Fraud Issues Faced by Customs Brokers

accourt-risk-fraud-managementSenior Claims Executive at the TT Club in Sydney, Kate Hollis, sheds some light on the risks faced by licenced customs brokers and mitigation steps to take:

“As the international trade regulatory landscape continues to change and the commercial environment becomes increasingly competitive, the balancing act for forwarders and customs brokers between providing services to clients and complying with obligations to customs becomes more complicated.

“Customs brokers assume responsibility for acting correctly between cargo interests and customs. As a result, there is the potential to provide advice to customers or carry out actions that result in the cargo interest suffering financial loss, for which you can be alleged to have been negligent. Closely related to the liability exposure of your customer is the potential for customs to levy fines or penalties through infringement notices.

“Identity fraud is perhaps a less obvious area of risk. In some cases authorities find that brokers have committed an offence where checks on the identity of clients have not been performed and that simple verification of the identity would have alerted the broker to the fraud. Consistent with previous advice, we recommend dealing with your clients directly (rather than through an intermediary) and always perform your own background checks, both in regard to the entity itself as well as the statements being made to customs.

“One recent incident saw rice wine being imported into Australia from Korea, but it was declared as apple cider vinegar. This directly resulted in extra costs for handling the container and for storage costs under the customs bond. Following the inspection, duty was charged at the rate for rice wine – not cider – which the freight forwarder pre-paid on behalf of the importer. It proved impossible to reclaim the duty and additional costs because it transpired that the consignee company no longer existed. There have also been cases of people fabricating an identity in an attempt to import goods without paying the full amount of duty. When the companies were not successful, they simply disappeared.

“Customs brokers also need to be aware of the risk of identity theft. While the variety of scams is broad, TT Club has identified three areas that require particular attention for Customs Brokers:

  1. Piggybacking – where an unscrupulous entity uses the identifying details of a legitimate entity on a Cargo Report or Import Declaration, generally with the aim of importing consignments containing illicit substances or smuggled goods.
  2. User access security – the nature of access to customs entry systems and digital certificates means that individual login details need to be carefully guarded to avoid misuse and illegal activity.
  3. Mandate fraud – where fraudulent diversion of payments occurs. It is primarily the responsibility of the party making a payment to ensure that the bank details are correct.

“Customs Brokers should be aware that their licence might be at risk in a situation where the authorities consider that the broker has intentionally or recklessly facilitated a fraud. Such situations can also lead to fines being imposed on the Customs Broker as an individual, as well as actions against the forwarding business as a company.

“Mitigation of these risks is possible. In the first instance, it is important to review your own internal processes and systems. Recognise that the risk exposures are business critical and implement robust technology systems and standard operating procedures accordingly, particularly considering access rights and controls.

“Secondly, ensure that well drafted standard trading conditions are properly incorporated into your interactions with all clients. Many national trade associations provide ideal models You should seek legal advice to ensure that contracts are appropriate for your specific business. A third obvious mitigation is to purchase adequate and appropriate insurance. You should discuss this with your broker to ensure that your specific needs are properly covered.” Source: TT Club

Freight Forwarders and 3PL’s to bear the burden of IMO Box Weighing Rules

Container weighingThe responsibility for verifying the gross weight of loaded containers under next year’s new box-weighing rules will in many cases rest with freight forwarders, logistics operators or NVOCCs, according to freight transport insurance specialist TT Club.

Welcoming the initiative of the World Shipping Council (WSC) in its recent publication of guidelines to the industry in relation to implementing the SOLAS requirements that become mandatory on 1 July 2016, TT Club noted that unlike the CTU Code, which forensically seeks to identify the chain of responsibility for everyone involved in the movement of freight, the amendment to the Safety of Life at Sea Convention (SOLAS) mandating the verification of gross mass of container overtly only names the ‘shipper’, the ‘master’ and the ‘terminal representative’, and – by implication – the competent authorities.

TT Club said the complex nature of logistics means that the term ‘shipper’ may encompass a range of people involved in the contracting, packing and transporting of cargo. However, as stated in the WSC guidance, it said the key commercial relationship in question is with the person whose name is placed on the ocean carrier’s bill of lading.

“Thus, in many cases, the responsibility for actual ‘verified’ declaration will rest with a freight forwarder, logistics operator or NVOC. This means that often reliance will have to be placed on others to have adequate certified methods to provide verified gross mass – particularly for consolidation business,” TT Club said.

It noted that of course many suppliers of homogenous shipments will already have advanced systems, which merely require some form of national certification, adding: “Apart from having a sustainable method by which the gross mass is verified, the shipper also needs to communicate it (‘signed’ meaning that there is an accountable person) in advance of the vessel’s stow plan being prepared.

“The information will be sent by the shipper to the carrier, but with joint service arrangements there may be a number of carriers involved, with one taking responsibility to consolidate the manifest information, in addition to communication with the terminal.”
It said the ‘master’ comprises a number of functions within the carrier’s organisation.

“Implicit in the SOLAS amendment is that the carrier sets in place processes that ensure that verified gross mass is available and used in planning the ship stow,” TT Club said. “Arguably, each carrier will need to amend systems and processes to capture ‘verified’ information.

“However, the simplest might be to amend the booking process, so that the gross mass information is left blank in the system until ‘verified’ data are available. This will be effective if it is clearly understood by all partner lines and terminals with whom the line communicates.”

TT Club said the explicit obligation of the master was simply that he shall not load a container for which a verified gross mass is not available. “This does not mean that one with a verified gross mass is guaranteed to be loaded, since that would derogate from the traditional rights of a master,” the insurance specialist added.

Recognising the pivotal nature of the port interface, it noted that the ‘terminal representative’ has been drawn into the new regulation as a key recipient of information for ship stow planning “and, critically, in a joint and several responsibility not to load on board a ship if a verified gross mass is not available”.

It added: “There has been considerable debate as to whether terminals need to position themselves to be able to weigh containers, not least because of the cost of creating appropriate infrastructure, and amending systems and procedures, with uncertain return on investment. In addition there are commonly incidences of containers packed at the port, in which case the terminal activities could include assisting the shipper in producing the verified gross mass.

“The SOLAS amendment places responsibility on national administrations to implement appropriate standards for calibration and ways of certifying. The overtly named parties rely on this to work smoothly and, preferably, consistently on a global basis.”
TT Club said clarity of such processes needed to be matched by consistency in enforcement. “Talk of ‘tolerances’ is disingenuous,” it said. “SOLAS calls for accuracy. Everyone appreciates that some cargo and packing material may be hygroscopic, thereby potentially increasing mass during the journey, but that need not mask fraudulent activity, nor entice over-zealous enforcement.”

It said the UK Marine Guidance Note may be instructive here, stating that enforcement action will only be volunteered where the difference between documented and actual weight exceeds a threshold. TT Club concluded: “It is suggested that key measures of success of the revised SOLAS regulation will include not only safety of containerised movements, but also free movement of boxes through all modes of surface transport, and a shift in behaviour and culture throughout the unit load industry.”

FIATA 2014 Young Freight Forwarder of the Year Announced

Ms Nompumelelo Mboweni works as an Airfreight Import Controller at Bidvest Panalpina Logistics in Johannesburg [TT Club]

Ms Nompumelelo Mboweni works as an Airfreight Import Controller at Bidvest Panalpina Logistics in Johannesburg [TT Club]

The 2014 Young International Freight Forwarder of the Year (YIFFY) Award has been presented to South African forwarder Fortunate Nompumelelo Mboweni at the FIATA Annual Congress in Istanbul.

Each year at the FIATA Annual Congress the achievements of young freight forwarders from around the world are celebrated via an awards programme. TT Club is proud to have sponsored this award, now in its sixteenth year, since its foundation. The process of awarding the honour of Young Freight Forwarder of the Year (YIFFY) began earlier this year when entrants from all over the world submitted papers about a wide variety of transport and logistics projects.

These ranged from the transportation of tunnel drilling equipment to Bolivia to the delivery of a catamaran in Indonesia and from a project moving radioactive isotopes from South Africa to Namibia to the expedited deployment of a Disaster Assistance Response Team in the Philippines.

From this bewildering, yet highly professional array, the YIFFY Steering Committee selected a shortlist of four regional finalists. These four young professionals were then invited to attend the 2014 FIATA World Congress this week in Istanbul, Turkey to make a presentation on their dissertation topic.

The four regional finalists who proudly represented the future of the international freight forwarding industry in Istanbul were –

Africa/Middle East: Miss Fortunate Nompumelelo Mboweni, South Africa
Americas: Mr Douglas Whitlock, Canada
Asia-Pacific: Mr Saiful Ridhwan Bin Zulkifli, Singapore
Europe: Mr Christian Hensen, Germany

Following a comprehensive judging process, Ms Fortunate Nompumelelo Mboweni from South Africa was announced as the 2014 Young Freight Forwarder of the Year at the FIATA Congress’ opening ceremony on 13 October. Ms Nompumelelo Mboweni works as an Airfreight Import Controller at Bidvest Panalpina Logistics in Johannesburg. Andrew Kemp, TT Club’s Regional Director for Europe congratulated her and presented the award.

“I have been honoured as TT Club’s representative to be part of the selection process, and I personally was engrossed by the finalists’ presentations, which showed a considerable depth of understanding of their individual projects. I have to say all four finalists performed with flying colours at the recent final presentations; it was certainly a difficult decision to pick an overall winner. However, Fortunate prevailed and deservedly takes this year’s award,” said Kemp.

The award is presented in recognition of forwarding excellence and was established by FIATA with the support of TT Club to encourage the development of quality training in the industry and to reward young talent with additional valuable training opportunities. The TT Club has been a sponsor of the award since its inception and remains firmly committed to the importance of individual training and development within the global freight forwarding community. Source: TT Club

SAAFF names top young freight forwarder

From-the-left-are-Maria-du-Preez-Fortunate-Mboweni-and-James-Reddy-from-Bidvest-Panalpina-LogisticsFortunate Mboweni of Bidvest Panalpina Logistics has been named South Africa’s Young International Freight Forwarder of the Year. According to David Logan, CEO at the South Africa Association of Freight Forwarders (SAAFF), the award was based on her submission on the challenges of super abnormal loads and the complexities associated with the handling of ultra-sensitive cargo.

Says Logan: “Mboweni wrote a well-researched paper on two topical subjects: the shipping of highly sensitive material and the management of project (large, abnormal) cargo. The delivery of work was of a high standard and she can be proud of her efforts, which, in my opinion, stands a good chance of winning-at least the RAME [Region Africa Middle East] round.”

“She will now write a dissertation in order to compete in the regional round of the competition, and if she is successful, will be entered as a global finalist into the ‘Final Four’, which will be decided in Istanbul at this year’s Fiata Global Congress.”

The competition was initiated by its lead sponsor, the TT Club, in 1999 and its objectives are the encouragement of training and development in the industry as well as the elevation of professional standards .

Entrants who are brave enough to take up the challenge are obliged to write a dissertation on a topic that is set by SAAFF. This topic allows the entrant to write about current and often challenging issues and to demonstrate their knowledge and expertise on export and import forwarding and clearing matters.

SAAFF’s judging panel carefully adjudicates each entry in order to identify a winner, whose name is then submitted as the candidate for the regional round. As the competition is supported by FIATA (The International Association of Freight Forwarding Associations), it is adjudicated globally through its regional structures, which under FIATA nomenclature is RAME.

The winner of this round then goes through to the finals comprising the three other regional winners and the global winner is announced at the FIATA Global Congress each year.

Logan concludes: “The status attached to this competition is enormous and reflects positively on both the individual and the company for whom they work. Naturally, only freight forwarders may enter.”

In 2012, SAAFF’s entrant, Daniel Terbille, won the global competition and Logan says they have faith in Mboweni doing well in this international event. Source: Trans World Africa

TT Club – Container packing standards must be improved

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 trouble with Safety Sheets

The TT Club says that the abuse of safety data sheets (SDS) for cargo bookings is “uncomfortably frequent” leading to the view that shipping executives feel “surrounded by criminals”.

The following expose is no less pertinent to Customs risk-profilers.

A recent TT Club claim relating to a fire onboard a ship highlighted a number of issues. The insurance expert argues that differing global format standards and the ease of creating “viable” SDS are only serving to make cargo screening more difficult.

What’s really in the box asks the TT Club.  Photo: Port of Hamburg (Credit - Port Strategy)

What’s really in the box asks the TT Club. Photo: Port of Hamburg (Credit – Port Strategy)

In the claim, a cargo was booked, packed, declared and documented by a shipper as ‘Hookah burner (C.Tablets)’. When the ship caught fire at sea, significant costs were incurred by the ship because of mis-declared cargo, which was in fact activated carbon/charcoal.

Worryingly, when this was investigated further, the shipper had produced two safety data sheets – one was correct, but the other suggested that activated carbon was not considered to be a dangerous good.

TT Club argues that the situation is made far more difficult by the lack of consistency between the various governments about when SDS should be reviewed – Australia stipulates every five years, Canada every three and the EU Regulation recommends checking at “regular intervals”.

Peregrine Storrs-Fox, risk management director, TT Club, told Port Strategy: “We’ve identified two [problem]areas – firstly at the point of booking/contracting with a carrier and secondly post event. Conversations with a number of liner shipping companies confirm that the information given at the time of booking/contracting is frequently suspect. In one instance a single SDS had been presented for about 50 different cargoes over a period.”

Although this is an issue between shipper and carrier, which includes forwarders/logistics operators, there is wider issue here for port operators. During an incident, the port may be supplied with SDS in order to respond appropriately – so there is a risk associated with that too.

The advice to freight forwarders, operators and carriers from the Club is to “Be constantly vigilant and question anything that seems strange or suspicious”. The penalties for non-compliance can be severe. Source: PortStrategy.com