Category / Freight Forwarders

by Mike Poverello

Freight forwarders’ liability is being boosted by expanding supply chains

TT Club, the international transport liability insurer, is warning that freight forwarders and other transport intermediaries face increasingly significant liability risk, particularly in emerging markets, as they take on additional supply chain services for their customers. TT Club specialises in the insurance of liabilities and equipment for multi-modal operators.

Traditional freight forwarders, who have seen the opportunity to offer extended warehousing, packaging, delivery fulfilment and even purchasing functions for shippers are not always fully aware of the liabilities for cargo loss and third-party damages that these additional tasks are opening them up to, according to Andrew Kemp, European regional director of the TT Club.

He told the Cargo and Freight Insurance Annual Conference in Moscow that as supply chains continue to develop to supply emerging markets, where the cargo owners are not always willing to invest in distribution infrastructure, the out-sourcing of such tasks will proliferate.

This could bring significant new business opportunities to companies, which had previously limited their service offerings to freight forwarding and the organisation of international transport, but these additional procedures could be complex.

“A typical new type of activity would be the packaging, for the local retail market of an item with a sales promotion attached (price discount or two for one offer). This task is straightforward in itself but brings with it risks of errors and possible damage to the items. This would be something not experienced by transport operators in the past,” he said. Source: Logisticsmanager.com

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by Mike Poverello

Reminder: People Run the Supply Chain

doesn’t this just sound so familiar? What a fine article by Chris Kane, Chief Strategy Officer of a family owned third-party logistics provider (3PL).

As the U.S. economy continues to struggle and unemployment remains high, our industry has focused on cost cutting through automation. Technology has undoubtedly helped us move more products more quickly and less expensively than ever before, but have we focused so much on automation and technology that we’ve neglected to identify how they affect the people in our supply chain?

I’m a distribution guy, so I’m the first to admit that technology provides visibility into our operations that makes my life much easier. A single report can tell me exactly where a specific load for any one of our customers is located in real-time. What it doesn’t tell me is how our people in the distribution center hustled to get the trailer loaded, even after a forklift problem, so that the driver didn’t miss his delivery window. Or how the driver’s skills helped her avoid an accident that would have destroyed the customer’s product. If I just look at that report, I miss the most important aspect of our business: the dedication of our people. When things go wrong (as they inevitably do), technology will only get us so far.

Is our industry fast paced? Absolutely. Do we need to utilize the technology available to be more efficient, more cost-effective and more competitive? Of course. But if we pursue those options exclusively, with little regard for the people running our operations, we’ve failed. Because at the end of the day, it’s the efforts of the people in the supply chain that get the product to its destination.

by Mike Poverello

Shakeup!

Unpacking of the Customs draft Bills reveals more and more surprises – despite the fact that there is still no site of the subordinate rules. Without any shadow of doubt, the ‘clearing and forwarding industry’ will be hardest effected by the ‘change’.  Why is this? Well there are a number of factors.

Firstly, this industry has always faced the immediate brunt of the law. Customs historical focus on the goods declaration – to ensure optimum revenue collection – has always relied on a high degree of competence and compliance from this sector.  As mentioned before, ITC has made significant inroads in this industry to the extent that specialisation in qualified entry clerks (for instance) is no longer an attribute in this sector. Consequential developments, and in particular, the creation of an deferment scheme gave ‘clearing agents’ even more flexibility to manage cash flow and minimise administrative burden. Several clerks and runners either lost their jobs or were otherwise absorbed in the company.  The first round of accreditation also gave forwarding brokers some leverage to accrue their client base. This did however prove ineffective from a compliance point of view especially where shady shippers merely used brokers for their apparent accreditation. Many brokers did however institute due diligence mechanisms to vet existing and prospective clients to ensure their own credibility and compliance with SARS.

Secondly, the specialised skills in valuation, tariff and trade remedies became more difficult to hold onto. This expertise will be found now mostly in the big ‘audit firms’. Still, the larger forwarding houses have retained some of these skills as it is vital to their overall service offerings to local conglomerates and multi-national clients.

Thirdly, the emergence of ITC service providers has likewise created a niche industry that for all intents and purposes seeks increased business knowledge and understanding of the customs compliance regime. Growth in this sector can be attributed to an organic increase in the need to service a greater and more mechanised supply chain. This has been particularly beneficial to the Customs Modernisation Programme as these entities have been relied on to champion the ICT change externally for Customs.

Naturally, the ‘clearing and forwarding’ sector will bound to feel some pain, as there would appear to be no less emphasis of Customs’ pressure on them to maintain ‘seemingly impossible’ levels of compliance. Forwarders would also no doubt feel some level of grievance in that there is still no visibility of parity in the supply chain. By this I mean the allocation and expectation of binding agreements (legal obligations) by SARS on other supply chain operators – carriers, transit sheds, terminals, etc.  Truthfully, this is being done albeit slow and tedious.

Change, despite all the anxiety it creates, brings about opportunity. My wish is that all parties recognise this and make the best of the situation, irrespective of the challenges. In this latter regard challenges relate to the mercenary-like approach of some role-players versus, honesty and business acumen of others. In todays’ world, being scrupulous and morally right does not always translate into being successful or prosperous. Modernisation implies that everyone changes! Some casualties are inevitable.

Next up: We’ll discuss the attributes of the bills in terms of liability, compliance and punitive measures.

by Mike Poverello

Confidentiality of manifest information – tips for US importers and consignees

South African shippers take heart, this is a worldwide phenomenon. Check out the article below on how US shippers are addressing the issue.

Is there a foolproof method for importers or consignees to maintain confidentiality of identifying information listed on shipping manifests? Unfortunately, the short answer is “no.” While an importer or consignee may request that US Customs treat its identifying information as confidential, the infinite number of variations of this information (e.g., spelling of company name) precludes confidentiality for each possible variation.

There are, however, steps that importers and consignees can take to minimize risk in this area. Under federal law, the public may collect manifest data at every port of entry. Moreover, reporters may collect and publish names of importers from vessel manifest data unless an importer/shipper requests confidentiality. Specifically,

[a]n importer or consignee may request confidential treatment of its name and address contained in inward manifests, to include identifying marks and numbers. In addition, an importer or consignee may request confidential treatment of the name and address of the shipper or shippers to such importer or consignee. 19 CFR 103.31.

As many importers and consignees have learned, however, confidentiality is not assured even CBP grants such a request. A bill of lading may often contain a variant of a company name, and if that variant is not included on the confidentiality request, confidentiality will likely not apply to the information on that particular manifest. For example, if the John Smith Corporation requests confidentiality for its corporate name, and a manifest lists “J. Smith Corporation” or “John Smith Corp., Inc.”, confidentiality would not technically apply since these names were not within the scope of the confidentiality request. Nevertheless, the trade may take steps to mitigate this. To ensure the broadest confidentiality exemption, an importer or consignee may consider including in the confidentiality application:

  • Every variation of the names that has been used previous shipping documents
  • Likely variations of the name
  • Misspellings of the company name
  • Any D/B/A or A/K/A previously used
  • Names of sister companies, including those in other countries
  • All company addresses

Even if an importer or consignee diligently follows these suggestions, confidentiality is not 100% guaranteed. One incorrect keystroke by someone entering data in a document somewhere in the supply chain can result in a “new” variation of a company name that is not covered by a grant of confidentiality.

US Customs and the trade have had discussions about the shortcomings in this process. Perhaps that is why CBP has for the time being disabled an online form used to make confidentiality requests (NOTE: requests can still be mailed to CBP as specified in the regulations). To tighten up this process, one possible solution is to leverage IRS/EIN numbers instead of relying on guessing at spelling of names. Source: CustomsNow Blog

by Mike Poverello

Mandatory reporting of Cargo Carrier Code

On Sunday, 31 July 2011, SARS will implement a stepping stone towards full cargo/declaration matching and acquittal. All goods declarations must reflect a valid cargo carrier code as part of the house waybill number data field.  The requirement was implemented successfully in the sea cargo environment some years ago with the launch of the old Manifest Acquittal System; the challenge now lies largely within the air cargo community.

The ‘House Waybill” data field comprises two parts – The first part must reflect the Cargo Carrier Code (Eight-digit Alpha Numeric Code). This is the code assigned by the Automated Cargo Management (ACM) system to the entity who issued the House Bill of Lading e.g. the Groupage Operator or his appointed agent in the Republic. The second part must reflect the actual number of the transport document.

By way of faciliatory gesture to legitimate importers who may be blissfully unaware of the non-compliance of their forwarding agent / carrier, SARS will allow the insertion of a specific code “ZZZ99999” for non-compliant cargo reporters. This code must only be used in the event the cargo reporter is not registered with SARS for submission of cargo reports to ACM. The facility is a temporary measure which will be withdrawn after a short period.

In the event a declarant inserts the aforementioned code, the associated declaration will be selected by the customs system for scrutiny by a customs official. In order to remedy any delay to an otherwise legitimate import, the unregistered cargo reporter must immediately identify themselves to SARS by way of disclosing their company name and contact details to enable SARS to expedite registration of the entity for ACM compliance. The sooner this is accomplished the quicker the importer can obtain release if there is no further outstanding impediment.

Subsequent registration of the non-compliant carrier could also result in the imposition of a penalty against the entity concerned. Therefore as of 31 July 2011, declarants will need to be more vigilant concerning the status/standing of their local forwarding agent in regard to compliance with SARS reporting requirements. Once the temporary dispensation above is withdrawn, the effect of a customs intervention will directly impact on the release of an importer’s goods.

Freight forwarders, Customs Brokers and Service Providers are urged to make their clients and business partners aware of the new developments to mitigate disappointment.  For more information refer to the SARS Modernisation webpage.

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by Mike Poverello

Contrasting fortunes for Freight Forwarders

Freight forwarder associations were celebrating this week after helping force through changes to the International Air Transport Association’s (IATA) Cargo Accounts Settlement System (CASS) in Europe, which could save forwarders having to provide bank guarantees of up to £400,000 (US$655,440). On the other side of the globe, in the US, two US Congressmen have introduced a bill aimed at clamping down on fraudulent brokers and freight forwarders.

The British International Freight Association (BIFA) said that until the recent global financial crisis, the requirement for forwarders, when appropriate, to undergo a financial assessment by IATA had largely been dormant. However, the crisis had sparked a u-turn by IATA, with European forwarders having to undergo financial assessment, and as a consequence, provide CASS with a bank guarantee.

One member, it said, had been faced with having to provide a £400,000 guarantee. However, BIFA along with international freight forwarder association FIATA managed to get this requirement overturned after a small working group – of BIFA, FIATA and IATA – was established through a meeting of the European Air Cargo Programme (EACP) joint council.

In the US, Congressmen Russ Carnahan and Frank Guinta’s bill has won the backing of the US-based Owner-Operator Independent Drivers Association (OOIDA), the Transportation Intermediaries Association (TIA) and the powerful American Trucking Association (ATA). The Fighting Fraud in Transportation Act 2011 would put a stop to a system that allows ruthless brokers and scam artists to continue to operate unchecked. Moreover it would require brokers and freight forwarders to carry a US$100,000 bond rather than the current requirement of $10,000. It would also improve transparency of those seeking to become brokers and establish “significant” penalties, including unlimited liability for freight charges, for those operating without authority. The TIA believes brokers, forwarders, owner-operators and carriers need each other, and the speed of today’s logistics marketplace means that companies must be able to reasonably rely on representations made in the terms of their agreement.

Just goes to show the power of lobbying!

by Mike Poverello

Addressing Apathetic Compliance Mentality – Part 3

In conclusion of this topic, let’s consider the importance of both cargo and goods clearance. The goods declaration attests to the admissibility of goods according to the Customs tariff, valuation, origin, and all other government regulatory requirements. The cargo declaration and associated cargo reports allow Customs to confirm that what has been cleared has in fact been physically out-turned and accounted for. Moreover, in the case of transit movements, it allows Customs to track cargo movements.

It is therefore not difficult to understand that any non-participating party will undoubtedly impact on whether or not an importer receives his/her goods timeously. It is true to state that until now, the emphasis on valid clearance and release has been placed at the doorstep of the clearing and forwarding agent – the party that presents the goods declaration to Customs. In essence this is little more than a data validation exercise. It does not in any way prove the location of the goods, and the quantities received. Neither does it prove that the correct formalities have been applied as concerns the handling and temporary storage of the goods upon arrival.

What benefit is this to the country if Customs can only satisfactorily control the goods declaration? For exports this is even more nonsensical – after clearing goods for export, how often does it happen that no physical shipment leaves the country for one or other reason; and in such instances are these transactions cancelled with Customs? True, Customs should not be a barrier to trade, but it must still account to the fiscus and trade and industry with accurate trade statistics. Therefore, Customs information requirements are crucial to much more than just the clearance of goods. The SA Reserve Bank is likewise a recipient of Customs data whereupon it monitors foreign exchange and payments.

The difference now is that SARS requires this information in advance, and electronically. To re-iterate – the first phase of ACM is to ensure the registration of all sea and air cargo reporters and the consequential compliance of the cargo data which they submit. As alluded to in Part 2, SARS will continue its liaison with the business community and will mobilise campaigns shortly to get all remaining parties registered. Supply chain security is a myth if certain operators fly under the radar. The consequence of non-participation implies that importers (and exporters) will unwittingly find themselves at the wrong end the stick once SARS commences formal manifest/declaration matching.

Should SARS penalise the importer, exporter or clearance broker, where a cargo reporter fails to submit a manifest? Certainly not, the consequential delay of the latter’s action would have already damaged the his/her reputation, if not the viability of the consignment concerned. Therefore it is important for any ‘qualifying’ cargo reporter to come forward and register. As unsettling as this may sound, it is the best way to clean up the industry and bring it in line with requirements that are ‘standard’ practice in other parts of the world.

Interested parties can open the ACM Fact File, which provides the necessary details and information for registration.  Further details will also be available on the Customs Modernisation webpage, shortly.

by Mike Poverello

Addressing Apathetic Compliance Mentality – Part 2

Now that Africa has sufficiently patronized the demands of the west and the east, it’s time to focus on the realities in our own back yard – charity begins at home. At this juncture it is a good reminder that had the WCO not had a non Anglo-American chairperson post 9/11, the present climate in Customs could have been a whole lot different from what it is today….someone that had the mind and intent to ensure that ALL of the customs world should have a bite at the ‘modernization’ cherry, not just those paying the highest subs.

The tidal wave of US initiated security measures peeved many foreign governments and at one point even threatened a stand-off between the US and the European Commission over its unilateral approach to annex key European ports to its Container Security Initiative (CSI) programme. Needless to say most international carriers rallied their support for heightened security measures in exchange for ‘green lane’ treatment for their goods arriving in the US. Never before (in living memory) has Customs (in the US that is) been able to impose such influence on the international trading community – all for its own domestic policy.

Now, unless I’m seriously mistaken local freight forwarders, NVOCCs, consolidators and carriers must at some time or another be confronted with ‘advance security reporting requirements’ for China, EU and North American bound consignments. This being the case, the least your local authority is asking is that you extend the same courtesy here.

It is no understatement that SARS values the time, effort and goodwill of many locally based forwarders, transporters, and their service providers. The input and cooperation gained from fortnightly gatherings of the Cargo Reporting Technical Workgroup is a minor revelation to say the least. It is the dedication of these who stave off the mite which SARS may inflict on non-compliant and apathetic operators, for now.

The co-creation spirit of SARS/Trade interaction therefore implies that SARS considers the latter’s recommendations in pursuit of attaining the desired outcome – a fully automated cargo reporting system, involving known parties committed to the seamless processing of import and export cargoes, creating a real market opportunity for foreign investors and traders. At this point let’s consider a process going forward –

  • Participating cargo reporters (freight forwarders, NVOCCs, and carriers) will continue their efforts to ramp up their performance concerning the submission of manifests (master and house level). SARS will monitor all electronic exchanges and provide continued feedback to these parties on performance and progress.
  • Those (cargo reporters) concerned with cargo outturns, arrival schedules and reports, discharge and load listings, and gate control reports (container depots, transit shed operators, ground handlers, off airport degroupers, and terminal operators), will continue their efforts in testing such electronic exchanges with SARS until an appointed time for ‘live’ operation is determined. Live operation will include the coordination and sequencing of cargo manifests and most important – the issuance of ‘release’ based on manifest/declaration matching.
  • SARS will redress its approach in communication (direct and through the media) with industry stakeholders. This will follow a more focused outreach, in layman’s language, which will leave no doubt in any party’s mind as to what SARS’ cargo reporting requirements are.
  • It is acknowledged that the industry umbrella organisations SAAFF, SAASOA, and ACOC can only do as much according to the extent of their membership. SARS will therefore encourage increased urgency by these associations in bringing their respective constituencies in line with cargo reporting requirements. SARS is satisfied that these association’s membership comprise at least 80-90% of international cargo reporters in the country.
  • Simultaneously, SARS will –
    • Continue its discussion with stakeholders to bring finality relating to cargo outturn, manifest versus declaration matching, acquittal and exception reporting expectations.
    • Finalise and publish the required legislation for the new cargo reporting requirements. Upon publication SARS will have the necessary means to enforce such new provisions as well as the punitive measures associated with non-reporting of manifest and conveyance reports.
    • Broach 2nd phase requirements with stakeholders. This will include discussion and prioritization of remaining modes of transportation (rail and road).

None of the above is beyond the means of reality. To re-iterate, without the abovementioned building blocks in place, there is little chance of extending benefits on an AEO basis. A successful supply chain operation requires all members – be they traders, cargo reporters, third-party logistic providers, port, and airport operators – to act in concert with one another.  In Part 3 (the final part), I will discuss the consequences of any party’s non-compliance with cargo reporting requirements.

by Mike Poverello

Useful Incoterms Online Resource

Incoterms 2010A fundamental aspect of any sale of goods transaction is costing the product accurately. I found this website which I believe is useful for any would be importer/exporter or trade practitioner in the understanding of INCOTERMS. Who is responsible for those charges under the new Incoterms 2010?  See: Incoterms® 2010 Freight and Associated Charges—Part 1: Just who is Responsible?

I received another useful tool from Bill Paul of Freight Match Services, Inc., Roselle, Illinois 60172, USA, who has kindly allowed the publication of his Incoterms 2010 Quick Reference Chart for followers and visitors to this blog.

by Mike Poverello

Freight Forwarders and Brokers – a US perspective

Of all supply chain operators, the brokers and freight forwarders undoubtedly have the most challenging business – highly competitive and so dependant on the activities and integrity of all other logistics players. For an interesting analysis of the US environment you will find the following white paper both interesting and thought-provoking.

10 Best Practices and Recommendations for customs brokerage and freight forwarding