| M E M O R A N D U M | |
| TO: | Clients and Friends of the Firm |
| FROM: | John M. Peterson Neville, Peterson, LLP |
| RE: | Customs Adopts Final Rule Requiring 24-Hour Advance Submission of Certain Manifest Data for Containerized Cargo. |
The United States Customs Service has issued a final regulation requiring the advance and accurate presentation to Customs of certain manifest information at least 24 hours prior to the lading of containerized and certain break bulk cargo at foreign ports of exportation. Customs’ new advance filing requirement becomes effective December 2, 2002.
Customs’ new regulation will require carriers, NVOCCs, shippers and importers to change many of their business practices. Failure to submit timely and accurate cargo manifest information during the 24-hour advance period may result in the denial of a permit to unlade the cargo, as well as the assessment of civil monetary penalties or claims for liquidated damages.
This Memorandum describes the operation of this important new regulation, and addresses some operation and legal issues which the regulation poses.
Background
Concerned that containerized cargo may be used to smuggle weapons of mass destruction into the United States, the Customs Service has been pursuing several initiatives designed to strengthen supply chain security. These include the Customs–Trade Partnership Against Terrorism (C-TPAT), in which Customs works with selected importers to gather information regarding shipping patterns and cargo security practices, as well as the Container Security Initiative (CSI), under which U.S. Customs has placed its own inspectors at certain cooperating foreign seaports, so that they can conduct pre-exportation inspection of high risk cargoes.
The new 24-hour advance filing requirement for certain manifest information is designed to allow Customs to fully implement its CSI program. Customs will use the manifest information to determine which “high risk” shipments should be inspected abroad by U.S. Customs inspectors at CSI participating ports.
Customs received some seventy-eight (78) public comments regarding its proposed advance filing regulation, which was published in the Federal Register in August, 2002. Several changes have been made to the final regulation in order to address some of these comments. However, many firms will need to change their business practices to meet the new requirements.
Summary of Advance Information Filing Requirements
Customs has amended Section 4.7 of its Regulations [19 C.F.R. Section 4.7] to require that carriers submit to Customs the vessel’s Cargo Declaration [Customs Form 1302], or a Customs–approved electronic equivalent, at least “24 hours before such cargo is laden aboard the vessel at the foreign port.” The data may be submitted in “hard copy form”, although Customs encourages carriers to submit it electronically. Participants in the Automated Manifest System (AMS) must file the Cargo Declaration data electronically.
Customs has modified its proposed rule to allow the filing of Cargo Declaration data by a Non-Vessel Owning Common Carrier (NVOCC) which is (1) licensed by or registered with the Federal Maritime Commission and (2) in possession of an International Carrier Bond pursuant to 19 C.F.R. Section 113.64.
The Cargo Declaration must list all the inward foreign cargo onboard the vessel regardless of U.S. port of discharge, and must separately list any other foreign cargo remaining on board (“FROB”). However, empty containers need not be listed on the Cargo Declaration.
As noted below, Customs has exempted bulk cargo from the advance filing rule, and has established procedures to exempt “break bulk cargo” from the advance filing requirement, on a case-by-case basis.
The information which must be submitted to Customs in advance of lading the container is the following:
Customs’ regulation requires the filing of this information with the agency at least 24 hours before the cargo is loaded onto the vessel. It is not required, however, that the container physically arrive at the port at least 24 hours prior to lading , so long as the information is timely submitted in advance. 1
Under Customs’ new regulation, any vessel master who fails to provide advance manifest information or who presents or transmits electronically any document which is forged, altered or false, may be liable for civil penalties pursuant to 19 U.S.C. Section 1436, in addition to penalties under other provisions of law. In addition, if any NVOCC fails to submit timely or accurate data, it will be subject to liquidated damages against its bond pursuant to 19 C.F.R. Section 113.64(c), in addition to other penalties available under law.
In addition, where advance information is not timely and accurately submitted, Customs may deny a permit to unlade either to all of the cargo on an arriving vessel, or deny such a permit to that cargo which has not been properly reported.
Effective Date
The new reporting requirement will be effective for all cargo loaded onto vessels on or after December 2, 2002, providing shippers and carriers with little advance time to adjust their operations to meet the requirements of the new regulations. Citing national security concerns, Customs declined to provide a longer effective date.
However, Customs has indicated that, during the first sixty (60) days the regulation is in effect, the agency will not penalize shippers or carriers for the submission of incorrect data, assuming the violation is not is not fraudulent or intentional.
Customs is prepared to receive automated manifest information immediately, for carriers who do not wish to wait for the December 2, 2002 effective date.
Proposed Expansion of Pre-Shipment Data Transmission Requirements
Customs’ notice imposing the new regulation indicates that, acting in accordance with Section 343(a) of the Trade Act of 2002, Customs will issue regulations “that will require the advance electronic transmission of information on cargo destined for importation into the United States by vessel, vehicle or aircraft.
Bulk and Breakbulk Cargo
Customs’ final regulation exempts bulk cargo from the advance reporting requirement.
Bulk cargo is defined as “homogeneous cargo stowed in bulk, that is to say, loose in the hold and not enclosed in any container such as boxes, bales, casks and so on.” Examples of bulk cargo include oil, grain, coal and ore, and materials which can be pumped or run through a chute and handled by pumping, as well as articles requiring mechanical handling, such as bricks, pig iron, lumber, and steel beams.
Breakbulk cargo – that is, cargo which is not containerized, but which is otherwise packaged or bundled -- remains subject to the 24 hour reporting requirement. However, carriers of breakbulk cargo may apply on a case-by-basis for exemption from the 24 hour rule for such cargo.
Filing of Advance Data by NVOCCs
Customs’ proposed regulation allowed the advanced filing of cargo information by NVOCCs, which were “licensed” by the FMC. The final regulation extends participation to NVOCCs which are “registered with” the FMC, so long as they are bonded by Customs. However, Shipper’s Associations may not participate in the electronic filing program.
Confidentiality of Manifest Information
Confidentiality of manifest information is always a concern for shippers. Courts have ruled that manifest information may be publicly disclosed, and commercial services such as PIERS routinely obtain manifest information and sell reports to the public based on such information.
Sensitive to the disclosure of such information, the Customs regulations provide a procedure for shippers to file a biennial confidentiality certification, directing Customs not to disclose their manifest information. The adoption of Customs’ new filing requirements has exacerbated confidentiality concerns, since shippers are afraid that this information will be available for release even before the cargo arrives in the United States, and also because general descriptions ( “general cargo”, “said to contain” or “freight of all kinds”) can no longer be used.
Customs has indicated that it “will not be releasing information from cargo declarations until the complete manifest is filed with Customs.” The agency also intends to propose a regulation in the near future expanding the parties who may file a biennial certification on behalf of the shipper or consignee in order to block the release of manifest data.
Companies concerned with possible disclosure of their manifest data should consider filing biennial confidentiality certifications, pursuant to the Customs regulations. Our firm would be pleased to furnish any assistance which may be required in filing such certifications.
Shippers have also expressed concerns that the extended disclosure of commercial information to carriers may encourage pilferage, if the carriers do not have strong procedures to ensure the confidentiality of the information. Carriers are also concerned that by placing detailed descriptions of goods on manifests (as opposed to general descriptions such as “said to contain”) they may increase their liability to shippers in the event of cargo loss or shortage.
Denials of Permits to Unlade
Customs has indicated that, where advance information is not filed as required by the new regulation, the agency may deny a permit to unlade the entire vessel, or that much of the cargo which is not compliant. Customs has indicated that it “has the authority to process that portion [which is not correctly reported] differently from the remainder [of the cargo on the vessel]. Customs will allow unloading of that portion of the cargo that has been laden in accordance with the regulations, unless circumstances require otherwise.”
Customs has indicated that it has the right to initiate penalty actions against any party who is responsible for providing required information, and who fails to provide timely and accurate information. For example, if NVOCC-manifested cargo is left behind, the NVOCC, as the party responsible for filing the information, would be subject to penalty.
Paper Manifests
The regulatory requirement that a paper manifest be carried onboard the vessel will continue, unless the carrier is a participant in the Vessel Paperless Manifest Test.
Customs’ final regulation also stresses the distinction between a manifest and a cargo declaration noting that:
The cargo declaration is one of several documents which, when taken together, constitute a vessel manifest. In this rulemaking, by requiring the submission of cargo declaration information 24 hours prior to lading, Customs is eliminating the requirement for vessel carriers to submit an additional cargo declaration upon arrival in the United States. However, the remaining documents comprising the vessel must be available for presentation upon entry of the vessel.
Short Haul Voyages
Customs’ requirement for 24-advance filing of cargo declaration data applies even to “short haul” vessel voyages which require less than 24 hours. The requirement applies to goods imported into the United States from the United States Virgin Islands, which is located outside the Customs territory. Vessels destined to Puerto Rico, Hawaii, and Alaska from the continental United States are considered to be operating between points in the Customs territory, and are not subject to the advanced reporting requirement.
Data Elements
Under Customs’ new regulation, “dummy” data reporting is not permitted. As noted above, general descriptions of merchandise are no longer acceptable.
Consignee names must be shown on all cases, except in the case of “to order” shipments where the merchandise will be sold in transit. However, if the consignee’s name is available, the shipper must disclose it.
Customs is eliminating the requirement to report the “actual boarded quantities” of cargo to Customs electronically.
Load/No Load Messages to Carriers
Although Customs agrees in principle that it would be advisable to provide electronic confirmation messages to carriers that would authorize the lading of containers, the agency cannot complete the necessary programming to its systems before the new regulation will enter into effect. The capability of providing “load/no load” messages may be added at a later point.
Vessels Touching at Multiple Foreign Ports
Many inward foreign vessels touch at several foreign ports before departing for the United States. The carriers will need to report cargo at each of the ports it touches at least 24 hours before permitting the lading of cargo at that port. The carrier will not have to re-transmit cargo declaration information already provided from previous foreign ports.
Diversion of Cargo to Canadian Ports
Some commenters have expressed concern that Customs’ regulation will require the diversion of cargo to Canadian ports. Customs’ response has merely been to indicate that the United States Customs Service is cooperating closely with Canadian authorities and that “if either Customs administration suspected that goods are being routed in an attempt to evade scrutiny, those goods would likely be treated as high risk.”
Empty Containers
Many carriers have noted that empty containers are often used to complete stowage plans, and are loaded the last moment. Customs has confirmed that it will not require the advance submission of carrier declaration in respect of empty containers.
Conclusion
Customs’ new advance reporting requirement will create substantial operational and legal burdens for carriers and shippers. The short lead time for implementation of the regulation will also be difficult for numerous carriers and shippers to comply with.
Our firm stands ready to furnish any additional information or assistance which shippers, importers or carrier may require with regard to the new regulation.
Please do not hesitate to call if you have any questions concerning this matter.
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