing them with highly customized weekly or quarterly reports of their trade activity broken down by tariff number, duty payments, customs district, and so forth that they can use to analyze workflows and determine the best way to allocate their resources to most efficiently execute their importing activities. This will require that we be more flexible, efficient and tech-savvy to meet these demands. 
        I am confident that customs brokers and licensed freight forwarders will continue to be reliable resources for expediting commerce efficiently and securely, remaining in the forefront as the "go to" facilitators of international trade. We have achieved this status in no small part due to our adherence to the rules and regulations defined by governments, both here and abroad. We do this in the face of the complexities those rules create for market transactions, especially in the amount of detail information and data that all trade participants, not just us, are required to gather and maintain.
        However, one troubling trend we are seeing is the reliance by some government agencies on data collected by individuals who, unlike customs brokers and licensed freight forwarders, are not licensed or overseen as closely by regulatory agencies. That is not to say the data is prima facie unreliable but in the absence of a track record of compliance, assurance that the provider understands the implications of the data, and the knowledge that the providers livelihood depends on the accuracy of the data being filed, how confident can the government regulatory entities, who are ultimately charged with the security and economic well being of their respective countries, be in accepting it?
        As customs brokers and licensed freight forwarders, data filing is our "bread and butter" and we are aware of all aspects of it down to the finest detail of the largest shipment. We are held accountable for insuring that all the "t’s are crossed and the i’s are dotted" or we lose our livelihoods; it is as simple as that. This professional discipline has motivated us since the first licensed customs broker and licensed fright forwarder cleared a shipment. As a result, we take the responsibility to provide solid, accurate information very seriously and that is why all governments would be prudent to insist that only licensed individuals or individual companies that represent themselves, rather than someone outside the customs regulatory environment, input the trade data that our commercial viability and national security have come to depend on in the 21st century.

Executive Vice President’s Report 
by barbara reilly

        This was a hectic fast-paced year that saw us continue to bring our Washington office up to staff and bring our more seasoned senior staff up to speed so as to better serve our members nationwide. In the middle of that administrative undertaking, NCBFAA pulled off one of their most successful Annual Conference’s ever, (more than 80 "First Time" attendees) held in Phoenix, Arizona; convened one of the better attended Annual Government Affairs Conference in recent years in Washington, DC, continued the focus of strengthening the foundation of the NCBFAA’s Educational Institute under the direction of Committee Chairmen Kiko Zuniga, Dr. Robert Perkins, and Darrell Sekin, and spent a significant amount of time streamlining the communication between NCBFAA and the membership.
        Throughout 2007, there were too many wonderful volunteers who really helped our NCBFAA staff immeasurably to list, but Treasurer Geoff Powell and Budget Chairman David Katzman, along with our new NCBFAA General Counsel Edward Greenberg stand out. David's attention to detail and his willingness to go that extra mile to ensure that the Treasurer felt the NCBFAA ran as efficiently as possible were critical to our success last year. While Ed went through a speedy transition following the loss of our late beloved former General Counsel, Harvey Isaacs, he was also a font of knowledge who let us bother him with a million questions that he answered timely and graciously.
        As for the coming year, I am very excited about the prospect of working on a number of marketing and communication initiatives designed to spread our message throughout the international trading community, as reflected by more time spent at various other industry organization events by all the NCBFAA Officers, lead by President Mary Jo Muoio. The Affiliated Presidents Network chaired by Scott Larson is making significant progress with the many associations assisting them with potential improvements to their local membership. The various NCBFAA local Associations have rolled out the red carpet on a number of occasions, and they deserve our gratitude as well.
        As the NCBFAA Principal Standing Committees continue to work with the major regulatory agencies involved with our industry on your behalf, those agencies understand that the more our members know about what is expected of them the better they can comply with the requirements of doing business during these interesting times.
        Another initiative our Communications undertook was redesigning the NCBFAA website, which is now complete as far as the public face is concerned but a number of other initiatives are underway and ongoing to ensure the site not only serves the communication needs of the organization but also the information needs of our diverse membership.
        One crucial campaign that we have to succeed at is increasing our membership. This is always a critical concern but never more so than now as international trade grows by leaps and bounds and the issues facing our industry continue to become more complex, as realized by Membership Chairman Bruce Goodwin. If we want to be sure that the solutions to the problems these issues raise are not worse than the problems, we must be heard when these concerns are deliberated. A large robust membership is the best guarantee that our voices will be heard and considered.
        Along with your staff in the Washington office (Tom Mathers, Kimberly Murphy, Kim O'Beirne, Andre Paige, Jeff Short, Drenda Williams, Hanan Bedri and Maria Voziyan), I look forward with anticipation to the great things we will accomplish for you and together we welcome the challenges and opportunities our Association will face in the coming year.

Treasurer’s Report
by Geoffrey C. Powell and David E. Katzman

        NCBFAA ended 2007 with a small profit, slightly less than was budgeted. This is in comparison with a budgeted and incurred loss in 2006 due to our investment in our new CCS program. The three revenue bases of our organization, the Annual Conference, Membership and the NCBFAA Educational Institute (NEI) all met their respective net revenue figures for 2007.
        Although we anticipated our 2007 revenues for the NEI to exceed $450,000.00, we did fall short of that by $90,000.00, but the associated costs were reduced at the same time by $83,000.00. To benefit our members, we increased our office space in Washington to make space for a new Director and continued our investment in the interactive web site for the growing NEI program. The NEI courses continue to grow, not only through our local associations, but also through other associations, to continue to educate our growing NEI membership. 2007 saw our investment increase in the Webinar Program, which has proven to facilitate our teaching and we look for these programs to continue to grow. 
        The membership within our organization grows every month through the hard efforts of our Membership Chair, Bruce Goodwin in conjunction with our fine staff in Washington DC. Although consolidations of companies can have a negative impact on NCBFAA’s revenue stream, our 2007 actual Membership dues came within a hair of meeting our aggressive budget set out at the beginning of the year. 
        Our Annual conference will always continue to be the best time spent learning about new issues that affect your business, seeing old friends and meeting new friends. Our association is very dependent on the revenue generated from this annual event. The 2007 Annual Conference, held at Wild Horse Pass in Phoenix, Arizona was a phenomenally successful event. The revenue figures exceeded our budget by over $50,000.00, yet Chairman Averill wanted to ensure that all the members of this organization were treated to a truly first class event and made sure that there was no expense spared, which increased our expenses over the budget. I heard many comments from a number of people that the conference venue was one of the nicest in years and compliments go out to our Washington staff, barbara reilly and Kim O’Beirne for finding such a great location.
        The Government Affairs Conference held this past year in Washington was the highest revenue producing Government Affairs Conference the association has ever enjoyed and congratulations go out to Lee Connor, Jon Kent, our Washington representative and our Washington staff for making this such a successful event. The success is defined not only in how our congressional representatives view the importance of the NCBFAA, but is also measured in the financial return to our association to become stronger and more respected in Washington.
        NCBFAA has been very busy this year continuing to work on the many issues that affect us all. We therefore in 2007 changed the budgeting process to ensure that all the committees working on your behalf are properly funded; yet properly managed. In prior years, we put a lot of the expenses under two main standing committees, the Customs and Freight Forwarding Committees. The 2007 budget was created by each of the committee chairs for the Forwarding Committee, the Customs Committee, the Airfreight Committee, the Ocean Carrier Best Practices Committee, the Affiliated Presidents Network, the Regulatory Affairs Committee, the NVOCC Committee, to name a few. It was our belief that, by creating a more detailed budget, we can better control and manage the NCBFAA expenses on your behalf. In addition, as the NCBFAA has developed close partnerships with other world organizations such as FIATA, IFCBA, JIG, AAEI and NACBA, we have budgeted for a number of our dedicated members to devote their time and energy to ensure that the NCBFAA remains an organization respected throughout the world. 
        David and I have to acknowledge the professional work that our new accounting person, Kim Murphy, has brought to this association. The accounting can be very complex, but as the Committee Chairs will attest, Kim has done a fantastic job of properly monitoring and allocating expenses.
        2008 will be a challenging year financially for the NCBFAA. The Trade, all the government organizations and Congress rely upon the NCBFAA for our expertise in shaping and directing the important issues we will need to address in 2008 not only to better our industry, but also to keep America secure.
In the last report, I included the below statement, that I think is still very appropriate for 2008:
        The Budget Committee will:

  • Closely scrutinize all expense accounts
  • Monitor more closely all spending against the budget and report any discrepancies
  • Continue to make suggestions on how to improve the finances to the Board through the Executive Committee
  • Work with all parties to explore ways of spending our limited funds to the best benefit of the association.

The Board of Directors should:

  • Support the work of the association and its committees by actively working with the committees and encouraging firms to attend the seminars and conferences of the association
  • Actively solicit new members and sponsors for the Annual Conferences
  • Actively support and encourage a positive PR effort on behalf of the association
  • Listen carefully to financial suggestions and act in the best interest of all members

Our Washington staff should:

  • Carefully monitor expenditures, making sure that expenditures are properly approved and coded to the proper account
  • Monitor administrative expenses and make suggestions for possible savings in these expenditures
  • Pursue possible alternative sources such as grant money and reductions in expenses such as the use of interns.

        The year 2008 will present a real challenge to all of us. Our Annual Conference Committee is working hard to make sure that this is the most successful conference ever. We face a year of Government agencies promulgating new regulations based on the laws passed last year. Furthermore, we need to make sure our industry can successfully operate under the new Homeland Security Department. The CCS program and NEI will go into high gear. The bottom line is that there will be increased demands on us to spend money to represent the interests of our members. We all need to help make sure that the money is there to be spent and that it is spent to benefit our members.

Washington Representative’s Report
by Jon Kent
        2007 proved to be a challenging, yet successful year for NCBFAA. As Legislative Representative for the Association, my primary "beat" is Congress; however, I interact at the policy levels of CBP, DHS, FMC, TSA, and other federal agencies. The new Congress, with a change of parties attending to governance, set the tone for legislation and for relationships with those federal agencies. Congress took a stricter tone on security and safety, leaving the Administration left with the challenge of showing how its risk-based approach better protects the nation. Congress’ 100 percent examination approach particularly conflicts with that formula.
        Following are a series of issues where NCBFAA encountered this dynamic, as well as other areas where customs broker/transportation intermediary activities were at stake.
        Congress passed the "9/11" security bill. NCBFAA fought to eliminate the requirement for 100 percent inspection of air cargo and succeeded with a positive definition of "screening" that continued the risk-based approach. However, another provision relating to ocean cargo turned an existing 100 percent pilot program into routine examination. NCBFAA bought time (the provision won’t go into effect until 2012) and additional wiggle room (DHS can extend the deadline under certain criteria.)
        Food safety legislation would close a number of ports to food imports and take a draconian approach to examination and certification of foreign suppliers. NCBFAA attendees at the Government Affairs Conference lobbied against this bill and Congressional action stalled.
        An imported products safety bill (involving the Consumer Products Safety Commission) would have put customs broker licenses at risk where there was a "repeat" violation of statutory and regulatory provisions. NCBFAA waded into that fight through the urgent calls of our members, raising a storm of protest. Using our positive relationship with the Senate Finance Committee, the Association has thus far succeeded in seeing the provision stripped from the bill.
        DHS’ proposal for a Global Trade Exchange (GTX) would create a warehouse for data that would be made available to US and foreign government regulators. This proposal threatens the role of US customs brokers if it continues on the course espoused by DHS proponents. NCBFAA President Mary Jo Muoio voiced strong opposition, while GAC attendees took it to the Hill. Our continued involvement is crucial to the future of our industry.
        DHS threatened to take $30 million from ACE development, diverting it to another program. NCBFAA intervened with the House Ways and Means Committee, which forced the Administration to drop the proposal.
        Some farm state Senators sought to return APHIS employees from DHS back to the Department of Agriculture. NCBFAA took CBP’s side, testifying in a public hearing and urging opposition to its inclusion in the Farm Bill. The Association worked with the House and Senate Homeland Security Committees, resulting in amendments being dropped and a satisfactory compromise being reached. Result: APHIS stays put.
        Drawback modernization was readied in the Senate Finance Committee and then emerged in the House in a similar form (although it included a provision directed to wine drawback). The NCBFAA drawback committee chairman has worked with his committee and CBP to reach agreement on a bill. 2008 may well be the year for its passage.
        As you can see, much of the legislation has been harmful ? even disastrous ? for NCBFAA members. The strong involvement of the Association, its leaders, and its members has been key to our success. While we would prefer to work on proactive legislation seeking changes at CBP and other agencies, the continued existence of profoundly negative legislation dominates the Congressional landscape. Our work is cut out for us in 2008.

Legislative Affairs Committee Report
by Lee Connor
        Once again the Legislative Affairs Committee's main activity was to organize the annual Government Affairs Conference in Washington. This year's conference was the most well attended GAC in a decade. This reflected a growing realization among our members that we must make our voice heard on Capitol Hill.
        Supply chain security was a major focus of the conference as expected. Against the backdrop of a Congressional proposal to radically alter the importation of food products, NCBAA members presented a very detailed position paper, which was well received by most members of Congress we visited. Some of the draconian measures in the Dingell draft bill included restricting the number of ports through which food imports could enter, a massive increase in penalty risks for brokers and onerous user fees that could have placed an unfair burden on certain commodities and industries. Although this will be an ongoing battle, NCBFAA's lobbying efforts were very timely on this issue.
        We also requested members of Congress to take a hard look at the proposed Global Trade Data Exchange concept. NCBFAA members presented our strong support for making the collection of trade data statistics as efficient and accurate as possible but also raised some very pertinent questions how commercially sensitive data is collected, controlled and protected. Many of our congressional members agreed to contact the Department of Homeland Security and raise some of these same questions.
        The GAC program also included a variety of speakers and panelists that brought attendees up to date on issues like the status of 10 + 2, ACE, the implementation of new TSA rules for Indirect Air Carriers and the requirements for 100 percent cargo screening. We heard from top officials at CBP, DHS, FMC, TSA as well as Congressional staffers. Much was learned and accomplished in an action packed two and a half days and, most importantly, NCBFAA further enhanced its presence and visibility on the Hill
        Many thanks go to our president, Mary Jo Muoio, Washington representative Jon Kent, Peter Powell and Ed Greenberg for their support and work to make the conference productive. I also wish to thank barb reilly and the NCBFAA staff for their tireless efforts to ensure the conference was a success. Finally, a huge thanks to all those members who contributed ideas and time serving on panels and, most importantly, those members who took the time and effort to be there, march on the Hill and make our views known to over 75 members of Congress. Great job! I look forward to seeing all of you (plus a few more) back in DC for Government Affairs Conference in September '08. It will be well worth it for our industry, your customers and your business.

Customs Committee Report
by Ken Bargteil
        A sense of great honor and privilege, followed fast by a recognition of inadequacy and humility, suffuse one’s thoughts in reflection on the work of the Customs Committee when composing one’s sixth annual report to the membership. The Customs Committee is the principal actor on stage as the interests and fortunes of customs brokers play out in the public arena. Its members are among the most dedicated, informed and motivated professionals representing NCBFAA membership on the broad sweep of issues associated with the dual missions of Customs and Border Protection: border security and trade facilitation. Activity within the Customs Committee can also be divided into two tracks: formulation and recommendation of policy and strategy to the Board of Directors, and direct engagement with CBP on discreet issues as these come to the Committee’s notice.
        The agendas and meeting notes published by the Customs Committee for NCBFAA membership on its website provide a running commentary on many of those activities throughout the year. This report will focus on just three of the matters to which the Customs Committee devoted itself and NCBFAA resources during 2007: CBP’s attempts to vest in the Assistant Commissioner for the Office of International Trade codified authority to summarily suspend or revoke a customs broker’s license; CBP’s formulation of the "10 + 2" advance electronic data filing requirement, and CBP’s decision to eliminate some data edits when moving entry summary from ACS to ACE. It is far from overstatement to suggest that if these were the only issues addressed in 2007, it would have been more than sufficient to test the mettle of any trade association. It is the Chairman’s belief that the Customs Committee channeled heroic efforts on behalf of NCBFAA into these matters.
        Summary Authority to Suspend or Revoke a Customs Broker License – The work of NCBFAA’s Customs Committee is most often supported and advanced by the Association’s counsels. The value of these assets was much in evidence in the development of this matter. It was first brought to the Committee’s attention by our esteemed DC Counsel, who learned of it from Congressional staff, rather that CBP’s legislative liaison. The very fact that this legislative initiative was not discussed in advance with the Customs Committee by the Office of International Trade, and was not advised to our DC Counsel by CBP’s legislative liaison was one of the aspects of this initiative that most concerned the Customs Committee.
        The summary authority that would be granted the Assistant Commissioner for the Office of International Trade to suspend a customs broker’s license would be predicated on a willful violation by the customs broker that put at risk public safety, health or interests. The three principal factors that made this proposed legislation unacceptable to NCBFAA were that: it put at risk both an individual’s customs broker license and the license granted a customs brokerage firm; it made no provision for due process in advance of the suspension or revocation; and it included in the causes sufficient for suspension or revocation a risk to public interests.
        The suspension or revocation of a customs broker’s license triggers 19 CFR 111.42, which prohibits a customs broker from entering into any business relationship with another customs broker whose license has been suspended or revoked. It is inescapable that given the absolute requirement for continuous customs clearance capability to serve the daily needs of its clients, the inevitable effects of even a suspension of a firm’s customs broker license would be ruinous to that business. For this reason, the Customs Committee argued that violations of the sort contemplated in CBP’s legislative initiative must always be traceable to individuals, and if a summary authority were to be legislated, it must apply only to individual licenses in order that innocent principals, employees and customers not be so severely, unnecessarily, and irrevocably impacted.
        Dispensing with due process in advance of verdict, sentencing and execution is alien to our sense of justice. It cannot be argued that summary powers will prove to be 100 percent correct and justified. Even granting that a strong argument can be advanced that where public safety and health are put at risk, quick and decisive action may be critical, a rubric of American justice is the presumption of innocence until proven guilty. No compelling argument was made that vesting summary authority for suspension or revocation of a customs broker license in the Assistant Commissioner for the Office of International Trade is the only means by which a sufficient degree of protection might be provided for public safety and health, given the apparent culpability of that customs broker in a violation. In fact, by reason of the Customs Committee’s efforts in this regard, CBP invited and received the Committee’s alternative legislative language that included due process protections in such proceedings.
        As mentioned above, while an argument can be advanced that where public safety and health are at risk, quick and decisive action may be necessary, arguments to that effect become problematic when public interest is added to the mix. This is evident because of the indefinite nature of the term; it is open to interpretation that expands the scope of causes to unimaginable proportions. Through the involvement of the Customs Committee, it appears that at least this category of causes has been abandoned by CBP. Unfortunately, the reason this statement can be made is that although the Customs Committee was assured at its September 26 meeting by the Assistant Commissioner for the Office of International Trade that legislative language would not be sent back to the Hill in this regard without consideration of NCBFAA alternative language and further engagement, a revised version was again intercepted by our DC Counsel, and once again was successfully suppressed.
        The Customs Committee expects to continue its engagement with the Office of International Trade on this matter in 2008. The Customs Committee will resist with all its resources any attempt to eliminate the due process rights of NCBFAA members in defending a customs broker license.
        Run-up to the "10 + 2" NPRM – The Customs Committee played a pivotal, if mostly "off stage" role in the consultative process mandated in the SAFE Ports Act of 2006, and leading up to the Notice of Proposed Rulemaking on CBP’s "10 + 2" advance electronic data filing requirement in the Federal Register, January 2, 2008 (cit. 73 FR 90). The reach of the Customs Committee on issues such as "10 + 2" extends beyond NCBFAA into both the Trade Support Network (TSN), and the Departmental Advisory Committee on Commercial Operations of Customs and Border Protection and Related Homeland Security Functions (COAC), and in addition to its direct influence through dialog and correspondence with CBP, the Customs Committee worked behind the scenes in both of those fora to inform the process. In particular, the         TSN Supply Chain Security Committee’s "10 + 2" Subcommittee, which did most of the development work on "10 + 2," included two members of the Customs Committee.
        The effectiveness of the Customs Committee on this particular issue can be readily found by comparing three documents: the CBP "strawman" proposal; the NCBFAA comments on the "strawman" proposal, and the above-cited NPRM. Additional evidence is apparent in the Committee’s published meeting notes for 2007. While there is much in the NPRM that requires adjustment, and even the merits of the initiative remain open to question, there can be no question that the Customs Committee was remarkably successful in its representation of NCBFAA member interests in this rule.
        Three of the four principle arguments made by NCBFAA in its comments on the "strawman" proposal were adopted in the NPRM: CBP should use existing technology modules for the security filing; CBP should define the 10 data elements in terms of entry filing requirements, and CBP should phase implementation of the new security filings. Moreover, while CBP did not accept the fourth argument advanced by NCBFAA in its comments, i.e., that activities required for the preparation and filing of "10 + 2" data fall within the definition of "customs business," elements of the NPRM such as the requirement that a filing agent obtain a power of attorney and customs bond, give evidence that CBP was moved by our arguments that U.S. licensed customs brokers are best suited to file for this purpose. 
        "Edit Lite" – The development of the Automated Commercial Environment (ACE) has exemplified government at its best, and government doing not so good. The degree to which CBP has engaged with the trade in meeting the challenge of creating a successor to the Automated Commercial System (ACS) is in the best tradition of government of the people, by the people and for the people. One could only hope that other government agencies would work in as close cooperation with its stakeholders in developing programs used by those parties. On the other hand, the dedication of resources and time on the front end to portal functions urged on it by some of those stakeholders, and presumably by its prime contractor, resulted in a compressed time frame for both development and funding to produce core functionality such as entry summary and release. This situation was exacerbated by CBP concession to trade concerns that CBP’s proposed "big bang" implementation of Entry Summary, Accounts and Revenue (ESAR), which would have moved the entire filing community, at the same moment and at all ports of entry, from summary filing in ACS to ACE, was too risky. The change to a phased implementation necessarily extended the timeframe for that process.
        When it became evident that documentation of data edits that acted to filter records filed through ABI was either incomplete or absent, a second and more substantial delay for ESAR roll out loomed on the horizon. To reproduce in ACE a similar set of data edits, CBP had to conduct a decomposition of the data edits in ACS, document those and then provide for reprogramming the edits into ACE. It was estimated that the total delay created by the phased implementation and recomposition of the entire ACS data edits set would be as much as 15 months. That eventuality was rejected by the CBP Modernization Board of Directors and resulted in a decision to curtail the data edits in ACE. In very basic terms, to many in the trade, including a large and highly vocal contingent among the customs broker members, this was a betrayal of the very promise of ACE. ACE was envisioned, promoted and supported as an improvement on ACS, and "Edit Lite" was seen as less rather than more in comparison to ACS.
        The strong position taken by the Customs Committee questioning the soundness of CBP’s Modernization Board decision to proceed with "Edit Lite" was instrumental in eliciting commitments from CBP to: share the results of its decomposition exercise with the Committee; remain open to discussion on the relative merits of "Edit Lite," and provide sufficient definition and guidance for private sector reproduction of any eliminated edits in filer automated systems.
        Summary – It is simply not possible to treat adequately just the three issues dealt with by the Customs Committee that have been reported above within the constraints of an Annual Report. It is unthinkable that the full range of issues that the Customs Committee addressed itself to in 2007 might even be mentioned in this context. The work of the Customs Committee is unending and its responsibilities weighty. There can be no question that its service to the NCBFAA and its members is truly invaluable. A great debt of gratitude is owed to every member of the Customs Committee, its Customs Counsel, Senior Advisors, DC Counsel, and all of its volunteer contributors and supporters. The Chairman thanks one and all, and respectfully submits this as the NCBFAA Customs Committee 2007 Annual Report.

Ad Hoc Security Committee Report
by William Evans

        First, I would like to thank Lee Connor, Geoff Powell, Peter Powell, and barbara reilly for all their support in the past year. The Security Committee primarily worked with the Center for Disease Control on the Quarantine and Border Health Training Workgroup formed in March 2007. The purpose of the workgroup is to help the Centers for Disease Control and Prevention (CDC) Division of Global Migration and Quarantine (DGMQ) assess the public health-related training and communications needs of key partners at U.S. ports of entry. 
        Over the next year, the Workgroup will advise CDC on developing a comprehensive assessment of training and education needs related to quarantine and border health. CDC views the planned needs assessment as a collaborative effort to help ensure the health of the U.S. public. The needs assessment will help CDC to better understand the training and communication needs of other agencies and organizations. It will help CDC’s partners to gain a greater understanding of their role in protecting the public’s health. It will also create synergy between agencies around training and communication related to public health emergency preparedness and response.
        CDC, in the coming months, would like to have conversations with our membership’s personnel responsible for training within our respective organizations. These interviews will take approximately one hour. If you would like to participate please contact NCBFAA at (202) 466-0222 or recp@nbcfaa.org and in the subject line show CDC. I will contact you in the near future with further details. Issues such as 10+2 and air cargo security were addressed by other committee’s who will report accordingly.

Freight Forwarding/NVOCC Report
by William App, Jr., and Joseph Meunier

        This has again been an extremely busy year, as the Forwarding and NVOCC Committees have dealt with a large number of issues that arose from governmental initiatives and efforts to streamline and modernize existing regulations that affect the members. As discussed in greater detail below, the Committees provided important guidance and direction to the Association in its efforts to improve conditions for forwarders and NVOCCs.
        One of the more significant efforts that the Committees have undertaken is to attempt, again, to eliminate the burden of rate tariff publication for NVOCCs. When this issue first arose four years ago, the Association filed a petition with the Federal Maritime Commission (FMC) that sought to eliminate any requirement that NVOCCs be required to publish their rate tariffs, primarily on the basis that the industry had changed and that tariffs no longer served any valid public purpose; consequently, there was no valid reason for NVOCCs to continue to bear the substantial costs associated with tariff publications. Unfortunately, while the FMC did use its exemption authority in an attempt to improve conditions for NVOCCs, the agency only authorized NVOCCs to enter into confidential contracts with their shippers (called NVOCC Service Arrangements or NSAs) and did not act on the broader relief sought by the Association.
        As the Committees believed that being able to enter into NSAs did not address the cost and problems still associated with tariff publication, we resumed our efforts in that direction. During the past year, those efforts included meeting with the various FMC Commissioners to exchange views on this topic, forming a working coalition with organizations, such as the National Industrial Transportation League, to obtain their support, meeting with representatives of the steamship lines, and securing the agreement of those companies that previously supported the NSAs. In addition, the Committees directed counsel to draft a petition that could be filed with the FMC to seek a broad exemption from the tariff publication provisions of the Shipping Act. Those efforts continue.
        During the year, an important issue arose with respect to the potential liability of air forwarders for cargo loss and damage claims. It has been the law for many years, under the Warsaw Convention covering loss and damage claims, that the two year statute of limitations was an absolute standard, so that any indemnity action brought by a forwarder against an airline had to be instituted within two years after the cargo was damaged. Since many actions against forwarders, especially those involving subrogation actions by insurance companies, are not brought until late in the period, this essentially has precluded many forwarders from bringing the underlying carriers into those lawsuits even though in most cases it was the airlines that were clearly responsible for the damage. When a new case arose involving the application of the new Montreal Convention, the Committees directed counsel to prepare an affidavit as an expert witness to file in support of UPS Supply Chain Solutions, which had been sued by an insurance carrier for loss and damage. In that matter, UPS sued the underlying airline (Qantas) after the expiration of the two year statute of limitations, the airline filed a motion to dismiss. Our Counsel’s affidavit explained why the courts should interpret the Montreal Convention differently than had been the situation under the Warsaw Convention, so as not to deprive forwarders of their ability to seek indemnification from the underlying carriers for such matters. At the time this report went to press, the court had not yet issued a decision. But this is an extremely important matter for air forwarders and will almost certainly be appealed regardless of who prevails in the trial court.
        Another significant event occurred this year when the State of Texas imposed a gross receipt tax on companies doing business in that state, whether or not they had offices there. As the Texas tax specifically declined to permit forwarders, NVOCCs and brokers from deducting so-called passthrough revenues (in other words, monies advanced to Customs for duties or to carriers for freight charges), the tax would have a significant adverse effect on many (or most) intermediaries and brokers doing business in that state. The Committees’ counsel to send a letter to the Texas authorities explaining the adverse consequences on brokers and intermediaries and requesting reconsideration. As of this date, the Texas authorities have not changed their position, but efforts of the Committees continue.
        This is a significant issue also because a number of other states have indicated their intention to similarly apply gross revenue taxes to the activities of service providers. One state, Michigan, actually enacted such a tax during the year, although it was later repealed when the industry complained. The Committees will be watching the activities of other states.
        Another governmental initiative that arose during the year pertained to the efforts of the port of Long Beach in Los Angeles to enact new container fees that are intended to reduce pollution in the port areas. Because of the concern about potentially inappropriate collective activities of these ports, as well as the amount of the fees and the significant consequences this is likely to have in restricting the number of truckers that would be able to use the port facilities, the Committees participated in drafting comments to the ports urging reconsideration of the initiative. In addition, we met with the FMC Commissioners and other agency officials to explain why the Commission should take action on this issue.
        We had been meeting with Congressman Manzullo’s staff concerning a possible legislative effort relating to the submission of Shipper’s Export Declaration through the Census Bureau’s Automated Export System (AES). In this draft bill, it is proposed that AES filers be licensed and that the government build any export restrictions that may exist directly into the AES system. We have been working with the Congressman and the various governmental agencies involved in the hopes of shaping this legislation so that it is both productive and does not impose undue burdens on the industry.
        The NVOCC Committee has continued to work closely with the Customs Committee in responding to the initiative from Customs and Border Protection to add the so-called 10+2 data elements on top of the 24-hour rule security filing that is required for import cargo. In response to CBP’s formal Notice of Proposed Rulemaking, the Committees worked together to help draft the Association’s recently filed response to the proposal.
        Committee members continue to work with the newly formed Carrier Best Practices Committee, which incorporates members of both the steamship line and rail industries, in attempts to develop efficient and standardized practices for moving containers in ways that minimize unnecessary demurrage and detention. These efforts continue to achieve positive results in increasing efficiency and minimizing inappropriate and unnecessary claims that the carriers had previously made against NVOCCs and brokers for demurrage and detention.
        The Committees have been monitoring the various U.S. and foreign government investigations of airlines with respect to antitrust issues that arise out of the movement of air cargo. In addition to keeping the members of the Association apprised of those matters, the Committees have directed counsel to develop appropriate guidelines for use by the members that would be helpful in educating everyone concerning the types of actions that could potentially create problems in this area.

Air Freight Committee Report
by Scott Case

        The continued focus on cargo security and interactions with the Transportation Security Administration occupied the lion’s share of the committee’s time this past year. Due to the regulations governing the sharing of Sensitive Security Information (SSI), there are many details, which cannot be covered explicitly.
        In 2007, the NCBFAA and the Airforwarder’s Association entered into an alliance called SAFE (the Strategic Alliance for Freight Forwarding Endeavors) to work together on legislative and other issues that face our industry. This alliance was key to working with House and Senate Committee staffs to insure that the language, which was finally agreed to in conference in the 9/11 bill called for the screening of cargo rather than the inspection of cargo. The latter term would have held dire consequences for our industry.
        As TSA now works to meet their mandate to be screening 100 percent of cargo on passenger aircraft by August 2010, we are working with TSA on several fronts to insure that the needs of our members and industry are understood and that the role we play continues to be a vital one. Whether the Certified Shipper Program, the Certified Cargo Screening Pilot, the launch of the new Known Shipper Management System or planned re-writes of the Indirect Air Carrier Standard Security Programs, the NCBFAA air freight committee is working hard on your behalf.
        The NCBFAA participated in Cargo Network Service’s Partnership Conference last year. As a panelist at the latter, we made sure to stress the importance of the forwarder’s relationship to TSA and also defended our industry against wrong perceptions held by some shippers about how our businesses function. We plan to participate again this year as well as with the Airforwarder’s Association.
        In 2008, we hope to strengthen and build on relationships, which have been cultivated through our membership in FIATA as well as several opportunities we have with IATA’s North American arm, Cargo Network Services. The NCBFAA will be a key partner in their development and implementation of e-Freight, a program designed to take the pouch out of air cargo and move us to a more paperless environment where data is shared between forwarder, carrier and Customs authorities electronically. At this writing, the NCBFAA is also working to finalize arrangements as a Channel Partner with IATA, which will allow us to deliver IATA publications at a preferred rate to NCBFAA members.
        The world of air cargo is global, whether it be import or export. Another agenda item we have for 2008 is to work on improvement of cargo ground handling services for imported air cargo. Introductions were made at CNS’s Partnership Conference last year to individuals in the top management of many of the ground handlers who many airlines have retained to manage their warehousing operations. The challenges we face on a daily basis and the commonalities between facilities around the USA need to be addressed and process improvements made for the betterment of our mutual customers. Much like the NCBFAA’s other committees, we have items that we have identified as important to our industry, but are always welcoming and actively soliciting items from our membership. Should you have suggestions for agenda items, please submit them to staff at NCBFAA and we will gladly work to address them on your behalf. We are your Association and look forward to serving and satisfying your needs.

Membership Committee Report
by Bruce Goodwin

        Well another successful year has passed and our membership ranks have continued to grow, but the striving for additional members never ends. As has been stressed to our membership many times over the years, the success of the NCBFAA lies in the hands of our very talented members. It is incumbent upon all of us to be the sales force of the NCBFAA and sell it whenever possible. As the largest single component of the NCBFAA income, membership dues comprise 36 percent of the budget. Last year at this time our membership totaled 838 members (680 Regular, 30 Associate and 128 Affiliate). As of the end of February 2008 those totals are 771 members (640 Regular, 20 Associate and 101 Affiliate). Those membership dollars support our voice in the regulatory and legislative matters of concern to our Association and our customers. With "10 + 2" and ACE getting nearer and nearer every day, it is a necessity that we have a seat at the legislative table during these discussions to let your voice be heard.
        As salesmen of the NCBFAA, we must constantly share the benefits with others. Let all non-members know that NCBFAA membership gives them an active voice in Washington DC. It enables them to further educate/update themselves and their employees on the constant changes in our industry thru the NEI programs and to be alerted to current events and updates with our Monday Morning e-Briefing as well as to receive the NCBFAA Annual Membership Directory.
        We have made a pledge both financially and in voluntary man-hours to make the NEI programs work. This shows the government and regulatory agencies that govern us that we are professionals in the purist sense about our vocation. To make both these programs work, we heed help from the entire membership.
Finally, I would like to thank my committee and the DC office for their input and guidance. I appreciate the comments and suggestions from the membership. As I stated last year, if each member brought in just one new member in 2008, think of the membership dollars that would bring in.
                                         "Stay Involved If You Already Are And Get Involved If You're Not Yet Involved"

NCBFAA Educational Institute Report
by Darrell Sekin

        Professional development is an essential component of the NCBFAA Educational Institute (NEI). In 2007, the previous NEI Chairman, Robert A. Perkins was instrumental in bringing the Certified Customs Specialist (CCS) program literally back from the ashes. With the support of the dedicated Washington staff, Dr. Perkins conducted a CCS program with a passing rate over 70 percent and implemented an internal system to improve the delivery of the certification program. He built a strong foundation to keep the program moving ahead until NCBFAA was able to hire NEI's new director, Ms. Hanan Bedri.
        Ms. Bedri came to us with a background in association education programs and was able to make an immediate impact on the NEI, planning educational events customized to meet members' professional development needs. Through Ms. Bedri's guidance, NEI produced online surveys to measure program effectiveness.
        For the 2007-2008 CCS Class, Dr. Perkins and Art Litman, another very talented and generous senior counselor dedicated to this program, volunteered to develop case studies each followed by an assessment to enhance the learning about import regulatory and logistics management.
        Earlier this year, Mary Jo Muoio, Kiko Zuniga and I visited with the staff at the Canadian Society of Customs Brokers (CSCB) in Ottawa, Canada, concerning certain operational aspects of the CCS program. During the meeting, CSCB staff shared their experience and demonstrated an on-line version of the program. This made us realize we had much to do to reach the standards set for CSCB's CCS program. CSCB has agreed to work with NCBFAA to get two chapters of the CCS and the Certified Export Specialist (CES) programs up on CSCB's on-line system to demonstrate NCBFAA's certification programs at the Annual Conference. CSCB and NCBFAA will work on future plans to get the entire CCS and CES programs on-line. NCBFAA/NEI thanks Carol West and her staff at CSCB for their steadfast encouragement and support in bringing our programs to realization.
        We believe 2008 will be an exciting and fruitful year for NEI with what our Director has scheduled and the interest we have received from our membership. Interest has also been generated during events such as the recent ICPA Conference where we had an exhibit booth manned by NCBFAA Senior Counselor Harold Brauner.
        In an effort to strengthen members' value, NEI Chairman Darrell Sekin developed a new sponsorship program through CargoWise edi to provide new professional development resources and opportunities to NCBFAA members. This program will be introduced at 34th NCBFAA Annual Conference.
        This year, NEI will continue to focus on strengthening the internal delivery system of its continuing education programs. In addition, NEI will strengthen users' value by providing superior educational opportunities, understanding users' professional needs, and developing marketing strategies to drive participation in NEI certification programs

Drawback Committee Report
by Michael V. Cerny
        During 2007, the Drawback Committee continued to work with CBP and industry leaders through the Trade Support Network (TSN) to revise drawback statutes and regulations in an effort to streamline drawback procedures under the new Automated Commercial Environment (ACE). Over the past five years, various members of the Drawback Committee have been actively involved with the Customs Trade Support Network. The TSN Drawback Subcommittee developed a consensus drawback reform statute raising drawback claims to the entry summary line item level similar to the way that petroleum drawback is done under 19 USC 1313(p). Under the proposed law, products and components of the same 8-digit HTS code would now be considered identical. The proposed law would also greatly promote automation and enhance the ability of drawback to take advantage of developments available in ACE.
        During 2007, the substance of the proposed law found its way into a bill in the House and much of the year was spent working with Jon Kent and staff at Senate Finance and House Ways & Means addressing certain changes to the language of the bill made by other interests. While the year ended without the bill being passed, the committee is encouraged by the continued enthusiasm for the bill in 2008 and we have recently seen a renewed effort to pass this legislation to allow Customs to appropriately program the requirements of the proposed law into ACE. The committee will continue to work with Mr. Kent, Customs and congressional staff towards passage of this legislation in 2008.
        The committee held three meetings in 2007, including an in-person gathering at the Government Affairs Conference in Washington, DC. A similar meeting will likely take place this year at the GAC, particularly if the drawback legislation is still pending. We will also continue our involvement with Customs through the TSN Drawback Subcommittee in automating drawback and preparing for drawback in the ACE environment. The goal of the committee will be to continue our leadership on these issues, to keep our members fully informed of proposed changes, and to solicit comments from our members regarding important developments. The Drawback Committee members and its Chairman remain available to discuss these issues, or any other issue related to drawback, with interested members of NCBFAA. All members of NCBFAA with interest in drawback are encouraged to attend our meetings and conference calls.

Counsel Review Committee Report
by Lee Hardeman
        The Counsel Review Committee was formerly established in 2004 under President Kiko Zuniga to develop an orderly process to review current counsel and to select new counsel. The development process took more than a year and, in the Summer 2005, resulted in an exhaustive list of qualifications and criteria for each of our three counsel positions. We decided to review each counsel position every three years, resulting in one review per year.
        We reviewed then Customs and General Counsel Harvey Isaacs in the Fall 2005. In the early Fall 2006, we were just beginning the process of reviewing Transportation Counsel Ed Greenberg at Harvey’s untimely death. We then switched to the selection process for our new customs counsel. This took several months to identify Alan Klestadt, who was appointed in November 2006. This year, we reviewed General and Transportation Counsel Ed Greenberg. We will review Washington Counsel Jon Kent in the latter part of 2008.


 

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