ISF – an NVO burden

ISF – an NVO burden       Ocean freight forwarders and non-vessel-operating common carriers, who fail to meet U.S. Customs and Border Protection’s Importer Security Filing regulation, risk watching business walk away.
      ISF, which entered into the enforcement phase on Jan. 26, requires an importer to electronically file 10 types of transaction data 24 hours before its container is loaded on a vessel.
      A key piece of information that must be included on CBP’s ’10+2′ form is the bill of lading (B/L) number issued by the ocean carrier and included on the advance manifest it files through a separate automated system to notify CBP of cargo riding onboard. The agency uses the B/L file date to measure whether the ISF was filed on time even though many carriers may transmit the manifest several days before loading occurs.
      Many NVOs that buy wholesale space from carriers and market it to shippers prefer to file their own manifests to CBP through the Automated Manifest System. Smaller NVOs that aren’t worried about carriers trying to take away their customers submit paper manifests and let the carriers electronically file manifests on their behalf for a small fee. As American Shipper reported Jan. 6 (‘ ’10+2′ pressures NVOs to automate,’), that type of arrangement has created problems because the B/L and associated identification number the NVO provides its customer is not the same as the carrier’s B/L. Carriers assign their own tracking numbers to these house bills to standardize and enter them into AMS. But many importers are incorrectly using the NVO-generated transaction number on their ISF and getting rejections because it doesn’t match the manifest on file at CBP. An NVO or forwarder with AMS capability benefits because its internal B/L is automatically attached to the carrier’s master B/L without any additional steps.
      ‘Many importers that I have spoken with will require their NVOs are automated participants in Sea AMS if they want to continue doing business with them,’ said Albert Saphir, president of ABS Consulting, a Weston, Fla.-based consultancy specializing in NVO and forwarder matters.
      Importers are subject to damages of $5,000 per ISF transmission, which could reach $10,000 for some shipments if amended documents are filed that also include errors.
      ‘For those NVOs that are automated participants in the CBP Sea AMS program, ISF should present few challenges since they are in full control of their destiny and hopefully have developed some value-added systems tools to support their U.S. customers with smart ISF solutions,’ Saphir said.
      ‘But for those thousands of NVOs (and forwarders who act as intermediaries and not as carriers) that have not joined CBP’s Sea AMS program, times will become very tough in 2010 as CBP ISF penalties start coming in,’ he warned. ‘In the past, many importers did not even know if their NVOs were automated. Now, they will find out very quickly.’
      Saphir expects an increase in NVO Sea AMS participants in 2010, although many of them may find it difficult to secure the required CBP Type 3 carrier bonds, since their financials may not meet the U.S. surety minimum standards. In these cases, the only way to obtain the carrier bond will be to post $50,000 to $100,000 cash collateral with the surety ‘ a near impossibility for many smaller NVOs, he explained.
      Bryn Heimbeck, president of TradeTech, said ISF is unlikely to force consolidators and forwarders to close their doors because there are plenty of easy-to-use, Web-based applications that cater to small businesses.
      When customers start getting fined and NVOs lose a couple of accounts ‘then they’ll jump and do it,’ Heimbeck said. ‘Nobody can afford to lose a piece of business for failure to reach the market standards and the market standards have just been increased.’ ‘ Chris Gillis

Price-fixing ghost haunts forwarders
      The European Union on Feb. 9 sent a number of prominent freight forwarders a ‘Statement of Objections’ related to a price-fixing investigation of their air freight forwarding activities.
      The investigation primarily focused on alleged collusion between the companies on air freight surcharges assessed from the United Kingdom and Europe to the United States, and from China and Hong Kong to Europe. The probe reached a crescendo when the offices of a number of prominent forwarders, including Panalpina, Kuehne + Nagel, CEVA (formerly EGL), Expeditors, UTi Worldwide and Schenker, were raided in October 2007.
      A Statement of Objections is a formal step in antitrust investigations in which the European Commission informs the parties concerned in writing of the objections raised against them.
      ‘The commission is investigating allegations that these companies fixed prices by colluding on the imposition, level, timing and application of various surcharges, in breach of Article 101 of the (Treaty on the Functioning of the European Union),’ the EU said in a statement.
      The EU is working with the U.S. Justice Department and Swiss Competition Commission on the investigation. The Australian and Canadian governments were also involved but have closed their investigations.
      European logistics giants Panalpina and Kuehne + Nagel confirmed on Feb. 10 that they were served with the notice.
The U.S. Justice Department’s air cargo price fixing investigations alone have already resulted in more than $1.6 billion in fines paid by a number of major airlines, including British Airways, Korean Airlines, Qantas Airways, Japan Airlines, Martinair, Cathay Pacific, SAS Cargo Group, Air France, KLM Royal Dutch Airlines, LAN Cargo, Aerolinhas Brasileiras, and El Al Israel Airlines Ltd.
      Some prominent air cargo executives have been impacted over the allegations.
      In August 2008, Bruce McCafferty, former vice president of Qantas’ U.S. cargo operations, agreed to a plea deal with U.S. federal prosecutors related to conspiracy charges stemming from air cargo price-fixing. Instead of facing a possible 10-year prison sentenced and $1 million in fines, he served eight months in prison and was ordered to pay a $20,000 fine.
      In April 2009, Frank de Jong, former vice president of cargo sales in Europe for Martinair, agreed to serve eight months in jail, pay a $20,000 criminal fine and cooperate with the Justice Department investigation.
      The forwarders recently served by the EU may experience similar fallout within their organizations in the months ahead. ‘ Eric Johnson