2005 NCBFAA Annual Report

(Part II)

Customs Committee Report
By Ken Bargteil

        This is the fourth Annual Report of the Customs Committee submitted by the writer. During this four-year term the NCBFAA benefited wonderfully from the dedication and generosity of Committee members, advisors and counsel. Though it is not possible in this space to acknowledge all those who contributed to the Committee’s work during the year, they should know that their efforts continue to be appreciated by my colleagues and me. The principal theme of this report is the work done in 2005 in matters that were carried on the Customs Committee agenda. It is hoped that this report will, in particular, provide some insight into the service of the Committee, the evidence of which should already have revealed itself in the beneficial and visible changes it has achieved for our community.
Bond Centralization – Two agenda items dominated the Customs Committee in 2005 – bond centralization and ACE development. Notwithstanding its demands on Committee and industry time, bond centralization issues are transitory and will be addressed as ACE takes effect. Moreover, in cooperation with the CBP Revenue Branch, the Committee, its ad hoc Subcommittee for Bond Centralization, and now COAC appear to have identified and addressed all leading causes for the business dislocation it generated. Notably, the CBP Revenue Branch remained available and responsive to the Committee for the duration of 2005.
ACE & ACS – ACE will have long term and wide ranging impacts on member businesses, and will pose multiple challenges to our community. We have benefited from access to the business blueprinting process, the TSN and it committees. Some of the Customs Committee work on issues attendant to ACE development is summarized here. This part should provide some insight into the process and applications changes we will need to make as ACE replaces ACS as the system of record, and get us thinking about how to manage the transition and costs.
        For the present Chairman’s entire term, the Customs Committee has devoted a good deal of its meeting time to staying informed about ACE development. In 2005 the primary focus was on ACE Release 5 (R5), now known as Entry Summary, Account and Revenue, or ESAR. A second focus was Release 4 (R4), or Truck eManifest. The Committee learned that in its trial at Blaine, WA, Truck eManifest did not test well and the pilot was suspended for a month. The system employs truck transponders that link to an advance electronic manifest, and clearance is performed using BRASS procedures. An ultimate goal for Truck eManifest is to provide advanced electronic cargo information as manifest elements for the automated targeting system (ATS). R4 is in one context also a step backward; on the southern border a larger set of data has previously been filed than is replaced with Truck eManifest.
        ESAR deals with entry summary and post-summary activity. With ESAR, entry and revenue will be independently processed. Summaries will be certified as originally filed. Daily statements (both traditional and periodic) will be discontinued and a substitute found for filing documents required for CBP review. An alternative for filing documents as electronic image files will be facilitated.
        The Customs Committee provided impetus for the elimination of restrictions to periodic payment of duty. The first success came when CBP eliminated the requirement that the importer be a C-TPAT partner. Then the exclusion of entries with census error was lifted. The debate over requiring bond riders for PMS was intense, but this debate was also won. However, other questions regarding the consequences of a customs broker’s late pay on PMS, specifically how CBP will fix customs broker penalties remain largely unresolved.
Carrier & Cargo Examination Issues – During 2005 it became clear that the Joint Subcommittee for Carrier Best Practices (JSCBP), established in 2003, was a resounding success for its own sake. Carriers meeting with the JSCBP in 2005 included Maersk Line, APL, OOCL, NYK, and MSC. Press coverage will help make the case to reluctant carriers for meeting with NCBFAA. Consideration is also being given to engagement with the American Association of Port Authorities to close the loop on certain JSCBP agenda items.
        The participating carriers agreed that demurrage and detention on intermodal through bills of lading for door delivery are subject to international tariffs, and domestic carrier demurrage tariffs are inapplicable. Since railroads provide less free time and impose more severe demurrage charges, NCBFAA members must contact vessel agents rather than railroads about demurrage. There was also agreement that demurrage and detention are for the account of the cargo, should be settled by the consignee, importer or carrier, according to circumstances, and unless guaranteed by customs brokers, should not be charged to them. The carriers in turn requested that customs brokers shown as notify party on bills of lading, consigned to a bank, order of shipper, or non-owner party, provide the name and address of the actual consignee/owner for billing detention. In response to the problem of long wait times and unreliable telephone support, it was agreed that NCBFAA members should learn to rely on the carrier websites.
        The JSCBP submitted guidelines for customs broker response to carrier requests for delivery orders on door-to-door moves. The Customs Committee recommended modified guidelines that the NCBFAA Board of Directors adopted. During its deliberations the Customs Committee also considered that an inability of the international carrier to fulfill door-to-door delivery contracts creates an opportunity for the customs broker to solicit that leg of the transportation and collect a fee, commission or increment. Another JSCBP recommendation endorsed by the Customs Committee related to unwanted billing for demurrage and detention. NCBFAA members should tell customers to instruct their shippers that they must not name the customs broker as consignee on bills of lading.
Border Brokerage – One of the most active and effective regional associations affiliated with NCBFAA is the Northern Border Customs Broker Association (NBCBA) and throughout 2005 many of the Customs Committee agenda items paralleled issues taken up by the NBCBA. Integration of new classification and ultimate consignee identification requirements for border cargo selectivity (BCS) was accomplished without disruption to the fast paced flow of cargo across the northern border.
Certified Customs Specialist – Possibly the most momentous development of interest to the Customs Committee in 2005 was only tangentially connected to the government. NCBFAA publicly launched its Certified Customs Specialist (CCS) program at the 2005 Annual Conference. Parallel goals for the CCS program are continuing education and formal recognition of members dedicated to professional development.
        The Customs Committee introduced the CCS program to CBP and requested the agency’s consideration for official recognition and the possibility of future collaboration on course curricula. As the year progressed, the Customs Committee reached consensus that it has an active role to play in development of the NCBFAA CCS program, and in particular should watch over curriculum, content, standards and awards. In its early stages, promotion of the CCS is important. The Customs Committee agreed that use of CCS as an appellation, and display of the lapel pin are simple ways to do that. The Customs Committee favored the prospect of continuing education points for 2007 CCS recertification being awarded at the 2006 Annual Conference, with dedicated sessions on Thursday.
C-TPAT and ATS – At the beginning of the year there were two significant changes in the linchpin of CBP’s supply chain security public strategy, the Customs - Trade Partnership Against Terrorism (C-TPAT): DHS took a leading role in making C-TPAT policy public and CBP, after five revisions almost entirely based on trade comments informed by the Customs Committee Chairman, published minimum standards for C-TPAT importers. The published standards were much improved through the revision process, but still include some requirements that are unrealistic as commercial propositions for many businesses, and others that may prove costly. The Customs Committee and the NCBFAA have formally offered to collaborate with CBP in the drafting of minimum C-TPAT standards for customs brokers.
        CBP introduced an issue to the Customs Committee that could dramatically change the customs clearance process by requiring submission of CBP Form 3461 information as early as possible for their automated targeting system (ATS). CBP is looking to our members in ACE trade engagement to determine how we can provide entry-level data as early as 24-hours prior to loading. This need arises from the inadequacy of 24-hour rule AMS information. The Customs Committee cautioned that some 3461 data might not be available to filers 24-hours prior to loading and an option for partial filing might prove useful, in particular since data most likely to be missing from the customs broker’s information would be available to CBP in AMS. Alternatively, CBP might refine the 3461 data needed for this advance filing and create a new filing type specifically for security clearance, an idea that the Customs Committee surfaced many months ago.
        CBP suggested that customs brokers should work with their importer clients to compile a complete 3461 dataset in advance of container loading. The Customs Committee was asked to channel its input through the customs broker Trade Ambassadors. The working assumption is that this filing will be treated as customs business and made in ABI.
        By September CBP had enhanced benefits to C-TPAT certified importers by giving cargo examination priority to those partners when practical. The Customs Committee reminded CBP of the overwhelming support for C-TPAT in our community and of the considerable associated costs. The Customs Committee asked what specific benefits might be targeted directly to customs brokers. CBP invited suggestions and the immediate response included waiver of the annual permit fees and additional relief in late duty payment cases.
Multiple §1641 Penalties – The Customs Committee, at the behest of the NCBFAA Executive Committee, considered a case before the CIT involving 65 entries, more or less, with classification errors. Although the subject entries were filed within a short period, CBP assessed multiple §1641 penalties against the customs broker filer, all involving the same kind of error, i.e., mistaken classification. As these penalties, in the opinion of the Customs Committee, were inconsistent with CBP legal authority, and the potential harm to NCBFAA members should the penalties be upheld was judged to outweigh the reasonable costs estimated by counsel for filing an amicus brief for the defendant, the Customs Committee recommended, and the NCBFAA Board of Directors adopted a motion instructing NCBFAA General Counsel to do so.
        General Counsel was eminently qualified for this purpose as his office was instrumental in drafting the legal authority relied upon by CBP in assessing the subject penalties. In a nutshell the legal issue in this matter relates to the expansion of §1641 penalty authority to include monetary sanctions, which the Customs Committee believes was intended and understood to be limited to a $30,000 maximum that would apply only once to all violations attributed to the same cause, and imputed to the violator at any time prior to the enforcement action.
Quota Demise – During 2005 the Customs Committee made good progress on its initiatives collateral to quota integration. From its list of recommended changes for entry of merchandise no longer subject to quota, CBP agreed to allow RLF, paperless, informals, §321, pre-filing of textile entries, as well as elimination of textile statements. CBP was not disposed to act on Customs Committee recommendation for normalization of the conditional release period, bond amounts, and ACH payment. CBP expressed its intention to propose broad, sweeping regulatory changes in this context to CITA. A brief agency retreat at the beginning of the year on the issue of RLF entry for textile goods previously subject to quota was quickly reversed through the efforts of Customs Counsel.
Integration of APHIS Inspections – The Customs Committee took notice that the promise of one face at the border was unfulfilled in 2005. Exploration of the matter found that release functions are not coordinated, and responding on behalf of CBP, APHIS acknowledged the problem and explained that one impediment had been the need to complete security clearances before allowing legacy APHIS personnel access to the CBP databases; these are now complete. Progress on CBP’s one face at the border goal had accelerated, and, in fact, inspection activities of USDA and CBP were already taking place at CBP exam sites. In addition, CBP was working to provide ABI messages on Agriculture holds through selectivity instead of relying exclusively on AMS.
        The Customs Committee addressed a specific problem related to situations in which cargo holds are placed by both legacy Customs and USDA inspectors. ACS records the first date of release not the last, and the duty payment and summary certification clock begins when the first release is posted although it can be another week before actual cargo release. CBP is aware of and working on this issue.
CBP Commercial Operations – Customs Committee attention to the staffing of CBP commercial operations continued to reflect the post 9/11 environment in which emphasis on security, inspection and passenger processing is often seen overbalancing trade facilitation in a contest for limited resources. The visible attrition of entry processing personnel, and in particular in the Commodity Specialists Teams (CST) naturally reinforces the proposition that commercial operations suffer from a massive diversion of CBP manpower resources into the primary mission of border and cargo security. In point of fact, evidence of service breakdown and bottlenecks, while troubling, would be most accurately characterized as isolated and non-critical. As the issue matured on the Customs Committee’s agenda it was decided to change the focus from staffing levels to service levels, and most of these issues were addressed off the agenda.
        A Customs Committee proposal to instruct new CBP commercial operations personnel on import operations from a customs broker’s perspective at CBP’s annual team leaders meeting and other training opportunities was made to CBP at the May 27 meeting. Further discussion with CBP resulted in an invitation for NCBFAA to participate in training at the Glynco, GA facility, which will begin in 2006.
CBPF 7501 Revision – Customs Committee attention to CBP Form 7501 revision was rewarded. The revised form, dictated by the move of CBP to the Department of Homeland Security (DHS), and the Americans With Disabilities Act requirement for larger fonts, was reworked to good effect in conformity with criticism and suggestions offered by or through the Customs Committee on early drafts. A one-year transition period was agreed for adopting the new CBP Form 7501 to allow for exhaustion of old forms. On October 1, instructions for completion of the new 7501 superseded Customs Directive 3550-061 dated September 18, 1992, without replacing it for purposes of completing the still acceptable old form. 
FDA-BTA Prior Notice – An item that consumed the Customs Committee agenda in 2004 came off the agenda in 2005, with the incorporation of Prior Notice (PN) into customs clearance routine standing as testimony to the hard and productive work of its members and NCBFAA volunteers who served on the ad hoc Bio-Terrorism Act (BTA) Subcommittee. It also represents another important bridge built between the Customs Committee and FDA as well as CBP.
        Specific improvements to PN processing in 2005 included expansion of the pre-filing window to 15 days. Recognizing that Customs Committee work on this question was substantially complete, and that with the appointment of Cary Weinberg as Chairman of the RAC and reinvigoration of that committee, continuing focus in the Customs Committee was misplaced, the Chairman handed-off this agenda item to the RAC. The RAC will continue the work to get PN viability extended beyond the 30-day limitation.
WPM Enforcement – Despite USDA giving one-year notice to importers and suppliers, examinations in July of 2004 revealed only a 25 percent compliance rate with the Wood Packing Material (WPM) rules promulgated by the Animal and Plant Health Inspection Service. The Customs Committee, at the request of the CBP Office of Field Operations, arranged a presentation at the NCBFAA 2005 GAC, just three days after the 1st Phase of WPM Enforcement commenced. The exemption for Canadian WPM, when imported directly from Canada as packing for Canadian origin goods, and permissible variations in the stamp of compliance, provided that all elements shown in examples posted to the CBP web site are present, were explained at that time.
RLF on Master In-Bond – The Customs Committee realized its goal to provide for Remote Location Filing (RLF) for entry of goods previously moved in-bond. CBP not only accepted the Customs Committee’s position, but also agreed to invest in ACS programming to provide immediate implementation rather than postponing the enhancement for an ACE solution development. Notice of this change was published in the Federal Register on March 31, 2005 (cit. 70 FR 16510).
Conclusion – The Chairman wishes to congratulate and sincerely thank John Peterson, who faithfully served as the Customs Committee’s Vice-Chairman, Amy Magnus, Cary Weinberg, Myra Reynolds, Marie Armelagos, Gary Ryan, Darrell Sekin, and Russ Jones – the voting members, Harold Brauner and Art Litman – Senior Advisers, and Harvey Isaacs, most esteemed Customs Counsel. The Chairman also wishes to acknowledge and thank the many NCBFAA members who participated on Customs Committee subcommittees as well as those who attended and contributed to the Customs Committee meetings.
        Now, at the end of this term of service, I must again thank Kiko Zuniga, who as President of NCBFAA honored me with the opportunity to serve as Chairman of the NCBFAA Customs Committee, and my many colleagues for their invaluable encouragement and support. 
        I respectfully submit that this is the NCBFAA Customs Committee Chairman’s 2005 Annual Report.

Ad Hoc Security Committee Report
By Bill Evans

First of all I would like to thank my fellow committee members for persevering through the long drawn out security clearance vetting process. We were finally successful; however, yet another reorganization within the Transportation Security Administration has again put our program into a suspension mode temporarily. 
        As of this writing, TSA has introduced a general manager position for each of ten infrastructure modes. Each general manager will be responsible for implementing an industry partnership program. We will work closely with the appropriate general managers and plan for a method of communicating information from our members to them and from them to our members.
TSA has shown excellent cooperation with NCBFAA and has graciously committed to conducting a three-hour tabletop exercise during the 2006 NCBFAA Annual Conference. Titled Operation Forward Vision, this session will help participants form a Business Continuity of Operation Plan (B-COOP) that will apply in any type of situation in which your business operational structure is threatened.
        As we move forward into 2006 I see NCBFAA continuing to proactively interface with all agencies as cargo security remains in the spotlight. We should begin to have current and relative information to share with our members by mid-year as a result of our relationship with TSA.

NVOCC/Freight Forwarding Report
By William App, Jr., and Maurine Cecil

In mid-April, we met with the FMC’s General Counsel to express the Association’s concern that the OTI regulations might be construed in such a way to make it more difficult for US licensed NVOCCs to work with existing agents and other service providers in the US. This concern arose out of several enforcement cases, which indicated that the agency’s Bureau of Enforcement was interpreting the regulations to require that any party providing a portion of the NVOCC services in the US needed to be separately licensed as an OTI unless it was an affiliated branch office. We explained that this would raise havoc with NVOCC operations and in any event constituted an inappropriate extension of FMC jurisdiction over parties not normally subject to such regulations, such as container freight stations, brokers, trucking companies.
        The NCBFAA suggested that the Commission issue a notice of proposed rulemaking to clarify its rules and minimize the confusion and disruption that would otherwise occur. In addition, we urged the Commission to implement a moratorium on further enforcement cases in this area until the issues can be resolved.
        Thereafter, several member companies made a specific request to the FMC’s General Counsel on this topic and provided specific information relating to the nature of the relationship between their NVOCC operations and those of their agents in the US. After a number of further discussions, the FMC’s General Counsel indicated that under those circumstances the agents would not need to be separately licensed, thus eliminating a potential source of confusion and potential liability for the NVOCC members of the industry that do have agents in the US.
        The Association filed formal Comments in response to Notice of Proposed Rulemaking that had been issued by the Census Bureau concerning the mandatory use of the Automated Export System (AES) for filing shippers’ export declaration (SED) data. Essentially, the NCBFAA urged that the Census Bureau issue appropriate and meaningful guidelines when promulgating the final rules which would both keep penalties for noncompliance reasonable and ensure that forwarders are not held responsible for violations that were not their fault. The Association also urged Census to institute a phased-in compliance period to give the trade sufficient time to understand the new rules and implement appropriate compliance procedures.
        In anticipation of the final rules requiring a specific authorization for forwarders to transmit SED data electronically, we revised the NCBFAA form of Power of Attorney so that the members would be in compliance with the new rule once the final regulations come out. Together with Jon Kent, we attended a meeting with staff of the Senate Finance and Judiciary Committees relative to the Association’s concerns with S.378 on Port Security, which provides for substantial mandatory penalties for violations of the CPB manifest regulations. Since the bill would specifically make NVOCCs responsible equally with the carriers for any violations, and since NVOCCS cannot always be certain that the information they are submitting - - particularly with respect to vessel or aircraft specific data - - is accurate, we were working to either remove NVOCCs from the coverage of the bill or have the bill amended to require that parties be specifically found to be negligent or otherwise directly responsible before any penalties can be assessed. At the conclusion of the meeting, Committee staff agreed that the issues we raised warranted attention and promised to work with us as the bill moves forward to accomplish these objectives.
        Consequently, we met again with these staffers, along with Senator Biden’s counsel on the Judiciary Committee to further discuss these issues. Again, staff agreed that the issue of NVOCC liability needed to be discussed further before the bill goes any further. 
        Together with Scott Case, we attended a meeting, with Rafael Ramos and John Beckius of the Transportation Security Administration. The purpose of the meeting was to discuss the current TSA position requiring that site visits of shipper premises, for the purpose of acceptance into the known shipper program, need to be accomplished by employees of the indirect air carrier (IAC) or employees of the IAC’s affiliates overseas. We argued that this had an adverse, discriminatory affect against small to medium size IACs and that TSA should not implement a rule of this nature. They ultimately indicated that while they were sympathetic and although it is possible that the site visit requirement might ultimately be eliminated, TSA felt more comfortable with employees of affiliates being trusted than employees of unrelated agents. We will attempt to draft criteria pertaining to the vetting of agents, with a view toward having TSA accept those guidelines as a basis for having site visits performed by agents.
        The NVOCC Committee determined that it would be useful to develop a standard form bill of lading terms and conditions that would be appropriate for use by all members. This document was intended to take into consideration recent developments of cargo liability law, NVOCC and shipper obligations under the new security and manifest reporting regulations and other current issues that would affect NVOCC liability. A draft of such a document was completed and approved by both the NVOCC and Forwarder Committees and by the Board of Directors. In addition, the document was submitted to several of the underwriters that write marine cargo insurance for NVOCCs, all of whom approved the form of the document and it is now available to the members.
        One of the disturbing trends that surfaced during the year was the tendency of the steamship lines to seek to recover detention and/or demurrage charges from customs brokers and NVOCCs even when there was no legal liability for such claims. In most cases, the carriers have placed provisions in their bills of lading and tariffs that include "agents" within the definition of "merchants," and then come back against the broker or NVOCC if the demurrage or detention bills are not paid. We have spent a great deal of time trying to reason with counsel for the carriers, have arranged a number of meetings and have discussed these issues with the forwarder, NVOCC and customs committees of the Association. 
        As part of that effort, we developed a position paper to send to the carriers, trade press and regulatory agencies for the purpose of educating third parties about the issues and hopefully persuading the carriers to desist from at least pursuing customs brokers for such charges. These efforts were synchronized with those of the Association’s Carrier Best Practices Subcommittee, which has now met with a number of carriers in an effort to reform and standardize their practices regarding billing for detention and demurrage. In addition, we have met with a number of carriers and were able to enlist the active assistance of the one of the lines on this issue during a session of the Government Affairs Conference in September. 
        As an outgrowth of this effort, the Association formed the Carrier Best Practices Subcommittee which has now had several meetings with members of both the steamship line and rail industries in attempts to develop efficient and standardized practices for moving containers in a way that would minimize unnecessary demurrage and detention. Although this will require additional effort over the coming year, we are optimistic that the effort will yield positive results and that our members will ceased being plagued with inappropriate detention and demurrage charges.
        In addition, we have spent a great deal of time on the issue of export compliance and its importance on the forwarder and NVOCC members of the Association. This issue will take on increasing importance once the final AES rules are promulgated and made effective; even without that, it is clear that the various governmental agencies have begun focusing their attention on forwarders and NVOCCs as a sort of last line of defense against violations of export controls and the various US trade embargoes. To increase awareness and training in this area, the Committees have made this issue a significant part of the program during the Annual Conference. Also, they formed a Best Practices Subcommittee, which is charged with the responsibility of drafting a set of recommended best practices in the export control area for forwarders and NVOCCs, so that the members would have the benefit of clear and concise guidelines of their responsibilities in this increasingly complex, yet important, area.


NCBFAA Educational Institute Report
By Jan Fields and Marie Armelagos

        What a phenomenal year for the NCBFAA Educational Institute! In less than one year we have established a top notch, professional certification course that will solidify the NCBFAA’s position as the one stop educational source for our industry. The Certified Customs Specialist (CCS) program was rolled out in March of 2005 and has already surpassed 1500 grandfathered designates. The CCS year-long course has been rolled out and is available for enrollment. We expect at least one hundred applicants for the 2006 course and have scheduled this year’s exam for November 18. Our certification is unique in that continued education is required on an annual basis to maintain certification to ensure knowledge is kept up to date with the ever-changing regulations. We fully expect this program to eventually evolve into a fully accredited institution.
        We would like to take this opportunity to officially thank Carol West as President of the CSCB (Canadian Society of Customs Brokers) in holding our hands through the CCS process and maintaining the momentum necessary to produce this concise and exceptional certification program. We are also eternally grateful to Ken Bargteil, Leman (Chip) Bown, David Katzman and Dan Meylor in sacrificing their personal time over the holidays to review each and every detail of our course content.
        Our course will quickly become the benchmark for training and educating within our industry. As our Customs Committee Chairman, Ken Bargteil, stated in our last board meeting, "I am confident that this 23 Chapter course will not only challenge the serious student, but will prove the merit of any who pass. We can scarcely appreciate the significance of this achievement for the future vitality of NCBFAA and what tremendous dividends the dedication and efforts made thus far will return in the months and years to come. I fully expect the CCS to be recognized as the most important legacy of this President, this Executive Committee and this Board of Directors. All that is left to do is get applicants enrolled." 
        Our next mission will be to establish a similar program for ocean transportation intermediaries. Work on that project will begin by mid 2006.
        We continued our customary educational programs to the industry by offering both an on-line Customs Brokers License correspondence course as well as an on-site, four day Boot Camp to prepare for the exam.
        In 2005, we held three "Third Thursday" sessions for members and affiliated associations via teleconference accompanied with a video presentation educating participants on Antidumping/Countervailing Duties; Liability for Freight, Detention, and Demurrage; and Free Trade Agreements. We are scheduling four sessions for the year 2006 to meet the needs of our Association, so if you have any suggestions, let’s hear them.
        Multimedia sessions will educate participants in regulatory matters, procedural and operational details and other essential trade related issues to improve the knowledge and performance of the participants.
        The NEI is marketing our newly formed "Professional Membership" for individuals who wish to reap the benefits of our Association on an educational level. Importer, exporters and support organizations will be able to participate in our educational curriculum at the reduced membership fee.
        NCBFAA staff has worked closely with Department of Commerce in marketing Export Compliance seminars throughout the country to various industries and associations. We will continue to partner with commerce in their outreach efforts.
2006 will even further our mission as stated:

The NCBFAA Educational Institute is dedicated to offering the Membership a wide variety of proprietary subject matter to ensure a high standard of professionalism within the trade industry through classroom and Internet-based training programs.

NCBFAA Drawback Committee Report
By Frank McCarthy and Michael V. Cerny

  During 2005, the Drawback Committee continued to work with CBP and industry leaders through the Trade Support Network to revise drawback statutes and regulations in an effort to streamline drawback procedures under the new Automated Commercial Environment.
        Over the past three years, various members of the Drawback Committee have been actively involved with the Customs Trade Support Network. The TSN is a group made up of individuals from Customs, the brokerage committee, importers, exporters, manufacturers and others in the trade. The primary mission of the TSN over the past four years has been the development of the ACE computer system.
        The work of NCBFAA Drawback Committee members on the TSN has really amounted to a fight for the very survival of drawback. About six years ago, the battle lines were drawn when John Durant announced at the first Customs Trade Symposium that drawback was unworkable and must be eliminated. When the TSN began addressing ACE in 2002, the Revenue, Entry and Export committees of the TSN decided to establish a drawback subcommittee specifically to tackle the issue of drawback in ACE. Customs entered this process with the goal of restricting or limiting drawback. Their initial position echoed Mr. Durant's assertion that the current drawback process would not work in a modernized computer system such as ACE. It was against this backdrop that members of this committee began extensive negotiations with Customs through the TSN Drawback Subcommittee in an attempt to save drawback and actually to enhance drawback by making it more accessible for both companies and brokers.
        After much negotiation, the TSN Drawback Subcommittee developed a concept paper that reflected a consensus program raising drawback claims to the entry summary line item level similar to the way that petroleum drawback is done under 19 USC 1313(p). Products and components of the same 8-digit HTS code would now be considered identical. All drawback would thus become substitution drawback and multiple substitutions would be allowed. By contrast, substitution drawback today is limited to a very subjective determination of whether unused merchandise is commercially interchangeable or whether components used in manufacturing are of the same kind and quality. Moreover, substitution today can only take place once, requiring claimants to trace the item using serial numbers or an inventory accounting method after the substitution has taken place.
        During 2005, the TSN Drawback Committee developed language for a new drawback statute based upon the concept document approved by the TSN in 2004. Members of our committee were instrumental in developing both the concept paper and the draft legislation. The proposed language eliminates some of the complexity of the current drawback law by basing drawback on HTS number. It also allows drawback to be tracked more easily in the ACE system. The proposed language also makes drawback more accessible to exporters who are often hampered by the regulatory limitations associated with the drawback law. Members of the committee have spent significant time during the year working with CBP on draft language, negotiating aspects of specific statutory language, and reaching out to members of the trade community for their comments on the proposed changes.
        In October, we held a committee teleconference during which members of the committee expressed resounding support for the new drawback law. The members were particularly supportive of the concept of 8-digit substitution. Some concerns were expressed about the potential for isolated and unique circumstances where a particular claimant might receive less in refunds under the new system. However, it was generally felt that the benefits to the new law far outweighed these isolated situations and claimants should be able to maintain the level of current drawback refunds by either expansion of drawback opportunities or by modifying import or export procedures.
        The proposed statute was initially included within the draft of the Miscellaneous Trade Bill pending in the House in 2005. Subsequently, the drawback language was removed from the MTB pending further finalization of statutory language. Members of this committee arranged meetings between CBP and members of the trade community to discuss concerns about the proposed statutory changes. As a result, CBP has agreed to certain changes to the statutory language and it is now anticipated that the bill will either be included within the House or Senate versions of the MTB, or in another bill to be introduced and voted on in 2006. The proposed legislation is universally supported by the major organizations representing the trade. 
        As we enter 2006, our committee expects to finalize the statutory revisions and to work staff in both Congress and the Administration seeking passage of this important new law. We also intend to continue committee activities to educate our membership about the new law and its substantial benefits for the drawback community. Finally, we intend to work within the TSN and with other trade organizations and CBP to ensure that regulations are issued that properly implement both the letter and spirit of the proposed legislation.

Legislative Affairs Committee Report
By Lee Connor

Once again the Legislative Affairs Committee focused its attention almost exclusively on the NCBFAA Government Affairs Conference in Washington, DC in September. The Conference proved to be, once again, an effective tool for promoting the political weight of NCBFAA and communicating to members of Congress and regulatory agencies about our industry issues.
        The 2005 GAC program was lauded by many association members for the content of the speakers and panels held on the first day. This year’s agenda included presentations by the Chairman of the FMC and the Commissioner of Customs and Border Protection. In one day we heard from both of these gentlemen, as well as perspectives from government experts on the latest in security enforcement affecting both imports and exports. FMC, TSA, CBP as well as our own members and representatives of a major ocean carrier made presentations. 
        Position papers were presented to congressional offices on several issues and, even though there was a lack of pending hot-button issues on the Hill this year, it was a great opportunity to remind members of Congress of the key role our industry plays in our national and international transportation infrastructure. The importance of NCBFAA and its members in developing and implementing new security measures was reinforced by our members and recognized by numerous government officials.
        We missed many of our members from New Orleans, who were dealing with the effects of Katrina and its aftermath, but they were with us in spirit and we kept them in our thoughts as well. All credit and thanks go to John Kent, Ed Greenberg, Peter Powell, and the NCBFAA staff and committee chairs that spent time to help organize and run the conference.
        It is not easy to engage in lobbying and promotion on Capitol Hill. This action is not how we earn our living or conduct normal everyday business activities. Yet, it is crucial to all our businesses that are so impacted by the regulatory and political components so vital to international trade. Taking a couple of days a year to bring our message to Washington is a very worthwhile investment. I thank all those members who attended this year and encourage every member to consider being with us at the 2006 Government Affairs Conference.

Membership Committee Report
By Bruce Goodwin

Membership is the lifeblood of any organization. The success of the NCBFAA depends, as is so aptly put, on the "pool of talented professionals" that makes up our association. In 2005, our Association’s membership has grown to a total of 768 total members. This number includes 634 Regular members, 26 Associate members and 108 Affiliate members. Also, add to those totals 12 members to our new NEI Professional Membership that began on December 2, open only to non-NCBFAA member firms.
        As membership is such a high priority to any association, this year the NCBFAA has appointed Kelly Swearingen as Membership and Marketing Director. Kelly has continued our drive for new members with the "recruit-a-member" program. As membership dollars are vital to our Association, allowing the NCBFAA to voice its opinion/position on the regulatory and legislative issues, she makes sure that our membership dollars are paid timely and correctly. 
        In the coming year, please sell the praises of the NCBFAA to your local association members who are not presently NCBFAA members. Yes, they are out there. Speak to the NVOCCs that you have contact with almost daily. Find out why they have not joined and put them in touch with Kelly in the DC office. As I stated last year, we are all sales reps for the NCBFAA and should be out there at all functions sharing the benefits of membership, whether it be the Monday Morning eBriefing, our Quarterly Bulletin, the Who’s Who Annual Directory, the Certified Ocean Forwarders Program, the NCBFAA Shippers Association and the NCBFAA Educational Institute (NEI). We are brought together twice a year to exchange each other’s business ideas at the Annual Conference and the Government Affairs Conference.
        I want to thank my committee members for their input and help. I appreciate the comments and help from the membership. Stay involved if you already are and get involved if you’re not. 
        Again, thank you all for your support



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