Customs targets terminals for unauthorized cargo discharges

Customs targets terminals for unauthorized cargo discharges U.S. Customs and Border Protection is cracking down hard for the first time on marine terminal operators who prematurely release containers that the agency has designated be held for security inspections.
   In the past two months, CBP has assessed $8.4 million in penalties to container terminals and others for allowing cargo to exit port facilities without authorization, said Todd Owen, executive director of cargo and conveyance security, in an interview.
   CBP is taking immediate, and perhaps even more costly, action by deploying Customs officers to check containers at the gates of terminals that have experienced so-called 'gate outs' and lack mechanisms for tracking the customs status of containers. The officers at the out gate will query each container number in CBP's computers to make sure there are no holds on them for automated or physical inspections, which has the indirect cost of slowing the flow of cargo out of the terminal and causing truck and rail backups.
   'CBP has taken a zero tolerance policy towards these incidents' after first communicating its expectations to the terminal industry, Owen told the Commercial Operations Advisory Committee earlier this month in New York. 'It's a serious issue where high-risk containers may not have been examined before they left the port.'
   CBP began in June 2005 to inform terminal operators and ocean carriers about the problem and educate them on how to comply, but felt the need to take a stronger stance to further prevent any containers that could pose a terrorist threat from slipping through custody, Owen said. In September, CBP officials met with maritime industry officials to explain their get-tough policy and urge that controls be put in place before enforcement actions escalate.
   The stepped-up enforcement is an attempt to get out in front of a highly critical, but as yet unreleased report by the Department of Homeland Security Inspector General's office stating that there were more than 300 instances of mistaken container releases in fiscal year 2006, according to an industry source that was briefed on the matter by CBP.
   There have been roughly three-dozen premature releases of flagged containers since Oct. 1, according to Owen.
   The number of unauthorized 'gate outs' is puny compared to the 11.6 million sea containers that entered the country and the 569,000 that were targeted for inspection in the past year, but CBP wants to eliminate the problem altogether.
   'We need to make sure that terminal operators have positive control mechanisms in place,” Owen said. 'It's unacceptable that any containers get released without the required inspection.'
   CBP has traditionally held carriers responsible for ensuring that cargo is properly released or authorized to move in bond. But under a broader interpretation of customs law, the agency is now going after terminal operators, as well as customs brokers, when they are the culpable party that allowed the container to exit without permission.
   Two of the penalty cases have involved customs brokers, Owen said. One way customs brokers can be at fault is if they schedule a motor carrier to shuttle the container to a Container Examination Station for inspection and the trucker instead delivers the cargo to the recipient listed on the shipping document.
   Early releases are primarily caused by a breakdown in communications between carriers and terminal operators. CBP communicates cargo hold and release information through the Automated Manifest System, an electronic agency program originally reserved for vessel operators. As such, terminals that are owned and operated by large container lines are having few problems with unauthorized releases of cargo compared to independent terminal operators that do not have their own ships.
   CBP is urging all terminal operators to link their computer systems to AMS as soon as possible so they can check each container before exiting the facility and eliminate inadvertent discharges.
   'If you choose not to participate in AMS, you are still required to have electronic procedures in place to ensure that no shipment leaves your terminal if a hold has been placed on it. This procedure should address shipments that leave your terminal by truck, rail and barge,' said William G. Brush, Philadelphia port director, in a directive to industry.
   The Maritime Exchange for the Delaware River and Bay, for example, has a system called TRACS linked to CBP that allows terminals to check the Customs status and carrier release of containers moving through their facilities.
   'Everybody is looking at their systems to make sure that mistakes don't happen. Customs has got everybody's attention,' said Christopher Koch, president of the World Shipping Council, representing liner carriers in the U.S. trade.
   Port industry officials say they want to close the loopholes that allow premature cargo discharges from ports, but suggest that CBP is unfairly penalizing terminals because they rely on other parties to convey whether a container has been cleared by Customs. Mistakes can happen when carriers tell terminals that the containers are good to go or because Customs placed a late hold on a container after an initial green light, and the new information didn't get back to the terminal operator.
   'The countermeasures appear to be not uniform and confusing, and are of concern to our members,' said Charles T. Carroll, executive director of the National Association of Waterfront Employers. The trade association is surveying its members to find out how CBP is enforcing the new rules, he added.
   P&O Ports North America, which is expected to be sold next month by Dubai Ports World, is working to get carriers to share the Customs status information in real time by having them designate the terminal operator as a secondary notify party on the bill of lading, said Robert Scavone, executive vice president and general counsel. Most of P&O's carrier customers have nominated it as the secondary party for notification and the company, which operates a half-dozen East Coast terminals is moving to integrate the data into its own operating systems, he said.
   'Our IT people are working on automating our own systems in such a way that when we get the secondary notification, it can be promptly, in an automated way, brought to the right system and the attention of the right person so a box can be held,' Scavone said. He noted that getting an AMS account set up and developing computer links to CBP cannot be done overnight.
   Meanwhile, the agency is also looking at ways it can improve its AMS messaging to carriers that may be contributing to the confusion.
   'We're in the process of streamlining the messages that the carriers receive to make it clear whether there is a hold or not,' Owen said. 'We recognized internally that we needed to do some housecleaning as well.'
   CBP will not collect the full $8.4 million in penalties assessed at the domestic value of the cargo in the container because initial penalties can be appealed and mitigated.
   But in a sign of how seriously the agency takes the matter, it plans to sharply escalate penalty mitigation guidelines for premature cargo releases by any party. Owen said the agency is expected to soon announce that the first offense can be mitigated no lower than $10,000 and could range to $25,000 depending on mitigating factors, up from the existing floor of $2,500 for first-time offenses. Second offenses will incur penalties ranging from $25,001 to $50,000, and third offenses will cost from $50,001 to $75,000.
   CBP also plans to require that terminals purchase customs bonds to guarantee the government can collect penalties if the operator doesn’t pay up, Owen said.
   Terminal operators are the only entity in the customs entry process that are not bonded. Ocean carriers, customs brokers, and non-vessel-operating container consolidators must take out bonds from approved surety companies in order to enter goods in the country.
   Customs plans to issue a decision by the end of the year, but still needs to determine the value of the bond, Owen said.
   One factor reducing the potential security threat from uninspected containers is that the Department of Homeland Security has installed hundreds of radiation detection machines at terminal gates around the country covering nearly 80 percent of ocean cargo entering the country, Owen noted.