Tag / Customs broking

by Mike Poverello

New Ressano Garcia Cargo Terminal Operational By December

Mozambique flagA new cargo terminal will be opened at the Ressano Garcia – Lebombo border crossing before the end of the year to speed up the processing of customs clearance for goods moving between Mozambique and South Africa.

To further the project an agreement has been reached between the Mozambique Tax Authority (ATM) and a consortium composed of the Matola Cargo Terminal (Frigo), Matrix and the “Zambian Border Crossing Company”.

The 15 year concession contract was signed on 14 June in Ressano Garcia by the chairperson of ATM, Rosario Fernandes, and by the managing director of Frigo, Filipe Franco.

Filipe Franco told AIM that a new truck terminal is being built where facilities will be available for all the necessary services including customs, migration, and officials dealing with health and agriculture.

He pointed out that “our objective is to ensure that the terminal will be completed and operational by December”, adding that the consortium is composed of companies with a great deal of experience in managing cargo terminals.

Rosario Fernandes said that the cargo terminal project will facilitate trade by speeding up customs clearance at the border post through a one stop system and the single electronic window system which is being implemented throughout Mozambique. Source: AIM (Mozambique News Agency)

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by Mike Poverello

Customs Modernisation – some benefits in the offing

 

Its been a while since I penned some comment on the customs modernisation programme in South Africa. Amongst the anxiety and confusion there are a few genuine ‘nuggets’ which I would hope will not go unnoticed by the business community. With stakes high in the area of business opportunity and competitiveness, such ‘nuggets’ must be adopted and utilised to their fullest extent. Lets consider two such facilities.

The widespread implementation and adoption of electronic customs clearance has allowed brokers to file declarations for any customs port from the comfort of their desks. Brokers can now consider centralised operations especially for customs clearance purposes. Likewise the withdrawal of the annoying goodwill bond should also come as a welcome decision. Hopefully this may translate into cost-savings over time.

As of 11 August 2012, the business community will also be glad to learn that imported goods which do not fully meet all national regulatory requirements can be entered into bond on a warehouse for export (WE) basis. While this may not sound like anything new, the provisions which come into effect, will accord the identical treatment of such goods as if they were being entered for warehousing. In short the new provisions will allow more flexibility with the ability to re-warehouse WE goods; the ability to change ownership on WE goods; and the ability to declare WE goods for another customs procedure.These provisions can be considered a relaxing of the original approach which mandated compulsory exportation. All government regulatory requirements (i.e. permits, certificates, etc.) will however be strictly enforced upon clearance of WE goods for home use or another customs procedure. The apparent relaxation forms part of ongoing alignment of customs procedures with the Customs Control Bills, which are in the process of finalisation.

For those who have enquired about the followup to the national transit procedure, I have not forgotten about it. The ‘touchy’ nature of the subject requires a mature and fair response. Please bear with me.

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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

The meaning of a Customs Broker

The following article comes from the 22 June 2011 issue of the American Shipper. It was written by the president of The National Customs Brokers & Forwarders Association of America (NCBFAA). I do believe that it is poignant for African’s to better understand what makes trade tick. It is particularly relevant in the South African context where certain service providers and consultants believe it is they that ‘turn the wheels of trade’ and that the ‘real’ end users are merely a consequence to push the ‘enter button’. While the ‘brokering industry’ has been tainted by criminal activities (in many cases ex-customs officials) there is a legitimacy to the continued existence for the trusted customs broker. The importance is even more pronounced today  where South African importers and exporters will soon face the brunt of the new Customs’ law – the need for skilled and experienced brokers should be an imperative within our local industry. So lets put ignorance aside and consider the article, below.

As a third generation customs broker, I know what it takes to enter goods into the commerce of the United States. As president of the National Customs Brokers and Forwarders Association of America, I know that the customs brokerage industry consists of thousands of individuals who work for small and large, old and new, struggling and successful companies for fees that do not reflect the true value of the service they provide.

It is unfortunate that some would say we “stubbornly stand in the way of progress.” The fact is that without the leadership of the brokerage industry and the NCBFAA, importers would still be taking their commercial invoices and bills of lading to the Customs House only to wait weeks for release and it would be impractical to conduct international business.

If you have never cleared goods entering the United States, I encourage you to try. It is naive to believe that all a broker does is push a couple of buttons and magically goods are released and delivered to your door.

To start, let’s look at the new Importer Security Filing (ISF). Pre-arrival shipment information that was considered unavailable three years ago is now given to U.S. Customs and Border Protection prior to loading for more than 90 percent of the goods heading by vessel to the United States. Customs brokers or freight forwarders receive and process practically all that information before transmitting it to CBP. What if you didn’t have access to the broker’s Automated Broker Interface system or the forwarder’s Automated Manifest System connection to transmit this data? How would you send the ISF? How would CBP receive it? Would every importer have to establish and maintain a CBP-compatible computer system? At what cost?

CBP Commissioner Alan Bersin has said that other agencies generate two of three import exams. In addition to myriad CBP regulations, there are numerous other regulations you must know to import successfully. Do you know the Food and Drug Administration rules? What about the Bio-Terrorism Act — did you research it yourself or hire another industry expert to figure out how this was going to impact your company? Then there are FDA product registrations and Prior Notice requirements and now the new Food Safety Act. Of course your broker can help with that. The U.S. Department of Agriculture, Environmental Protection Agency, Federal Communications Commission, Transportation Department — more than 20 agencies with requirements that must be met every time a shipment is presented for entry. Anti-dumping, free trade agreements, quota, denied parties, State Department, International Traffic in Arms Regulations, Office of Foreign Assets Control, etc. Can you imagine what would happen if your broker didn’t know about those things? How would your goods get cleared? Would your goods be detained or seized? What if multiple shipments were en route when the problem was identified? It is a good thing that you have somebody in your corner paying attention to this stuff.

I hear over and over how CBP wants to reduce the cost of importing. Let’s review the costs associated with importing: Freight ocean/air, duty and customs fees, broker fee and delivery fee. Freight we can’t control, duty is a given, Merchandise Processing Fees and other government fees we cannot control. There are exam fees, Vehicle and Cargo Inspection Systems exam fees, storage fees caused by exams, VACIS handling charges by some carriers and port facilities, trucking fees to get containers positioned for exams, and so on. A great number of these costs are a result of government security efforts. The broker fee averages about 0.1 percent of the cost of the imported goods, and then there is the truck fee plus a clean truck fee to pickup and deliver the goods. Hmm … what should be reduced?

“It is a good thing that you have somebody in your corner paying attention to this stuff.”

During the CBP Trade Symposium, the Consumer Product Safety Commission (CPSC) described a tip about two containers that might contain non-compliant goods so they worked with CBP to perform an intensive exam. Luckily the tip did not pan out and the goods were found to be compliant. “Disaster avoided!” What CPSC didn’t say or didn’t know was that the storage and handling costs associated with having two containers held for two weeks exceeded $4,000. There was also no mention about whether the goods were time sensitive. At most ports in the nation, if a government agency puts a hold on a shipment, the expenses do not go on hold. Demurrage and per diem costs accumulate daily. Who creates those extra costs? I suggest that those who want to reduce the cost of importing consider where the real costs are being accrued — it is not in the brokerage industry, which works very hard to help reduce the cost of importing. 

That leads to the discussion of using brokers as a “multiplier” to reach small and medium-size importers. That is, in fact, what brokers do for the thousands of importers who know their product but have limited knowledge of the importing process. We get the importer’s goods cleared through the maze of government regulation and delivered to them within days of arrival into the United States. Talk about a multiplier. The fact is that we do that for businesses of all sizes, from the biggest multinational corporations with multiple import divisions and thousands of different products to the start-up business with a single product. Moreover, we do it every day … routinely.

Let’s talk about the Automated Commercial Environment. Do you know why few brokers use ACE? The system doesn’t always work and you can’t use it to release a shipment into the commerce of the United States. While you can use ACE for certain entry related functions, to the extent that brokers do utilize ACE, they must maintain two operating systems and train their personnel to perform limited tasks in both systems. What a nightmare! Talk about inefficiency and the bloated cost of importing!

We would love to have ACE working as promised. For more than 10 years the brokerage industry has gone to Congress and asked for money for ACE development. Three billion dollars later, the system is a fraction of what was promised and we have been told it will have reduced functionality in many of the areas that are crucial to our businesses. Would you change to a new system if it was worse than the one you currently use? The answer is “no” and neither will we.

Two years ago, the NCBFAA gave CBP a white paper that outlined the minimum system requirements needed before we would encourage our members to make the switch. Once ACE development has met those minimum requirements, we will encourage our membership to transition to the new system. CBP understands exactly where we are on this and we continue to vigorously support ACE development. We are excited about the progress that Cindy Allen has made in her limited time as the ACE project leader. That gives us hope that this endless project will have value and will be completed before we all retire.

The brokerage industry is comprised of highly regulated, dedicated professionals who must pass a rigorous examination to become a licensed customs broker. Did you know the annual pass rate for this examination is less than 10 percent? That is a lower pass rate than the CPA exam, the attorney’s bar exam, doctor medical boards, or the insurance broker exam. Talk about tough. Five years ago, the NCBFAA developed a six-month certification program called the Certified Customs Specialist (CCS). At the outset of the program, licensed brokers who wanted to participate were grandfathered into the CCS program, but had to earn 20 units of continuing education annually. Interested parties who were not licensed customs brokers, brokers who missed the grandfathering, and anyone who simply wanted to learn more about the import process, could enroll in the CCS program. We encourage anyone with a desire to learn more about the importing process to take the CCS course. In our role as professionals we know that we must keep current with the regulatory changes and in an industry where change occurs daily, annual continuing education is important.

We appreciate the recognition that the brokers are the most knowledgeable and trade savvy individuals to effect positive change on their industry. We are the biggest supporters of ACE, ISF, Customs-Trade Partnership Against Terrorism and other government programs that are reasonable and improve trade facilitation. We make the highly complex, tightly regulated and difficult process of importing into the United States so easy that not only the biggest corporations can do it but also the smallest ones can do it just as well.

We welcome positive change but, yes, we are stubborn when promises made to us are not kept and the costs associated with short-sighted, ill-conceived programs are dumped on our industry and the trade.

There’s a lot more to customs brokerage than pushing a button. Licensed customs brokers handle more than 95 percent of the entries filed with CBP with the single goal of getting our customer’s goods entered into the commerce of the United States legally, quickly and as efficiently as possible. And we do it proudly, professionally and humbly.

Is this situation any different elsewhere worldwide?

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by Mike Poverello

Customs Modernisation Release 3 – SACU

Saturday 11 February 2012 sees the implementation of new modernised customs procedures and formalities at South Africa’s first SACU land frontier office – Kopfontein – border between South Africa and Botswana.  While enhancements are slanted more in terms of internal SARS customs procedure, SACU traders will no doubt experience some anxiety with the transition. For the first time SARS Customs Modernisation impacts directly on traders and neighbouring Botswana Customs operational procedures in a significant way, which will fashion operations at all remaining inland border posts of the Customs Union. Over the last few months SARS has worked with trade, the Botswana customs authority as well as the business chamber in Botswana concerning the intended changes and their impact on stakeholders. The implementation ushers in cross-cutting changes for customs staff operationally, new technology as well as legal and policy changes. In the case of the latter, a further element of the draft Customs Control Bill is introduced whereby foreign business operators (importers, exporters and road carriers) must be registered with SARS to perform customs transactions in South Africa. This is perhaps the single issue which has had ramifications for parties who regularly cross the border between Botswana and South Africa. Hopefully recent iterations of notices and explanations have helped clarify the SARS requirements. (See the SARS Customs Modernisation webpage).

Other modifications and changes include –

Elimination of paper clearance documents – this is a significant departure from traditional SACU processing where all member countries have relied on the Single Administrative Document (SAD) to facilitate intra-SACU clearance. With the bulk of clearances expected to be electronic, SARS will now only print a customs notification (CN1) which will specify the status and outcome for each clearance. This the trader will use in support of customs clearance in Botswana. SARS will therefore no longer stamp and authorise hardcopy SAD500 clearance documents. Of course, there is nothing which stops a trader printing the SAD500 for cross border purposes, only SARS will no longer attest these. As concerns SARS VAT requirements, arrangements will be made for traders to submit the CN1 for purposes of VAT returns. Details on this to follow.

Electronic supporting documents – already tried and tested at sea and airports across South Africa, traders no longer need to carry on their person hard copy clearance supporting documentation , i.e. invoices, worksheets and packing lists. These are only required should SARS indicate via electronic message that a consignment requires further scrutiny. Customs brokers and traders using EDI will in most cases have the SARS e@syScan facility available on their computer systems which makes it relatively simple and easy to scan, package and submit to SARS. In the event a trader cannot perform this electronically, he may approach any of the 4 Customs Hubs (Alberton, Cape Town, Durban, and Doringkloof) across the country, to have these scanned and uploaded by SARS. Alternatively, these can of course be delivered to the border post for manual processing and finalisation of a customs intervention. Supporting documents are linked to a unique case number which SARS notifies to the trader in the event of a risk.

Clearance processing – SARS has centralised its backend processing of clearances where goods declarations are now processed off-site at one of the 4 Hubs. No longer are clearances processed at customs branch office. All goods declarations – whether electronically submitted or manually captured – are routed to a central pool for validation, verification and assessment if flagged by the risk engine. In the case of land borders all clearances once successfully processed will receive a ‘Proceed-to-border’ message implying that the road carrier may commence delivery to the border. A key feature of the new clearance process is the availability of Customs Status Codes. These codes are initiated by the customs system at specified points in the process to alert the declarant of the status of his/her transaction. These status’s also indicate the follow-up required of the declarant to bring the transaction to a state of finality.

Automated Cargo Management (ACM) – All road carriers are now required to submit their road manifests electronically, via EDI, to the Customs ACM system. For now, SARS will not electronically match the manifest against the declaration, but will monitor compliance and data quality of electronic manifest  for a period of time before initiating real-time matching and acquittal. This will invoke a significant responsibility on both trader and road remover to ensure that they both provide credible data to customs otherwise delays will occur. Upon arrival of the cargo at the border, the driver presents a printout of his electronic manifest. The manifest number is ‘checked in’ by a customs official which in seconds brings up all associated goods declarations linked to the manifest number on the system. The customs officer is able to determine the overall risk status of the vehicle. Where no risks are present a status notification (CN1) is printed for each goods declaration, and a gate pass (CN2) is handed to the driver permitting him to exit the customs controlled area. The future real-time matching will comprise a combined risk assessment of both manifest and declaration information that will result in a single risk outcome. Such risk assessment will include both fiscal and security compliance features thereby bringing SARS in line with international supply chain security standards. Going forward, risk assessment will accommodate ‘all-of-government’ requirements ensuring that all regulatory measures and associated risks are administered in a single instance obviating the need for successive, time-consuming inspections and costly delays.

Automated Customs Inspection – Following its recent introduction at the Beit Bridge border post, the new hand-held inspection tool, conveniently developed on an iPod, allows the customs border control official to electronically access, capture and upload an inspection outcome to the central customs system. This significantly improves the efficiency for this time-intensive activity where the officer can initiate a status up date electronically at the inspection site, where previously the declarant would have to wait for the outcome of the manual inspection report and release note. What’s more, the customs officer has access to the underlying clearance data and can even activate the camera function and capture visuals of suspect cargo which can be appended to an inspection case for verification by higher authority or historical reference value.

There are additional features and functionality to be introduced at Kopfontein and all remaining border posts over the next few months. These relate to improved revenue accounting, new trader registration and licensing system offering online application and approval, and a new traveller and temporary import/export processing. More about this in a future post.  For traders, the benefits of the new solution at SACU land borders aim to remove random and unwarranted intervention by customs. All activities are risk driven via a secure ‘get next’ selection function ensuring that internal integrity is maintained and only ‘risk-related’ consignments/transactions are dealt with. Please visit the SARS Modernisation webpage for all the latest updates and notices on modernisation releases.

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by Mike Poverello

Customs Connect 2 – SA Customs Modernisation

Customs Connect 2The year 2011 has proven both challenging and beneficial for many in the South African Customs community. New business opportunities offered via the Customs Modernisation Programme materialised and provided the service providers ample scope to improve their service offerings to clients in the freight forwarding and clearance space. Leveraging off tried and tested technology tools already employed by SARS in the Tax business, the implementation of E@syScan provided significant efficiencies in the customs clearance processing response times, although the jury is still out on whether such efficiencies have in fact translated into cost-savings for the customs trade. In this regard it is up to trade itself to assess if the traditional cost of printing reams of paper and employing a runner to deliver manual documents to Customs is significantly reduced by the new electronic supporting document process. Could be an interesting exercise.

On the SARS front, the implementation of a new automated case management, and inspection workflow is nothing short of a revelation in so far as traceability and improved efficiency. Similarly, such efficiency needs to translate into cost savings. Certainly there are less manual interventions in the process, the emphasis now moves to working more smartly as regards the booking and conducting of physical inspections. True this has been a huge learning curve for all. Refinements and fine-tuning of the process moving forward will undoubtedly release the expected results to the point where most will wonder how they ever managed in ‘manual mode’ in the past.

To close off the year, SARS has just published its second edition of its electronic Customs bulletin – Customs Connect. Please take the time to read and digest.

by Mike Poverello

Who’s data is it, anyway?

What with increased automation and the plethora of services becoming available to brokers, traders and specialist duty/tax recovery consultants, it would seem that the virtual nature of business has overlooked some key criteria which is cardinal for trader compliance with Customs. Lets deal with one of these – customs clearance (goods declaration) and cargo reporting (cargo manifest) information. Before I forget, as of June 2011, this also includes supporting documents. South African Customs law prescribes an obligation on traders to maintain documents (which includes any electronic transcription/version thereof)  for a statutory period of 5 years. This applies to all customs’ registrants and licensees.

While service providers (computer bureaus) provide a vital service in the provision and maintenance of software, hardware and communication services to the trade, site should not be lost of the fact that at any point in time, the trader may need to access, produce or submit documentation to support a claim or proof of their compliance in any customs matter. As one ‘provider’ recently exclaimed – since the inception of SARS’ electronic supporting document facility E@syScan, ‘gigabytes’ are now being transmitted over the internet. No doubt SARS endeavours have (or are) making service providers more profitable, but these also require a fair measure of support and ongoing maintenance to ensure such facility work at optimum performance. But, I’m digressing somewhat.

My point is that traders must have full rights, access and ownership of such data, including so-called product libraries. SARS has not imposed any view or directive on this matter, and has left it to the terms and conditions of the commercial agreement between the trader, broker and the service provider. Should a broker/trader wish to terminate his/her relationship with a service provider, the agreement should provide for a transfer of ‘customs transactional data’ from the service provider to the trade entity. There are no doubt instances of breach of contract which may cause either or both parties to sever the commercial relationship under a cloud. Nonetheless, my advice to the trader/broker is to ensure that their contractual agreement includes a clause which provides for the availability or transfer of ‘data’ to the trading entity in the event of a termination of the agreement. A ‘can’ of worms? Speak to me!