BEFORE THE

UNITED STATES CUSTOMS SERVICE

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19 CFR Chapter 1

Development of Regulations Regarding Mandatory Advanced Electronic Cargo Information –

Air Transportation Destined to and Departing from the United States

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COMMENTS

submitted by

THE NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE

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The National Industrial Transportation League (“League”) submits these Comments to the United States Customs Service (“Customs”) in response to the Notice issued by Customs on November 26, 2002. See, 67 Fed. Reg. 70706 (November 26, 2002). Customs seeks suggestions on proposed regulations to be published by Customs under Section 343(a) of the Trade Act of 2002. In addition, in an air cargo meeting held with industry representatives in Washington, D.C. on January 14, 2003, Customs issued a “Strawman Proposal” for processing air shipments destined to and departing from the United States. These Comments by the League are thus directed both to Customs’ Federal Register Notice as well as the Strawman Proposal for air transportation destined to and departing from the United States distributed by Customs at the January 14 meeting. The League is also separately submitting comments directed to the truck, rail and vessel Strawman Proposals distributed by Customs at meetings held on January 16, January 21, and January 23, respectively.

The League is one of the oldest and largest national associations representing companies engaged in the transportation of goods in both domestic and international commerce. The League was founded in 1907, and currently has over 700 company members. These company members range from some of the largest users of the nation’s and the world’s transportation system, to smaller companies engaged in the shipment and receipt of goods. A copy of the League’s membership is attached to these Comments.

For many years, League membership was open only to shippers and receivers of goods. However, last year, the League broadened its membership to permit carriers and all other persons engaged and interested in the transportation of goods to become members. Thus, the League’s membership now includes not only “classic” shippers and receivers of goods, but also includes carriers, as well as third party intermediaries, logistics companies, and similar entities. Members of the League are engaged in all forms of transportation, including rail, motor, ocean, and air carriage. Members of the League ship huge quantities of goods both domestically and in international commerce. Numerous members of the League have operations in Canada and Mexico and in other countries, in addition to domestic United States facilities.

Since its founding, the League has sought a competitive, efficient, and safe transportation system. Toward that end, the League has participated actively in federal regulatory proceedings and legislative matters dealing with national and, as global commerce has changed, increasingly in international transportation.

The League would note that, in the past, it has been an active participant in helping to develop sound transportation policies by focusing its attention and resources on regulatory and legislative matters affecting and before the Department of Transportation; the Interstate Commerce Commission and its successor, the Surface Transportation Board; the Federal Maritime Commission; and similar agencies. However, the tragic events of September 11, 2001, and the need to make our system of transportation more secure, has changed everyone’s thinking dramatically. Clearly, the U.S. Customs Service has taken the lead in securing our nation’s borders, and its actions and proposed actions have affected and will affect our nation’s transportation system, and thus our domestic and worldwide trade. Matters involving transportation, and those involving customs and trade, are inextricably intertwined. Indeed, what happens at and beyond the nation’s borders affects the efficiency, safety and security of the entire supply chain, and therefore economic health. The League participated actively in Customs’ RIN 1515, Presentation of Vessel Cargo Declaration to Customs Before Cargo is Laden Aboard Vessel at Foreign Port for Transport to the United States [“24-Hour Rule”], by submitting extensive Comments to Customs. Indeed, the League was pleased to see that Customs, in that proceeding, adopted some of the League’s suggestions with respect to that rule.

Beyond its participation in that proceeding before Customs, the League has participated actively in both national and international efforts at securing our nation’s transportation system, including active participation from the beginning in the Department of Transportation’s Container Working Group; deliberations on maritime security before the Organization for Economic Cooperation and Development; the International Chamber of Commerce; and in a number of other governmental and private efforts directed toward increasing transportation security, including consultations with the Transportation Security Administration, one of Customs’ sister agencies within the Department of Homeland Security. The League actively participated in the Congressional deliberations leading to the provisions of the Trade Act of 2002, of which this proceeding is an outgrowth.

The League would note that Section 343 of the Trade Act requires Customs to “solicit comments from and consult with a broad range of parties likely to be affected by the regulations” required under that provision of the Trade Act. The League strongly commends Customs for its efforts to date in consulting with and seeking comments from a broad range of interested persons. The League pledges to work with Customs to craft regulations that meet the requirements of the law, and that result in a efficient, safe and secure national and international transportation system.

Customs’ Strawman Proposal for Air Transportation

On January 14, 2003, Customs released a “Strawman Proposal” for air transportation destined to and departing from the United States. For commercial air cargo destined to the United States, all carriers, deconsolidators, freight forwarders and some express consignment couriers will be required to provide advanced electronic paperless transmission via the Air Automated Manifest System (“Air AMS”). Under the Strawman Proposal, that transmission would need to be made 8 hours prior to lading for courier shipments and 12 hours prior to lading for other shipments. Current participants in the Air AMS will be required to comply with the proposed new data quality and cut-off time requirements within three months of the publication of the final rule. Non-Air AMS participants will be required to begin transmitting electronic manifest information within two months of the publication of the final rule and meet the data quality standards within the three-month time frame.

For commercial air cargo departing the U.S. under the Strawman Proposal, Customs would require all air cargo information for exports to be electronically transmitted prior to export via the Automated Export System (“AES”) no later than 24 hours prior to lading for air carriers and air couriers. The trade would be required to report both the External Transaction Number (“XTN”) and the Internal Transaction Number (“ITN”) for every shipment until proposed enhancements to AES are complete.

Statutory Requirements under the Trade Act

Under Section 343 of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, Customs is authorized to promulgate regulations providing for the transmission to the Customs Service, through an electronic data interchange system, of “information pertaining to cargo to be brought into the United States or to be sent from the United States, prior to the arrival or departure of the cargo.” Public Law 107-210, 116 Stat. 981, Section 343(a)(1), as amended by Public Law 107-295, 116 Stat. 2089, Section 108(b)(1) [emphasis added].

It is clear from the wording of the statute that, for inbound shipments (i.e., shipments “to be brought into the United States), the information has to be provided “prior to the arrival” of the cargo in the United States. For outbound shipments (i.e., shipments “to be sent from the United States”), the information has to be provided “prior to the . . . departure of the cargo). Thus, the relevant temporal “measuring point” for the provision of information under the statute for both inbound and outbound shipments is the U.S. point of arrival or departure. As long as information is provided prior to the time of U.S. arrival (for inbound shipments) or prior to the time of U.S. departure (for outbound shipments), the statutory requirements are satisfied (though of course it is within Customs’ discretion to determine how much time before U.S. arrival or departure that it desires the information to be provided).

This analysis is important because it appears clear to the League that, for inbound air shipments, it is statutorily permissible to permit air cargo information to be provided to Customs after a cargo or passenger aircraft is “wheels up” leaving a foreign airport, since the “wheels up” time is still substantially prior to the “arrival of the . . . cargo” in the United States. For outbound air shipments, it is statutorily permissible to permit information to be provided to Customs prior to the point of aircraft “wheels up” leaving a U.S. airport, since “wheels up” is the point of “departure of the cargo” from the United States.

Finally, the League would note that there are a number of statutory considerations that Customs must take into account in developing rules under the Trade Act. Under Section 343 of the Trade Act, 19 U.S.C. §2071, Customs must take into account “differences among different modes of transportation, including differences in commercial practices, operational characteristics, and technological capacity to collect and transmit information electronically.” Customs must “protect the privacy of business proprietary and any other confidential cargo information . . .” except for manifest information collected pursuant to section 431 of the Tariff Act of 1930 and required to be available for public disclosure. Most importantly for air cargo service, under the statute, in determining the timing for transmittal of any information, Customs must “balance [the] likely impact on flow of commerce with impact on aviation, maritime, and surface transportation safety and security . . . .” Finally, under the statute, Customs may determine whether it is appropriate “to provide transition periods between promulgation of the regulations and the effective date of the regulations and shall prescribe appropriate transition periods in the regulations.” Customs may determine that different transition periods are appropriate for “different classes of affected parties.”

Comments of the League

The Special Characteristics of Air Cargo Transportation and the Regulation of Air Cargo Trade Participants Must Be Recognized by Customs As the Agency Drafts its Proposed Rules Under the Trade Act

It is patently obvious that air cargo is, by its nature, the most time-sensitive traffic of all transportation modes. What may be only slightly less obvious is the fact that a significant percentage of air cargo is last-minute, special or “emergency” shipments, rather than regular, recurring shipments that are more prevalent in the vessel, motor, and rail modes. Thus, any requirement that would impose a waiting/notice period before cargo is laden on board an aircraft will very substantially undercut the very reason for the existence of that service and thus the air cargo mode. A significant percentage of air cargo “shows up” at the last minute, when goods simply have to get to their destination on time. While the League understands Customs’ desire for information on air shipments destined to and departing from the U.S. by air well before the cargo is laden on board an aircraft, such a requirement is simply not compatible with air cargo transportation.

Secondly, it is crucially important for Customs to understand that the air cargo mode, and air transportation in general, are already subject to comprehensive security requirements and substantial governmental control. Even before 9/11, security was an important focus for air transportation, and after 9/11, security measures have become even more stringent. For example, indirect air carriers are governed by the Transportation Security Administration under Transportation Security Regulations (“TSR”) Part 1548 (“Indirect Air Carrier Security”), and are thus already the subject of strict governmental scrutiny. Air carriers already are required to subject their personnel to background checks. TSR 1542.209 (“Background Check Requirements”). Most importantly, the Transportation Security Administration, under its “known shipper” program, requires air carriers to either physically inspect or inspect by means of non-intrusive inspection methods, all shipments by “unknown shippers.” See definition of “known shipper” published in DSIP Section 6(g). Thus, there is a high level of security already built in to the current air cargo transportation system. Therefore, Customs requirements under the Trade Act should recognize and take account the safeguards already built in to the air cargo system when designing information/notice requirements under the Trade Act. Some of these precautions were built into the air transportation system as a result of suggestions by the National Transportation Safety Board and resultant actions by the United States Department of Transportation and the Federal Aviation Administration under FAA Part 107.

As Currently Drafted, Customs’ Strawman Proposal Would Destroy Air Cargo Service Destined to and Departing From the United States

As noted above, Customs’ Strawman Proposal for air cargo destined to the United States would require the transmittal of information to Customs 8 hours prior to lading for courier shipments and 12 hours prior to lading for other shipments. For air cargo departing from the United States, transmission of data would be required 24 hours prior to lading for air carriers and air couriers. These requirements, if implemented in anything like the form published, would destroy air cargo service destined to and departing from the United States and have devastating effects on U.S. global trade and economic development.

The League attended Customs’ January 14 public meeting to discuss the air Strawman Proposals, and heard the severe problems that the proposals would cause. Since that January 14 meeting, the League has received a number of communications expressing very, very deep concern over the proposals. Accordingly, the League believes that Customs must radically revise its proposal before issuing a Notice of Proposed Rulemaking as required by the Trade Act.

Customs’ Notice of Proposed Rulemaking Should Radically Revise Its Proposal for Mandatory Advanced Electronic Cargo Information for Shipments by Air

Under the Strawman Proposal for inbound air shipments, Customs envisions the transmission of data 8 hours prior to lading for courier shipments and 12 hours prior to lading for other shipments. The League believes that using a “prior to lading” measuring point for determining advanced electronic cargo information, as well as the very lengthy time periods set forth in the Strawman Proposal, both need to be radically revised.

Specifically, the League suggests that, for inbound shipments, advanced electronic cargo information should be provided 2 hours after “wheels up” for an aircraft leaving a foreign point of origin, unless the total trip time from a foreign airport to the U.S. destination is less than 4 hours, in which case advanced electronic cargo information should be provided 2 hours from the expected time of arrival in the U.S. For outbound shipments, electronic cargo information should be provided no later than the time of departure of the aircraft from the gate at the U.S. airport.

For inbound shipments, a rule requiring information to be provided no later than 2 hours after “wheels up” (for trips from foreign points of origins at least 4 hours long) would give Customs at least two hours before the aircraft arrives (and generally much longer) for Customs to analyze the data sent by the air carrier. The League believes that, in order to permit the air cargo system to continue to operate and in order to meet the statutory requirement to “balance likely impact on [the] flow of commerce with impact on aviation . . . security.” Customs must accommodate these timeframes in its review of the information for air cargo shipments.

If, despite the safeguards already built into the system such as TSA’s “known shipper” program, Customs believes that a package carried on board the aircraft is suspicious, Customs could either make arrangements to inspect the package upon arrival, or, in the case of a very suspicious package, could redirect the aircraft to a secure location. It should be recognized that, unlike trains or vessels, where it is very difficult to redirect a train or a ship to another destination, it is possible (though expensive) to redirect an aircraft to a destination other than the one scheduled, in the rare event that Customs determines that a particular shipment poses a clear and present danger. Given the safeguards already built into the system, it is extremely unlikely that “holds” will be frequent, and Customs could make advance arrangements for the redirection of aircraft with extremely suspicious lading to a secure location (such as a military base located outside of the United States).

The same is true for outbound shipments. As noted above, the League suggests that Customs implement a rule that would require information to be provided no later than the departure of the aircraft from the gate, which is a point still prior to the “wheels up” point of departure of the aircraft from the United States. In this case, Customs will be able to utilize the time that the aircraft is in the air headed for the foreign location, to make arrangements for inspection of suspicious packages placed aboard outbound U.S. planes upon landing at the foreign airport, or for redirection of the plane to a secure foreign location.[1]

Customs Should Provide for a Reasonable Phase-In Period After Publication of the Rule

The Trade Act of 2002 specifically grants Customs the right to provide for a transition period between the promulgation date of the regulations and the effective date of the regulations. The League believes that Customs should provide for a reasonable phase-in period after publication of the rule, certainly no less than the 90-day phase-in period provided for in the 24-Hour Rule, and ideally somewhat longer.

Confidentiality of Data Should Be Maintained

Unlike movements by vessel, there are no statutory requirements that would mandate Customs’ release of information provided pursuant to the requirements of the Trade Act, since Section 431 of the Tariff Act of 1930 applies only to movements via vessel. The League strongly believes that detailed shipper-specific data provided to Customs should be kept confidential by the agency, and should not be released to the public. Of course, aggregated data could be used by government agencies for statistical purposes.

For Goods Departing the United States, Customs Should Require Only the ITN

Under the Strawman Proposal, the trade would be required to report both the XTN and the ITN for every shipment until proposed enhancements to AES are complete. The League understands that, starting in April 2004, the Customs computer network will only require that the ITN be submitted by the exporter to the air cargo carrier. The League believes that, assuming that Trade Act rules are published on October 1, 2003 with an effective date of at least January 1, 2004, the League believes that the ITN should only be required to be submitted during the January through April 2004 time period

Conclusion

The League respectfully requests that the above comments be taken into account as Customs drafts its Notice of Proposed Rulemaking to implement the requirements of Section 343 of the Trade Act of 2002. The League would be very interested in working with Customs as the agency goes forward in drafting its Notice of Proposed Rulemaking under the Trade Act, and pledges to work with Customs on that important task.

The National Industrial Transportation League

1700 North Moore St..

Suite 1900

Arlington, Virginia 22209

By its Attorney:

Nicholas J. DiMichael

Thompson Hine LLP

1920 N St. N.W.

Suite 800

Washington, D.C. 20036

Dated: February 18, 2003

[1] The League would note that Customs needs to provide guidance on the time periods applicable to joint intermodal movements. For example, air cargo transportation is very frequently associated with a prior truck movement.