2003 NCBFAA Annual Report

(Part I)

President’s Report
by Federico C. Zuniga

       It really amazes me at how quickly another year has gone by. It feels as is it was just a short while ago I was beginning my first year as president and now here it is the end of the second. People say when you are busy time flies. That being said it was an extremely busy year. 
       With the conclusion of 2003, we can point to a year of successes and continuing issues. One of the year’s biggest successes was our Annual Conference in San Antonio, TX. From the weather to the Hyatt facility to the sessions to the various social gatherings everything was top drawer as befits Texas hospitality. In keeping with the Conference theme, "Securing the Future of International Trade," our speakers represented the full spectrum of international transportation logistics and included regulators, practitioners, educators, executives, consultants and managers. 
       Attendees heard the latest details on federal security initiatives, Internet compliance tools, the role of other government agencies, international air cargo, customs business in Mexico, continuing ACE activity, COAC's evolving mission, and how the structure of homeland security is influencing the conduct of our business. These all concluded with a Wednesday debate on eliminating district permits. As reflected by attendee evaluations and comments, this year's Conference experience was a very profitable and positive one for the entire NCBFAA community, especially the Association.
       Because it is one of the major sources of funding for the NCBFAA, the success of the Conference is critical to our continued influence in the halls of Washington. For without the wherewithal provided by Conference proceeds it is doubtful we would have been able to play as influential a role as we have during deliberations in the Federal agencies or the Congress. So thank you all for your support.
       Recently, we began participating in the Department of Commerce’s U.S. Export Pavilion around the country. NCBFAA involvement in this program follows an invitation from the Census Bureau to join with them in sponsoring this permanent, hi-tech 10-station exhibit pavilion designed to promote international trade at trade shows around the country. Each station has a computer with monitor, periodical display rack and counter space.
       This is a tremendous opportunity and honor for the NCBFAA as it recognizes the important and vital role the Association plays in international trade. Since trade shows must offer a minimum of 1,000 exhibit booths to be eligible for Census participation, the NCBFAA will have the chance to demonstrate its programs and explain its mission to thousands of transportation logistics participants. We have participated in three of these events so far and fully expect to participate through the end of 2004.
       Security is still the top priority within our industry as we deal with all the government agencies initiating their programs to shore up our borders. This year has been full of challenges where we are simply trying to provide a reality check to the people writing various laws so as to smooth out the process of moving goods within our global economy. NCBFAA Security Committee Chair William Evans has details concerning our initiatives in this area in his committee report below.
       This year also saw the reemergence of the Affiliated Presidents’ Network as an active proponent of the NCBFAA’s presence in international commercial activity. In fact, APN representatives have staffed the Export Pavilion on behalf of both their local Associations and the NCBFAA. The APN conducts regular well-attended monthly conference calls and under the able guidance of Geoffrey Powell of C. H. Powell Company in Baltimore, MD, and John Hyatt of the Irwin Brown Co. of New Orleans, LA, the APN has identified and acted on several issues of local importance. In fact, it has played an important role in planning portions of this year’s Annual Conference agenda.
       The creation and provisioning of the NVOCC Committee early in the year was vital to fulfilling our commitment to that important segment of our transportation community. Under the able leadership of its chairman, Maurine Cecil of American Shipping Co., Inc. in Long beach, CA, it was instrumental in guiding our work on the petition for exemption from the tariff filing requirements of the Federal Maritime Commission and easing the transition to the People’s Republic of China maritime rules as well as the efforts to implement the "Special Bill" that relieves NVOCCs of onerous and unintended obligations resulting from adoption of the 24 Hour Rule.
       NCBFAA representatives continued their work on various industry committees involved in modernizing and securing the international commercial environment. Efforts toward realization of the Automated Commercial Environment (ACE) moved it from requirements to deliverables with the NCBFAA playing a leadership role in making certain that ill-informed initiatives in this arena were redirected. Our influence with the Trade Support Network and the COAC Committee also bore fruit
       The NCBFAA Educational Institute (NEI) rolled out a new educational product that combined teleconferencing with a computer-based presentation. The program provides courses to help NCBFAA members and others improve their understanding of international trade topics and knowledge of import/export regulations. Held through the year in cooperation with the Affiliated Presidents Network, the two-hour sessions addressed Incoterms, Customs Notices, CTPAT, 24 Hour Rule, Appropriate Procedures for claims filed against you, Valuation, Letters of Credit, and Tariff Classification. This highly successful program will continue through the coming year with more and different topics.
       Early in the year, the Transportation Security Agency (TSA) began tackling the development of an air cargo security system. In that connection, we were very pleased to be named to a special working group of Indirect Air Carriers. The working group is an adjunct to the Aviation Security Advisory Committee (ASAC), which has been tasked to provide private sector input on transportation security policy. Our activity in that group is addressed in the Freight Forwarding Committee, Subcommittee on Airfreight Chairman Scott Case’s report below.
       In closing, I would like to commend the hard work and dedication which has been demonstrated by many individuals within the organization, the board of directors who have demonstrated the courage to make hard decisions and them go forward and further educate the membership as to the merits of their decisions. The Committee chairs who really do the bulk of the work for this association. Their tireless and unselfish work normally does not get the full recognition it deserves from the membership, but let me assure you without their dedication little would be accomplished. 
       The entire Executive Committee, Peter Powell, Mary Jo Muoio, Bob Perkins, and Billy App guide me in the direction we should take as an organization and for that I am grateful. Many of these same people have been unselfish with their time and represented the organization at important meetings that I was unable to attend. But I would like to single out Chairman Powell for a special expression of gratitude for his advice, counsel and, most importantly, friendship that he has provided me during my term as President. His presence and support have helped me, in no small measure, to enjoy what success I have had in this position. Thank you, Peter.
       Our counsel, Harvey Isaacs, Ed Greenberg, and Jon Kent, make sure all our good intentions and ideas are moving the organization in the right path. Their expertise has been of great value to the organization in preserving and expanding its important role of service to our industry.
       Of course where would we all be without the fabulous work and dedication of the staff in Washington, DC? Their hours of tireless energy are truly appreciated by me as well as all those who come in contact with them. And an organization could not exist without its membership. The dedication and unselfish dedication demonstrated by some individuals within this organization continues to humble me. Without their efforts, we would not be able to accomplish the work presented to us. Thank you for all your support and all the Board Members and Committee members as well as I will continue our work for the betterment of the transportation logistics industry.

Chairman's Report
by Peter Powell, Sr.

       The work we do to expedite and facilitate international commerce is critical to the economic well being of our nation and our international trading partners. To do it correctly requires extensive knowledge of transportation logistics along with federal and state regulations and international trade as well as the ability to adjust quickly to changing circumstances beyond our control. 
       All of which raises the questions: does this make us professionals? Do our knowledge, experience and understanding of trade rise to the level of professionalism? Do we need a continuing education requirement to deserve the title of professional? Is our involvement with governmental agencies and Congress enough to grant us professional status? Does the licensing requirement many of us fulfill give us the right to call ourselves professionals?
       Many in the trade do not view us as the professionals we are. They often view us as tradesmen, entry clerks or document compilers with offices. And to some extent we are all those but we are more. A lot of us are second and third generation logisticians. We have seen our businesses evolve from paper intensive, port-based operations to computerized, worldwide enterprises. Along with that infrastructure growth has been the increased complexity that accompanied the internationalization of trade and commerce and has created a body of specialized knowledge.
       This increasing complexity has accelerated the evolution of industry certifications from local company based credentialing to full-scale academic disciplines. The process of certifying individuals began as an effort to provide employees without extensive academic or business experience the opportunity to become well grounded in the logistics business. 
       The NCBFAA’s Certified Ocean Forwarder (COF) program and its current Technical Assessment exams are examples of this approach to certification. For those who take the scholastic route many colleges and universities have added or expanded existing schools of business with curricula that includes degrees in transportation logistics subjects. Numerous schools now offer an MBA or Masters in topics such as supply-chain management or operations and a few are offering Doctorates in areas like distribution.
       Along with these industry credentials many of our staff members have been licensed and permitted by government agencies involved in international trade. The customs broker license, national permitting, Federal Maritime Commission registration, C-TPAT certification, etc. are all government agency acknowledgements that individuals and the firms they work for have attained a level of proficiency and professionalism to satisfy rigorous federal standards.
       While important, credentials, however, are but one aspect of professional status. Providing quality service to clients and problem solving oversight to their issues also motivates a professional. They collaborate with their clients, recognizing that only if their clients are successful can they succeed.
       Another quality all professionals share is team orientation to support and improve the supply chain through which a client’s merchandise travels. Whether enhancing security, adjusting scheduling, providing transportation, the professional works with all the links in the chain as a team member, performing as effectively as possible.
       The professional men and women who staff our firms are focused on the job at hand and enthusiastic about every opportunity they get to serve the international trading community. Their active participation in the implementation of federal directives, especially the many security related measures we must now work under, has ensured that disruptions in the flow of trade have been minimal. Only because of their professional experience and expertise did they have the knowledge of the commercial environment to be able to mitigate the impact of these complex and extensive new rules.
       My years in this industry have been enjoyable and rewarding on many levels but nothing pleases me so much as the growing recognition by clients, regulators, and our trading colleagues of the solid professionalism of the customs broker and forwarding community and the increasing value that they bring to international trade.

Executive Vice President’s Report
by barbara reilly

       In looking back on 2003 what is most striking to me is the ever-growing workload that our evolving security mandates are creating for our industry volunteers. The complexity of these new initiatives requires more study and debate to determine how best to respond and that takes time; time that these fine folks have to add to their already busy schedules. They all stand to be congratulated on the yeoman work they do year in and year out for our industry and our Association. You may rest assured that the NCBFAA staff appreciates and commends them all for their dedicated service and expert contributions to the mission of the NCBFAA.
       Whether the topic is air cargo security, drawback in bilateral and multilateral free trade agreements, new Chinese maritime regulations, facilitating split shipments, mitigating the adverse effects of bioterrorism rules, or identifying shipper agreements that disadvantage our members, NCBFAA volunteers are involved protecting your interests. But they could use your help. If you are interested in affecting the outcome of the great regulatory debates that continue to swirl about the industry, I would ask you to step forward and volunteer for one of the NCBFAA’s many committees. Your input and perspective may just be the key to a positive outcome for the industry.
       Getting out the word on the great work of the Association was made a little easier as we partnered this year with the Department of Commerce in their U.S. Export Pavilion. Our involvement in this excellent initiative is owed to the generosity of the U.S. Department of Census, which invited us early in 2003 to become a part of their outreach to exporters. As a result, the NCBFAA is now able to detail the value that our members bring to international commerce at trade shows that involve more than 100,000 attendees.
       Along with reaching out to the trade community with these programs, they have also provided us with a great opportunity to work with a number of our local Affiliated Associations. They have unselfishly staffed our section of the Pavilion when it is located in their geographic areas. This kind of cooperation goes right to the heart of our Affiliated Presidents’ Network (APN) reason for being. The NCBFAA benefits by having more hands to help with the work of outreach and the APN representatives benefit by having access to additional venues where they can get their messages out. 
       Through 2003, the APN under the able and competent leadership of Geoff Powell, C.H. Powell Company in Baltimore, MD, and John Hyatt, The Irwin Brown Co. in New Orleans, LA, has convened monthly teleconferences where they discussed local, regional and national issues among the Presidents of the local Associations as well as learned from special guest speakers who provided them with valuable advice on furthering the missions of their organizations. The growing importance of this group to the NCBFAA is indicated by the role it is playing in the 2004 Annual Conference. In addition to the traditional Tuesday Presidents’ breakfast with NCBFAA officers, entire portions of the Monday sessions have been turned over to the APN to address issues especially pertinent to them. In addition, display tables will be set up for each participating Association to recruit, advertise its diverse membership, showcase their sponsors and friends; in short, to communicate whatever they believe is important to their memberships and their organizations.
       Another NCBFAA endeavor that I expect to return major dividends for our members is the evolving work of the NCBFAA Educational Institute (NEI). Under its auspices in 2003, a number of very well attended teleconference sessions were conducted. These well-received, inexpensive sessions covered a variety of transportation logistics topics for a national audience.
       Because this program was designed to attract groups of participants to remote locations, the rate structure was set to encourage such participation. As a result, our Affiliate Associations received the best price and members who belong to one of these groups were encouraged to attend these sessions through them.
       Another project that the NEI has in its sights is revitalization of the Certified Ocean Forwarders program by updating and enhancing the existing one and then marketing the finished product in a way that makes it a must have credential for industry participants. The NEI is also looking to the APN to help it develop a program of online virtual certification seminars on importing and exporting. Offered in series, these 101 – 501 Import and Export Courses will teach and test the expertise needed to compete successfully in the transportation logistics industry.
       As I reflect on the year’s accomplishments, I have to mention the hard working volunteer chairs, Board members and past presidents to whom I turn frequently. I rely on all these people to continually provide us with the policy-making information we need to keep the Association on top of the issues that are critical to your success and survival in an increasingly complicated world. 
       There are simply not enough hours in the day to accomplish all we would like to do for you, our members, at NCBFAA, but I’d be remiss if I didn’t thank our NCBFAA staff. Through the concerted efforts of Tom, Jeff, Kim, Kelly, Fang and Laurie, we are able to assist you, the members, to the best of our abilities. 
       We’re listening. We hope that we hear more from many of you out there and that you, in turn, consider getting more involved in your industry association.

Treasurer’s Report
by Robert Perkins & David Katzman

       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 2004 will present a continuing challenge to all of us. Our Annual Conference Committee is working diligently to offer another interesting and productive conference. 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 successful operate under the new Homeland Security Department. The bottom line is that there is going to be increased demands on us to spend money to protect the interests of our members and our businesses. The Board will be asked to commit to continued support for support in these initiatives and we ask the members to understand and support the Association. The investment of our funds is an investment in our respective futures. We all need to help make sure that the money is there to be spent and that it is spent to benefit our members.
       While we distributed the NCBFAA funds for expenses to run the Association and to provide for the adequate representation of our interests, we will continue to need to invest in our future and will continue to support our representatives as they meet with the various agencies that now affect our business interests. We need to be at the table to protect the interests of our industry in this more complex world. I do not see that need diminishing in 2004. We can afford the small loss projected for 2004 but we cannot continue to project losses for the future and need your support to increase the dues to adequately fund the resources necessary to achieve our goals and support our industry. The future is in your hands.

General Counsel’s Report
by Harvey A. Isaacs, Esq.

       This has been another truly exciting year for the Customs brokerage industry. In 2003, as a part of Homeland Security, Customs and Border Protection (CPB), in addition to its normal operations, and other agencies continued focusing on issues involving the security of our country. The more significant items are summarized below.
        Customs Business: The ongoing issues relating to whether unlicensed employees of importers can give "customs advice" to related companies were finally resolved by an amendment to Part 111 of the Customs regulations. These employees may now advise sister companies regarding the classification and valuation of imported goods but may not prepare the actual entry. Further, because of comments filed by NCBFAA, objectionable wording that would have made these activities an exception to the "customs business" rule were removed and do not impinge of the classic role of a licensed broker.
        Legislation: In conjunction with NCBFAA Legislative Representative Jon Kent and Cindy Thomas we were called upon to draft amendments to the Tariff Act, to implement the recommendations of the Trade Support Network (TSN). Included in these are important revisions to the protest and section 520 provisions, language allowing a single monthly payment of duties as well as the filing of a monthly "reconfigured entry." We also worked with Mr. Kent on the language for the amendment to the bankruptcy statutes sought by NCBFAA. 
        Trade Support Network (TSN): I again represented NCBFAA on the TSN Entry Committee, Legal Policy Committee, and the E-bond subcommittee, and also attended all the plenary sessions of that group. 
Bioterrorism Act: A substantial part of last year was spent on the proposed FDA regulations under the Bioterrorism Act, enacted in 2002. As originally proposed by the FDA, these regulations would have had a disastrous effect on both customs brokers and food importers. NCBFAA successfully lobbied to have CPB assume an active role in the input of required information through ABI. We prepared and presented to those local associations requesting it, a seminar explaining the new FDA rules. We also prepared a standard agreement under which customs brokers would act as the transmitter of "prior notice." 
        Customs Regulations and Rulings: We continued with our efforts to obtain proposed changes to recordkeeping regulations, allowing customs brokers to image all documents at the time of entry as well as permitting brokers to store records at other than centralized locations. We prepared letters to Headquarters and met with Customs Officials in connection with the assessment of penalties for cargo mis-delivered by carriers, implementation of a new directive on the movement of "in-bond" merchandise; suggested revisions to "Importing Into The United States," the requirements for obtaining and using "assigned numbers" for ultimate consignees, and a myriad of other issues outlined in detail in the Customs Committee chairman’s report. 
        CIT Issues: Last year we reported on the fact that we prepared an amicus brief in the appeal of Byung Wu Lee v. United States, a CIT decision affirming the judgment of an administrative law judge, revoking a broker’s license for failing to pay a monetary penalty. NCBFAA believed that this violated the section 1641. Unfortunately, the Court of Appeals for the Federal Circuit upheld the decision.
        Miscellaneous: We prepared suggested amendments to the NCBFAA by-laws. As general counsel, I attended all board meetings and reviewed the meeting minutes. In my role as Customs counsel, I also attended all meetings of the Customs Committee. We also regularly authored articles for the "Monday Morning eBriefing" and the NCBFAA Quarterly Bulletin. On a regular basis, we responded to general questions relating to the customs broker regulations, received from members.
       I must again recognize and express my appreciation for the leadership and counsel of our President, Kiko Zuniga, the Customs Committee Chair, Ken Bargteil, and the members of the committee. Many long hours were spent by both of them reviewing and providing helpful comments on the work of counsel.

Washington Representative’s Report
by Jon Kent

       Security considerations dominated 2003. From our days of pushing Customs to provide more efficient processes for commercial operations and to be just as emphatic about facilitation as they were about enforcement, we have encountered a decidedly different and more challenging era.
       In early 2003, the Department of Homeland Security was formed. Customs began enforcement of its 24-hour rule and was preparing to meet its responsibilities under the Trade Act for advance notice. By the end of the year, the FDA began its enforcement of the Bioterrorism Act — new and uncharted territory to be sure. TSA readied its regulations for air cargo security that would sweep in indirect air carriers (otherwise known as air forwarders). And, changes in committee jurisdiction had left Congress in a quandary: What legislators are in charge of Customs (now CBP)?
       These times called for NCBFAA to assume leadership in the national trade community: we have the resources to influence policymakers; we have the expertise to educate the new security agencies on transportation and commercial processes; and, we have the challenge of creating order where otherwise there might be chaos.
       A highlight of the year was work done to implement regulations imposing advance notice. Through our representatives on COAC (the Commercial Operations Advisory Committee), NCBFAA confronted CBP with the realities of transportation practices and the role of its NVOs, forwarders and brokers. In January the agency agreed on a go-slow, education-oriented enforcement policy. So successful was this decision that CBP became the industry’s best friend at the end of the year as we worked together to convince FDA that this was the most prudent approach also for bioterrorism.
       Legislation moved slowly. While the passage of negotiating authority for the President to create free trade agreements was a major victory for the expansion of worldwide trade, the politics of protectionism have colored many of the agreements and yielded mixed results. Controversy over such issues as apparel, sugar, the environment and labor practices have caused a back up, as many FTAs will have to wait until after the election for enactment.
       NCBFAA’s agenda has been stalled by relative Congressional inaction. True, drawback brokers preserved drawback, convincing the US government to insist on its continuation in the FTAs. Provisions changing Customs law to the advantage of brokers as we move into ACE however were in limbo at year’s end, as Congress could not pass a miscellaneous trade and tariff bill. Our bankruptcy relief legislation was blocked by the failure of Congress to move more comprehensive bankruptcy legislation. And, oversight of Customs and other key agencies has to be conducted at the 10,000-foot level as under-resourced new committees strive to learn the details of trade and logistics. Thus, we’ve had a year of transition. NCBFAA continues to take the lead on the many matters of importance to the industry — however it has been a painful process as new issues and new players acclimate to a totally new and sometimes uncomfortable environment.

Customs Committee's Report
by Kenneth Bargteil

       It continues to be an honor and a privilege to serve as the NCBFAA Customs Committee Chairman. In my previous Annual Report I posited that during 2002 our industry had been presented with more serious challenges than at any time in memory. In 2003 we saw the implementation of programs arising out of the issues with which we dealt in 2002. If the issues of 2002 presented novel and fateful challenges to the intellect, the program implementations in 2003 provided even more daunting challenges to our business processes. High anxiety and extraordinary efforts to maintain accustomed levels of service served as constant reminders of how dramatically the events of September 11, 2001 had impacted our lives and how lasting the effects would be.
       As is always the case, along with the profound we also dealt with the usual compliment of mundane matters demanding attention and appropriate action. I hope that in facing these challenges I’ve continued to serve the best interests of our community while remaining true to my policy of: seeking the advice of those with greater experience, accepting meritorious ideas from a wide range of constituents, building a broad based consensus, and moving ahead in a resolute and unabashed fashion. For 2004, with the support of the President, the Board of Directors, and my colleagues on the Customs Committee, I look forward to continuing our work on unresolved issues and meeting the new challenges we are certain to face. The balance of this report will highlight some of the matters that comprised the Customs Committee agenda in 2003, and provide perspective on what lies ahead.
       In 2003 the overarching need to enhance supply chain security continued to be the dominant theme playing through the work of our committee, and governmental responses to this need sounded two major chords. These involved the continuation by CBP of its attempts to acquire high risk targets early in the international transportation through advanced electronic collection of cargo data, and the like minded mission at FDA to assess bioterrorism risks with line item detail, prior to arrival of food products.
       Although the work done in bringing forward our well received "White Paper" on supply chain security, with the "Chain of Custody Dataset" as its seminal element, has still not found fertile ground, there is growing discontent within the trade community for further development by CBP of their ad hoc solutions involving manifest data. We continue to introduce government officials and likeminded trade associations to our concepts for the more penetrating, far reaching and verifiable data stream available through a "Chain of Custody Dataset" than might ever be achieved through the manifest. While our goal remains the adoption of a more meaningful and less distorting mechanism for enhancing supply chain security, our publication and dissemination of the NCBFAA "White Paper" on supply chain security continues to give evidence of our proactive, cooperative and creative approach to this vital issue.
       At the beginning of 2003, with the endorsement of the NCBFAA Board of Directors, we made available to our membership the C-TPAT materials developed by this committee. These materials were created to assist our member firms in their efforts to construct an individualized C-TPAT program that would obtain certification and achieve validation.
       After study and much discussion our committee produced comments on the NPRM’s for "Confidentiality Protection for Vessel Cargo Manifest Information", and "Required Advance Electronic Presentation of Cargo Information". We have since continued the process this year by joining with the World Shipping Council and the National Industrial Transportation League in a petition to CBP for reconsideration of its final rule on advance electronic presentation of cargo information.
       Committee work on the Bioterrorism Act NPRM’s published by FDA began with an extended briefing by Fred Higdon, then Chairman of the NCBFAA Regulatory Agencies Committee, at our March 14 meeting. We proceeded with collaboration on comments to the registration and prior notice NPRM at the end of March, with a final draft completed April 6, and in response to the recordkeeping NPRM on June 30. We believe NCBFAA was instrumental in bringing FDA to the understanding that they needed to partner with CBP to build an ABI capability for the prior notice requirement rather than rely exclusively on their proposed web-based prior notice system for that purpose. It is difficult to imagine the consequences had we not been successful in making that argument.
       Even so, by November we faced the possibility that on December 12 there would be sufficient problems with the modalities available to cause major disruption to the flow of commerce. A two-pronged strategy was initiated. First, we prodded FDA to define and extend their phased enforcement of the rule. Second, we engaged with CBP to better understand their intended treatment of in-bonds, their "WP" solution, and possible alternate solutions based on the "EI", "HI" and "HN" transactions. There was a flurry of activity throughout November, culminating with meetings on December 1 with FDA and December 2 with CBP. It is difficult to assess the impact we had in mitigating what we had judged could be a "train wreck" on December 12; it is indisputable that the process engendered a very positive development in our relationship with these two agencies. It may also have inspired the unprecedented commissioning of CBP officers by FDA for enforcement of this regime at the borders.
       In counterpoint to the strident chorus of security issues, the movement of ACE from requirements to deliverables, although no less significant to our business environment proceeded sotto voce. Our strategy for ACE has been to:

  • Have an active and influential presence in the Trade Support Network
  • Reach out to our membership with ACE/Modernization Retreats and highly compressed panel discussions at our Annual Conference and Government Affairs Conference, and
  • Maintain a leadership role, especially in legislative initiatives.

       We have so far proved adept at leveraging our TSN membership to inform the process and redirect poorly aimed initiatives. We delivered a third ACE/Modernization retreat in Torrance, CA that was agreed by all attendees to have been well worth the price of admission and time away from the office. There was resounding affirmation by many in our audience who arrived knowing little or nothing about ACE that our retreat was an extremely effective forum for informing about and engaging them in this important development. Our principal focus in the TSN for 2003 was on release 3, providing for the customs broker account portal and monthly payment of duties. Our influence in the major committees has been well established.
       A secondary focus in ACE development attached to the perverse and discordant refrain that echoed throughout 2003 in the Trade Support Network, Web-based Entry Portal Subcommittee. The "malodious" tune played out in the PowerPoint presentation made by one of the importer members of the subcommittee at the first TSN plenary session of 2004 will hopefully also sound the death knell for this proposal. If not, we have prepared a "Call to Action" for activation at our Government Affairs Conference as part of our mission to Capitol Hill.
       Concluding the triad we rehearsed in our 2002 Annual Report, we take note that CBP finalized its new rule amending the definition of customs business. While we failed to persuade Customs to take up the harmonious position we orchestrated within the larger trade community for resolving this issue, we do find some of our analysis in the final rule. While it may be too early to hear any reverberations from this development, it does not appear likely to have a significant impact on our fortunes.
       For each of these major challenges, the Customs Committee studied the issues and charted a course of action. That more often than not involved reaction, as the stage had already been set in 2002, and we faced the consequences in 2003. We will need to audit the results in 2004, build on our gains and find new paths where progress has been stymied. At the end of the day, our measure of success cannot be determined on a win/loss basis; these engagements have a life of their own, and not even the most powerful in our society have the ability to carry, or defeat these forces. Our success can only be gauged by how well we lead when leadership fell to us, what we contributed when our role was a supporting one, and whether we were able to enhance our reputation and standing in the trade community by the power of our ideas, the fairness of our conduct, and the strength of our resolve. By that measure I think on these major issues we were resoundingly successful in 2003.
       The work of the Customs Committee is not all involved with the great issues of the day. This was also true in 2003, and the ability and willingness of this committee to tackle the issues of less significance, or of a more localized nature is in some sense of equal importance to our membership. The Customs Committee is where we want our members to turn when they aren’t able to solve a Customs problem that requires national attention. Follows a recap for some of those issues.
       In reaction to a change of policy at the National Finance Center requiring a FOIA request and $50 fee to obtain refund information, we submitted a noncontroversial trade requirement to the TSN Revenue Committee that would provide this information to the broker automatically in ACE when the broker has tendered the duty.
       On January 22, we met with Mike Craig, Patty Fitzpatrick and other CBP officials at their headquarters to discuss current views within the agency regarding ultimate consignee identification for entry. Patty Fitzpatrick advised that this subject is a high priority for Jayson Ahern. Failure to obtain accurate ultimate consignee identification at entry creates a hole in the criteria used for security screening. This discussion continued without much intensity throughout 2003 and noticeable progress was not made.
       As our work continued during the year –

  • We succeeded in eliminating the CF28 inquiries into importer security programs.
  • We provided input into Customs bond centralization proposal and derailed the proposition that customs brokers would be custodians for the original bonds.
  • We were finally successful on March 27 with rulemaking for split shipments.
  • We inspired the delivery of "201" steel seminars to educate our members.
  • We established a joint subcommittee with the Freight Forwarding Committee to deal with deteriorating customer service within the carrier industry.
  • We continued to press for creation of a customs broker accreditation program within the NCBFAA.
  • We persuaded CBP to streamline its application process for RLF.
  • We renewed our petition for amendment to the recordkeeping regulations as applies to customs brokers.
  • We successfully argued against a southern border practice of escalating penalties for manifest errors based on the customs broker involved.
  • Customs acceded to our request that they not replace existing entry forms without our involvement in the redesign and a mutually agreed transition period.
  • The committee appealed to CBP to enhance ACS so that the customs broker does not need to amend the original I.T. when a truck crosses at a different port.
  • We have repeatedly demonstrated the need for CBP to focus on development in the customs broker account portal of means to facilitate importer account management.
  • Agreement was reached with Regulatory Audit for due diligence standards during the test phase of monthly duty payment.
  • We have asked for elimination of port practices that interfere with clearance of cargo moving on express cargo bills.
  • A subcommittee was formed to engage with CBP Broker Management for the revision of the customs broker qualifying examination.
  • CBP agreed to study our concerns regarding the use of PATS data to measure customs broker compliance.
  • We urged Customs to delay implementation of revised in-bond procedures per C.D. 3240-036A until enhancements were made to ACS allowing for input at the house bill level.
  • Customs agreed to amend its specimen CF5291 wherever it is published, to comply with the regulatory imperative in 19 CFR 111.29(b)(2)(i)
  • We published "Principles of ACE Development" in the TSN as guidance for delivering ACE benefits as rapidly as possible to all trade participants desiring inclusion.

       Some of the major projects we worked on with Customs & Border Protection in the last year were common sense issues as opposed to new adventures in problem solving. Part of the highlights include: 
Centralized Continuous Bond Filing Project – CBP wanted to bring their Centralized Continuous Bond program national after just a short test in one port, St. Albans. The NCBFAA Customs Committee convinced CBP to roll out the project with a few more test ports before they took the entire project national. When they tested the program with additional ports they found a 50% rejection rate. By extending the project on a limited basis, most customs brokers around the country were spared high bond rejection rates and delays. It brought to CBP's attention that additional training needed to be done before taking the project national. 
Customs Forms – CBP wanted to change forms to comply with the Americans with Disabilities Act. The NCBFAA Customs Committee told CBP that "the trade" needs one year in which to use up current forms after the new forms have been introduced. CBP agreed with a one-year allowance to switch to any new forms. This will save customs brokers hundreds to thousands of dollars in surplus forms inventory. Plus, CBP agreed to work with the NCBFAA Customs Committee to try to get the new forms onto one page rather than two pages. 
Enforcement of New CBP & FDA Laws and Regulations – While the FDA and some at CBP wanted immediate enforcement of the new "24 Hour Rules" and Bioterrorism Act regulations, the NCBFAA Customs Committee urged CBP to use informed compliance before going to enforced compliance. As a result, the new regulations are being eased into effect and most penalties have so far been avoided. 
Customs Brokers License Examination – CBP has agreed to work with the NCBFAA's Customs Committee in the redesign of the customs broker license examination. We feel the new examinations will test the applicant's knowledge of customs laws, regulations, directives and the tariff schedule as opposed to simply testing the applicant's ability to take tests. 
Outreach to Customs – The NCBFAA's Customs Committee and its Educational Outreach Committee put on an educational teleconference with Customs & Border Protection in February 2004 to introduce and educate new Customs inspectors on the role of the customs broker in the customs entry and release process. 
Customs & Border Protection Staffing - The NCBFAA's Customs Committee has told CBP that it needs to increase its staffing if it is going to take customs inspectors away from commercial cargo operations and put them into radiation monitoring portals. Additional staffing is needed to enforce Bioterrorism Act regulations. In spite of Customs’ need to enforce more laws and regulations, we need to keep the same fast movement of commercial cargo that we have now and CBP must maintain their enforcement of current Customs and trade laws and regulations. Both the NCBFAA's Customs Committee and its Legislative Advocacy Committee will need to keep pressing ahead for additional staffing for Customs & Border Protection in 2004 & 2005.

Ad Hoc Security Committee Report 
by William Evans

       The committee continues to work closely with the National Cargo Security Council (NSCS), and other interested trade associations, in the organization of the Supply Chain – Information Sharing and Analysis Center (SC-ISAC).
       The SC-ISAC, when fully functional, will operate from the Transportation Security Administration’s state of the art Transportation Security Coordination Center (TSCC) located in northern Virginia. NCBFAA has had numerous meetings with management of TSA order to define our mutual roles in participating in this government-industry partnership.
       As one can imagine, the process of starting any ISAC is long and tedious and ours is no exception. Coordinating between multiple associations takes a lot of effort and some associations take longer than others do.
       Some of the pending issues involve the receipt of information from our members and conversely the distribution of information, which at times could be security sensitive. What means of communications will we use? Can current NCBFAA facilities/systems meet these communications needs? 
       At this time, committee members have all applied for National Security Clearances from the Department of Homeland Security. The clearance process, can take an extended period of time to complete. TSA is working with us to develop a temporary clearance based on a preliminary check that will permit us to have controlled access to the TSCC.
       The SC-ISAC member associations must complete a memorandum of understanding between the combined associations that will formally organize the SC-ISAC. An additional memorandum must then be prepared between the SC-ISAC and TSA. This initiative is currently being driven by the NCSC as the lead association with support from NCBFAA.

Freight Forwarding Committee's Report
by William App, Jr.

       The year 2003 was a remarkably busy - and a remarkably successful year - for the Forwarding Committee, as it took on a number of issues that have enormous economic and operational significance to the forwarding and NVOCC community. Indeed, given the heavy focus that was necessarily placed on the NVOCC side of this industry, the Forwarding Committee was instrumental in forming a new standing NVOCC Committee that would be able to address the special issues confronting NVOCCs that arise from time to time. Nevertheless, the Forwarding Committee worked hand-in-hand with the newly formed NVOCC Committee to move that important agenda along.
       As we reported last year, in 2002 the NCBFAA had petitioned the FMC to investigate whether the ocean common carrier members of the Trans Pacific Stabilization Agreement (TSA) had violated the Shipping Act. In this petition, the NCBFAA expressed concern that TSA had established and enforced discriminatory service contracting policies and practices for traffic moving in the eastbound Trans Pacific trades. More specifically, the Association contended that the TSA’s practices of refusing to negotiate with NVOCCs until they have completed negotiations and sign contracts with proprietary shippers and the discriminatory application of surcharges and GRI’s on NVOCCs violated various provisions of the Shipping Act.
       In response, the FMC initiated a Fact-Finding Investigation into the TSA practices in an effort to ascertain whether it had discriminated against NVOCCs as the NCBFAA had alleged. The FMC conducted an in depth investigation of these issues, interviewed a large number of NVOCCs, subpoenaed thousands of documents from the TSA members and deposed a number of carrier officials. At the conclusion of the investigation, the TSA members entered into a settlement agreement with the FMC by which they paid a substantial penalty for $1,350,000. In addition, TSA made a number of significant structural changes in its approved Agreement, including the following:

  • TSA would not form any committee or group for separately discussing NVOCC rates.
  • TSA would not establish any service contract guidelines by which they would contract with NVOCCs at a different time than proprietary shippers.
  • TSA would not collectively distinguish between NVOCCs and other shippers with respect to general rate increases and surcharges.

       TSA members would be prohibited from sharing information on specific shipper accounts, including those of NVOCCs.
       The TSA representatives are now to meet semi-annually with the FMC in order to permit the Commission to review TSA practices with respect to NVOCCs.
I hope that this will prevent a recurrence of the problems caused by TSA service contracting practices last year, but the Committee will remain vigilant on this issue. A second major issue pertained to the Regulations on International Maritime Transportation that had been issued by the People’s Republic of China. One of the major concerns in the Chinese regulations was that NVOCCs were required to become registered with the Chinese authorities in order to continue to act as NVOCCs in the U.S./PRC trades. In addition, one significant impediment to the registration process was that the Chinese regulations required all NVOCCs to post roughly $96,000 as a security deposit in a Chinese bank.
       The NCBFAA filed a number of petitions, both with the FMC and the Chinese government, that addressed the burden this regulation would impose on many U.S. licensed NVOCCs. In addition, the NCBFAA met frequently with various U.S. and Chinese governmental authorities that were responsible for bilateral negotiations with the Chinese on maritime issues. During those discussions and pleadings, the NCBFAA suggested that the two governments should develop a reciprocal registration bonding program that would avoid requiring U.S. licensed NVOCCs to post the cash security deposit in Chinese banks. 
       That effort was successfully concluded in December of 2003 when the U.S./PRC governments signed a new bilateral agreement on maritime transport issues. Chief among the provisions in that agreement was the condition requested by the NCBFAA - namely, that U.S. licensed NVOCCs would not need to post the cash deposit if their NVOCC bond was amended to cover the total $96,000 of liability that is required under the Chinese regulations.
       Almost immediately thereafter, the NCBFAA filed a petition with the FMC requesting that the Commission amend its rules in order to provide for the modification to NVOCC bonds. The FMC ultimately agreed that it would do so and has now initiated a rule making proceeding, in its Docket No. 04-02. It has proposed to amend its regulations to provide for, on a voluntary basis, an additional $21,000 bond for those NVOCCs who wish to qualify to be registered in China for engaging in the U.S./PRC trade.
       A third major endeavor arose out of the promulgation by the Office of Customs and Border Protection (CBP) of the so-called 24 Hour Rule on inbound ocean transportation. The Committee was extremely active in this regard, and had several of its members appointed by the Secretary of the Treasury Department to the Customs Operations Advisory Committee (COAC), that was formed for the purpose of attempting to make the 24 Hour Rule substantially less burdensome and more efficient. 
       During the course of the year, COAC met with CBP on a large number of occasions, worked with other and affected trade groups, and was remarkably successful in getting CBP to remove the most unworkable and burdensome aspects of the rules. 
       Those efforts were particularly important due to certain unforeseen consequences of the 24 Hour Rule, which created enormous operational problems for inbound cargo that was to move through inland Customs ports via in-transit bonds. The NCBFAA was requested by CBP to set up a special committee to work with the carriers and CBP in order to develop a remedy to these problems, all of which ultimately came to fruition at the end of the year with an introduction by CBP of the so-called Special Bill Procedure. Using this procedure, NVOCCs were once again able to efficiently participate as AMS filers and protect the confidentiality of their customer information from the steamship lines.
       In another significant effort, the NCBFAA filed a petition seeking to exempt NVOCCs from having to publish and enforce rate tariffs. At the same time, similar and related petitions were filed by a number of NVOCCs (including UPS, BAX Global and C.H. Robinson) that sought authority for their companies, acting as NVOCCs, to enter into ocean service contracts with their customers. As part of the effort, the NCBFAA filed its initial petition, responded to the petitions filed by other NVOCCs, replied to the adverse positions taken by the steamship lines, met with and negotiated a common set of principles that were promulgated by the NCBFAA and the National Industrial Transportation League, and solicited a substantial amount of support for its position on Capital Hill. Those efforts of course are continuing in the current year and will be a major focus of the work of both the Forwarding and NVOCC Committees.

Air Freight Subcommittee
by Scott Case

       The NCBFAA Freight Forwarding Committee Air Freight Subcommittee spent most of 2003 focused on the issue of cargo security. As it grows in prominence within our national legislature and concern grows nationwide for a more secure transportation system, the Transportation Security Administration reached out to the trade through the Aviation Security Advisory Committee (ASAC) and created three working groups to address the matter.
       The working groups covered the topics of cargo acceptance, the Indirect Air Carrier and securing the all-cargo aircraft. These groups met over the course of six months in Washington, DC, and presented the ASAC with their recommendations. These recommendations were accepted by the ASAC and TSA is reviewing and proposing changes to the current regulatory structure, based in large part on industry’s suggestions. Our mission encompasses not just cargo security, but also any issue within the airfreight arena, inbound or outbound.
       We encourage input from the NCBFAA membership to help set our agenda.

 

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