2004 NCBFAA Annual Report

(Part I)

President’s Report
By Federico Zuniga
        With the conclusion of 2004, we can look back on a year of continuing success as we all worked to secure the international supply chain in the face of terrorism threats while maintaining our own business profitability. Throughout the year, the NCBFAA was able to mitigate the impact of federal security initiatives by actively participating in the process and working closely with federal agencies and congressional committees. Given the credibility that the Association has with these parties, we represented the perspective of our membership during deliberations over these issues and were able to ensure that the effects of these measures on the members and other industry participants were clearly understood before any final action was taken.
        The people who wield the political and regulatory power that influences international commerce have long recognized the reputation of the NCBFAA for integrity and expertise. That is one of the most valuable benefits of membership in the NCBFAA, affiliation with an organization that, by virtue of its reputation, has insider access to the levers of power and can protect the interests of its constituency. Mitigating the excesses of well intentioned but inexperienced officials has been a major activity of NCBFAA officials over the past few years.
        In performing this service, we have several venues available to us. One is the Customs Committee which is comprised of subject matter expects from throughout the NCBFAA membership. Their work on your behalf is well documented in the Customs Committee report below. However, I would like to highlight one aspect of their work, which I consider of critical importance to our industry, the continued development of the Automated Commercial Environment (ACE), especially the ongoing efforts of the Trade Support Network (TSN). The TSN is a group of trade representatives who provide input into the design and development of Customs and Border Protection’s Modernization projects, one of which is ACE. Much of the TSN membership is employed by NCBFAA member firms and several are actively involved in the ongoing business of the NCBFAA. 
        This provides the Association with immediate access to the deliberations of the TSN as well as the opportunity to influence the outcome of the group’s undertakings. We have enjoyed significant success in ensuring that the ACE releases are compatible with the business operations of our members or are announced with sufficient lead-time as to minimize any adverse impact on our members’ enterprises. 
        Another group we are working with very closely is the North American Customs Brokers Alliance (NACBA). NACBA includes the NCBFAA, the Canadian Society of Customs Brokers (CSCB) and the Confederacion de Asociaciones de Agentes Aduanales de la Republica Mexicana (CAAAREM). As part of an ambitious agenda, NACBA has developed a common position paper that focuses on FAST and ACI issues, including data elements, processes and the position of customs brokers under these systems.
        NACBA identified three priority issues in its paper. The first of these priority issues the group hopes to resolve involves the requirements of other government agencies. As we move toward the objective of 100 percent electronic processing, pre-arrival, NACBA sees an opportunity to influence the efforts of CBP, CBSA and Mexican Customs to become a single window for requirements of other government agencies.
        Although the area of harmonization, through standardized data elements and processes, has its limits, especially as it occurs between governments, NACBA is determined to influence what harmonization should look like and how the processes and priorities of harmonization should evolve. 
        To further this effort, NACBA members suggest a harmonized FAST process. There have been representations made in Canada for implementation of a similar process to U.S. FAST, with minimal transactional data requirements, to be transmitted electronically in advance of the arrival of the cargo. Business should have access to common procedures, for traffic traveling across our North American borders. In addition, NACBA would like to standardize the use of C-TPAT processes, with mutual recognition of approval in the respective countries, and engage the trade in full discussion before the parameters of C-TPAT are changed (such as the introduction of C-TPAT mandatory minimum standards). 
        Other recommendations include: implement a standard highway manifest, based on U.S. requirements; standardize ACI/ACE requirements, identifying common elements and usages among all three NAFTA countries; develop a trilingual glossary of terms, for easy reference; and fully engage the customs brokerage community in any discussions of prescreening/preclearance; expand the use of FAST (driver) cards for requirements of other government agencies.
        Along with covering its priority issues in the position paper, NACBA is also including statements of principle on three topics: the role of the customs broker in security; cost of security; and the importance of business-government relationships. NACBA agreed to ask that governments report on the total cost of security measures that have been put in place, as a starting point for tracking the cost to taxpayers and the cost to trade.
        Even though governments may agree to share information for security purposes, NACBA will press for maintenance of processes for business to government transmission of data, in the country of export and the country of import. Governments may want to collect security information from as many sources as possible, but it is only customs brokers who have the knowledge and relationships to provide authentic commercial and trade information on a timely basis.
        Another area that promises to enhance the NCBFAA’s reputation as a industry leader is the work our NCBFAA Educational Institute (NEI) is doing. In addition to the audio seminar program and customs exam boot camps offered through its auspices, the NEI will be creating, at the Board of Directors direction, an extensive training and education program for Customs Brokers and Freight Forwarders. Each profession wil have its own distinctive designation and the program should be in full operation within two years. More information on this activity can be found in the NEI Report below. 
        In closing, I would like to take a moment to thank the many individuals within the organization for their hard work and dedication as well as the Board of Directors whose courage to make the hard decisions enables the NCBFAA to conduct its business successfully. It goes without saying that if not for the tireless and unselfish work of our many Committees and their chairs little would be accomplished. 
        The entire Executive Committee, Peter Powell, Mary Jo Muoio, Jeff Coppersmith, and John Hyatt guide me in the direction we should follow as an organization and for that I am grateful. I especially want to thank Chairman Powell for his generous an continuing advice, counsel and, most importantly, friendship that he has provided me during my term as President.
        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.

Chairman’s Report
By Peter Powell, Sr.
        During my firm’s long involvement with our Association, I have witnessed the National Customs Brokers & Forwarders Association of America, Inc., evolve from a regionally oriented organization to a strong and vibrant national advocate for our industry. The efforts of its many volunteer activists over the years have yielded much that is positive not only for our industry as a whole but also for the individual firms that comprise the transportation logistics intermediary community.
        For nearly 100 years the NCBFAA conducted the industry’s business out of New York City, which was, for most of that time, the preeminent center of commerce on the East Coast, if not the nation. While in New York, our Association characterized itself as the voice of the transportation logistics intermediary industry. During those years, transportation logistics steadily grew more complicated and regulated with the influence of Washington increasing steadily. 
        In 1997, we moved our operations right to the very seat of the national government, Washington, DC. Subsequent events, especially the rise of security and counter-terrorism concerns, have demonstrated the prescience of that relocation as it placed our Association right at the heart of the decision-making process. From this vantage point we have been able to monitor and confront new initiatives or changes to existing ones and to communicate this activity directly to our membership, which truly makes us the voice of our industry.
        The one factor that really gives us credibility in our role as spokesman for the industry is the active participation of NCBFAA members from around the country in the continuous legislative and deliberative processes that comprise the work of Washington, DC. This involvement with government agencies allows us to influence the establishment of policies and regulations that affect the import/export trade and the intermediary community, in general. 
        Within this Annual Report you will find numerous examples where our standing committees in the customs, forwarders and NVOCC areas have worked diligently to insure that the decisions made by regulatory and congressional agencies were well considered and properly vetted so as to minimize any adverse effect on our business community. These subject matter experts are to be congratulated on the effective and professional way they have represented our business community in meetings, forums and hearings throughout the year.
        Participation in advisory groups and on task forces is another way the NCBFAA not only continues to further the interests of our industry but also demonstrates its grasp of the issues affecting the trade. One group that is especially effective in focusing attention on challenges faced by the intermediary industry is the U.S. Treasury’s Commercial Operational Advisory Committee (COAC). Since inception, COAC, through its direct efforts and those of its many subcommittees, has provided policy makers with the industry’s perspectives on proposed and newly enacted measures that impact the transportation logistics community. 
        This group brings together 20 representatives from ports, brokerages, vessel carriers, importers and exporters for two-year terms so they can provide their knowledge and expertise to the deliberations surrounding the development of regulatory initiatives governing intermediary activities. Indicative of the NCBFAA’s importance is the presence on this panel of NCBFAA President Federico Zuniga, F. Zuniga, Inc. and NCBFAA Vice President Mary Jo Muoio, BARTHCO International. In addition, three members hail from NCBFAA member firms: Marian Ladner, Strasburger & Price; Norman Schenk, UPS Trade Management Services; and Tom Travis, Sandler Travis & Rosenberg. Thus, 25 percent of the panel’s composition consists of individuals with direct connections to the NCBFAA. 
         Congressional representatives and their staffs to help craft legislation that can determine how we will conduct our commercial activities. One of our most effective strategies in pursuing this goal is the annual Government Affairs Conference in Washington DC, where you and your colleagues join together to visit Congressmen and Senators in an effort to communicate directly to them the issues and concerns facing our industry. By supporting your Association in this endeavor you not only reinforce our position as preeminent spokesman for the intermediary industry but also make it possible for us to have a place at the table where and when the deliberations surrounding these issues occurs.

Executive Vice President’s Report
By barbara reilly
        In looking back on 2004 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 hundreds of thousands of 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 2004, 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 reflected by the role it played in the 2004 Annual Conference
        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 2004, 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.
        Although I am not in a position to discuss the issue as we go to press, another project that the NEI has in its sights and will be launching at the Annual Conference, is a new program with another trade related organization, which the Association feels will be a major benefit to our members and the industry at large.
        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. Along with President Kiko Zuniga and the Executive Committee, Counsel, Board and Chairs, 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 Kim, Jeff, Tom, Kelly, and April, 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 Jeffrey C. Coppersmith and David E. 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 2005 will present a real challenge to all of us. Our Annual Conference Committee is working hard to make sure that this is the most successful conference ever. We face a year of Government agencies promulgating new regulations based on the laws passed last year. Furthermore, we need to make sure our industry can successful operate under the new Homeland Security Department. The bottom line is that there are going to be increased demands on us to spend money to represent the interests of our members. We all need to help make sure that the money is there to be spent to benefit our members.
        We spent our money wisely in 2004. 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 2005. Although we are projecting a small profit of $6K for 2005, there is concern that we are relying too heavily on a successful Annual Conference to fund our organization. We need to look at the revenue side and the possibility of a strong membership drive in 2005.

General Counsel’s Report
By Harvey Isaacs
        This has been another truly challenging year for this industry. During 2004, we worked on a myriad of issues.          The more significant items are discussed below:
        A. Customs Business
        On several occasions, we met with OFO regarding the requirement to include the "ultimate consignee" number on the CF 3461.
        We wrote to CBP regarding the increase in demurrage charges at the various U.S. seaports, solely because of the time required to perform both conventional and VACIS examinations.
        We spoke with HQ regarding penalties assessed against brokers under 19 U.S.C. §1595a(b) for the failure to deliver cargo ordered for examination. 
        B. Customs Regulations and Rulings
        We wrote to CBP requesting that it advise the ports that local guidelines for the issuance of permits must be in conformity with Section 111.19(b) of the Customs Regulations. In response, Headquarters issued a memorandum reiterating the specific items required to obtain a corporate permit.
        We wrote to CBP involving the incorrect manifesting of imported cargo and broker liability under 19 U.S.C. §1436. We asserted that the responsibility lies with the carrier. We were successful in obtaining HQ to issue a memorandum to the field stating that a broker is not liable. 
        We corresponded with CBP requesting rescission of the NFC policy of refunding duties by credit to the importer’s ACH account. 
        We wrote to Champlain expressing NCBFAA disagreement with the statement in its notice, "Reporting Importer Violations to CBP," that a filer is obligated to report a violation relating to a commercial falsity. 
        We met several times with OFO regarding the ACE electronic entry summary correction period. CBP finally conceded that a 10 month period is appropriate, but other issues still remain.
        We drafted an NCBFAA Power of Attorney form for the broker proxy account.
        An NPRM was published on October 5, 2004, which provided that information available to the copyright owner include names of brokers or forwarders. In response, we filed comments requesting that names of brokers and forwarders not be divulged. We are awaiting the final rule.
        We met on several occasions with CBP regarding the possible revision of CF7501. We are pleased to advise that, due to our comments, the matter has been dropped by CBP. 
        C. FDA-BTA 
        In connection with the BTA Subcommittee, we devoted considerable time engaging CBP and FDA regarding problems relating to the Prior Notice requirements, including: PN’s that were not confirmed by FDA; products requiring prior notice; products exempt from the FDA codes and how this information should be transmitted to FDA. 
        We submitted comments relating to the FDA NPRM on Penalty Assessment and Mitigation. In particular, we objected to the inclusion of the Guideline for violations of 19 U.S.C. §1595a(b) against any person (including a broker) that aids or abets a violation of PN requirements. We were successful in having FDA include a comment in the Final Rule exempting brokers.
        We submitted extensive comments opposing the FDA proposed rule including brokers within the class required to maintain records. The final FDA rule for maintenance of records under the BTA agreed that the recordkeeping requirements do not apply to customs brokers who do not directly manufacture, process, pack, transport, distribute, receive, hold, or import food. The FDA also stated that it is only the importer of record or consignee performing one of the covered activities that must maintain the records. Therefore, a broker acting as the nominal consignee and importer of record is exempt from that requirement.
        D. TSN
        I participated as a member at meetings of the Legal Policy and Entry Committees and E-Bond, Surety Account and Ultimate Consignee subcommittees.
        E. Miscellaneous
        As general counsel I attended board meetings, Customs Committee meetings, and reviewed meeting minutes. I authored articles for the "Monday Morning Briefing" and the NCBFAA Bulletin. I also responded and provided information to members; where necessary, we pursued many of these matters with CBP Headquarters.
        Once again, I express my appreciation for the leadership and counsel of our President, Kiko Zuniga, and the Customs Committee Chair, Ken Bargteil. I truly appreciate their counsel and advice.

Washington Representative’s Report
By Jon Kent
        It should come as no surprise that 2004 was another year dominated by security concerns. While a great number of measures had previously been put into regulation and legislation, in the backdrop of the War in Iraq and the continuing fight against terrorism, a national homeland security strategy had yet to be fully developed. As before, NCBFAA was obliged to respond to ad hoc measures that failed to take the business of forwarders, NVOCCs and customs brokers into consideration. 
        Among the most troublesome of bills was a proposal by Senator Fritz Hollings (D-SC) – since retired – that would impose a penalty on containers not removed from the dock within a fixed time period and require their transfer to GO. While the party held to account – the carrier was proposed first, then the importer – may not have been responsible for any delay, legislative proponents ignored the realities of trade and customs clearance, sticking stubbornly to their guns. 
        Only a strong counterattack by NCBFAA and a number of other associations defeated several separate efforts to pass the provision. [A postscript: a new version of that bill is being readied for introduction in 2005.] The Hollings proposal, along with a Schumer effort to require inspection of 100 percent of containers, a Markey provision to inspect all air cargo, and other such measures demonstrate more than anything the political volatility of homeland security and the endless draconian possibilities that can ensue. 
        On a related matter, brokers have faced a number of problems with the entry of the Food and Drug Administration (FDA) to the homeland security arena. Under the terms of the Bioterrorism Act, many NCBFAA members are concerned about meeting the requirements of prior notice. Although the agency has established a mechanism for reconciling issues with Customs and Border Protection (CBP), it has proven difficult, even standoffish, at national and local levels for brokers to work with the agency. 
        Many of the issues - such as FDA’s poorly designed automated prior notice system, discordant reporting times, and unwelcome delays at the border - were the subject of a House hearing in June where NCBFAA Board Member Roger Clarke testified on behalf of several organizations. Then, during the Government Affairs Conference, participants outlined these grievances for members of the House and Senate. Many of these issues remain unresolved as we enter 2005, despite the best efforts of CBP.
        On a more positive note, the continued involvement of the House Ways and Means Committee and Senate Finance Committee has yielded positive results. [NCBFAA has worked actively with both committees, as homeland security-related panels have unsuccessfully attempted to usurp jurisdiction.] Passage of a miscellaneous trade and tariff bill has produced helpful technical changes to drawback, periodic payment and entry procedures. Particular credit within NCBFAA needs to go to the Drawback Committee members, Customs Committee Chairman Ken Bargteil, Customs Committee Co-Chairman John Peterson and NCBFAA General Counsel Harvey Isaacs for their work on those provisions. Another positive effort has been the continued support that brokers have bestowed on NCBFAA’s bankruptcy legislation. Even though the bill has not yet advanced, simply adding co-sponsors due to our grassroots efforts, the legislation is poised to move ahead during 2005.
        In another venue, a great deal of effort has been expended by NCBFAA leadership to keep the regulatory environment trade industry-friendly as the DHS hastens to find new ways to protect our borders. The Commercial Operations Advisory Committee -- COAC -- has proven a valuable forum to address the need to balance trade and homeland security. Of particular note, one of its subcommittees – the Maritime Security Transportation Act sub – met throughout the year and made a series of recommendations to DHS and, in turn, Congress about how to expand container security with a minimum of disruption to the trade. 
        NCBFAA members – NCBFAA Chairman of the Board Peter Powell and Ad Hoc Security Committee Chairman William Evans -- and counsel actively participated in this forum. A particularly troublesome issue, and still unresolved, has been the plan at DHS to establish "regions." Joining with others in the trade, NCBFAA has made it clear that this cannot be permitted to encumber CBP decision-making nor jeopardize uniformity in policy. A high-level midyear meeting won assurances from DHS; however, regulations have yet to be issued.
        Thus, as we enter a new year, a new Administration and a new Congress, our confidence is high that we’ll succeed with these efforts. Although gratification has not been immediate, the unceasing hard work and commitment of your NCBFAA leadership make our continued success only a matter a time.



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