Archives For Containerization

Aerial view of Rotterdam Container Terminal

The Port of Rotterdam, Netherlands, is the largest port in Europe covering 105 square kilometers. (Picture: Benjamin Grant/Google Earth/Digital Globe)

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FTW - Gauteng Edition Sept 2013The latest Freight & Trade Weekly (FTW) [Gauteng special edition] publication reminds me of a very interesting article I read a few months back – refer to my post “What are surfaces?” of 23 June 2013. The article dealt with the question of surfaces (i.e. land and sea) in relation to the multimodal movement of containers and envisioned by the logistics and supply-chain management practices.

I bewailed the fact that the actual dissertation would set me back a US$1000 but remained intrigued by the content which such dissertation would contain given the very interesting abstract I had just read. Given the high cost of such, obviously acknowledging the expertise, knowledge and resourcefulness which often goes into the preparation such papers therefore puts them beyond the reach of most.

To my amazement, a few days later I received an email from a fellow blogger – an expert in supply chain logistics – who was happy to share with me his copy of the paper.  The paper is titled “Shipping container mobilities, seamless compatibility, and the global surface of logistical integration”, published by Environment and Planning (EPA) volume 45 (2013). The author, a Dr. Craig Martin has delivered a masterpiece (my view) which considers the subject matter way beyond what I, as a Customs and Trade specialist, would consider or envision. I thoroughly enjoyed his bringing together of historical and current concepts and principles (attributed to many experts and peers) in the matter of intermodal containerisation.

Understanding the supply chain is a critical pre-requisite in the international Customs and Trade arena, at least since 9/11. In addition to the various WCO guides and standards, one needs to locate and digest papers such as this – and here I refer also to the many other websites, reference portals and publications of international experts in the global logistics and supply chain field.

Some of the more salient statements contained in the  Dr. Martin’s paper confirms that the ‘ideology of containerisation emanates out of a wider body of reasoning based on the notion of integration.’

The Need and Logic of Integration

Integration focuses on interactions between various aspects of a supply chain and is defined as “a systems approach to viewing the supply chain as a whole, and to managing the total flow of goods inventory from the supplier to the ultimate customer”.

From the late 1950s, management theory began to emphasize the importance of “how industrial company success depends on the interaction between the flows of information, materials, money, manpower, and capital equipment”.

By the 1980s, the emphasis of the logistics sector’s control of company functions, including materials management, transport, storage, and information management, highlighted the importance and process of integration.

During the mid-1990s, the notion of integration extended even further with the move towards supply chain management (SCM), where aspects of supply, materials management, distribution, and retail functions were placed under the control of a single company. The overarching ideology of logistics and SCM are systemic completeness and the management of flow.

The movement of containerised cargo is a critical component of SCM, as it accentuates surface control through the integration of land and sea transport. As far back as the 1960’s, experts opined that “most types of liquids and solids may someday be moved in sealed containers interchangeable among road, rail, air, and marine transport. Advantages would include reduction in damage and loss in the time and cost of loading and unloading. Containers may prove to be the catalyst that integrates the various components of the transport sector which are now being independently planned, financed, and operated” – and this is exactly what is happening today.

Standardisation towards Intermodal Integration

In 1953 Malcolm McLean developed the idea of transporting truck trailers on ships rather than on the congested highways of the US East Coast. His rationale was to overcome congestion by consolidating the transport system: at this time the truck and ship industries were entirely separate. He is ultimately credited for the invention of the modern cellular container we have today.

Vital to structural integration was the standardized nature of infrastructure itself – enabling the coupling of a container with a variety of nodes. These include the design of container-cell vessels, the redesign of road haulage vehicles and railway rolling stock, the design of container handling vehicles in ports, the construction of large-scale dockside gantry cranes, the design of spreader bars, and not to forget the design of the container corner fittings – these are standardized across all of the equipment related above.

It can therefore correctly be asserted that “the container links land and sea transport in an almost seamless and profoundly international continuum” (Broeze 2002)

So I guess what I’m trying to emphasize is that close on 70 years of continuous harmonization and integration in the supply chain logistics industry, specifically in regard to multimodal (door-to-door) containerized transport, as well as the substantive facilitation support accorded thereto by both the WTO and WCO, the basis of containerisation must surely be a consideration when applying regulatory control measures whether it be in the export leg or import leg of an international supply chain movement.

The key enabler in a modern Customs environment is undoubtedly automated processing and no less automated risk assessment. Facilitation on the other hand is a tool whereby, in combination with risk assessment, Customs focuses on entities and patterns rather than transnational intervention. Unreasonable (and mandatory) termination of a multimodal movement destroys the benefits of containerization and will add costs and loss of competitiveness for traders. Our beautiful country can ill-afford this given burgeoning competition from our neighbours up north. Finally, The matter of regional integration is another aspect which needs in-depth consideration. As we enthuse and wallow in our new found technological state, physical borders remain the biggest inhibitors to trade. More on this another time.

Recommended Link

TT ClubThe TT Club, has called for higher levels of training to maintain and improve the expertise of those employed by shippers, consolidators, warehouses and depots to pack containers properly.

The insurance organisation said it is no surprise that the correct packing of containers is high on the agenda for industry bodies, regulators and insurers, as the consequences of unsafe and badly secured cargo are serious. According to freight transport insurer TT Club’s claims, some 65 per cent feature cargo loss or damage, of which over one-third result from poor packing.

It is timely that TT Club and Exis Technologies have come together to develop CTUpack e-learning, an online training tool for those involved in the loading and unloading of containers or Cargo Transport Units.

Designed and produced by Exis Technologies on the initiative of the TT Club, and with its financial investment, the CTUpack e-learning(tm) course is aligned with IMO/ILO/UN ECE guidelines for packing containers. Beginning with the foundation course, which will be launched later this year, it will comprise modules that include topics such as cargo or transport and elements equivalent to lessons, covering areas like forces and stresses.

In future the course will evolve to reflect developments and updates to the ILO guidelines and there is a capacity for additional modules to incorporate cargo specific and more advanced training elements. Source: Seanews.com

The Maher Terminal at Port Elizabeth has been cleared for danger after a radiation scare prompted a security response.

The Maher Terminal at Port Elizabeth has been cleared for danger after a radiation scare prompted a security response.

Misleading? No its Port Elizabeth – USA! Customs officials had suspicion about a shipping container that they were examining. An abnormally high radiation reading was detected, but CBP, FBI, the Port Authority of NY/NJ and other law enforcement officials initiated protocols to isolate and verify the source of the alarm.

According to New Jersey’s Star-Ledger, a Port Authority official said the container was filled with recycled paper, and a metal wire that bound the paper was the source of a positive reading for Caesium-137, a radioactive isotope formed during nuclear fission.

After review and confirmation from CBP’s Laboratories & Scientific Services, the container was deemed safe. The situation was resolved in less than two hours. Customs officials took control of the container and were moving it to a secure location.  Lengthy lines of trucks were at a standstill waiting to exit the port facility as the investigation was underway. At least 15 emergency response vehicles were on scene, along with various officers. Source: Maritime-Executive.com

Artistic impression of the Club K Missile System

Artistic impression of the Club K Missile System

Critical Logistics, an informative blog, reported an interesting if not disturbing article on the development of a new weapon’s system which uses the ubiquity of shipping containers as it is housed in a 40-footer. It is known as the Club-K Container Missile System.

An article by concerned commentator, Lajos F. Szaszdi, (The Heritage Network) raises several valid concerns in his article “The Club-K: A Deadly “Pandora’s Box” of Cruise Missiles”, which are summarised in the following paragraphs.

[…] Fittingly, the marketing name given to the system is “Pandora’s Box.” The container-looking weapon system can be fired from a container ship, a train cart, or a container truck. By appearing externally as a simple container, the Club-K can be positioned covertly, ready to unleash a surprise attack, probably firing simultaneously from more than one container.

[…] Container ships carrying the Club-K system could be used to attack commercial shipping, particularly in choke points like the Straits of Hormuz and Malacca. These container ships would be acting like Germany’s auxiliary cruisers of the First and Second World Wars, which were armed merchant ships used for commerce raiding. Cargo ships armed with the Club-K could be equipped with Unmanned Aerial Vehicles to provide airborne Intelligence, Surveillance, Target Acquisition and Reconnaissance (ISTAR).

Even though use by Hezbollah is a possibility, the greatest potential threat could come from China, which reportedly was already interested in acquiring Club missiles for its submarines of the Type 041 Yuan class, the nuclear-powered Type 093 Shang class, and Russian-made Kilo class subs. China could load container ships with land-attack missiles, with E-Bombs for a surprise attack against Taiwan, and armed with nuclear warheads and E-Bombs to strike the port facilities used by the U.S. Navy in Singapore, the U.S. West Coast, the Panama Canal, etc. Chinese missiles could be launched from container trucks sent secretly to Mexico mixed with legitimate containers. India, another customer of the SS-N-27, could use the Club-K system against Pakistan or China as a first or second strike weapon. Iran could be another customer for the Club-K, once U.N. sanctions are lifted.

The Club-K is a highly destabilizing weapon system. Due to the nature of international trade, with millions of containers being shipped worldwide, transported by train and particularly by trucks, it would be very hard to detect, and an attack could happen at any time on any day without warning. The military and intelligence services of the U.S. and its allies must keep a close watch on this Pandora’s Box, to make sure it will never be opened in anger against them.

A promotional video of the system by (oddly named) manufacturer Concern Agat appears below. http://

For more details on the system visit their website – http://www.concern-agat.com/products/defense-products/81-concern-agat/189-club-k

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?

Get ready for a crazy roller coaster ride…As is already well known, the current situation in the shipping world is that there is a large lack of demand against the current overall supply of container space. Today, the current fleet capacity is around 15.5 million TEUs. Since 2005, the total capacity has roughly doubled – literally.

Because of the imbalance of supply/demand, carriers are losing blood and even declaring a negative balance sheet for end of 2012. This situation pushes them to the dilemma of getting bigger or getting smaller. Getting bigger means buying new, larger ships. These ships allow carriers to improve their cost effectiveness, work with smaller crews and lower their capital costs. On the other hand, some carriers are getting smaller; serving more niche markets where larger vessels will not call since that will reduce the efficiency of the vessel. You can imagine that a 15,000 TEU ship will not make 3 ports in the same country – if that country is not China.

These are the things we see and hear everyday. However a more important game is being played behind the scenes which has a crucial effect on the whole industry. According to Bloomberg; DNB ASA, the world’s largest arranger of shipping loans, expects the shipping industry to have a funding gap of $100 billion by 2015, as European banks are reducing their support to maritime transport. Even if US and Asian banks have an increased interest on maritime loans; EU banks account for 90% of the global ship lending. Considering net shipping loan losses at Nordea Bank AB (NDA), the world’s No. 4 shipping lender, tripled to 135 million euros ($179 million) last year because of “weak market conditions” and “a general decline in vessel values”, everyone will be thinking twice before granting a loan. In addition to that, since there will be less vessel orders with reduced prices, it will be forcing some yards to close in the following 12 to 18 months.

How is this going to affect exporters/importers? That’s our major question of course. Considering several factors; the EU Crisis, US getting out of recession, Arab spring is over; it will take another couple of years to get on track for sure. According to HSBC Global Connections, despite the current climate, the overall trend for international trade is positive with growth acceleration sooner than expected from 2014, than 2015. Over the next 5 years an annualized growth rate of %3.78 is forecasted for international trade. The main countries that will be carrying the growth are China and India, and China is expected to have an annualized growth of 6.60% in imports and 6.61% on exports; while India is expected to have 6.81% growth in imports and 7.60% in their exports from 2012 to 2016.

Now, according to 2010 stats, worldwide container traffic reached 560 million TEUs – an all-time high. China & Hong Kong Ports handle close to 169 milllion TEUs, 18% of this traffic. We need to keep in mind though, this is not only China exports/imports but also transshipped cargo that goes via those ports to other Asian nations.

With that in mind, if we take the growth rate with an average 6% for that region and multiply this with 169 million, we come up with a possible increase of 30 million TEUs annually and 500,000 TEUs weekly basis increase only in the region that handles %18 of global trade.Now, lets go back to the supply side. The major banks will be reducing loans, there will be less ship orders and there will be less ship yards to build new ships. How is this going to affect the years 2014-15 and later?

Can Fidan believes very tough years will come for exporters/importers in the sense of shipping costs and finding available space. Prepare to see more of the complaints from exporters not being able to find space and getting asked to pay very high freight charges like we were seeing in 2010. However, this time the difference will be, there won’t be any idle vessels sitting in Singapore or any new ordered vessels to come in and let everyone breath. Considering today, this sounds improbable… Well? the facts are out there and they show that the roller coaster ride we are on will just get crazier. Source: Can Fidan, MTS Logistics

According to a new research report from Berg Insight, the number of active remote container tracking units deployed on inter-modal shipping containers was 77,000 in Q4-2011. Growing at a compound annual growth rate (CAGR) of 66.9 percent, this number is expected to reach 1.0 million by 2016. The penetration rate of remote tracking systems in the total population of containers is estimated to increase from 0.4 percent in 2011 to 3.6 percent in 2016. Berg Insight’s definition of a real-time container tracking solution is a system that incorporates data logging, satellite positioning and data communication to a back-office application.

The market for container tracking solutions is still in its early stage. Aftermarket solutions mounted on high value cargo and refrigerated containers will be the first use cases to adopt container tracking. Orbcomm has after recent acquisitions of Startrak and PAR LMS emerged as the largest vendor of wireless container tracking devices with solutions targeting refrigerated containers. Qualcomm, ID Systems and Telular are prominent vendors focusing on inland transportation in North America, which is so far the most mature market for container tracking solutions. PearTrack Systems, Honeywell Global Tracking, EPSa and Kirsen Global Security are examples of companies offering dedicated solutions targeting the global end-to-end container transport chain.

Ever since the events of 9/11, there have been a lot of activities to bring container tracking solutions to the market according to the report. Only now technology advancement, declining hardware prices and market awareness are starting to come together to make remote container tracking solutions attractive. Container telematics can help supply chain operators to comply with regulations and meet the high demands on security, information visibility and transportation efficiency that comes with global supply chains. Source: Berg Insight

Out of respect for copyright, I would encourage all logistics followers to visit this link to learn more about a significant shift occurring in the distribution of containerized goods. Some food for thought considering local conditions in South Africa which currently appear to marginalize (if not discourage) inland localisation and multi-modal distribution of goods between the hinterland and major air and sea ports in Southern Africa. Source: FT.com

Related Article

The following piece suggests that the realisation of AEO obligations on shippers is real and will be augmented by support systems that may marginalise the highly competitive freight forwarding industry.  While there is a suggestion of cost savings due to non-reliance of shippers on traditional forwarding agents, I believe this is a short-sited view as the ‘real challenge’ lies in whether or not shippers are up to the task in meeting these obligations given their unfamiliarity with customs and transport requirements. I see many shippers having to recruit experienced customs and forwarding experts to maximise their compliance given the burgeoning obligations materializing in international shipping!

In October 2011, Aircargoshop an online booking portal provided shippers the possibility to book their own airfreight without involvement of the traditional shipping agent via the online portal Aircargoshop. This is a development that might have important consequences for the closed airfreight industry. As a consequence the online booking portal offers a lower-priced, more efficient and more transparent process for aircargo booking.

Founder Paul Parramore of Rhenus Logistics suggests that this system will bring down the cost of airfreight by as much as 50%. The Dutch Shipping Council EVO, gave the system the thumbs up and said that it will revolutionise the manner in which the freight business is currently being conducted.

Joost van Doesburg, a consultant with EVO said that in the long run restructuring of the industry is necessary in order to meet the challenges of the 21st century. Many of the forwarders will lose out, but the system is geared towards cost effectiveness and being competitive. He also added that if the forwarder is to add value to the supply chain, then he has to comply to adapting to the system rather than working against it.

On the home front, a recent article featured on the website Freight into Africa reports that the South African Cross Border Transporters Association (SACBTA) will be introducing a similar system which is currently under development for the cross border road freight industry. It will be called “ROAFEonline” or shortened form of Road Freight online which will allow the customer to book directly his freight with accredited SACBTA members hence cutting out the middleman and brokers.

All payments can and will be done online and this system will integrate with SARS EDI (Would like to hear more on this!). The consignor will only have to ensure that his goods are loaded onto the truck, the rest will be done by the system. The cost per transaction to the customer will be a paltry R100.00 in relation to a few thousand Rands normally swallowed up by the middlemen.

Based on our estimations a regular consignor can save up to R3-5 million Rands per annum which hopefully will be passed onto the consumer. With the looming integration of the SADC countries towards one stop clearing, it makes sense to further integrate the system. So whether you are in Dar es Salaam or Lubumbashi, you can now book your freight from Cape Town without having to go through a string of brokers. You also have the assurance that your cargo will be loaded by an accredited SACBTA transporter who complies to the standards set out by SACBTA. It will facilitate consolidations as any accredited transporter will at any given time be able to see what cargo is available. If Transporter A has only 20 tons, he can check which other transporter on the system has another 8 tons to Dar es Salaam for example. The transporters can then consolidate a load on the system which will happen in a shorter period of time than say for instance waiting a month to fill a tri axle.

This system will have many other functionalities that have been incorporated like online tracking, bar coding, which will give the consignor and consignee piece of mind knowing at any given time where their cargo is. It will also be accessible to border agents and customs officials who will be in a position to extract vital information on any consignment long before it actually gets to a border.

The system will go into testing around March of this year and if all goes well should be ready for implementation by the latter part of 2012 or early 2013. We hope that this will go a long way towards restructuring the industry for the better. It has long been the desire of SACBTA to allow industry players to come on board to create a better industry. However, there has been very little interest shown in transforming the industry and we feel this system will by virtue of its nature, transform the industry whether industry players are willing participants or not. Source: Freight into Africa and various own sources.

The International Association of Ports and Harbours (IAPH) has joined the World Shipping Council (WSC) and International Chamber of Shipping (ICS) in urging the International Maritime Organization (IMO) to establish an international legal requirement that all loaded containers be weighed at the marine port facility before they are stowed aboard a vessel for export. In what has been a much publicized issue since 2008 in the maritime industry, much the same view is taken by customs administrations. Like many other changes in the supply chain, it is a lot easier said than done. Modern ports are designed and developed taking into account requirements for weight bridges, radiation portal monitors, networks to monitor vehicle and container movements in and around port precincts, and inland transportation routes. While the expense and budget for these are usually borne by the relevant port authority, would it not indeed be good if those responsible for the packing/stuffing of containers took it upon themselves to ensure the correct weight, quantity and content are properly declared?

Refer to the joint WSC/ICS paper on “Solving the Problem of Overweight Containers” as well as the ICS’s “Safe Transport of Containers by Sea”. Both are self explanatory and short enough so as not to be considered laborious. In the South African context the question of who packed the box is often unanswered given that a variety of entities could be involved in this activity. In some instances it could be a container depot operator or a freight forwarding and consolidation agent; depending on how ‘safety and compliant conscious’ the shipper wants to be. While it will still take some time before the entire supply chain becomes properly regulated and monitored, now’s the time for ‘operators’ to take stock of what might in future be a new standard. New standards mean more capital outlay with pass-on costs for which the shipper ultimately carries the can.

Mystery BoxThe November 2011 edition of Wired.com (magazine) features an interesting read on the question of ‘suspect containers’. Perhaps this sheds some credible light on the dangers of unregulated handling of radioactive materials; and no less the potential hazards faced by cargo handlers and port authorities in the course of their duties. The billions of dollars spent by governments every year  in maintaining national security across multimodal transport modalities and ports of entry are often questioned; nonetheless, it is stories such as this case in the Port of Genoa, Italy, that lend credence to the need for non-intrusive inspection and detection equipment. Source: Wired.com

Following my previous post on ’empty container depots’, its time to dispel a long time myth basically perpetuated to safeguard the cargo handler’s imagined responsibility that goods delivered to be packed for export must be first cleared through Customs. There is no current law, rule or policy which supports this notion, and neither is there any liability on stuffers, consolidators, container depot, transit shed operators, empty container depot operators to ensure that goods they receive under instruction to pack for export have been pre-cleared with Customs.

Let’s first consider what a Customs export declaration implies. Generally, a declaration for export is lodged with Customs subsequent to the conclusion of a sales agreement between a local supplier and a foreign buyer via the commercial bank. The forwarding agent will arrange foreign shipment with a carrier, obtain commercial documents (pro forma invoice, required regulatory permits/certificates, etc.) and prepare a declaration for submission to Customs on behalf of the exporter.

The acceptance, by Customs, of an export declaration is no more than a formal notification of an exporter’s intention to exportnothing more. It is therefore untrue that an ‘approval to export’ or ‘release for export’ notification is the last word from Customs. Moreover, it is also incorrect to reason that Customs has no right to intervene in a ‘transaction’ subsequent to clearance. In essence the notion of an export ‘consignment’ only materialises once the goods are packed, sealed and ready for delivery to the point of international cartage ; or, more accurately, when the ‘secured goods’ are reported for delivery to the place/port of export. Only at this point can risk be evaluated in all its dimensions and a final decision by Customs (load/no-load) be pronounced.

The advent of advance information, post 9/11 and subsequent proliferation of ‘secure export’ initiatives means that ‘risk’ in relation to international cargo movements encompasses three key areas – information, conveyance and cargo. To merely accept whats declared on the export is insufficient for Customs. Other potential risks involving a multitude of people with a lesser liability, little appreciation for accuracy, and little or no sensitivity towards the safety and security of goods in their custody may compromise the ‘compliant’ intent of the exporter and clearance broker at time of initial customs clearance.

It is therefore plain to see why SARS Customs is modernising not only its procedures and systems, but also its enabling legislation.  A new export clearance and cargo reporting dispensation is envisaged, to be accompanied by the licensing of cargo handlers and their premises and the implementation of a seal integrity programme.

FTW published an article recently in regard to ‘empty container depots’ and their apparent negative impact on cost and response to industry needs. It was duly noted that while so much focus was accorded to Port delays, little is said about the additional costs caused by empty container depots. Many of these in fact hold, clean and distribute empty containers on behalf of shipping lines some of whom are not equipped to service the industry due to ill-equipped facilities.

Shipping lines complain about the turnaround of their vessels at the port, but take little interest in ensuring a quick turnaround of vehicles at their appointed container depots. The report continues: “Transporters are delayed for hours at major depots while waiting for containers to be turned in, cleaned and then released for export cargo. Most of these depots do not work 24 hours in line with the port and transporters, which further limits the ability of transporters and industry to perform”. I think this deserves some further thought and consideration, and for this I’ll provide a customs-slanted view.

Firstly, in other parts of the world, the same mentality prevails whenever a port or customs system is replaced or upgraded – an avalanche of vitriolic sentiment, followed by line operators threatening to institute port delay surcharges and the like. To place matters into true perspective – yes, the port and customs services are there for the benefit and support of the supply chain, and should run and be maintained to offer efficient operation even in the event of catastrophe or a burgeoning logistics market demanding increased capacity and responsiveness. 9/11 provided a catalyst for Customs Inc. to initiate an unheard of demand on trade to increase its internal security mechanisms and even provide information in advance of the lading of a vessel at a foreign port. The US lines were the first to climb on the band wagon in support of heightened security and quickly acted to ensure that their regional offices were able to assist foreign shippers in supplying the required ‘advanced information’ at a nominal charge – varying between $25 and $60 per bill of lading. Sure, this was the cost necessary to ensure lines met their new stringent reporting requirements to the US Homeland Security to obviate possible penalties of $5,000 and up. Nonetheless, the same lines, when asked to provide the local authorities the same courtesy, recoil and look for all sorts of excuses to avoid the subject. Sure, it is understood that only the US has the right to make such demands, not any anyone else. I have followed most other advance cargo reporting requirements with similar amusement.

You see, lines were prepared to make suitable arrangements for US-bound containers such as pre-booking empty containers. Now when the requirement is extended to other parts of the world there is an immediate issue. Simply, and as the article correctly deduces, supply chain security implies that everyone changes – even the empty container depots.

As the local port authorities and your customs service are spending millions in upgrades to meet the demands of the future, so too is the same required of trade. Unlike commercial entities, your customs service remains one of the few who in the world that has not instituted a customs service fee. Certain traders and intermediaries in the industry might complain that recent developments at SARS have seen their costs increase due to new transactional requirements, for example the electronic supporting document issue. This I will discuss on its own in a separate post. The bottom line is that the FTW article is an important cue for those container depots concerned to get their act together. The heat will undoubtedly be turned up on them once SARS introduces its new export clearance and cargo reporting requirements. South Africa needs smaller to medium enterprises offering dedicated services. Perhaps it’s time for the lines (those who operate such facilities) to consider outsourcing these activities to more dedicated enterprises. Read the FTW article here!