Accuracy or Else

Customs program now penalizes importers and carriers for inaccurate information about cargo identification


According to the UN General Assembly, the Rotterdam Rules are a “uniform and modern global legal regime governing the rights and obligations of stakeholders in the maritime transport industry under a single contract for door-to-door carriage.” Thus, when ratified, the Rotterdam Rules would make the vessel carrier liable for content on a single door-to-door bill of lading and responsible for cargo accuracy from stuffing the container at origin to destination.

There is also a new vessel-focused CBP program called 10+2 that contains the Importer Security Filing (ISF) rule, which became effective July 9, 2013. The rule allows CBP to begin issuing liquidated damages claims of $5,000 against importers and carriers for each inaccurate, incomplete or late ISF transmission. CBP may also withhold the release or transfer of the cargo, or even unlade the merchandise. Importers and maritime cargo carriers must submit additional cargo data prior to lading goods on board vessels destined for the United States.

Specifically, importers must report 10 data elements on each ISF, including information that identifies the manufacturer, supplier, seller, buyer, consignee, country of origin, tariff classification number, where the goods were stuffed into the container, who stuffed the goods and the party responsible for compliance with applicable import requirements. Importers themselves are now legally responsible for the accuracy and timeliness of their ISF filings, regardless of shipper error, or whether a customs broker or other intermediary does the actual filing.

Given these changes, the only method to comply with the rules on cargo identification is to adopt a chain-of-custody process that functions as a virtual criminal chain of custody applicable to the global supply chain. It begins with the identification of the vetted and authorized agent of the shipper who personally verifies the content and quantity of the cargo, personally arms the container security device, and personally seals the container. From then on, that container is monitored for its movement, access and internal environment, depending on the shipper’s needs, all the way to its destination where another trusted agent opens and verifies the cargo.

In effect, a chain-of-custody control system can limit the liability for importers and carriers under the new ISF filing obligations, and provide both benefits and solutions, which include:

  • Origin-to-destination visibility
  • Faster movement through U.S. ports
  • The solution of transshipment vulnerabilities
  • The solution of U.S. inbound and outbound vulnerabilities and risks
  • The solution of supply chain counterfeit vulnerabilities and risks
  • Intelligence mapping for law enforcement and CBP
  • The reduction and elimination of cargo fraud, and the reduction of money-laundering and counterfeit-product risks.

This system serves to provide accuracy of cargo data, and visibility and knowledge of container location and integrity, while improving the user’s bottom line. It is available today in the United States and soon in China. Why has the private sector not used it?

Independent reports and studies by Stanford University, A.T. Kearny, BearingPoint, and the Congressional Budget Office have all shown that efficiency, visibility and speed through ports of entry produce revenue and reduce costs. The electronic chain-of-custody system provides those benefits. However, to date, only the Department of Defense employs this electronic system. It is time for the private sector to recognize the benefits of its use!

 

 

Dr. James R. Giermanski is the chairman of Powers Global Holdings, Inc. and president of Powers International, LLC, an international transportation security company. His recent book is entitled Global Supply Chain Security (Scarecrow Press 2012). He was also the director of transportation and logistics studies at the Center for the Study of Western Hemispheric Trade at Texas A&M International University, and is co-inventor of a patent connected to transport container security.

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