2004 NCBFAA Annual Report

(Part II)

Customs Committee Report

By Ken Bargteil
        It continues to be an honor and a privilege to serve as the NCBFAA Customs Committee Chairman. In 2004 the agenda may have shifted form 2003, but the theme resonated to the same notes. Supply chain security meant a new FDA Bioterrorism regime and advance shipment data for all modes of transportation. The fateful events of September 11 continue to drive our industry toward processes and protocols imbued with security sensibilities.
        Once again the work of our Customs Committee ran the gamut from participation in the reshaping of our world to dealing with isolated issues of significance to but a few. All matters coming to the NCBFAA Customs Committee were handled with a degree of professionalism and dispatch in which our entire association can take pride. At this point I would like to acknowledge all of the Customs Committee members and in particular, the Vice-Chairman, John Peterson, Gary Ryan and Myra Reynolds, who from time-to-time acted as recording secretary at our meetings, making it possible for the Chairman to both preside, and preserve a useful record. That record serves as the basis for the balance of this report, but before relating some of the business of the Customs Committee during 2004 I must give special recognition and thanks to the tireless and inestimable work of our General & Customs Counsel, Harvey Isaacs.
        The efforts of our NCBFAA volunteers depend on support received from our community. The most frequently heard criticism from those who withhold their support is that there is no perceptible benefit to membership. This report summarizes the work of NCBFAA’s Customs Committee in 2004, demonstrating that the NCBFAA is, indeed, actively involved in many areas on behalf of the industry.
        The interim final rule implementing provisions of the Bioterrorism Act went into effect on December 12, 2003 and 2004 became the year of prior notice. The Customs Committee met this challenge head on, first organizing an ad hoc BTA Subcommittee and then engaging with both FDA and CBP to find a negotiable path to a more secure food supply. Through General Counsel we filed supplemental comments to the FDA IFR and with CBP for the Penalty and Mitigation Guidelines. In dealing with the federal agencies, we urged, obtained and attenuated phased enforcement as a critical step in this cooperative effort. 
        Throughout the year the BTA Subcommittee kept an open agenda of problems associated with implementation of prior notice and registration rules, posted helpful publications, and broadcast important developments. To keep our membership fully informed, as does the Customs Committee, the BTA Subcommittee posted the minutes of its meetings to FABnet. While the 2004 experience with BTA prior notice was at times fraught with anxiety, steeped in frustration and beset with problems, our committee work was also on the whole a very successful enterprise.
        While the Customs Committee worked closely with FDA on its prior notice regime, in the course of our work in 2004 we learned that the FWS system was taken down as the result of legal action brought by an American Indian group and that it can take up to 3 days for USDA paperwork in New York to move from one office to the next.
        NCBFAA Customs’ initiatives have begun to gain traction as CBP has begun to pick up on our recommendations regarding supply chain security, TSN Committee organization and the Pre-Entry Declaration. Originally suggested by Committee members the Pre-Entry Declaration concept resurfaced in part as a request from CBP Commissioner Robert Bonner that we encourage our members to file entries at least 24-hours in advance of arrival, and if possible 48-hours in advance. 
        In May we heard that C-TPAT validators were our members who used foreign agents, that they must visit those agents to verify their security arrangements. Later in the year there was some indication that DHS might co-opt C-TPAT causing some concern with regard to its voluntary basis. Most recently we have seen CBP struggle through a process of creating mandatory minimum standards for importer C-TPAT members, and while many of the more onerous of those standards were eliminated or rewritten with good effect in successive drafts, directly as the result of comments authored by the NCBFAA Customs Committee Chairman, at least some of the remaining standards are as patently unrealistic and ill-conceived as a requirement that our members verify on site, the security profile of every foreign agent.
Customs Modernization – The Customs Committee is very involved in Customs Modernization, and in particular with ACE and the Trade Support Network. Eschewing web-based solutions where there were no problems, the Committee encouraged CBP to rely on customs brokers, acting as proxy account owners for set-up, maintenance and account management, if they hoped to acquire a significant number of importer ACE accounts. CBP agreed that enhancement of the customs broker account portal for these purposes would be a high priority, efforts were underway in the TSN Accounts Committee Broker Portal Account Subcommittee, in cooperation with our Customs Committee to enhance the broker portal account for that purpose.
Terms & Conditions – The Customs Committee succeeded in having the ACE portal account terms and conditions amended to eliminate impossible and unnecessary recordkeeping requirements. 
TSN Committees – The Customs Committee has remarkable representation on the TSN Legal Policy Committee with its Vice Chairman, John Peterson serving as the Trade Co-Chair, and its Counsel, Harvey Isaacs, Senior Advisor, Art Litman, and Chairman, Ken Bargteil serving as members. Also a key member of the Legal Policy Committee is the NCBFAA Legislative Representative, Jon Kent. This group’s efforts culminated in changes to enable IASS liquidation at the line level, define the term reconfigured entry for that purpose, remove the remedies in 19 USC 1520(c) by incorporation into 19 U.S.C. 1514, extend the time period during which a protest will be timely filed to 180 days following liquidation, and change the date on which periodic monthly duty payment will be due from the 15th of the month following entry to the 15th working day in the following month.
        Two of the TSN Revenue Committee subcommittees were very active in 2004. The Customs Committee Chairman and General Counsel reviewed the draft concept paper prepared by the Drawback Subcommittee of the TSN Revenue Committee. That concept paper formed the basis for vetting by the Legal Policy Committee and subsequent trade requirements. The concepts advanced by the Drawback Subcommittee would replace the tortured ruling basis for commercial interchangeability and fungibility with simple 8-digit HTSUS matching, establish duty credit accounts in ACE from which drawback rights might be freely transferred, acceptance of AES records for proof of export, settle on an all-in-five year period from date of importation during which drawback would be available, and provide for an average duty, taxes and fees per unit method for calculating available drawback. CBP acknowledged this subcommittee’s work product and wants to move this forward.
        Work done in the Revenue Committee eBond Subcommittee did not always move forward with the same equanimity as did the Drawback Subcommittee. While the Subcommittee’s trade requirements did not have universal support within the surety community, delay for consensus building was not agreed. The eBond Subcommittee could not reach agreement on version 12 of their trade requirement and submitted version 11 to the TSN Revenue committee instead. Version 11 of the TSN Revenue Committee eBond Subcommittee trade requirement will allow for electronic bond filing, with brokers able to file on behalf of importers.
ACS Maintenance & Enhancements –The Customs Committee has lobbied to have ABI timely updated for new trade agreements. CBP also recognizes this as a problem and is anxious to correct it in ACE. The advent of automated truck manifest in ACE was the cause for some anxiety among those most affected. In that regard, the Committee continues to monitor CBP plans for a virtual private network (VPN) to accommodate this process and has of the end of 2004, this mechanism remains in testing.
Trade Engagement – In the spring of 2004 we were informed that CBP intended to transition its trade engagement strategy and rely on a small group of Trade Ambassadors who would interact directly with CBP and the eCP in the business blueprinting process for Release 5 at secure facilities. Although CBP will continue to support the TSN’s work in this area, the contributions of the Trade Ambassadors will be significant and the Committee is working to assure that the group adequately represent the widely diverse interests of the larger trade community.
Ace Funding – The NCBFAA Board of Directors unanimously adopted the following Customs Committee recommendation:

"The NCBFAA should join likeminded trade associations in support of accelerated funding for ACE with reservations. It is the position of the NCBFAA that certain aspects of ACE development are not in the best interests of its membership, the larger trade community or the government. In particular, commitments made by Customs to the trade should be honored:

  • Legacy systems should be supported for 5 years from full ACE implementation
  • Reasonable notice should be provided for information technology developments that require trade investment in new systems
  • Except for justifiable limitations due to new security imperatives, the "no harm no foul" electronic entry correction period of 10 months should be implemented as agreed
  • The web-based entry transaction facility should be shelved.
  • It is also the position of the NCBFAA that it should be given a seat on the Modernization Executive Steering Committee.

Broker Examination – The Customs Committee ad hoc Committee for Engagement on the Customs Broker Qualifying Examination cooperative efforts with CBP to develop a more meaningful test of an applicant’s customs business knowledge base met with a good degree of success. While there were no measurable results yet, since the next test will be the first one emerging from this collaboration, one of the obvious improvements was the elimination of double and triple negatives from the questions.
Customs Forms – In a similar vein, CBP invited NCBFAA’s collaboration for revision of the CF7501. Concerned that ACE development would require further form revision, the Customs Committee began urging CBP to delay revision of the CF7501 to avoid multiple revisions in a relatively short time. It remains the Customs Committee’s intention to press the issue at HQ if the forms office insists on moving forward with the revisions in the near term.
In-Bond – The Committee was unsuccessful in seeking the delayed implementation of the new in-bond directive C.D. 3240-036A dated August 7, 2003 until ACS could accept associated house bill level data.
Penalties – Various issues relating to broker penalties were the subject of Customs Committee attention during 2004. Two of these involved mis-delivery and manifest errors. The Customs Committee recommended that our members may want a statement on the delivery order that goods can only be collected from the international carrier on confirmation of customs release.
        The second group of penalties involved an issue the Committee thought it had settled previously. Despite an understanding that penalties would not continue to be issued to brokers on the southern border for truck manifest errors, there was a new rash of penalties issued to Laredo customs brokers. At the Customs Committee’s request, NCBFAA General Counsel filed a letter with CBP HQ on the manifest penalties being assessed and escalated against brokers in Laredo.
Bonds – As the result of bond centralization and sufficiency analysis, CBP demand for increased bonds became prevalent. In many cases CBP told our members that HQ policy prohibited extending the 30-day window for meeting the demand. Since these demands were not always communicated directly to the customs broker, and often required special arrangements, in some cases problems were experienced in meeting this deadline. CBP advised the Customs Committee that a deadline extension request could be granted for cause, e.g., arrangements for collateral, provision of financial statements, change in surety, etc. CBP agreed to provide clarification of headquarters policy in this regard to the field offices.
Inspection & Control – Delays and escalating costs associated with customs cargo inspection was reported to the Customs Committee from all parts of the country. NCBFAA General Counsel ask CBP to provide data regarding examination times around the country. In discussions with CBP, the Customs Committee underscored the security risk associated with dwell time of unexamined cargo containers at the marine terminals. In response to Customs Committee concerns regarding delays and escalating costs associated with customs cargo inspection, CBP has issued instructions to the field that they must meet with people at their ports to ensure that examination procedures are streamlined to the greatest extent possible.
Post Entry – Despite an initial agreement for a 10-month no harm no foul electronic entry correction period in ACE, CBP had reconsidered and adopted a new post entry electronic correction policy. For all intents and purposes, the no harm, no foul underpinnings had been removed, and the revised version had as its principal aim the prevention of multiple corrections to the entry summary record by bad importers and customs brokers. It accomplished this by restricting the trade to a single correction that would result in liquidation within a two-week cycle. In that way CBP would head off the bad actors and keep the system safe. 
        The Customs Committee arguments were focused on the single correction and immediate liquidation issues. We made the argument that there was no incentive for a customs broker to repeatedly update an entry summary record. With every handling of a job file the customs broker’s profit margin narrowed. The principal reason to correct the entry summary would be to quickly reflect new facts, with an immediate benefit that receiving dock reports requiring adjustment for quantity could be done without hassle. Moreover, not every update would involve a duty consequence. It would be in everyone’s interest to facilitate an accurate entry record at the time of liquidation. 
        Lastly, with the elimination of the one year period from liquidation for remedies previously available under authority of 19 U.S.C. 1520(c), moving immediately to liquidation following an electronic update of the entry summary would further collapse the time frame for perfecting an entry summary. The unintended result would be for the trade to withhold corrections until the end of the 10-month period. That would have implications for customs brokers that had advanced estimated duty. A follow-up letter recapitulating our position was sent by General Counsel to CBP at their request and we are still awaiting their response.
WTO Quota Demise –The Customs Committee submitted a request for changes in anticipation of WTO Quota Demise. Our requests for RLF, paperless and informal entries, §321, pre-filing, and elimination of textile statements were favorably received by CBP. Our suggestions for integration of the conditional release period, reduced bond requirements, and elimination of restrictions on ACH payment rescheduling did not gain favor with the agency. We were informed that CBP would push for paperless and informal entries.
Miscellaneous Committee Work – A letter drafted by Harvey Isaacs advising that CBP Los Angeles were arbitrarily and abusively creating hurdles in the approval process for an additional permit that were unjustified under existing case law and regulation, and asking for enforcement of a uniform and regular treatment for these purposes did obtain quick and effective results. Similarly, General Counsel sought and received CBP HQ intervention regarding Port of Champlain local insistence that a customs broker has an obligation to advise CBP of importer noncompliance.
        Comments were submitted through General Counsel on a copyright recordation and enforcement NPRM that could unnecessarily involve customs brokers in litigation. The copyright recordation and protection NPRM extended the information to be made public by CBP in such a way that the broker and forwarder name might be disclosed.
OR&R –The Customs Committee request for amendment to the regulations to relax and modernize the recordkeeping rules was approved in OFO, was getting favorable treatment at Office of Regulations & Rulings (OR&R) and was in the NPRM drafting stage. If tracking true to our request, the new rules will no longer require the customs broker to keep the original records for 120 days once faithfully recorded onto secure media, and will allow the customs broker to determine where to secure its records as long as it can produce them on demand within a reasonable amount of time.
        Another issue on the Committee agenda for a very long time is the CBP supported regulatory revision for shipper initiated split shipments. Since the creation of DHS and CBP’s removal from Treasury, this matter has unfortunately taken a back seat to OR&R focus on complex INS issues. 
Border Brokerage – A short fall of Free and Secure Trade (FAST) qualified drivers on the northern border made it clear that enforcement would have to be phased in with severe warnings but no penalty actions during the initial stages. In the fall border brokers faced a double whammy. CBP had given notice of their intention to require uniform ultimate consignee identification and classification treatment at all ports. Ultimately, the agency relaxed its original position requiring ultimate consignee identification by IRS or SSN on informal entries and formal entries under $2,000 in value, but they did not budge from their timeline.
        Use of IRS or SSN is problematical with accuracy and privacy issues involved. Efforts at dissuading CBP from this approach have proven less than successful. Whether requesting an official CBP document, admonishing importers to provide the SSN at the risk not getting their merchandise cleared or suggesting that CBP address ask Canadian shippers directly to obtain these identification numbers when accepting orders, CBP seems intent on pursuing its current course.
North American Customs Brokers Alliance – In 2004 NCBFAA, as an initiative of its President, Kiko Zuniga, entered into an alliance with the Canadian (CSCB) and Mexican (CAREEEM) customs brokers associations to form the North American Customs Brokers Alliance (NACBA). NACBA holds out the promise of bringing greater political muscle to bear on shared interests than might be exercise by any of the three associations operating independently. Fruits from this collaboration are already beginning to ripen, with the assistance of NCBFAA and CAREEEM in CSCB’s effort to beat back a decision by the Canada Border Services Agency to eliminate in-bond in Canada and require customs clearance of all merchandise at the first port of unlading. Likewise, CSCB’s offer to assist NCBFAA in the establishment of a customs broker professional certification curriculum patterned after their highly successful Certified Customs Specialist program received an enthusiastic reception by the NCBFAA Board.
        I hope that in facing these multiplicity of challenges reported in this document 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 2005, 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.

NVOCC/Freight Forwarding Committees
By William App, Jr., and Maurine Cecil
        Most of the broad range of issues addressed by the Forwarding and NVOCC Committees (Committees) this year involved both Forwarders and NVOCCs. Consequently, the members of both Committees were involved in deciding the issues to be considered and the use to which the Association’s resources were to be expended. The Committees accordingly decided that it would be easier and more informative to submit a joint report of their activities over the preceding year. 
        Once again, the Committees were both busy and remarkably successful, as they took on a number of issues that have significant economic and operational significance to the Forwarding and NVOCC communities. In one carryover from 2003, the final successful chapter was written to the Association’s efforts to remedy the adverse consequences of the Regulations on International Maritime Transportation that had been issued by the Peoples’ Republic of China (PRC). We reported last year that in December 2003, the U.S. and PRC governments signed a new bilateral agreement on maritime transport issues that included a condition sought by the NCBFAA.
        Now, U.S. licensed NVOCCs would not need to post a cash deposit in the amount of $96,000 in Chinese banks in order to be authorized to do business in the U.S./PRC trades. Almost immediately after that agreement was inked, the NCBFAA filed a petition with the FMC requesting that the Commission amend its rules to authorize a voluntary $21,000 bond for those NVOCCs wishing to qualify to be registered in China. Shortly after the filing, and once comments were received from various other parties, the FMC agreed with the NCBFAA’s petition and issued regulations that specifically authorized this optional bond. Consequently, it is now much easier and substantially less expensive and risky for U.S. licensed NVOCCs to operate in the U.S./PRC trades. 
        One of the biggest issues involving NVOCCs over the past several years has been the issue of tariff publication. In early 2003, the NCBFAA filed a petition seeking to exempt NVOCCs from having to publish and enforce rate tariffs; in other words, the Association sought virtual total deregulation in this area. A number of NVOCCs, including UPS, FedEx, BAX, Global, and others, approached the issues differently, seeking a more limited exemption so they could enter into service contracts with their customers.
        During the past year, the NIT League joined the NVOCCs seeking service contract authority, and they ultimately filed a new petition seeking authority to enter into what were called NVOCC Service Arrangements (NSAs) with their customers. This request for relief was conditioned upon the NVOCCs filing the NSAs with the FMC and publishing their essential terms in tariff form; in other words, the procedures for entering into NSAs were virtually identical to those involved with service contracts.
        The NCBFAA was extremely active in the negotiations with these parties and filed a number of pleadings with the FMC supporting the NSA initiative. However, the Committees believed that the NSA filing/essential term publication requirements were unnecessary, continued to maintain a substantial burden and expense for the NVOCC industry, and should be deleted from the final rule. Unfortunately, the FMC concluded that these conditions were necessary and imposed them as a condition in the final rule. 
        Accordingly, the efforts of the NVOCC and Forwarding Committees to support tariff deregulation were successful, in that NVOCCs for the first time now have the same ability as the steamship lines to enter into confidential service contracts with their customers. But, the FMC’s refusal to grant the total exemption from tariff publication sought by the Committees does not put an end to the issue. The Committees will therefore now focus on how to move this significant issue forward, with the hope that the total exemption will ultimately be granted in the near future. 
        A third major initiative involved the Committees’ efforts to work with U.S. Customs and Border Protection (CBP) on issues relating to the submission of advanced manifests for both the air and ocean modes. For example, on the air side, the Forwarding Committee worked with officials at CBP to address ambiguities in the Frequently Asked Questions that are published relating to Air AMS. 
        With respect to ocean commerce, the NVOCC Committee worked closely with the VOCCs on the so-called 24-Hour Rule, in a continuing effort to dissuade CBP from requiring NVOCCs and VOCCs to provide the agency with the names of shipper consignee interests other than as stated on the various bills of lading. Although CBP needs this information for its targeting purposes, and while the NCBFAA is both sympathetic and supportive of CBP’s goals in this area, we submitted an extensive position paper -- together with the VOCCs -- explaining why carriers could not provide this sort of information on a regular basis. At this point, CBP has not taken any action to compel an alternative result and we are hopeful that the agency has agreed. 
        More significantly, the NVOCC Committee was able to head off an initiative by CBP that threatened to preclude NVOCCs from handling traffic destined to the United States that moves through Canadian ports and crosses the border via rail. Briefly stated, since the railroads do not have access to NVOCC House Bill of Lading data, they are unable to provide that information to Customs prior to the time the trains are crossing the border from Canada into the U.S. And, although it does get much of the house bill of lading data it seeks from Canadian Customs (since NVOCCs are required to comply with the Canadian version of the 24-Hour Rule), CBP had initially determined not to permit any cars involving NVOCC traffic to cross the border until the additional house bill of lading data was produced. If this had been the final determination, the Canadian railroads were considering refusing to accept NVOCC cargo at the ports due to concern about trains being held up at the border crossings. 
        To address this, the NVOCC Committee met with members of the rail and the steamship line industries, developed a common position, and persuaded CBP to indefinitely postpone its application of this new screening policy. The NCBFAA is continuing to work with CBP and hopes to develop a solution that would both provide CBP with the additional data it seeks while minimizing any additional burden or expense on NVOCCs. 
        Fourth, the Forwarding Committee, working through the Air Freight Subcommittee, was extremely active throughout the year in working with the Transportation Security Administration on a variety of initiatives that were designed to enhance air cargo security. As one example, the Committee filed extensive comments in the TSA rulemaking in which the agency established new rules governing the security obligations of air forwarders. 
       Fifth, although it elected not to intervene and file an amicus curiae brief with the U.S. Supreme Court, the NVOCC Committee also addressed the issue of the liability of carriers in intermodal transportation arrangements. This arose out of the landmark case, decided by the Supreme Court in the fall of 2004, of Norfolk Southern Railway Company v. James N. Kirby. Ultimately, U.S. governmental parties adopted the position advocated by the NCBFAA, and were able to successfully persuade the Supreme Court that NVOCCs were not agents of the shipper and that the terms of their bills of lading governed the issue of liability between those parties. In reaching this decision, the Supreme Court has, for the first time since the advent of containerization, addressed the issue of intermodal liability of the various parties and established an understandable set of ground rules. Following the Supreme Court’s issuance of its decision, the NVOCC Committee produced a Special Report for the members concerning the implications of this decision. 
        Sixth, in a related area -- namely, the issue of possible reform of COGSA -- the NVOCC Committee was again active in working with other parties and the U.S. government in developing a common position to present to the United Nations, as efforts to develop a new international convention on maritime liability move forward. In this instance, the NCBFAA has worked with others to protect the interests of NVOCCs and ensure that that their rights and obligations are not subordinated to those of the steamship lines. 
        Finally, the Committees took the most unusual step of working with FMC Chairman Steven Blust and developed a seminar that was given to the FMC Commissioners and staff relating to NVOCC operations. Various members of the Committees and Transportation Counsel ultimately gave a two-hour seminar that was intended to provide better explanation as to how the industry operates. By all accounts, the seminar was very well received. Afterwards, the Commission decided that the seminar was sufficiently useful that it decided to ask other members of the maritime industry provide similar seminars.

Ad Hoc Committee on Security
By William Evans
        During 2004 we continued to attend an assortment of initiatives hosted mostly by government agencies. While somewhat redundant, the fact that we are finally being recognized and our participation sought on a regular basis, is a very positive accomplishment. The following is a brief summary of some of those meetings.
The Defense Department held two sessions exploring best practices that Geoff Powell attended. Comprised of senior executives from invited corporations and associations our attendance demonstrated the industries desire to learn from our expertise.
        Peter Powell, Jon Kent, Art Litman and I represented NCBFAA as members of the Maritime Transportation Security Act implementation sub-committee to COAC. The sub-committee made recommendations to COAC and they reviewed the sub-committee reports and then made formal recommendations under COAC guidelines. The main topics discussed were seal application, validation and available technology or products.
        We also participated with the air cargo security group at TSA in the foundation of an Air Cargo Freight Assessment. Joining with Mr. Powell, Mr. Litman, and me was Scott Case. This involved allowing TSA and a group of consultant study and outline our total operations process from sales through accounting during an on site visit by TSA and their consulting firm.
        Finally, we can report next to zero progress with TSA as far as standing up the ISAC at the Transportation Security Operations Center. We originally applied for clearances in December of 2003. In October of 2004 we were informed our clearances were being adjudicated and we would soon receive email notification. So far we have heard nothing. We are contacting TSA to see what interest may still exist in this program.
        I would like to thank the committee members who have attended these meetings at no cost to NCBFAA. Peter and Geoff Powell and Lee Connor have unselfishly given many hours of time, and countless financial support, to promote our association and the professionalism of our membership. We will continue our efforts in 2005 as we see what changes will come along with the new leadership in DHS, and with CBP’s C-TPAT management.
        This concludes my report and I thank the executive committee, the board, and the membership for this opportunity.

Air Freight Subcommittee Report
By Scott Case
        As change continued within Customs AND Border Protection (CBP) and the Transportation Security Administration (TSA), two key events that impacted the airfreight industry required our integral participation and involvement to protect airfreight forwarders and indirect air carriers: air AMS implementation and ongoing evolution of TSA security requirements.
        The implementation of air AMS, which was staged geographically across the country, was met with acceptance and a smooth transition. Far smoother, it would appear, than the implementation of ocean AMS that required the subsequent "Special Bill" to return the reporting and release function to the steamship master bill rather than the NVOCC house bill of lading. We will continue to watch this.
        It is interesting to note as a side bar to this that as our counterparts in the sea freight business observe shorter and shorter periods of free time at piers and inland rail points, airlines have maintained their usually short periods of free time. While a concern, they certainly have not met with the hue and cry that surface shippers are raising. Perhaps this is because most air cargo moves in consolidation and is already being transferred to private in-bond facilities for segregation and clearance.
        Air forwarders transfer their cargo shortly after arrival; ocean consolidators who may have taken a more casual attitude to making that transfer must now be more aggressive in their pursuit of availability, presentation of the appropriate permits to transfer and removal of the cargo from the freight location. It signals an almost airfreight like urgency in sea cargo, a seminal change in many companies business processes.
Without question, TSA initiatives are a second area where we need to focus our resources. We meet with the TSA regularly to discuss a host of issues. The much-anticipated TSA proposal suggesting major changes in how air forwarders would be permitted to operate in the future was issued late in 2004 and the trade filed comments in January 2005. As of this writing, we are awaiting their final regulations. 
        Of concern, however, is the fact that despite some of the best efforts of the trade to help steer the course of the regulations in such a manner that it enhances security but does not burden the process, many of those suggestions fall on deaf ears. Some of the TSA suppositions about the size of our industry were incorrect and their use to calculate implementation costs resulted in inaccurate results. The stringent requirements for background checks on employees and the gray area of who is subject to them must also be ironed out.
        The TSA is formulating a Freight Assessment System, or FAS, to screen cargo prior to its presentation to an air carrier for shipment. In a series of meetings late last year with TSA, it was evident that the trade and the management at TSA had different visions of how to implement the system and, more importantly, what type of cargo to screen. Their initial thinking, to screen domestic air cargo, was problematic since there is nowhere that domestic cargo data is electronically presented to a government agency for reporting or vetting. To try to implement this plan within their timetable would have been unrealistic.
        It is for this reason that a coalition of trade associations and private sector entities has encouraged TSA to pursue this system with international cargo where the data is already being transmitted through the Automated Export System (AES). With the issuance the Census proposal on mandatory use of AES, no data would escape collection. As both TSA and CBP are both under the Department of Homeland Security umbrella, it would seem that the potential resources and information technology could be leveraged to make the system a success. Continuing redundancies and lack of a clear vision for cargo security responsibilities, however, contribute to the fits-and-starts progress of the implementation of this and other programs.

NCBFAA Educational Institute Report
By Jan Fields 
        The NCBFAA Educational Institute continues to offer an array of educational opportunities for our membership. Our Third Thursday Audio Seminar sessions will continue in 2005 on a quarterly basis. These sessions are provided via teleconference to allow anyone, anywhere in the country to participate. In February we covered Antidumping/Countervailing Duties, followed by Liability for Freight, Detention, and Demurrage in May, Free Trade Agreements in October, and Country of Origin Markings in November.
        We offer a correspondence course as well as a weekend Boot Camp on preparation for the Customs Brokers Exam. These courses are offered six to eight weeks prior to each broker's exam. 
        In 2004, we hosted seminars for a number of our government agencies. We participated with the Department of Commerce's U.S. Export pavilion, which is displayed throughout the United States. 
        The next two years will be an exciting time for the NCBFAA and the NEI. At its November 2004 meeting, the NCBFAA Board of Directors tasked the NEI with the challenge of providing a much needed training and educational program for customs brokers. This March we are pleased to announce the adoption of a proven certification program for the Import community.
        Based on the highly successful Certified Customs Specialist program in Canada, the NCBFAA will offer a similar designation in the United States. The full program will be rolled out at the March 2005 conference beginning with the Import portion. The Export portion, which will recognize the Certified Ocean Forwarders, will roll out by the March 2006 conference and will offer a Certified Transportation Specialist designation.

NCBFAA Drawback Committee Report
By Frank McCarthy and Michael V. Cerny
        During 2004, the Drawback Committee continued to address two very significant issues facing drawback. The first was the ongoing effort to ensure that the United States Trade Representative preserves drawback and duty deferral rights under recently negotiated bilateral and multilateral free trade agreements. The second was working 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.
        Drawback limitations placed in the U.S.-Chile FTA in 2002 acted as a "wake-up call" for many in industry using duty drawback. In 2003, our committee members worked with a broad coalition to convince the USTR to maintain drawback rights in the in pending free trade agreements. In 2004, we continued those efforts by maintaining dialogue with staff in both Congress and the Administration. Committee members also attended the Government Affairs Conference and were successful in getting meetings with congressional staff and committee staff. We are happy to report that no new free trade agreement in 2004 contained drawback limitations.
        The other issue addressed by the committee in 2004 was the incorporation of drawback into ACE. For over two years, the TSN Drawback Subcommittee has been exploring the possibility of a major overhaul of the drawback law in an effort to streamline drawback procedures and to make drawback more compatible with the ACE environment. The TSN Drawback Subcommittee is made up of both industry and CBP representatives, including a number of members from our committee.
        In 2004, the TSN Drawback Committee developed and approved a concept document outlining changes to the drawback law and procedures. Members of our committee were instrumental in developing this concept paper. The concept document proposes eliminating some of the complexity of the current drawback law by basing drawback on HTS number. It would allow drawback to be tracked more easily in the ACE system. The system established in the concept document would also make drawback more accessible for 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 negotiating these issues with CBP and communicating the possible changes to others interested in drawback.
        As we enter 2005, our committee expects to review proposed statutory revisions incorporating the principles of the TSN drawback concept document. Once both industry and CBP representatives approve of the draft statute, our committee expects to work with staff in both Congress and the Administration seeking passage of this new law.

Legislative Affairs Committee Report
By Lee Connor
        The Legislative Affairs Committee was not very active in terms of regular meetings. We did keep in touch with Jon Kent, Washington Representative, on a variety of issues relating to various regulatory agencies and legislative matters.
        The main area of work involved the Government Affairs Conference (GAC) in Washington in September. The conference was reasonably well attended and a very effective tool for communicating with Congressional members and staffers about issues affecting our industry. 
        Jon Kent, Ed Greenberg and Staff at NCBFAA provided immeasurable assistance in planning and carrying out the program. The assistance of key committee chairs and members was also solicited and much appreciated. Most of all, the members who attended the GAC and went to the Hill are owed a huge debt of gratitude by all members of the trade. States best represented included members from Illinois, Texas, Georgia and California.
        Among the accomplishments was getting the legislation killed in the House that would have resulted in draconian measures, under the guise of security, for cargo left on the Pier more than 5 days. Another highlight of the GAC was the opportunity to for an NCBFAA panel to present our perspective on the NVOCC industry to almost the entire FMC staff! We continue to build strong relationships with key players in this agency.
        Once again, thank you to all who attended the GAC and I encourage everyone to give serious consideration to making the trip to DC this year. All politics is local but what happens in Washington can have dramatic impact on our livelihoods. Stand with us in 2005 and make our voice even louder!

Membership Committee Report
By Bruce Goodwin
        The success of any association lies with its membership. The NCBFAA is no different. Our success depends strongly on the "talented pool of professionals" that makes up our association. Our Executive Committee, Board of Directors and Committee Chairs come from this talent and keeps on being replenished by our ever-growing membership.
        At the end of 2004 our membership totaled 712 members, with 603 regular, 23 associate and 86 affiliate. We would like to welcome our new members and look forward to their contributions. Of course, we thank our long-standing members for their continued support. Without your membership and financial support, the NCBFAA would not be able to voice its opinion on the regulatory and legislative issues that concern our membership. 
        As you are all aware, at the end of 2004, we began membership drive that rewards any member that brings in and new member or members. For every new member that is accepted, the member that recommended them will receive 10 percent of the new members membership as commission at the end of 2005. 
        The more members that you preach the benefits of the NCBFAA successfully to, the less your membership will cost. I have asked the Area representatives to approach members of their local association(s) that are not presently NCBFAA members and recruit them into the National. We also have members approaching NVOCCs that are not currently members and bringing them into the fold.
        We are all salesman for the NCBFAA and should be out there at all functions sharing the benefits of membership, whether it be having a voice in DC, the Monday Morning eBriefing, the Quarterly Bulletin, the Who's Who Annual Directory, the Certified Ocean Forwarders Program, and the NCBFAA Shippers Association. The NCBFAA also brings all of us together in one location twice a year to discuss matters that are urgent to our industry at the Annual Conference and the Government Affairs Conference. Being a member, also gives everyone access to our educational workshops and seminars that are presented by our Education Institute. 
        As has been said by my predecessor, I appreciate the input, comments and help from the membership. Please stay involved if you already are and get involved if your not, and I ask each member to bring one (1) new member into the Association in 2005. 
        Thank you!


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