Customs Update: SECURITY PROPOSALS ABOUND, FEW MAKE SENSE

(Published in the Journal of Commerce on June 06, 2002)

Despite the fact that we are now many months beyond the events of Sept. 11, the focus of Congressional and regulatory efforts remains on security. Here is a limited list of solutions being entertained by our legislators, proving once more that they aren't consulting the experts!

The in-bond program in again under attack. It is no secret the program, allowing the movement of goods from one port to another for Customs clearance at the second port, has never been popular with Customs. While forming the lifeblood of much of industry in middle America, Customs has allegedly never found a way to adequately address its purported concerns with in-bonds. Capitalizing on the frenzy surrounding security, a seemingly benign proposal to  require the inclusion of the cargo's six-digit tariff number on the in-bond paperwork has been put forth. Customs claims it needs that information for security reasons. What security reason? Surely it can't be the need to know the contents? Why is the need to know the contents of in-bond containers any greater than the need to know the contents of the containers which arrive by ocean or air?

Commissioner Robert Bonner and others have correctly said that it's too late to find the bomb once it has reached U.S. shores. How does requiring the cargo's six-digit tariff number on the in-bond entry address that concern?

Another major reason why this proposal is a bad idea is the history of in-bond documentation. The job of the carrier is to move the cargo from origin to destination as quickly and safely as possible. What happens if a land bridge of 50 or 100 containers gets held up because one isn't properly documented? We all know someone at the carrier will take an educated guess so the cargo moves, it's only human nature and a practical solution to the delay. In the context of in-bonds, carriers quite correctly do not receive shipment value information. Therefore, in order to prepare an in-bond entry for any cargo moving between ports, carriers estimate value. Over time, the rule of thumb by which value was estimated has risen from $1 per pound to $10 per pound, then to $100 per pound, and now to the figure which is reported somewhere in the $1,000 per pound range for certain types of cargo. In other words, requiring the carrier to provide tariff information, when value information has never been more than an estimate, is an unworkable solution, never mind that carriers don't generally have the Harmonized Tariff in their office to consult as that information is outside their area of expertise.  Customs and others who question the need for the in-bond program will be quick to respond that the information should be provided by the shipper or the importer. That proposal, too, seems reasonable until one recalls that manifest information is publicly available.  If information as to value and classification are in the public domain, it raises the likelihood the goods will be more easily targeted for theft. Equally important, it puts proprietary information out to the public which can easily lead to business espionage and other severe and negative complications for a company. If indeed there is a legitimate need for the six-digit tariff number on any documents processed by or put in the hands of carriers, then two things must happen before one could consider this option as viable:

 -First, all manifest and in-bond information must be made confidential and not subject to any law which allows it to be publicly disseminated.

 -Second, the requirement should be in place for all cargo and be an element of what must be reported to the carrier at the time the shipment is tendered at origin. Alternatively, if the six-digit tariff number is not needed for all cargo, then it should not be required for any cargo.

A similarly questionable proposal is one attributed to Sen. Charles Schumer of New York. In S. 2426, Schumer has proposed the elimination of freight all kinds (FAK) and other general cargo descriptions on bills of lading. Again, on its face, it seems reasonable to insist that a specific description of the cargo being shipped be required. But again the legal and business framework of the shipment of goods has been overlooked. So long as the U.S. requires tariff filing, carriers must have a catchall category which describes freight not otherwise itemized in their tariffs. The second concern is again that of proprietary information falling into the wrong hands. A broad description of electronic products is generally preferred by a shipper and/or importer instead of television sets due to theft concerns. The thief could be a thief or it could be a competitor seeking to obtain trade secrets. Either way, the damage is potentially devastating if the information falls into the wrong hands.

Again in this context, the issue of publication of manifest information must be considered. Frankly, one wonders whether to eliminate publication of manifest information, or better, to leave the current situation as is and require Customs to provide a means whereby brokers representing American importers and forwarders representing American exporters have the means to electronically provide additional shipment proprietary details as needed directly to Customs, not through the carrier. Whichever option is chosen, the way to secure American borders is to have inspections take place at origin not destination. As previously noted, it's too late once the bomb arrives at destination.

Schumer's bill would also require Customs to inspect 10% of all imported cargo. While at first glance a seemingly admirable goal, any arbitrary number is just that arbitrary. Why not 7% or 8%, or even 15%? The Senator, and other members of Congress who naively complain Customs doesn't inspect enough cargo, consistently fail to consider the sophisticated artificial and human intelligence used by Customs and the other federal inspection agencies in deciding who and what to inspect. Arbitrarily picking 10% of the cargo to inspect will accomplish little more than make Customs busier and delay delivery of goods, in the penalizing the economy and consumers, who will bear the cost.

While S. 2426 includes sums of money to be used by Customs to obtain additional equipment to facilitate more inspections, it does nothing to deal with the real dilemma. Customs' staffing has been stagnant at approximately 19,000 employees for at least the last 10 years. If Congress is serious about asking Customs to perform more inspections, a substantial increase in staffing is needed. On this same subject, Congress should also keep in mind that any increase in Customs' personnel should not be limited to just inspectors and agents. A large part of how Customs insures compliance is performed by the import specialists, entry clerks, protest and penalty processors and others who facilitate the paperwork filed by importers and exporters. That part of Customs should not be shortchanged when looking for ways to allow Customs to do a "better" job of processing cargo and people.

Moving in the right direction is a manager's amendment to H.R. 3009, the Andean Trade Preference Expansion Act, which would require all carriers to electronically transmit manifest information. Electronic transmission is already routinely performed in the ocean and air environments. As currently enabled, Customs has a limited ability to accept electronic manifest information for rail shipments and none for truck moves. Hopefully, the Automated Commercial Environment (ACE) under development will include that capability among its first components. Nonetheless, if approved, this approach is more in line with what is needed to improve security by obtaining information in advance of arrival.

The remaining question: what will it take for Congress to understand that it should be pushing for international rules so that inspections which take place at origin are thorough and reliable? The situation domestically needs few if any changes in terms of how Customs operates.

From recent events, it is clear the same cannot be said of several of the other federal law enforcement agencies!