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U.S. CUSTOMS GETS SERIOUS ABOUT ADVANCE NOTIFICATION
Ocean import rules now in effect, while controversy surrounds other modes

As U.S. Customs sets out to implement the Trade Act of 2002, the twin goals of trade promotion and homeland security are increasingly at odds. Signed into law on August 6, 2002, the Act gives the Treasury Department one year to set out new regulations for the mandatory collection by Customs of import and export cargo information.

With its new rules already in effect for ocean freight and recent “strawman” proposals to regu-late other modes of transportation, the govern-ment finds itself facing considerable resistance from the international trade community. Shippers and carriers are deeply concerned about the impact of the rules upon their supply chains. The strawman proposals in particular had the potential to raise overall logistics costs while disrupting lean manufacturing systems that rely on Just-in-Time inventory. Although the government has since abandoned the proposals, it continues to look for workable solutions for advance notification.

Ocean freight and the 24-hour manifest rule

At the heart of the matter is U.S. Customs’ focus on obtaining advance data to better target ques-tionable shipments. To ensure resources are ded-icated to intercepting high-risk cargo, officials want to know as much as possible about every shipment, as early as possible.

In January 2002, U.S. Customs announced the Container Security Initiative (CSI) to help secure America’s ports. By relying on data and technolo-gy, CSI focuses on targeting and pre-screening inbound cargo at foreign seaports, well before a threatening container can reach a domestic port.

To date, nine countries have signed agreements with the U.S., representing 15 of the 20 largest ports exporting to the American market.

Customs now requires ocean carriers and Non-Vessel- Operating Common Carriers (NVOCC) to file cargo manifests 24-hours prior to loading any ship bound to the U.S. The rule came into effect on December 2, 2002, although Customs allowed a grace period of two months to get ready. Reluctant industry players have been vocal in raising their operational concerns, but most have made serious efforts to comply.

Canada has followed suit by announcing, in early April, that ocean carriers and freight forwarders will be required to submit manifest and customer data electronically to Canada Customs 24 hours before loading at a foreign port. This new rule will come into effect by April 2004. “Importers and exporters must be aware of the operational challenges resulting from the 24- hour rule,” says Mike Scott, President & CEO, PBB Global Logistics. “For many, new shipping procedures will be needed to accommodate the earlier release of shipment information to their carriers.”

Preparing a cargo manifest for a large container ship can be time consuming, forcing carriers to require cargo documenta-tion from shippers anywhere from 24 to 72 hours before the actual 24-hour filing require-ment. But currently many carriers build their manifests from information on bills of lading, which are not created until cargo is actually tendered to the carrier. Shippers must there-fore be prepared to provide data using other means, or contend with delays and storage costs during the screening process – which raises another operational issue: limited space at many ports.

The 24-hour rule also introduces the potential for loading complications, should Customs be slow in notifying the carrier of any “holds”. Stowage planning would be seriously disrupted if Customs advises of holds at the last minute, leading to delays and additional costs.

The impact of the 24-hour manifest rule will be pronounced, mainly through increased operational costs (one major carrier estimates an investment of $15 million will be required to comply). As a result, many carriers have introduced surcharges of around $25 per bill of lading, along with penalties for any corrections. Slower shipping times can also be predicted, at least for shippers who do not upgrade their systems to facilitate electronic transmission of data, which now becomes increasingly important to achieve efficiency.

Fortunately, early reports from the first couple weeks after the February 2 implementation date suggested no major disruptions, with only 13 no-load orders out of 142,000 bills of lading reviewed. Observers note, however, that February is typically a slow month for ocean freight, while also speculating that Customs is purposely being lenient during the initial transition period.

Strawman Proposals: advance notification for all modes

The recent experience with inbound ocean freight is a precursor to what faces traders in other modes of transport. Fulfilling its duty under the Trade Act of 2002, U.S. Customs held a series of public meetings in January 2003 to solicit input on its so-called strawman proposals. These proposals set forth potential advance notification guidelines to govern import and export shipments via air, truck and rail.

Industry reaction was harsh. Whereas ocean is not particularly time-sensitive, air and truck transportation are critical to Just-in-Time operations, courier services and other urgent shipments. For trucking, the four-hour advance notice proposed by U.S. Customs pertaining to imports represented a serious obstacle to supply chain management. General Motors, for example, pointed out that it often does not even order its parts four hours before they are needed in production, nor does it have the floor space to store inventory for the four-hour period. As GM’s representative at the public meeting explained, “there’s material that will leave Detroit and go to Windsor and be plated or painted and brought back to the United States in less than two hours. This is normal course of business.” Indeed, many manufacturers load trucks right off the assembly line, complicating any requirement to provide the necessary data ahead of time.

The business community was able to breathe a sigh of relief when Customs decided even before the deadline for public input had expired to abandon the strawman proposals. In doing so, however, Customs assured business that it still intends to proceed with its mandate one way or another. Watch for some fierce lobbying in the months ahead.

Until recently the international trade community has been fairly supportive of the U.S. government’s efforts to strengthen security in the supply chain. Industry appreciates the value of programs like CSI, C-TPAT (Customs Trade Partnership Against Terrorism) and “Smart Border” initiatives in securing trade. Government and business, however, are showing definite signs of divergence after the strawman experience. The months ahead will be critical for both parties to fashion an advance notification system that will enable Customs to effectively target questionable shipments while causing minimal disruptions to sophisticated international supply chains.

EVENT PLANNING EXPERTISE HELPS PBB LAND PRESTIGIOUS INDUSTRY CONFERENCE

PBB Global Logistics’ Corporate Travel service has been selected by the Transportation Marketing Communications Association (TMCA) to be the exclusive event planner for its upcoming 2003 conference at the Crowne Plaza located on Hilton Head Island, South Carolina.

Scheduled from June 15-17, TMCA’s Seventh Annual Conference and Educational Forum is the leading forum for marketing and communication professionals in the North American transportation and passenger transit industry. Delegates from across the U.S. and Canada will attend.

At one time, TMCA managed the conference but decided to outsource to PBB based on their extensive expertise in event planning. As a result, TMCA realized cost efficiencies by tapping into PBB’s buying power and vast contact network. In the end, TMCA was left with more time to focus their energy on other projects.

PBB will manage every detail of the conference including: site selection, air and ground travel arrangements, booking hotel accommodation, special event planning, organizing sports and entertainment activities, and arranging menus for dinners, cocktail recep-tions and the conference finale – the Tranny Awards Banquet. PBB will also have staff on-site throughout the conference to oversee the operation of all activities and to provide audio-visual support.

“PBB has long been esteemed for its history of corporate travel service excellence and event planning success,” says Josephine Boyle, Director, PBB Corporate Travel. “Our experienced corporate travel team is perfectly suited for an event of this scale. In 2002 alone, we managed the hospitality and travel requirements for over 200 conferences worldwide including 40 events in countries such as China, Italy, Germany, France, the U.K. and the Dominican Republic.”

ENHANCED BROKERAGE SERVICES OFFERED AT NEW PBB FACILITY

PBB has opened a new office in Fort Erie, Ontario that will offer clients enhanced brokerage services.

Situated at the Fort Erie Truck and Travel Plaza near the Canada – U.S. border, the facil-ity is the first to be located within a traveler’s rest stop and will assist PBB customers with review and preparation of documents on southbound shipments. Staff at the new facil-ity will be able to forward documents to the PBB office situated in Buffalo as a pre-alert for shipments arriving into the U.S., as well as offer assistance to clients or those who have no broker in the areas of Customs and PGA requirements.

PBB also plans to develop a system whereby release information can be inputted directly from within the new facility on southbound movements as a pre-release option.

PBB BECOMES “PARTNER IN PROTECTION” 

PBB Global Logistics has established a new working partnership with the Canada Customs and Revenue Agency (CCRA), under its Partners in Protection program (PIP).

PIP is a voluntary program aimed at strengthening physical security in areas of production, transportation, importation and exportation. Through PIP, PBB will work closely with the CCRA to enhance border security, combat organized crime and ter-rorism, increase awareness of Customs compliance issues, and help detect and pre-vent contraband smuggling.

“In today’s environment we must do all we can to ensure safety and security in all of our business practices,” says Mike Scott, President & CEO, PBB Global Logistics. “By working in partnership, both parties con-tribute to the protection of Canadian society and the facilitation of legitimate trade.”

PBB is also an active participant in the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) — a voluntary program aimed at combating terrorism by encourag-ing businesses to review their supply chain and adopt practices to enhance security.

A new era of global trade requires new strategies for success.

The complexities of trading internationally change almost every day. Customs rules and regulations evolve. Traders face increased responsibilities to ensure compliance, in an environment where Customs audits are more frequent.

PBB’s Trade & Regulatory Services team eases the burdens presented by this ever changing trading landscape. It provides strategic thinking and solutions, establishing “reasonable care” and allowing you to reduce risks and liability.

From Customs compliance assessments, trade analysis and consultative research, to tactical representation during an audit, PBB’s Trade & Regulatory Services ensure effective trade management.

WHY USE PBB'S TRADE & REGULATORY SERVICES?

• Thorough Customs compliance assessments and reviews of trading practices result in identifying irregularities and opportunities prior to audit.
  
• Proven penalties management systems — eliminating, avoiding or greatly reducing penalties through voluntary compliance or prior disclosure.
  
• Trade function analysis ensuring system linkages among departments (Sales, Marketing, Purchasing, Logistics, Shipping, Accounting) producing consistency and efficiency through an integrated trade strategy.
  
• Representation and consultation during each phase of the audit, ensuring proper record keeping, internal control, valuation and classification of goods.
  
• In-depth analysis of Customs and trade regulations affecting your e-Commerce systems.

  Additional Benefits:

• Discovering and recovering unclaimed cost reductions and overpayments to customs.
  
• Consultative research and recommendations on various issues including Valuation, Classification, Country of Origin, Marking, Labeling and compliance with other federal agencies.
  
• On-site international trade seminars and training, tailored to sector-specific issues.
  
• Exporter assistance and guidance including foreign duties and tax strategies, cargo movement and export controls.
  
• Access the global knowledge and expertise of PBB’s fully licensed team of trade professionals.

  PBB’S GUIDE TO TRADE ACRONYMS
  
  

  
  

  Canada ACI – Advance Commercial Information An intensified and electronic process for unknown or higher risk trade. AMPS – Administrative Monetary Penalties System A schedule of civil penalties designed to encourage compliance with Canadian import laws and regulations. CAP – Customs Action Plan 2000-2004 A Customs perspective and vision for border management and trade administration. CSA – Customs Self Assessment A program that allows pre-approved importers the benefits of streamlined accounting and payment process for imported goods. A program that allows pre-approved importers, carriers and registered drivers the benefits of a streamlined clearance option for CSA-eligible goods. NPA – Notice of Penalty Assessment A prescribed Canada Customs and Revenue Agency (CCRA) form, explaining the details of an AMPS penalty. PIP – Partners in Protection A program designed to enlist the co-operation of the private industry in efforts to enhance border security, combat organized crime and terrorism, increase awareness of Customs compliance issues and help detect and prevent contraband smuggling.

  U.S. CSI – Container Security Initiative An initiative designed to enhance security of sea cargo containers and to prevent global containerized cargo from being exploited by terrorists. C-TPAT – Customs - Trade Partnership Against Terrorism A program that encourages businesses to review their entire supply chain and adopt practices to enhance security. FAST – Free and Secure Trade A joint Canada - U.S. initiative that harmonizes commercial process to pre-approved importers, carriers and registered drivers. Shipments for approved com-panies, transported by approved carriers using registered drivers, will be cleared into either country with greater speed and certainty and at reduced cost of compliance.

  BORDER SECURITY A PRIORITY AS PBB PARTNERS WITH U.S. CUSTOMS SERVICE

  PBB Global Logistics has long provided the knowledge, resources and integrated services clients require to ensure their goods are accurately classified, properly valued and expedited through Customs. Recently, the company partnered with the United States

  Customs Service in a program aimed at enhancing their Customs clearance services while ensuring border security and continued free flow of international trade.

  Through the Customs-Trade Partnership Against Terrorism (C-TPAT) program, PBB will secure all company operations against possible compromise, communicate these efforts to business partners, and maintain a high level of compliance in all Customs related areas.

  PBB suggests its clients also become C-TPAT certified to ensure every link in their supply chain meets U.S. and Canadian security guidelines. Businesses who are C-TPAT compliant are eligible for expedited clearance under Free And Secure Trade (FAST). Certified clients experience fewer delays at the border due to reduced Customs inspec-tions, and a more favorable position following border reopenings in the event of a shutdown. They are also invited to attend anti-terrorism training seminars and best practice sessions. Information gathered at these best practice sessions is shared among all C-TPAT partners and trade security agencies.

  PBB’s Customs expertise, combined with the in-depth knowledge gained from going through the C-TPAT compliance process, makes them an ideal resource for clients who are ready to become C-TPAT compliant themselves.
  

  ON-LINE DATABASE OFFERS COMPLIMENTARY INFORMATION ON 2003 H.S. CODES

  PBB’s on-line tariff search engine has been updated, providing traders with an essential resource for planning and pricing their shipments. Located at www.pbb.com, this on-line database features complimentary, up-to-date information on all Canadian Harmonized (H.S.) codes for 2003, and offers the perfect resource for traders looking to save time and prevent potential confusion over tariff regulations.

  PBB’s updated tariff search engine offers several value-added features to traders. This includes the ability to easily access the codes they require without having to rely on lengthy printed lists or out of date H.S. code sources. Searchable by product keyword or code number, the on-line database includes information on 12 different tariff treatments and features a faster, more powerful search engine that produces comprehensive and detailed results. In addition to its regular features, PBB’s site also includes H.S. codes regarding the recent Canada-Costa Rica Free Trade Agreement (CRT).

  PBB strongly recommends that importers familiarize themselves with their H.S. codes on a regular basis in order to keep up with all the latest Customs initiatives. For instance, incorrect codes or constant errors can result in warnings and fines under the Administrative Monetary Penalties System (AMPS) – the Canada Customs and Revenue Agency’s schedule of civil penalties for non-compliance.

  PHANCORP LAUNCHES FIRST OFFICE IN CHINA WITH HELP FROM PBB

  When Isabel Alexander, President of Phancorp Inc., a chemical wholesaler,> attended a PBB seminar in October 2001, little did she know the relationships she would establish there would lead Phancorp to one of its most ambitious projects to date – opening a new office in China.

  The seminar, organized by PBB Corporate Travel, was developed to bring Chinese and North American firms together in a bid to capitalize on the mutual benefits they could offer one another. The visiting delegation came from Hubei Province, the economic engine of Central China with major industries in hydroelectric power generation, chemicals, textiles and metallurgy.

  During the seminar, Alexander identified vast opportunities in the Chinese market-place for selling Phancorp products such as industrial and fire chemicals, metal working fluids and lubricants. In addition, she met with Tao Lu, Second Secretary of the Economic & Commercial Consul and Consulate General of the People’s Republic of China. This meeting sparked the beginning of an important business relationship.

  Following the seminar, Alexander was invited to represent the North American chemical industry on PBB’s 16-day annual trade mission to China. While in China, Alexander was reacquainted with Lu. After working closely together for several days, Alexander invited Lu to join Phancorp as a fulltime employee charged with the responsibility for opening the Chinese office.

  “PBB’s trade mission to China, and the extensive network of connections we have been able to establish through them, has allowed Phancorp to engage on this exciting new enterprise,” says Alexander. “By tapping into PBB’s 20-year history of relationships in China, Phancorp has gained an expanded global presence and lifted us to a new level of success.”

  PBB NEWS BRIEFS

  Estimated Freight Charges Reminder
  
  To be compliant with existing regulations, importers are reminded that they are responsible for reporting their freight charges to U.S. Customs and their Customs broker.
  
  International air or ocean freight, insurance and costs incidental to international shipments must be reported to Customs. Deductions include international air or ocean freight, insurance and incidental costs (if included in the price paid or payable for the merchandise) and foreign inland freight charges from the price paid or payable.
  
  Exceptions and exclusions apply. For further details contact PBB’s Trade & Regulatory Services department at (716) 692-3100.
  
  RF Technology Now at PBB’s Western New York Distribution Center
  
  PBB continues to invest in supply chain management technology with its latest introduction of radio frequency (RF) at the company’s 78,000 sq. ft. distribution center in Buffalo, NY.
  
  Companies using the facility will benefit from enhanced warehouse productivity, thanks to increased accuracy, faster turnaround and real-time inventory data.
  
  Integrated into PBB’s existing Warehouse Management System, RF technology further automates the company’s North American distribution network and its electronic capabilities. Maximize your efficiencies. To find out more about managing warehousing capacity, inventory cycles, and final distribution, contact our Western New York distribution center at (716) 692-3100 or buffalo@pbb.com.
  
  Clarification Regarding Deductibility of Fines and Penalties
  
  To determine if fines or penalties may be deductible in computing income from a business or property, businesses must first clarify that the fine or penalty was incurred for the purposes of gaining or producing income from their business or property. If sufficient proof cannot be provided, the fine or penalty cannot be deducted.
  
  For clarification as to whether a fine or penalty has to be unavoidable in order for it to be deductible, the simple answer is no. The taxpayer does not have to attempt to prevent the act or omission that resulted in the fine, or penalty, but it must be established that there was an income earning purpose for the act or omission regardless of whether or not that purpose was realized.

  
  TIGHT TIMELINES AND COMPLEX DELIVERY DETAILS NO PROBLEM FOR PBB

  This past summer, PBB was selected by Hilton International to expedite the shipment of furnishings for its newest property, the Hilton Morumbi Hotel that was under construction in Sao Paulo, Brazil.
  
  Several challenges, from tight timelines to complex delivery details and cargo that originated in several locations including the U.S., India, Canada, South America and the U.K., were addressed and professionally managed by PBB.
  
  “Not only were we faced with the challenge of coordinating logistics with many different individuals, but in some cases, we shipped actual furniture materials such as textiles, to third parties to be assembled or upholstered prior to shipment to Sao Paolo,” says Maria Elena Alonso, Corporate Manager, Business Development of Latin 
                                                                                                      America and the Caribbean, PBB Global Logistics.
  
  Shipments for this new 22-storey, 485-room property included carpets, mirrors, lamps, furniture and other decorations for various lobbies, restaurants and individual hotel rooms.
  
  “We were extremely pleased to be recognized for our expertise in the South American market,” says Mike Scott, President & CEO, PBB Global Logistics. “The professional work of our team in Miami has helped to enhance PBB’s solid reputation for fast and reliable integrated supply chain solutions.”