Customs withdraws requirements: air, rail, truck affected; advance notice of sea shipments remains. (Capitol Comments).

Just weeks after the U.S. Customs Service circulated draft rules calling for advance eleconic notification detailing manifests for shipments into or out of the U.S. via air, truck or rail, Customs announced that it is scrapping the plan and going back to the drawing board. Customs' move comes in response to overwhelmingly negative feedback from importers and the transportation industry.

Customs originally announced it would craft these rules in November. The intent was to comply with legislative requirements adopted by Congress in the wake of events that occurred on September 11, 2001. In January, however, Customs convened a series of public meetings to receive comment on its proposed approach, and the agency was met with significant, sometimes extremely agitated, opposition to its plan.

The overall message from industry and transportation sources was that the proposed requirements would be overly burdensome, would wreak havoc in the shipping industry and would have a significantly negative impact on the entire U.S. economy. Heeding these warnings, Customs pulled its original proposal from consideration and promised to convene industry-government panels to assist the Agency in developing a new draft that would be more acceptable.

The Agency has its work cut out for it, however, since Congress has required that these regulations be in place no later than October 1, 2003.

Considering the amount of product that the nonwovens industry ships throughout North America each year, INDA, Association of the Nonwoven Fabrics Industry, Cary, NC, is watching this issue carefully and is currently investigating how the industry's interests can best be represented to the Customs Service. While recognizing the need for tightened security, it is INDA's goal to support provisions that will be as palatable as possible for the nonwovens industry.

Background

Customs' efforts to develop these regulations evolved from enactment of the Maritime Transportation Security Act of 2002 (Public Law 107-295). Specifically, Section 108 of the new law amended Section 343(a) of the Trade Act of 2002--the same legislation that renewed Presidential trade promotion authority--and mandated that Customs develop rules requiring the electronic transmission of all types of inbound and outbound cargo.

Customs had already kicked off efforts to secure shipments coming into the U.S. by ships before the trade legislation was amended. Citing the particular vulnerability of sea cargo for terrorist smuggling, Customs quickly promulgated a related rule last August that requires sea carriers to submit a detailed cargo declaration 24 hours before lading at foreign ports. When announcing the agency's intent to develop this rule, Customs Commissioner Richard Bonner explained that the 24-hour requirement for inbound ocean-going vessels was a critical piece of the larger Customs-sponsored Container Security Initiative (CSI). The CSI program was launched last year to facilitate joint efforts with governments of other nations to secure major international ports.

Because of these factors, Customs aggressively pushed ahead and-despite opposition from industry interests-issued regulations for incoming sea cargo which began being enforced February 2. The Customs Service is taking enforcement of these regulations seriously and issued 13 "no-load" orders to shippers who failed to adequately describe their incoming cargo during the first two weeks of February.

With regard to advance notification for shipments via road, rail or air, however, Customs held four public meetings in January to increase awareness of the Agency's intentions and gather industry comments. To that end, Customs released a series of position papers (referred to as "strawman proposals) prior to the meetings. These were designed to generate discussion among interested parties in the air, rail, truck and sea shipping industries, respectively.

The draft proposals addressed the technology that each mode of transportation would be required to rely upon to transmit their cargo information and specified hours in advance of lading that shippers would have to send this data to Customs.

For exporters, the strawman proposals recommended that the existing Automated Export System (AES), which is jointly administered by the Customs and the Bureau of Census, be employed as the mechanism to receive cargo information prior to export, whether by air, sea, rail or truck. For imports, the draft suggested that shipments coming in via air, rail and sea be required to use their respective Automated Manifest Systems (AMS), which are already in place and operated by the U.S. Customs Service.

The strawman for truck cargo noted that Customs is in the process of developing an Automated Commercial Environment (ACE), which will include an automated truck manifest system. According to the draft, trucks carrying cargo into the U.S. would be required to establish connectivity to the ACE truck manifest system within 90 days of its official availability.

But it was not the proposed technology requirements that sparked furor throughout the shipping industry, as these suggestions could easily end up in the next set of proposals. Rather, the controversy centered on the time frames suggested by Customs.

Under the draft rules, for instance, all outbound truck, sea and air shippers would have been required to send cargo declarations to Customs at least 24 hours prior to lading, while those moving cargo by train would have been required to transmit the data no later than eight hours prior to lading.

For those shipments coming into the U.S., truckers would have been required to declare their manifests four hours before lading, while incoming rail shipment manifests would have to be transmitted 24 hours before lading. Air cargo carriers would have been required to provide Customs with cargo data for courier shipments eight hours prior to lading and 12 hours prior to lading for all other air shipments. Little would have changed for sea carriers who are already expected to submit inbound cargo declarations 24 hours prior to lading under the rule implemented in December.

Representatives from the air, truck and rail shipping communities roundly criticized these time requirements during the public meetings, maintaining that such stringent rules would cause the U.S. shipping industry to come to a grinding halt. Cargo industry officials predicted that, if implemented, these rules would mean the end of international express shipments as well as the "just-in-time" delivery system widely being used by U.S. businesses.

In the face of these and other concerns, Customs withdrew its draft rules and said that it would begin work to develop new proposals for circulation during the coming months. As Elizabeth Durant, Customs' Executive Director for Trade Compliance and Facilitation explained, "We constructed the strawman with the sole purpose of having some structure to our public meetings that were held a couple of weeks ago. So, from that perspective, its usefulness to us for that purpose has been completed."

From this point forward, Customs has said that it intends to work closely with impacted industry interests as it crafts the next draft version of the rules. To do this, the U.S. Treasury Advisory Committee on Commercial Operations of the U.S. Customs Service (COAC) intends to form subcommittees for air, truck and rail shippers as it did while working on the sea cargo rules.

While INDA did not participate in the public hearings, the organization is currently investigating whether it would be possible for the nonwovens industry to participate in one or more of the panels being convened by Customs. Considering the tremendous amount of goods imported by nonwovens producers each year-- including primary materials, roll goods, converted items and machinery--the industry assuredly does not want to face requirements that would have a negative impact on day-to-day operations. On the other hand, the nonwovens industry is mindful of heightened security concerns in these uncertain times, and we recognize that Congressional will cannot be ignored. To the extent that INDA may be able to assist in efforts to find a more practical means of implementing legal requirements, therefore, it will certainly do its best to participate.

Peter Mayberry is the director of government affairs for INDA, Association of the Nanwoven Fabrics Industry. He can be reached in care of Mayberry & Associates, LUC at 252 N. Washington Street, Ste. A, Falls Church, VA 22046. Telephone: [phone]; Fax: [phone]; E-mail: [e-mail]. His Capitol Comments column appears monthly in nonwovens industry.