Abalone Shells

Oxpeckers’ environmental investigative journalist, Crystal Chow,  digs up the dirt on the illicit abalone trade.

Abalone tops the list of the most exquisite seafood in Chinese cuisine, and fresh South African abalone are always the first choice for feasts in Cantonese restaurants, where one fresh abalone alone can cost up to HK$2,000 (about R3,000). In recent years, the overfishing and smuggling of wild abalone has pushed this endemic species of the South African coast towards extinction.

“The South African wild abalone are heavier, and they are better than the farmed Japanese and Australian ones in terms of fresh flavour and texture,” said Chit-yu Lau, general manager of Ah Yat Abalones restaurant in Hong Kong. “Our fresh South African abalone are all imported through legitimate channels. The smuggled ones are usually dried, and are rare in Hong Kong.”

Nonetheless, the illicit abalone trade has been gathering significant attention from conservationists combating wildlife trafficking, who believe the profitable contraband market of abalone is linked to the black market of ivory and rhino horns – both of which are driven by high demand from the Chinese market. To read the full story Click here!

Source: oxpeckers.org, author – Chow. C, June 9, 2017.

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Hamburg Sud_1

Durban-based Hamburg Süd is the first shipping line – and the first South African Revenue Service (Sars) client – to be granted exemption from the requirement to submit paper manifests to local customs branches, thus becoming the first fully electronic cargo reporter.

While the electronic reporting of pre-arrival manifests to Sars has been a requirement since August 2009, shipping lines are, to date, still required to present pre- and post-arrival paper manifests to local customs branches in order to account for cargo. This was also because the data accuracy of electronic submissions varied significantly between different reporters.

Sars’ implementation of the new Manifest Processing (MPR) system in June 2016, provided industry with the mechanism to also report acquittal manifests electronically. Additionally, the system is able to match customs clearances to their corresponding cargo reports (manifests) in order to identify instances of non-reporting.

Three months after MPR was introduced, the facility for full paperless cargo reporting was made available to shipping lines and airlines who submit both pre-arrival and post-arrival manifests to Sars electronically; submit complete sets of manifests without any omissions; achieve a reporting data accuracy rate of 90% or higher in respect of both their pre-arrival and acquittal manifests reported for each of the three months preceding any application for exemption from paper reporting requirements; and can maintain that level consistently.

A significant benefit to carriers reporting electronically is the cost-saving of hundreds of thousands of rands spent per year in the paper and administrative costs associated with submitting paper manifests to Sars offices. The process is now more efficient allowing for improved risk management, security and confidentiality.

“Hamburg Süd’s core business strategy is to deliver a premium service to our customer, and to achieve this, compliance is a core driver. SARS paperless reporting is in line with our compliance and sustainability strategy,” said Jose Jardim, general manager of Hamburg Süd South Africa.

For Customs, the mandatory submission of cargo reports forms a significant part of the new Customs Control Act (CCA) in order to secure and facilitate the international supply chain.

With the impending implementation of Reporting of Conveyances and Goods (RCG) under the CCA – targeted for 2018 – carriers of internal goods in the sea and air modalities are urged to follow Hamburg Süd’s example and ensure that they become compliant in good time so that they can enjoy a smooth transition to the new legal dispensation.

Paperless cargo reporting would bring an end to one of the last remaining paper-based processes in customs while further contributing to the expedited processing of legitimate trade through an enhanced and integrated risk management environment.

According to a Sars spokesman technical stakeholder sessions to implement the reporting requirements introduced by the new Customs Control Act are due to commence soon and carriers and other supply chain cargo reporters are urged to attend in order to ensure they adapt their systems in good time.

Source: adapted from FTW Online, Venter. L, “German shipping line first Sars client to become fully electronic reporter”, September 14, 2017.

global-local

Global trade has reached its peak and globalisation is giving way to localisation, which is one of the most “profound changes” currently facing the global economy, says Paul Donovan, global chief economist at UBS Wealth.

Accounting for about a quarter of the world’s GDP, global trade is at a record high. “This is as good as it gets. What we are now starting to see is localisation returning to the manufacturing sector,” Donovan said on Tuesday, speaking at a Sasfin Wealth event.

Advances in robotics and artificial intelligence, collectively referred to as the fourth industrial revolution, mean that factories are mechanising, and are placed closer to companies’ consumer markets.

Swedish retailer H&M is using robotics, manufacturing most of its clothing in Europe, not Asia, enabling it to respond to consumer demand more effectively, Donovan said.

This allows the fast-fashion front-runner to quickly respond to consumer demand and even unseasonal weather.

“The fourth industrial revolution will dramatically alter investment, economics and society.”

At SA’s recent inaugural Singularity University event, disruption innovation expert David Roberts said that 40% of the S&P 500 companies would disappear in the next 10 years as exponential technologies disrupted a host of industries. The average lifespan of an S&P 500 company had decreased from 67 years to 15 years, he said.

While only about 9% of jobs would disappear altogether, automation and digitisation would affect about 40% of jobs, said Donovan. This would require people and companies to adapt to new ways of doing things.

“If your university degree is reliant on memorising a textbook, you are a low-skilled worker. We need companies and countries with workforces that are flexible.”

Donovan predicted a return to the imperial model of trade, where raw materials and intellectual property were imported, while “everything else” happened close to the consumer. “Raw materials will still be globalised, but finished products will be declining as a force for global trade in the years ahead.”

Source: Originally published in Business Day, Ziady. H, September 6, 2017. Globalisation gives way to localisation, in profound change, UBS economist says.

transfer pricing

Tax collection from transfer pricing audits has become more common in Africa, with little sign that it will abate in the near future.

The transfer pricing policies of many multinational companies have attracted widespread attention in the recent past, to the extent that it is considered the “criminal child of tax”.

Transfer pricing is the way a company prices goods and services supplied to a company within the same group. The price should be aligned to a price that the company would offer to a third party.

Nishana Gosai, senior transfer pricing executive at Baker McKenzie, and former head of the transfer pricing unit at the South African Revenue Service (SARS), says that despite having transfer policies in place, most large multinational companies find it difficult to control every aspect of its business. There is a rising perception that transfer-pricing transgressions are criminal and should be met with criminal sanction.

In Tanzania, failure to keep transfer pricing documentation is considered an offence. The punishment is a fine of $30,000 or six months’ imprisonment, or both.

In SA, the revenue authority settled a transfer-pricing dispute with a subsidiary of Kumba Iron Ore to the tune of R2.5bn in 2016. The initial assessment was R6.5bn.

In Tanzania, a large mining company recently received a $190bn tax assessment.

Transfer pricing has been regarded as the major culprit in base erosion and profit shifting (Beps) in which profits are shifted from high-tax jurisdictions to lower tax jurisdictions to limit a global group’s tax exposure.

Gosai emphasises that transfer pricing is not an exact science. It requires judgment and discretion. No one can define the exact price. Finding middle ground requires pragmatism. Information is important in any transfer-pricing dispute, but it seems the burden of proof is becoming insurmountable, she says.

“We are moving into a space where tax administrations are demanding documented proof and evidence to substantiate routine commercial realities,” Gosai says.

Andrew Wellsted, head of the tax team at Norton Rose Fulbright, says that if a company’s affairs or record-keeping are not up to scratch, it faces a long, time-consuming process of getting what the revenue authorities require.

If taxpayers have followed incorrect practices, knowingly or otherwise, it will expose them to tax liabilities and potential disputes. Irrespective of any actual legislative changes, 93% of respondents believe that tax authorities will increase tax audit assessments as a result of proposed Beps initiatives.

“If the audit is conducted in an aggressive fashion, it can be very disruptive to the day-to-day operations of the taxpayer. This needs to be carefully managed by taxpayers and the authorities,” says Wellsted.

Deloitte recently published its survey on the views of multinational companies regarding the greater interest in “responsible tax” and Beps among the media, and political and activist groups.

In the 2017 survey, 460 people in 38 countries responded. The results show that respondents are expecting a major effect on their compliance requirements due to the additional reporting requirements arising from the Beps action plans developed and published by the Organisation for Economic Co-operation and Development (OECD).

The survey shows that 94% of the respondents believe that the additional transfer-pricing reporting requirements will substantially increase their compliance burden when it comes to corporate tax.

More than 90% of the respondents agree that tax structures are under greater scrutiny by tax administrations than a year ago.

“Irrespective of any actual legislative changes, 93% of respondents believe that tax authorities will increase tax audit assessments as a result of proposed Beps initiatives,” Deloitte’s survey found.

Gosai says many multinationals make the mistake of not fully understanding what they are submitting to a revenue authority, the context of such submissions, the potential ways that it could be interpreted by a revenue official and, most importantly, that once submitted, such disclosures cannot be retracted.

Companies tend to over-comply when faced with a request for information from SARS, especially if it is not specific about its scope. There is a danger that information offered by the taxpayer that is not relevant to the question asked may lead to further questions or may create the wrong impression.

Most tax disputes turn either on a legal interpretation of legislation, or a factual issue. The dispute is often centred on whether or not an arm’s-length price (the price offered to an unconnected third party) has been charged.

“This involves complex and detailed economic analysis and is invariably very subjective,” Wellsted says.

“Thus finding the objectively right answer as to what an arm’s-length price could be, is almost impossible,” he says.

Source: Originally published in Business Day, Visser. A, published as “Multinationals face quandary over transfer pricing”, September 6, 2017.

Ghana
Deputy Minister of Trade and Industry, Mr. Carlos Ahenkorah, says Ghana a signatory to the WTO Trade Facilitation Agreement is too small a country to have two Single Window operators.

He challenged the pioneer and only single window operator, Ghana Community Network Services Limited (GCNet) to speedily re-double its efforts in actualising the full breadth of Single Window operations in the country.

He recalled GCNet’s drive to automate trade facilitation and port clearance processes in the country and the difference that brought to trade and port operators.

He praised the Ghana Integrated Cargo Clearance Systems (GICCS) deployed by GCNet as efficient and robust enough to deliver on any valuation needs and address any bottlenecks in the overall clearance systems at the ports to deepen trade facilitation and enhance revenue mobilisation.

He noted that GCNet had taken too long in securing the manifest, the seed document in clearance processes at the ports from source, a situation that may have encouraged other operators to exploit the loophole to try to secure that right from the International Air Transport Association.

The Deputy Trade Minister, however, noted that if GCNet had connected Maersk Lines to transmit its manifest into the Ghana Customs Management System (GCMS) over the past three years then there was no way that it could not oblige other carriers to emulate that example and ensure that both air and sea manifest are transmitted expeditiously.

He also urged GRA (Customs Division) as the statutory body to assist GCNet to get all other carriers to do so with dispatch going forward.

Mr. Ahenkorah also charged GCNet to remain committed to their tenets of innovation and service delivery and work harder to expand the scope of its TradeNet Single Window platforms in order to ward off any superfluous and duplicitous competition.

On his part, the Chief Executive Officer of the Ghana Shippers Authority, Dr. Kofi Mbiah, challenged Government to be bold to speedily resolve critical issues militating against the full actualisation of Single Window implementation in the country.

He said Ghana having been acknowledged as a pioneer in Single Window operations by international bodies like the World Bank and a number of countries having undertaking familiarization visits to Ghana to learn about the GCNet experience.

Dr. Mbiah noted that in as much as there was the need for collaboration between GCNet and other operators, it was also extremely important to define the parameters of engagement to create a level playing field for all players in the trade facilitation and revenue mobilisation eco-system.

Welcoming guests earlier to the event, the Executive Chairman of GCNet, Dr. Nortey Omaboe, noted that as a Public Private Partnership (PPP) conceived since its inception, the model over time had proved to be the most effective way of executing such a national mandate to support revenue mobilisation by Government, foster trade facilitation and enhance business competitiveness.

Dr. Omaboe observed that Government’s quest for increased revenue in an environment of reduced taxes to stimulate private sector growth meant greater focus on GCNet to come up with new initiatives to support revenue mobilisation efforts.

He, therefore, outlined a number of initiatives that GCNet had proposed to Government to enhance revenue mobilization.

These include the need to improve upon the valuation of consignments, the need to invoke bonds for transit goods that do not exit the country after 14 days and the review of the paltry charges currently imposed, ensuring that warehoused goods are ex-warehoused within the stipulated time periods.

Also, tighter control of free zone operations and the duty and tax exemptions granted thereon, the assignment of all newly registered taxpayers to relevant GRA Tax Offices and ensuring they file tax returns, etc.

Dr. Omaboe however expressed concerned about non-clarity in the role of some entrants in the trade facilitation and revenue mobilisation space following the cessation of the destination inspection companies and called for urgent steps to address the worrying development; and its inherent duplications and hence unnecessary cost to Government.

He was confident that what he termed ‘unnecessary complication’ would eventually be resolved mindful of the consideration that the interest of the country should remain paramount and be protected.

Dr. Omaboe assured guests that GCNet was poised for further growth and development in the years ahead as it leverages upon its continuous innovations in deploying systems that bring greater value to the Government and people of Ghana. Source: Ghana News Agency, Two Single Window Operators too much for Ghana, April 19, 2017

Customs_&_Central_Excise_DKBThe Indian Customs department (CBEC) has allowed self-sealing procedure as of 1 October for containers to be exported, as it aims to move towards a ‘trust based compliance environment’ and trade facilitation for exporters.

In a circular to all Principal Chief Commissioners, the Central Board of Excise and Customs (CBEC) said exporters who were availing facility of sealing at the factory premises under the supervision of customs authorities will be automatically entitled for self-sealing facility.

It said that permission once granted for self-sealing at an approved premise will remain valid unless withdrawn. However, in case of change in the premise, a fresh approval from Customs department will be required.

“The new self-sealing procedure shall come into effect from October 1, 2017. Till then the existing procedure shall continue,” the CBEC said.

It asked field officers to notify a Superintendent-rank officer to act as the nodal officer for the self-sealing procedure.

The officer will be responsible for coordination of the arrangements for installation of reader-scanners.

Earlier in July, the CBEC had said it will introduce the system of self-sealing by 1 September , as against the practise of sealing of containers under the supervision of revenue officials.

However, the CBEC now said that exporters can self-seal containers using the tamper proof electronic seals from 1 October 2017.

Under the new procedure, the exporter will have to declare the physical serial number of the e-seal at the time of filing the online integrated shipping bill or in the case of manual shipping bill before the container is dispatched for the port.

The exporters will directly procure RFID seals from vendors.

“In case, the RFID seals of the containers are found to be tampered with, then mandatory examination would be carried out by the Customs authorities,” the CBEC said.

From October 1, the exporters will need to furnish e-seal number, date of sealing, time of sealing, destination customs station for export, container number and trailer track number to the customs authorities.

In a circular in July, the CBEC had said it endeavours to create a trust based environment where compliance with laws is ensured by strengthening risk management system and Intelligence setup of the department.

Accordingly, CBEC has decided to lay down a simplified procedure for stuffing and sealing of export goods in containers. Source: The India Times > Economic Times, 5 September 2017.

Luc Castera founder of Octopi, a tech company in the logistics industry, has recommended a series books to broaden culture and learning about the shipping industry. Ninety percent of everything around you was carried over on a shipping container before it reached you. It’s the industry that puts food in your plate, clothes on your back and enables the success of e-commerce globally. Yet, very few companies are trying to solve the hard problems facing this industry, says Octopi co-founder Luc Castera. If you are new to this industry, or if you have been working it in for 20 years and believe that learning should be constant, Luc highly recommends the following books.

1. The Docks by Bill Sharpsteen

Focusing on the Port of Los Angeles, The Docks delves into the unseen world of this highly successful enterprise. Author Bill Sharpsteen paints a picture of the port’s origins, zeroing in on the people that helped contribute to its economic prosperity. While Sharpsteen emphasizes the Port’s success, he also talks about its vulnerability with security and labor, while including personal stories from industry insiders. One perspective he includes is that of one of the first women longshoremen. The Docks demonstrates the energy behind this incredible port through dramatic photographs and personal perspectives.

2. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson

The Box tells the story of the container and its beginnings. What started as a simple box, changed the future of the shipping and transportation industries collectively. The container idea was slow on the uptake and economist Mark Levinson tells the story of how, after a decade of struggle, it came to fruition and changed the transport industry for good. Levinson includes key notes about how the inclusion of the “box” brought some ports back to life, whereas others suffered with its implementation. Thanks to this extraordinary box, costs were cut in the transport sector and the global economy is able to thrive, today.

3. Port Management and Operations by Maria G. Burns

Port Management and Operations has created a manual filled with insights and strategies into the world of shipping. Through examination of port management practices on a global level and deconstructing them on commercial and technological levels, this manual provides readers with a new set of skills and perspective. Port Management and Operations touches on 4 themes: “Port Strategy and Structure, Legal and Regulatory Framework, Input: Factors of Production, and Output and Economic Framework.” This book also identifies strategies and provides insight into the future of shipping.

4. Port Business by Jurgen Sorgenfrei

For veterans or those just starting out in the shipping industry, this book breaks down the meaning of ports and explains the role they play in the global supply chain. With globalization, exporting has increased exponentially, and the shipping market is changing. Port Business breaks down and analyzes the struggles for small to mega-sized ports, providing insight into the industry’s future.

5. The Travels of a T-Shirt in the Global Economy by Pietra Rivoli

Through the perspective of a T-shirt, this narrative has a lot to say about globalization and international business. Following a T-shirt from Texas to Africa, author Pietra Rivoli reveals political, cultural, economic, and moral issues associated with international business. The reader is challenged to view trade through an unconventional perspective while evaluating the complex layers of business crossing borders.

6.The Shipping Man by Matthew McCleery

Matthew McCleery tells the story of a hedge fund manager turned shipping man. After deciding to buy a ship on a whim, Robert Fairchild enters the complex world of shipping. A stark contrast to his New York life, Fairchild embarks on a journey where he learns about everything from Somali pirates to the wealthy folk of Wall Street. Though he ends up losing his hedge fund, he gains the title of shipping man along with the knowledge associated with it.

7. Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate by Rose George

Ninety Percent of Everything unveils the invisible world of shipping to the commoner’s eye. Author Rose George divulges the secrets of the “invisible industry” through her incredible adventure sailing from southern England to Singapore. Five weeks aboard The Maersk Kendal and countless miles later, George lets readers into the shipping industry from the perspective of someone with little experience. Her objective in writing this tell-all piece is to shed light on the otherwise closed-door industry and to inform consumers about the shipping life and all that entails.

Published by Maritime Executive, Luc Castera, August 23, 2017

Irish flag

Following Britain’s recent utterances that it will not rule out the possibility that the EU may retain oversight of customs controls at UK borders after it leaves the bloc, the Irish government has warned UK authorities it will not be used as a “pawn” in Brexit negotiations, reports News Letter, UK.

Foreign Affairs Minister Simon Coveney said he does not want the issue of the Irish border to be used by the UK government as a tool to pressurise the EU for broader trade agreements.

Mr Coveney also said that sufficient progress on the future of the Irish border has not been made during Brexit talks.

Speaking ahead of a meeting with Northern Ireland Secretary of State James Brokenshire in Dublin on Tuesday Mr Coveney said: “We do not want the Irish issue, the border issue, to be used as a pawn to try to pressurise for broader trade agreements.”

He added: “Sufficient progress (on the issues facing the island of Ireland post-Brexit) hasn’t been made to date.”

He warned that in order for Brexit negotiations to move onto the next phase “measurable and real progress” is needed.

Before the meeting Mr Brokenshire insisted there was no possibility of the UK staying within a customs union post Brexit.

He said that to do so would prevent the UK from negotiating international trade deals.However, following a meeting with the Irish and British Chamber of Commerce he said there would be a period of implementation where the UK would adhere closely to the existing customs union.

“We think it is important there is an implementation period where the UK would adhere closely to the existing customs union,” said Mr Brokenshire. “But ultimately it is about the UK being able to negotiate international trade deals.

We want to harness those freedoms. If we were to remain in the customs union that would prevent us from doing so. “We are leaving EU, customs union and single market. We have set out options as to how we can achieve that frictionless trade,” he added.

However, Mr Coveney said the Irish Government believes the best way to progress “the complexity of Britain leaving the European Union is for Britain to remain very close to the single market and effectively to remain part of the customs union.”

He added: “That would certainly make the issues on the island of Ireland an awful lot easier to manage. “But of course the British Government’s stated position is not in agreement with that but that doesn’t mean we won’t continue to advocate for that.

“In the absence of that it is up to the British government to come up with flexible and imaginative solutions to actually try to deal with the specific island of Ireland issues.” Source: Newsletter.co.uk, author Mc Aleese. D, August 22, 2017.

Chamber of Mines

The report claimed there was widespread misinvoicing in primary commodities in developing countries, including South Africa.

The Chamber of Mines on Tuesday called on the United Nations Conference on Trade and Development (UNCTAD) to withdraw its report on trade misinvoicing and acknowledge its shortcomings, saying that the prestigious agency had failed to collect its data accurately.

This comes after the Chamber released the third and final report in a series commissioned to examine the July 2016 UNCTAD report that claimed there was widespread misinvoicing in primary commodities in developing countries, including South Africa.

Also read Maya Forestater’s blog post Misinvoicing or misunderstanding? for an incisive explanation regarding the UN’s claims in its recent report Trade Misinvoicing in Primary Commodities in Developing Countries.

The UNCTAD report titled “Trade Misinvoicing in Primary Commodities in Developing Countries: The cases of Chile, Cote d’Ivoire, Nigeria, South Africa and Zambia”, claimed to have found widespread under-invoicing which, it alleged, was designed by commodities producers to evade tax and other entitlements due to the fiscal authorities.

UNCTAD said some commodity dependent developing countries were losing as much as 67 percent of their exports worth billions of dollars to trade misinvoicing.

For South Africa, the report calculated cumulative under-invoicing over the period 2000-2014 to have amounted to U.S.$102.8 billion; which was U.S.$620 million for iron ore, U.S.$24 billion for silver and platinum, and U.S.$78.2 billion for gold.

UNCTAD revised the report in December, though its fundamentals remained unchanged.

The Chamber of Mines also commissioned Eunomix to compile its own reports which were published in December and February respectively, focusing on UNCTAD’s gold scenarios.

The third report, which was published on Tuesday, deals with the other commodities.

The Chamber said in terms of gold, the UNCTAD study methodology compared reported exports by product and country of destination with the reported imports of the products by those same countries, and did not use other widely available data, including that of Statistics SA and the Reserve Bank.

The Chamber also dismissed all other UNCTAD findings in terms of silver and platinum, and iron ore.

The Chamber said all the factors that UNCTAD did not consider reinforced the point made in the earlier Eunomix reports regarding the lack of rigour and unreliable methodologies used in UNCTAD’s report.

“This is extremely unfortunate given the levels of credence that tend to be given to reports of this UN agency. Accusations of extensive misinvoicing and other illicit financial flows are feeding a growing lack of trust between key stakeholders in the mining industry,” the Chamber said.

“The Chamber of Mines again calls on UNCTAD to withdraw this report and acknowledge its shortcomings.” Source: The Citizen, Business News, 22 Aug, 2017. [Picture: Chamber of Mines]

UK Brexit

Reuters reports that Britain will not rule out the possibility that the EU may retain oversight of customs controls at UK borders after it leaves the bloc, as the country seeks ways to keep unhindered access to EU markets following Brexit.

Last week, the UK published a policy document proposing two possible models for customs arrangements between Britain and the EU after withdrawal from the EU in 2019.

The first model was a “highly streamlined customs arrangement”, which involved the reintroduction of a customs border but which envisaged electronic tracking of shipments, rather than physical checks of goods and documents at the border.

An alternative proposal was the “new customs partnership”, which would remove the need for a customs border between the UK and EU altogether.

Under this model, the UK would operate as if it was still part of the bloc for customs purposes. British goods would be exported tariff-free and Britain would levy EU tariffs on goods coming into the UK for onward passage to the EU directly or as components in UK exports.

Lawyers said there would be a need for a mechanism to oversee the “new customs partnership” to ensure that the UK was correctly monitoring goods coming into the UK and destined for Europe.

The EU’s system of movement of goods across EU borders without checks works on the basis all members closely monitor shipments coming into the bloc from outside, to ensure the correct tariffs are paid and that goods meet EU standards.

The antifraud agency of the EU polices customs agencies across Europe to ensure that they are correctly monitoring imports. Source: Reuters, Bergin T, August 21, 2017

AEO group

The following article appeared on Maritime Executive’s webpage titled ‘Can C-TPAT be fixed?‘ authored by Stephen L. Caldwell (2017-07-18). The assessment reveals that Customs-Trade partnerships require continuous review and enhancement to retain their appeal and relevance – a significant challenge for customs and border authorities primarily focussed on compliance with the law. I have appended hyperlinks to the critic’s articles at the bottom of this post.

As the Customs-Trade Partnership Against Terrorism celebrates its fifteenth anniversary, it faces stagnant membership, software train wrecks, questionable assertions of benefits and a much- needed retooling to stay current.

The Customs-Trade Partnership Against Terrorism (C-TPAT) is a voluntary security program started in the aftermath of 9/11. Member companies sign up and agree to maintain strong supply chain security. U.S. Customs and Border Protection (CBP) staff then validate members’ security practices to ensure they meet minimum criteria. Members are then eligible for benefits such as reduced likelihood that CBP will examine their shipments.

C-TPAT currently has about 11,500 members including importers, consolidators, sea carriers, port terminals and foreign manufacturers. Membership is segregated into three “Tiers” with Tier I representing companies that sign up, Tier II representing validated members, and Tier III representing companies with the highest demonstrated level of security.

The program grew rapidly in the beginning, reaching 1,500 members by 2002, 3,000 by 2003, 7,000 by 2004 and 10,000 by 2012. Given this growth, Congress wanted to make sure it was more than just a “sign- up sheet” and asked its watchdog, the Government Accountability Office (GAO), to monitor the program.

GAO’s July 2003 report found that, after companies signed up but before any validation process was completed, CBP went ahead and provided benefits by reducing their scores in its risk algorithm. By May 2003, for example, there were 3,355 members receiving benefits but only 15 had been validated. It took a couple of years to work down the backlog.

Even then, GAO’s March 2005 report found the validation process was not rigorous enough to ensure that a company’s security practices were reliable, accurate and effective. Its 2008 report found that CBP still faced challenges in verifying that C-TPAT members met minimum security criteria. It also found that CPB’s records management system did not allow managers to determine whether C-TPAT members complied with program requirements.

Midlife Crisis

Michael Laden, head of customs compliance firm Trade Innovations in Eden Prairie, Minnesota, has been helping industry clients with C-TPAT since 2005. Laden has been a licensed customs broker since 1981 and served as Director of Global Trade Services at Target Corporation prior to founding his own firm. He believes that C-TPAT is having a midlife crisis: “The stagnation of membership levels in the 10,000-12,000 range is an indication that industry has lost its appetite for C-TPAT.” He cites a problematic history of revolving short-term leadership as part of the problem.

Laden says the program reached its nadir with the August 2015 release of the much-anticipated Portal 2.0 software, designed to further automate the validation process. “The release was rushed into service with limited capabilities and minimal pre-testing,” he explains. “It was a complete train wreck. The data from the previous version just disappeared. In some cases, not only did the data disappear but the company disappeared too.”

The problems with Portal 2.0 were documented in GAO’s most recent report of February 2017, which found that Portal 2.0 incorrectly altered C-TPAT members’ certifications or security profiles, impairing the ability of C-TPAT specialists to identify and complete required security validations. Portal 2.0 problems also prevented C-TPAT members from accessing their own data and responding to validation reports.

Since C-TPAT was presented as a partnership with CBP benefiting from its knowledge of member companies’ security practices and companies benefiting from reduced scrutiny of their shipments, CBP in 2012 developed a software “Dashboard” to track such benefits. It used the Dashboard in its Program Benefits Reference Guide to assert that entries filed by C-TPAT members were less likely to undergo a security examination than those filed by non-members. Tier III members, for example, were nine times less likely to be examined, and Tier II members 3.5 times less likely.

However, the February 2017 GAO analysis found that C-TPAT members’ shipments did not consistently experience lower examinations, hold rates or processing times compared to non-member shipments. When GAO shared its preliminary analysis with C-TPAT officials, they acknowledged that they had never completed system verification, acceptance-testing, or checks on the data in the Dashboard. GAO’s conclusion was that the data was unreliable going back to the Dashboard’s introduction in 2012, and CBP to this day remains unable to determine the benefits of C-TPAT membership.

Industry Finds Its Own Solutions  

While industry was anxious for definitive information on membership benefits, it decided to find its own solutions to some of the costs. One key cost involves security audits of the supply chain, particularly in foreign countries. Shippers and importers got together and created the Supplier Compliance Audit Network (SCAN) to address costs, “audit fatigue,” inconsistent reporting and varying compliance requirements.

Companies pay a sliding fee to become part of SCAN, where they can commission audits and get access to completed audits, which could obviate the need for a new audit of a particular supplier. In 2016, SCAN completed more than 3,379 audits in 51 countries. Its board of directors represents some of the largest importers in the U.S., and its audits are conducted by proven service providers such as Bureau Veritas and business standards company BSI.

Dan Purtell, Senior Vice President of 30 BSI’s Supply Chain Solutions Group, says, “SCAN members clearly see the benefit of the C-TPAT program. These companies are the ‘who’s who’ of the Tier III C-TPAT community and truly are the supply chain security thought-leaders within the private sector. Member companies compete on the shelf but unite to secure trade, mitigate supply chain risk, and identify and correct security deficiencies.”

Purtell notes that “More than 15,000 such deficiencies have been remedied by SCAN since its inception just two years ago. No other association has done more to address global supply chain exposures.”

Next Steps

Despite problems, there are signs of improvement according to Trade Innovations’ Laden, starting with the decision by the last CBP Commissioner to make the Director of C-TPAT a more permanent position. “This should add continuity to the leadership of the program,” he explains, “allowing it to reach its true potential.” Laden also praises the new Director, Elizabeth Schmelzinger, for her openness to listen to industry.

“We’re retooling the program so that it stays current,” says Schmelzinger. “There are a lot of factors that have changed over the years. We want to make sure the minimum standards are still relevant.” CBP had enlisted its industry-based Commercial Operations Advisory Committee (COAC) to help it validate those minimum standards and develop C-TPAT best practices with the results to be announced at COAC’s March 1 meeting in Washington, DC. However, it was announced at the meeting that the results had been delayed to “make sure they get it right.”

When asked whether the intent of revisiting the minimum standards was to increase membership, Schmelzinger responded: “C-TPAT’s standards remain high. It’s not all about joining the program. We also suspend companies and remove them from the program. So, there is a constant churn in membership.”

She also described the evolving roles of C-TPAT and CBP’s newer Trusted Trader program, noting that “C-TPAT was foundational to any Trusted Trader status.” In other words, the first element of a Trusted Trader program was to ensure security. Then the elements of compliance with rules and regulations would be taken into consideration.

Ultimately, C-TPAT and Trusted Trader would transition into a global safety net whereby low-risk importers and exporters would have their goods expedited through customs processes in both the U.S. and its trading partners.

AEOs and Mutual Recognition

In international parlance, security partnership arrangements like C-TPAT are called Authorized Economic Operator (AEO) programs. The U.N. reported that, as of 2016, some 79 countries had established AEO programs and an additional 16 planned to launch such programs in the near future. The E.U., consisting of 28 countries, has the largest program, and its Union Customs Code of 2013 aims to, among other things, reinforce swifter customs procedures for compliant AEOs.

Many countries with AEO programs, including the U.S. with its C-TPAT, have signed “mutual recognition agreements” whereby two countries’ customs administrations agree to recognize the AEO authorization issued under the other’s program and provide reciprocal benefits to companies. As of May 2016, some 40 bilateral agreements had been concluded with 30 more being negotiated. According to the U.N., these bilateral agreements will form the basis for multilateral agreements. To date, the U.S. has signed 11 agreements with, among others, the E.U., Canada, Mexico, Japan and Korea.

C-TPAT Director Schmelzinger adds that “We are also restructuring the program to include exports so that it is more in line with the structure of other countries’ AEO programs. As part of our agreements with countries that have AEO programs, those countries will honor a commitment to our exporters who are low- risk. This will help U.S. exporters establish a foothold in those markets.”

One Step at a Time

Michael Laden is more skeptical of mutual recognition, calling it a “noble gesture” but adding there will be little enthusiasm from industry. Most of his clients are importers and will not get any benefit from the new export component.

Regarding exporters, he says that “Since CBP so rarely examines exports, the usual benefit offered by C-TPAT membership does not exist for that part of industry.” In Laden’s view, “Let’s fix C-TPAT before we move on to harmonize customs security and compliance throughout the world.”    Source: Maritime-Executive

Recommended reading –

 

TEU Token

The creators of a new industry-specific digital currency that shippers can use to book ocean shipments say so-called “cryptocurrency” could help reduce carrier overbooking and shipper no-shows, which cost the industry some $23 billion annually.

The Hong Kong-based 300 Cubits recently introduced the TEU, not the container unit but rather a digital dollar that replaces traditional currencies as the deposit for shipment bookings, providing greater visibility to the booking process and allowing users to penalize bad behaviour. Whereas other tech startups have introduced digital management platforms to achieve the same goals, 300Cubits’ founders say they’re offering something different: not a place for transaction, but a means of transaction.

The company introduced the new TEU crypto currency to the market, putting some up for sale and giving others away to container lines and shippers “who actively promote the tokens for early adoption.” The TEU tokens are blockchain-based, which means they are tethered to a decentralized, distributed digital ledger used to record transactions across many computers so that the record cannot be altered retroactively.

Blockchain is a largely back-end technology, which means there’s very little change for the user, both shipper and carrier, according to Johnson Leung, a longtime shipping finance analyst formerly with Jefferies who founded 300Cubits with his partner Jonathan Lee.

“The biggest change is the acceptance of TEU tokens as a booking deposit, which is a more commercial decision than a technical call,” Leung told, “We do not plan on a substantial change in terms of user interface experience other than having one more option for the user to choose whether to use TEU tokens and the amount to put it before the shipper clicks on the book button.”

The tokens were named TEU to honor, in a way, the classical unit of measurement for container shipping, said Leung.

“TEU is a kind of a classical unit for container shipping that is getting less and less used,” Leung said. “We just think that the people in the industry would appreciate the name as TEU when naming something that could be the money for the industry.”

In an era marked by the buzzword “disruption,” Leung was clear that TEU tokens are not disrupting any existing system or process in the container shipping industry. TEU tokens are like an industry-specific bitcoin, another blockchain-based cryptocurrency. Put simply, Leung said, “We play part of what the dollar does today in container shipping.”

According to a white paper prepared by the company, once TEU tokens are used to book shipment their value could be lost if a customer does not turn up with cargo or a carrier does not load cargo according to a confirmed booking.

Trust, or lack thereof, is the biggest pain point in the container shipping industry, according to 300 Cubits.

“Unlike ticket booking in airlines, customers in container shipping do not bear any consequence for not showing up for bookings. Industry people complain the lack of trust between liners and customers,” the company said in a statement. The TEU token can change that.

While it is aimed at tackling overbookings and no-shows and providing greater visibility into the container shipping industry, 300Cubits should not be confused with other tech firms attempting to accomplish the same feat through different avenues. Leung’s company only provides the means of transaction. It does not provide the actual space for where carriers and shippers can transact, like the New York Shipping Exchange, an online portal through which carrier cargo space can be booked and which also monitors whether the booking is fulfilled by shipper and carrier.

According to Leung, the container shipping industry is a $150 billion industry that has been in “constant distress” since the economic crisis of 2008. Subtle technological innovations, like digital currencies and digital marketplaces to use them, are going to be the means to ease that volatility.

Frequently Asked Questions regarding TEU – 300cubits.tech

300Cubits White Paper – 300cubits.tech

Source: www.dailyshippingtimes.com, 3 August 2017.

Police are on high alert looking for a syndicate that uses donkeys to smuggle luxury cars across the Limpopo River into the Zimbabwe.

Thieves tied ropes to the cars which were hitched on to the donkeys to pull the cars across the river.

Some cars are driven through the drier parts of the river. On Tuesday, a Mercedes Benz C220 was intercepted before it disappeared into Zimbabwe.

“Our members were just in time to pounce on them after the donkeys were apparently no longer able to pull it through the sand,” Brigadier Motlafela Mojapelo  for the SA Police Service said.

The suspects fled into the bushes towards Zimbabwe side. Most of the cars are being smuggled across the river through the border between South Africa and Zimbabwe, south of Beitbridge border post.

In December, police recovered a Hilux bakkie when thieves attempted to smuggle it through the river. The bakkie was stolen in Durban.

It was semi-submerged in the water when Limpopo police commissioner Lieutenant-General Nneke Ledwaba spotted it from a helicopter while he was leading a high-density operation in Musina and Beitbridge.

The vehicle and donkeys were abandoned in the middle of the river and the suspect fled into Zimbabwe. It is not clear why the thieves do not simply driver the car into Zimbabwe – one reason might be that most modern cars are fitted with a tracking device which uses satellite tracking to locate a vehicle, if stolen. The tracker is only active when the car is running.

Mojapelo said 13 vehicles have been recovered since January this year. Thieves target luxury bakkies, SUV’s, specifically Toyota and Isuzu. Gauteng and KwaZulu-Natal are the two provinces that are mostly affected.

Last week, four vehicles were recovered. A Range Rover worth R900 000 was recovered after police intercepted it at the Beitbridge border post. The vehicle was en route to Malawi. The man was arrested and was found in possession of cash with an estimated amount of R30 000.

Mojapelo said the car had Limpopo registration numbers, but it was still unclear where it was stolen. Source: Pictures – SAPS and article – Iavan Pijoos, News24, 2 August 2017.

Kunio Mikuriya - Hindu Times

The Hindu Times reports that the World Customs Organization (WCO) will soon bring out guidelines on ‘cross-border e-commerce’, which will focus on preventing illegal trade as well as addressing the challenges stemming from the ‘digital divide’, according to the WCO Secretary General Kunio Mikuriya.

In an interview to The Hindu on his recent India trip, Mr. Mikuriya said, “We are developing guidelines on e-commerce to see how best Customs can facilitate legitimate trade through that route.” He added, “We [the WCO] will address issues related to digital divide by looking into what is blocking e-commerce trade, and what kind of enabling environment is needed to support developing countries so that they benefit more from e-commerce.”

Terming e-commerce as a “game changer” in global trade that is benefiting small firms and consumers, he said the new guidelines would, however, include provisions to prevent illegal trade and illicit financial flows. This would be ensured through measures that would help strengthen information exchange between Customs administrations of countries as well as collaboration with other government agencies.

The WCO has a Working Group on e-Commerce and four sub-groups. To develop guidelines on cross-border e-commerce, the work packages identified are: ‘trade facilitation and simplification of procedures’, ‘safety and security’, ‘revenue collection’, and ‘measurement and analysis’. According to the UN body ‘UNCTAD’, the value of online trade jumped from $16 trillion to $22 trillion between 2013 and 2015.

“The continuous increase in online trading has raised questions regarding regulation, consumer protection, revenue collection and national security,” according to the WCO’s ‘Study Report on Cross-Border E-Commerce’ (March 2017). “These questions cannot be dealt with individually, but require a common, broad approach by the international Customs community, together with all relevant stakeholders as a whole.”

The WCO said more sophisticated equipment was needed to combat illicit trading through low-value shipments in the postal, express and cargo streams.

“Pre-arrival information on the consignment and the consignee could be of great importance in detecting and intercepting illicit trade. In addition, the improvement of non-intrusive inspection equipment and an increase in the number of trained staff could help to enhance the detection rate of illicit goods,” it said.

In an article on e-commerce, the WCO’s Director of Compliance and Facilitation Ana Hinojosa pointed out that in many countries, there were de minimisthresholds that allow low-value packages to enter a country with little or no duties or taxes, and with much more simplified procedures.

“This has led to clever manipulations by either the shipper or the consumer to avoid the extra charges by splitting invoices, undervaluing the invoices or mis-declaring the items altogether,” wrote Ms. Hinojosa. Another type of manipulation used was to classify the item as something else or claiming a different country of origin for the product, to take advantage of better duty or tax rates, the WCO official said, adding that these distortions had had an impact on many countries’ revenue collection volumes. Therefore, “some countries… are re-evaluating their established thresholds due to the significant implications that the changes brought about by these growing volumes of low-value small packages are having on their fiscal revenues,” observed Ms. Hinojosa. Source: The Hindu, 2 August 2017.