Category / Manifests

by Mike Poverello

EAC authorities share cargo data online

East African tax authorities have launched an online system to share customs cargo information in the region. The system, RADDEx 2.0 (Revenue Authorities Digital Data Exchange), will enable the tax authorities to instantly know what is in transit in the region. Uganda Revenue Authority says RADDEx 2.0 is web-based, has more “functionality and better performance” and will be used by clearing agents. If cargo destined to Uganda poses any risk, notifications  will be sent via e-mail so that authorities can plan action prior to arrival of the cargo. All data on cargo will be sent to a central server at the East African Community headquarters in Arusha, Tanzania. Any East Africa partner state that needs data about expected cargo will interrogate the system, which will automatically provide feedback. The system was developed by IT and customs expert staff from Uganda, Kenya, Tanzania, Rwanda and Burundi and sponsored by USAID/COMPETE (Competitiveness and Trade Expansion Programme). Source: The New Vision, Uganda

by Mike Poverello

Revisiting the national transit procedure – Part 2

You will recall a recent challenge by trade to SARS’ proposed implementation of mandatory clearance of national transit goods inland from port of initial discharge – refer to Revisiting the national transit procedure – Part 1.

First, some background

Now lets take a step back to look at the situation since the inception of containerisation in South Africa – some 30 years ago. Customs stance has always been that containerised goods manifested for onward delivery to a designated inland container terminal by rail would not require clearance upon discharge at initial port of entry. Containers were allowed to move ‘against the manifest’ (a ‘Through Bill’) to its named place of destination. This arrangement was designed to expedite the movement of containers from the port of discharge onto block trains operated by Transnet Freight Rail, formerly the South African Railways and Harbours (SAR&H) to the inland container terminal at City Deep. Since SAR&H operated both the national railway and the coastal and inland ports, the possibility of diversion was considered of little import to warrant any form of security over the movement of containers by rail. Moreover, container terminals were designed to allow the staging of trains with custom gantry cranes to load inland manifested containers within a ‘secure’ port precinct.

Over the years, rail freight lost market share to the emergence of cross-country road hauliers due to inefficiencies. The opening up of more inland terminals and supporting container unpack facilities, required Customs to review the matter. It was decided that road-hauled containers moved ‘in bond’ by road would lodge a customs clearance (backed with suitable surety) for purposes of national transit. Upon arrival of the bonded freight at destination, a formal home use declaration would be lodged with Customs. Notwithstanding the surety lodged to safeguard revenue, this has the effect of deferring payment of duties and taxes.

Diversification of container brokering, stuffing and multi-modal transport added to the complexity, with many customs administrations failing to maintain both control and understanding of the changing business model. Equally mystifying was the emergence of a new breed of ‘players’ in the shipping game. Initially there were so-called ‘approved container operators’ these being ocean carriers who at the same time leased containers. Then there were so-called non-approved container operators who brokered containers on behalf of the ocean carrier. These are more commonly known as non-vessel operating common carriers or NVOCCs. In the early days of containerisation there were basically two types of container stuffing – full container load (FCL) and less container load (LCL). The NVOCCs began ‘chartering’ space of their containers to other NVOCCs and shippers – this also helped in knocking down freight costs. This practice became known as ‘groupage’ and because such containers were filled to capacity the term FCL Groupage became a phenomenon. It is not uncommon nowadays for a single FCL Groupage container to have multiple co-loaders.

All of the above radically maximised the efficiency and distribution of cost of the cellular container, but at the same time complicated Customs ‘control’ in that it was not able to readily assess the ‘content’ and ownership of the goods conveyed in a multi-level groupage box. It also became a phenomenon for ‘customs brokers/clearing agents’ to enter this niche of the market. Customs traditionally licensed brokers for the tendering of goods declarations only. Nowadays, most brokers are also NVOCCs.  The law on the other hand provided for the hand-off of liability for container movements between the ocean carrier, container terminal operator and container depot operator. Nowhere was an NVOCC/Freight Forwarder held liable in any of this. A further phenomenon known as ‘carrier’ or ‘merchant’ haulage likewise added to the complexity and cause for concern over the uncontrolled inland movements of bonded cargoes. No doubt a disconnect in terms of Customs’ liability and the terms and conditions of international conveyance for the goods also helped create much of the confusion. Lets not even go down the INCOTERM route.

Internationally, customs administrations – under the global voice of the WCO – have conceded that the worlds administrations need to keep pace and work ‘smarter’ to address new innovations and dynamics in the international supply chain. One would need to look no further than the text of the Revised Kyoto Convention (RKC) to observe the governing body’s view on harmonisation and simplification. However, lets now consider SARS’ response in this matter.

SARS response to the Chamber of Business

Right of reply was subsequently afforded by FTW Online to SARS.

Concerns over Customs’ determination to have all goods cleared at the coast – expressed by Pat Corbin, past president of the Johannesburg Chamber of Commerce and Industry in last week’s FTW – have been addressed by SA Revenue Service.  “One of the main objectives of the Control Bill is the control of the movement of goods across South Africa’s borders to protect our citizens against health and safety risks and to protect the fiscus. “In order to effectively determine risk, SARS has to know the tariff classification, the value and the origin of imported goods. This information is not reflected on a manifest, which is why there is a requirement that all goods must be cleared at the first port of entry into the Republic.“It appears that Mr Corbin is under the impression that the requirement of clearance at the first port of entry has the effect that all goods have to be consigned to that first port of entry or as he puts it “to terminate vessel manifests at the coastal ports in all cases”. This is incorrect. “The statutory requirement to clear goods at the first port of entry and the contract of carriage have nothing to do with one another. Goods may still be consigned to, for example, City Deep or Zambia (being a landlocked country), but they will not be released to move in transit to City Deep or Zambia unless a declaration to clear the goods, containing the relevant information, is submitted and release is granted by Customs for the goods to move. The release of the goods to move will be based on the risk the consignment poses to the country.“It is definitely not the intention to clog up the ports but rather to facilitate the seamless movement of legitimate trade. If the required information is provided and the goods do not pose any risk, they will be released.”

So, where to from here?

The issue at hand concerns the issue of the ‘means’ of customs treatment of goods under national transit. In Part 3 we’ll consider a rational outcome. Complex logistics have and always will challenge ‘customs control’ and procedures. Despite the best of intentions for law not to ‘clog up the port’, one needs to consider precisely what controls the movement of physical cargo – a goods declaration or a cargo report? How influential are the guidelines, standards and recommendations of the WCO, or are they mere studies in intellectual theories?

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by Mike Poverello

Revisiting the national transit procedure – Part 1

FTW Online last week ran an interesting article in response to a proposed change in Customs’ policy concerning the national transit movement of containers from coastal ports to inland container terminals and depots. In February 2011, I ran an article Customs Bill – Poser for Cargo Carriers, Handlers and Reporters alluding to some of the challenges posed by this approach. The following article goes a step further, providing a trade reaction which prompts a valid question concerning the practicality and viability of the proposed change given logistical concerns. I believe that there is sufficient merit in the issues being raised which must prompt closer collaboration between the South African Revenue Service and trade entities. For now it is sufficient to present the context of the argument – for which purpose the full text of the FTW article is presented below. In Part 2, I will follow-up with SARS’ response (published in this week’s edition of the FTW) and elaborate on both view points; as well as consider the matter  on ‘raw’ analysis of the ‘cargo’ and ‘goods declaration’ elements which influence this matter. Furthermore, one needs to consider in more detail what the Revised Kyoto Convention has to say on the matter, as well as how other global agencies are dealing and treating the matter of ‘security versus facilitation’.

Customs’ determination to have all goods cleared at the coast does not bode well for the South African trade environment, Pat Corbin, past president of the Johannesburg Chamber of Commerce and Industry (JCCI), said. Speaking at the Transport forum in Johannesburg Corbin said the Customs Bills have been on the cards for several years now and while consensus had been reached on most issues in the Nedlac process, the determination of Customs to not allow for any clearing to take place at inland ports will only add more pressure to the already overburdened ports in the country. “Customs maintains that despite the changes they propose it will be business as usual. We disagree. We have severe reservations about their intention to terminate vessel manifests at the coastal ports in all cases and have called for further research to be undertaken in this regard,” said Corbin. “By terminating the manifest at the coast it has severe ramifications for moving goods from road to rail. International experience has shown when you have an inland port and you have an adequate rail service where the vessel manifest only terminates at the inland port, up to 80% of the boxes for inland regions are put on rail while only 12% land on rail if the manifest terminates at the coastal port.” Corbin said the congestion at both the port and on the road would continue and have an adverse impact on quick trade flows. “It also raises issues around the levels of custom security and control at inland ports and then the general implications on the modernisation project.” According to Corbin, government’s continued response has been that no provision exists for inland ports and that goods must be cleared at the first port of entry. “They maintain that it is about controlling goods moving across our borders and thus the requirement that all goods must be cleared at the first port of entry. The security of the supply chain plays an important role to avoid diversion or smuggling of goods,” said Corbin. “Government says that the policy change will not clog up the ports or prohibit the seamless movement of trade. Labour organizations and unions seem to agree with them.” But, Corbin said, the Johannesburg Chamber of Commerce differs and is worried about the ramifications of this dramatic change to the 35-year-old option of clearing goods at an inland port or terminal. “With this policy change all containers will have to be reconsigned after not only Customs clearance on copy documents but also critically, completion of shipping lines’ requirements ie, payment of freight, original bill of lading presentation and receiving delivery instructions prior to their issuing a delivery order.” Corbin said the issue had been addressed directly with Transnet CEO Brian Molefe on two occasions, but that he had said he accepted Customs’ assurance that nothing would change and the boxes would still be able to move seamlessly once cleared. “It is not understood that the manifest will terminate at the coast where all boxes will dwell until they can be reconsigned,” said Corbin. Source: FTW Online – “New Customs Bill ruling will put pressure on port efficiency.”
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by Mike Poverello

Where Does the Chain of Custody Begin?

Here follows an article, published by Dr. James Giermanski, an internationally renowned expert in container and supply chain security, international transportation and trade issues. It deals with a crucial but mostly forgotten/unknown aspect of international supply chains – who packed the cargo?

Tracking, tracing, and custody are all generally accepted concepts involving the control of movement. All these concepts have in their fundamental cognitive structure the idea of path, corridor, multiple parts, flow, and coordination.

However, what is often omitted or overlooked is the fundamental sine qua non core principle of “beginning”. What is the beginning of a chain of custody? This article focuses on this core concept and the role it plays as the beginning of the connective custody and control process. Specifically, it addresses the significance of cargo stuffing, the concept of authorized or trusted agent, the means of connectivity, the legal role of the authorized agent, and the consequences of a connected and visible supply chain.

Cargo stuffing

Establishing and maintaining cargo integrity begins with stuffing the container at origin. A chain of custody – chronological documentation or paper trail – involves “the movement and location of physical evidence from the time it is obtained until the time it is presented in court.” As in a criminal case comparison, a supply chain “chain of custody” needs three types of essential assertions:

  1. That the cargo is what it purports to be and in the quantity stated;
  2. That the cargo was in the continuous possession or control by the carrier who took charge of the cargo from the time it was loaded in the container at origin until the time it is delivered at final destination; and
  3. That there is evidence of the identify of each person or entity who had access to it during its movement, and that the cargo remained in the same condition from the moment it was sealed in the container for transfer to the carrier that controlled possession until the moment it released the cargo into the receipted custody of another.
Trusted partner

It is imperative that the initial point of a connectivity process begins at the beginning! Loading cannot take place without a human agent. The agent could be the company’s forklift driver, the dispatcher, the loading dock supervisor, or even an authorizing manager who has a specific duty to verify the cargo and its quantity. It could even be a third party hired by the shipper, for instance, companies that currently provide inspection services around the world.

Various Customs programs discuss, in one way or the other, the concept that supply chain security begins at “stuffing”: the Secure Export Scheme Program (New Zealand); the Partners in Protection Program (Canada); the Golden List Program (Jordan); the Authorized Economic Operator Program (Japan); the Authorized Economic Operator Program (Korea); the Secure Trade Partnership Plus Program (Singapore); and the Authorized Economic Operator.

Establishing ‘connectivity’

Maintaining connectivity depends on the security program, software and hardware utilized. While no system is 100% effective, and one cannot depend on technology alone, there are ‘off-the-shelf’ container security devices (CSDs) that provide connectivity through a sophisticated, comprehensive chain of custody system that begins with loading the container at origin, monitoring it, and reporting on its integrity at the end of the global supply chain path, i.e. at final destination.

CSDs can include the identity of the trusted agent verifying the cargo at loading and the agent’s counterpart at destination. Both parties are electronically connected by a unique identifier to the smart container system along with bill of lading or booking information, or data needed by Customs authorities. Therefore, when the CSD is activated, the accountable party becomes the initiating element in the smart container security system.

Consequences of chain of custody – standards, laws and litigation

If a smart container is opened at destination by an equally accountable person and cargo is missing, and there were no breaches detected, recorded or reported, the accountable person at origin can face either disciplinary, or worse, criminal action by appropriate authorities.

This ESI becomes a source of evidence, should legal action follow. The concept of custody and control from origin to destination also supports Incoterms 2010, a publication of the International Chamber of Commerce (ICC) which provides the playbook of international rules involving international sales of goods. These new terms now contain security requirements for the shipper, making a chain of custody system essential for compliance. There are also changes coming for shippers, consignees, and vessel carriers with respect to carriage of goods by sea: the new Rotterdam Rules.

According to the UN General Assembly, the Rotterdam Rules are a “…uniform and modern global legal regime governing the rights and obligations of stakeholders in the maritime transport industry under a single contract for door-to-door carriage” (cf. American Shipper). The new door-to-door liability places the vessel carrier directly in a chain of custody. Instead of the vessel carrier filing what the shipper said is in the container, the vessel carrier will be automatically and really responsible for knowing what is in the container.

What are the benefits?

The shipper, the consignee, the carrier, and control and regulatory authorities all benefit from a chain of custody system that begins with the loading of the container at origin. CSDs incorporating the identity of the trusted agent at stuffing would assist law enforcement officials to comply with international security and trade standards, solve transhipment problems, impair illegal access to the cargo conveyance, improve supply chain efficiencies, aid in securing hazardous materials and other dangerous cargo movement, reduce counterfeiting, eliminate the in-bond problem of unauthorized container access, and improve bottom line revenue generation for the firms using them. Source: Supply Chain Digest.

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by Mike Poverello

Non-declaration of hazardous containers

MV Rena off New Zealand Coast of TaurangaIn this age of heightened security it remains remarkable how carriers still willfully take custody and/or load ‘goods’ for which the contents thereof are unclear. True, carriers and intermediaries (fowarders/brokers) will correctly point at the ‘shipper’ (exporter) for not disclosing the details correctly. It also needs be mentioned that the cargo handler (packer of the container) is really key in all of this. It is this entity who has knowledge of what is being stuffed into the container. There is much debate on this matter, and a whole lot more work to be done in ultimately pinning down the responsible party. Given this state of affairs, most Customs administrations are happy to lay the responsibility and liability for lawful clearance on the party responsible for cargo reporting, i.e. the entity which ‘cuts’ the manifest. I dare say that the terms of sale (incoterms) also have an influence in terms of risk and liability here which adds some complexity to decision-making in time of misfortune. Take for instance the recent grounding of the M/V Rena off New Zealand earlier this month, where it has recently come to light that the wreck contains at least 21 containers which were not properly recorded on the ship’s manifest. Read articles below.

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by Mike Poverello

Korea to implement Advance Manifest System

The Korea Customs Service (KCS) will introduce an Advance Manifest System in accordance with WCO standards as well as fulfill its own responsibilities as a governmental agency of duties for collection and border protection. This follows other major trading partners such as the U.S., Canada, EU and China who have already already adopted the Advance Manifest reporting. Known as KAMS, the new system will be implemented by KCS from 1st December, 2011. For more information click the hyperlink to download Korea Customs Advance Manifest System guideline.

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

The mystery of the identity of the carrier on an inland haulage leg

Herewith an interesting article on a topic which many of us in the customs and supply chain industry are not always fully aware of – authored by Tony Norton and Crispen Camp of Edward Nathan Sonnenbergs.

Over ninety percent of the world‟s commodities are transported by sea. Since the 1960‟s, containerised cargo has steadily grown to become the leading means by which goods are transported across the world‟s oceans.    

Importers of containerised cargo have to consider a number of factors when contemplating the most cost-effective means to bring about the importation of their goods. These factors include the financing of the transaction, insurance, customs duties as well as how the goods are to be conveyed. Importers that have their places of business located at an inland destination, such as Johannesburg, also have to consider who will undertake the onward carriage to Johannesburg from a discharge port such as Durban.

The contracts which govern the conveyance of the cargo are in most cases evidenced by the terms of documents known as „bills of lading‟. Bills of lading traditionally perform three functions, namely: they act as a receipt by the carrier of the cargo concerned; they evidence the terms of the contract of carriage, and they reflect the entitlement of the holder thereof to the goods.

The parties reflected on the Bill of lading are ordinarily the shipping line engaged to transport the goods which is reflected as the carrier, the shipper of cargo and the party to whom the cargo has been consigned.

The terms of the agreement of sale concluded between the exporter and importer of the cargo will impose the obligation on one of the two parties to arrange the transport of the cargo to either the discharge port, for example, Durban, or point of final destination, for example, Johannesburg. Where the agreement of sale does not impose a duty on the exporter to arrange the transport of the cargo to final destination, the importer will have to arrange to do so.

Where an importer has to arrange for the transport of cargo to an inland destination it can do so by a number of different methods.

Firstly, it can make its own arrangements to contract a local road or rail haulier to do so. This is generally known as “merchant haulage” in that it is the merchant or receiver that contracts for the haulage, which has nothing whatsoever to do with the ocean carrier. In those circumstances, if the cargo is lost or damaged en route on the land leg between, say, Durban and Johannesburg, the merchant looks directly to the local road or rail haulier and not to the ocean carrier for compensation. Of course the advantage for importer in choosing to arrange for the onward carriage of the cargo to Johannesburg is that it will be in a position to negotiate transport rates with its nominated road haulage company.

Secondly, the importer can arrange to ensure that the bill of lading contract for the carriage of the cargo extends to Johannesburg, in which event the land leg is generally known as being covered by “carrier haulage”, with the ocean carrier being directly responsible for any loss of, or damage to, the cargo during that leg subject to the terms of the bill of lading concerned.

Lastly, there is a third variation which is commonly and misleadingly known as “carrier assisted haulage” or “carrier haulage”. This is when the importer approaches the ships agent of the ocean carrier to arrange for the on carriage of the cargo from the discharge port, for example, Durban, to the point of final destination, for example, Johannesburg. However, the ships agent generally has no authority from the ocean carrier in these circumstances to agree to extend the ocean carriage to a point of final destination and any assistance rendered by the ships agent in this respect is generally intended by the ships agent to be rendered with the importer as principal so that the contract for the road or rail haulage is directly between the road or rail haulier and the importer, and not between the ocean carrier or the ships agent, on the one hand, and the importer, on the other.  

The problem here is that the correspondence between the parties in this respect does often not clearly reflect that intention, with the term “carrier haulage” or “carrier assisted haulage” leaving the importer with the impression that the ocean carrier or the ships agent is responsible for the road or rail haulage of the cargo and the actual agreement between the ships agent and the importer not clearly reflecting who is responsible one way or another.  

As a general rule of thumb importers should be aware of the fact that if the contract of carriage in the bill of lading does not extend to the inland point of final destination, it is unlikely that the ocean carrier will assume responsibility for the road or rail haulage concerned. In those circumstances, the agreement for the road or rail haulage with the ships agent concerned should be closely examined and clarified to ascertain who the responsible party is for the road or rail haulage leg. Generally it will be found that the intention is that it is the road or rail haulier contracted by the ships agent, on behalf of the importer, notwithstanding the term “carrier haulage” or “carrier assisted haulage” applied to that situation.  

In an ever increasing globalised world economy, the transportation of containerised goods will only continue to expand and, in this environment, importers of goods will have to consider numerous factors along the import chain, not least of which will be whether or not to conclude land leg merchant or carrier haulage contracts or variants thereof and to properly understand the significance of them.

Source: Lexology.com

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by Mike Poverello

Shipping lines get tough over new EU cargo information rules

Seems like ‘cargo reporting’ is becoming as infectious as a virus! The shipping industry has warned its customers that failure to comply with new EU regulations will mean fines and their cargo will not be loaded. Following similar measures introduced by the US in 2002, it seems that not only is there a possibility of “fines” and “no loading of cargo”, but that shipping lines even get to cash in on a revenue opportunity; some to the extent of US$25 per bill of lading. It absolutely amazes me that this is allowed to happen – talk about non-tariff barriers!  While SARS, for example, can give thousands of ZA Rands worth of intellectual property (for free) to the trading community – with the hope of making trading easier – why can the bastions of the sea not do likewise? Seems as though the “war on terror” has been interpreted by some as a ‘cash cow’!  Read the full article online: www.bdpinternational.com.

 

by Mike Poverello

Penalties for non-compliant Cargo Reporters

Recently SARS issued a communication signalling its intention to penalise non-conforming cargo reporters as of 1 July 2011, if they fail to report their cargo manifests electronically to SARS. Following international practice, all parties who engage in the contract of carriage of goods internationally are obliged to report the details of such cargoes. While customs has traditionally placed more emphasis on the correctness of the goods declaration alone – due to it being the sole means of duty and tax assessment and collection of revenue, the introduction of measures to safeguard the supply chain and combat other forms of nefarious activities, implies that all supply chain operators are ‘known’ and share in the responsibility for their actions and activities.

Perhaps seen in this guise, the whole matter of supply chain security encompassing the universal adoption of the Authorised Economic Operator (AEO) concept seems less appealing than it did a few years ago. Yes, Customs wants to know more and more about your business and who you do business with. Freight forwarders / Clearing Brokers have borne much of the brunt from customs over the years, it’s now time for parties involved in the conveyance of cargoes to come forward and be counted.

Because international shipping by its very nature transcends borders, it has always been difficult for national authorities to apply effective controls over information and parties who in all honesty are representatives/agents for those supplying the ‘original’ shipping documents. What the law now says is that those acting on behalf of foreign principles, liable for the import leg of imported goods are obligated to submit the ‘manifest information’ of those goods (electronically) to SARS.

For those customs brokers who operate as freight forwarders, this is in essence a further requirement which SARS places on your organisation. In essence a freight forwarder has a dual requirement with SARS – declaring the manifested contents of a consignment, as well as making due clearance for regulatory compliance and payment of duties. Another party with a similar dilemma are certain ‘ground handlers’, specifically those who are contractually responsible for the inbound operations of foreign air carriers, as well as the deconsolidation of aircargo upon arrival in their transit shed. They too must report the aircargo manifests electronically to SARS, and secondly to report the outturn of such goods, once unpacked for temporary storage and customs clearance and release.

The NVOCC or Vessel’s Agent must also report all cargo – for which they are contractually responsible – for the inbound leg into the Republic. These parties represent the foreign carrier and must consequentially report the carrier’s manifest (electronically) to SARS.

SARS is for now focussing principally on the reporting of master and house (sea and air)cargo manifests in this phase. Other reports are to follow.

Details for the registration for reporting electronically to SARS’ Automated Cargo Management (ACM) system have been widely distributed, and for sake of convenience are available for download here.

Consequences for non-compliance post 1 July 2011

SARS has put into place mechanisms to identify non-reporters. In such instances customs officers will call for administrative penalties to the extent of R1000,00 for each ‘manifest’ not reported. Moreover, should SARS take measures to ensure that these penalties are not ‘passed on’ to the importer – this would surely defeat the object of SARS’ intentions? Shortly, we’ll discuss the future matching of electronic cargo reports and goods declarations, but first lets endeavour to accomplish the first milestone.

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by Mike Poverello

Automated Cargo Management – Whipping up Industry Awareness

Following the recent posts on this subject, SARS took to ‘walking the talk’ this week. Over the last month a significant increase in registrations with Customs as well as vast improvements in successful electronic manifest data submission has occurred, mainly in the sea freight industry, however. This week’s initiative took the campaign to the hub of air cargo in southern africa – Oliver Tambo International Airport. Meetings were arranged with various stakeholders and industry bodies to reinforce customs cargo reporting requirements. The campaign was intended to offer an alternative approach to the usual formalities of the bi-monthly modernisation meetings. If necessary, further campaigns will be undertaken leading up to the mandatory enforcement of electronic manifest and cargo report submission for air and sea cargo operators in the very near future. SARS will soon be announcing a final cut-off date for voluntary registration for ACM and electronic submission, after which punitive measures will be introduced. Watch the Customs modernisation webpage for further details.

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

Addressing Apathetic Compliance Mentality – Part 1

In 1993, I recall certain members of the shipping community admonishing the Customs and Excise department for being backward, lacking the ability to meet the demands of the community – shipping lines in particular. At the time this criticism was valid, and would have still been relevant for another 10 years – the time it took SARS to eventually implement its first manifest acquittal system (MAS).  Since the inception of MAS (2003) the interest and energy to bring about trade compliance in the submission of manifest and conveyance information has been tardy and uncoordinated from a central viewpoint. In retrospect, several reasons exist for this – erratic and unpredictable systems architecture, as well as the lack of a customs champion to drive the operational compliance initiative from a national level.

Along the way there have been various milestones which have signalled a radical re-think in the philosophy of cargo reporting. Introduction of the ISPS code and the US 24-hour advance manifest rule set the tone for world-wide ‘re-engineering’ (I prefer the word ‘reform’) of processes, information exchange and legal basis. These have continued for supply chain operators through various iterations of ‘advance reporting’ – New Zealand, Canada, China and more recently the EU’s Import Security filing have required shippers and logistics operators to re-align their business models to meet new customs reporting requirements. True, all these initiatives may have their respective national or regional flavours, yet, the Customs data requirements are principally identical.

In 2008 SARS signalled its intent to mandate the electronic submission of cargo reports, supported by legislation to give this due effect. Why electronic? Because there’s a belief that any party involved in international cargo handling, forwarding, and shipping must be computer literate in order to operate (at all) in this highly competitive business. We are not talking about once-off casual importers here, but parties who have a greater or lesser degree of business acumen, knowledge of INCOTERMS and supply chain procedural requirements. Am I mistaken? Perhaps. Maybe the Customs perception of this industry tends to accord it too much credence?

Mid-2010, SARS addressed these issues and made a few fundamental decisions to improve this lot. It was time to build a new system from ground up, on a modern, stable technology platform. In order to ensure that the business principles and systems logic were kept intact, it was time to assign the best brains (internally) to accomplish this. In a very short period, a new system was developed and put into production, offering improved predictability in the data validation and processing. Over the last 2-3 months several manifest and cargo conveyance providers have been actively participating in a test initiative.

Automated Cargo Management (ACM) was launched ‘live’ on 6 May 2011. The reality is that the ratio of manifests to clearance declarations is a mere 17% for sea freight and 8% in the case of aircargo, respectively. The take-on in number of new air and sea cargo reporting registrants is equally abysmal. Let’s reserve any further ‘adjectives’ for now.

A recent poll hosted by a local industry web service revealed a predictable outcome (over a 5-day time period) where a vast majority of respondents indicated a negative experience with the introduction of the new system. The reality is that those who participated and the internal Customs’ experience suggest a more positive situation. Why then the poll result? Speculation suggests that the pre-implementation communication campaign was not adequate; that few operators in industry really understand what they are required to do. Is this really palusible when the outreach by SARS, service providers to their clients in trade, and the industry umbrella organisations have all been canvassing their respective members about the developments? How come only 10 new applications for registration were only received by SARS the week after implementation?

Clearly there is no urgency. Almost 10 years of advanced manifest reporting has transpired across various global supply chains, and yet some operators are still unsure of what their obligations are meant to be. So how are we going to fix this? In order to succesfully offer real AEO benefits and other advanced services within the context of Kyoto and the SAFE Framework of Standards, this needs to be rectified. In Part 2, I will sketch the options available to address if not rectify the current state of affairs. Bringing non-cooperating parties into a state of compliance is a SARS’ pastime. Talk to you soon.

by Mike Poverello

SARS to introduce Automated Cargo Management (ACM)

Cargo freighter

Cargo freighter

SARS has announced the decommissioning of its current manifest acquittal system (MAS). This is scheduled for 6 May 2011. The new automated cargo management system (ACM) will be launched simultaneously to allow cargo reporters in the air and sea cargo environments to report cargo bills, and other related cargo reports to SARS. In recent months SARS has worked closely with external stakeholders to impart its vision and intent regarding the launch of the new system. The first phase of the cargo initiative is to ensure that all parties involved in the contract of carriage of goods against a cargo bill (bill of lading or airwaybill) are registered with SARS.

An important facet of this phase is to ensure that not only principal carriers report their cargo manifest to SARS, but also freight forwarders and NVOCCs. Customs’ aim is to perform combined risk assessment and matching of manifests with the goods declaration to enable automatic acquittal. This can only be possible if so-called house manifests are submitted electronically to SARS.

For more information refer to the SARS Customs Modernisation webpage.