BEFORE THE

DEPARTMENT OF HOMELAND SECURITY

BUREAU OF CUSTOMS AND BORDER PROTECTION

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19 CFR Parts 4, 103, 113, 122, 123 and 192

Required Advance Electronic Presentation of Cargo Information

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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 Department of Homeland Security, Bureau of Customs and Border Protection (“CBP”), in response to the Proposed Rules issued by CBP on July 23, 2003. See, 68 Fed. Reg. 43574 (July 23, 2003). CBP seeks comments on proposed regulations to be published by CBP under Section 343(a) of the Trade Act of 2002, regarding information pertaining to cargo that must be received by CBP before the cargo may be brought into or sent from the U.S. by sea, air, rail or truck.

I. IDENTITY AND INTEREST OF THE LEAGUE

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.

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 members now include not only classic shippers and receivers of goods, but also carriers, third party intermediaries, logistics companies, and organizations that represent these industries. 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 international transportation. In the past, the League has been an active participant in the development of sound transportation policies by focusing its attention and resources on regulatory and legislative matters before the U.S. Congress, the Department of Transportation; the Interstate Commerce Commission and its successor, the Surface Transportation Board; the Federal Maritime Commission; and similar agencies.

Matters involving transportation, and matters 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. Therefore, 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. In addition, 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 also participated in the public meetings at which Customs presented “Strawman Proposals” for each of the four transportation modes that ultimately resulted in the Proposed Rules in this proceeding, and the League separately submitted comments on each “Strawman Proposal.”

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. That process has resulted in the Proposed Rules that, on the whole, strike a fair and delicate balance between the needs of security and commerce. CBP clearly has listened to commenting parties and done an excellent job of addressing their concerns while preserving a relatively simple approach. As a result, the League’s comments are focused on some areas that need to be addressed or clarified, and upon the proposed rules for air cargo, which still raise some serious concerns.

II. GENERAL COMMENTS

The League is pleased with the overall scope and effect of the Proposed Rules. In particular, CBP has made good use of systems and procedures already in place in a way that will minimize disruption to the supply chain and international commerce. The Automated Export System (“AES”) system is user friendly and compatible with most major computer systems. The Automated Manifest System (“AMS”), although cumbersome and repetitive, already is in effect and familiar to all parties.

The League favors a different or improved automated system for inward bound cargo that would serve as the sole portal for receiving cargo information that is required by all government agencies. Towards that end, the League looks forward to reviewing and commenting upon the Automated Commercial Environment (“ACE”) and the International Trade Data System (“ITDS”), which currently are under development. It would be most helpful if CBP could provide a more specific estimate of the expected completion and implementation dates for the AES commodity module and state whether it is on target for completion in and in the budget for FY 2004. Once these and other future systems are in place, the League urges CBP to implement them for each mode at the same time for all ports of entry, as opposed to a port-by-port basis. In addition, the League hopes that CBP will maintain the same level of accessibility that it has demonstrated in this process on a going-forward basis.

With respect to all four modes, the Proposed Rules require a shipper’s complete name and address as the owner and exporter. Many companies, however, take title to the cargo when it leaves a foreign manufacturer for the U.S. In that scenario, the League asks CBP to clarify whether the required shipper information is that of the foreign manufacturer or the actual owner of the goods, as determined by title.

Another comment with potential relevance to the three surface transportation modes concerns consolidated shipments. Many shippers consolidate pool shipments from multiple suppliers in a foreign country into a single container, trailer or rail car. Once those shipments enter the U.S., the consolidated load is broken out into individual shipments and delivered to multiple consignees, sometimes as many as one-hundred. Although consolidated, each shipment is made on its own through bill of lading. The League requests clarification as to whether this scenario requires the shipper to identify all one-hundred consignees to CBP.

III. COMMENTS ON MARITIME CARGO RULES

As a general matter, the League agrees with the Proposed Rules for Vessel cargo destined to and from the United States. Most of the League’s comments on the “Strawman Proposals” have been incorporated into the Proposed Rules. The League, however, seeks clarification of one very important matter.

This specific area of concern for the League relates to consolidated shipments. As currently drafted, the proposed rule could be very costly to shippers, as it would require a major change in current business practice. The Proposed Rules appear to presume that all consolidated shipments occur under both Master and House bills of lading. However, a common practice among many U.S. companies (e.g. retailers and manufacturers) is to consolidate shipments from multiple suppliers into a single container for transport to themselves as the sole consignee, under the equivalent of a Master bill of lading, but without issuing a house bill of lading to each individual supplier. The bill of lading issued by the carrier shows either the U.S. company or its freight forwarder as the consignor and the U.S. company as the consignee. The Freight Forwarder issues only a Forwarder’s Cargo Receipt to the supplier. Thus, there is no house bill of lading. The Proposed Rules could be interpreted to require a change in this practice by requiring a separate bill of lading for each supplier in the consolidated container.

The League urges CBP not to adopt this interpretation. This scenario does not pose the same risks and need for information as the more typical consolidation, in which there frequently are many unrelated shipments with multiple consignors and consignees. Rather, this scenario concerns a single shipment of cargo from different suppliers, but destined to a single consignee, that has been consolidated by the consignee’s freight forwarder for ocean transportation. Since the U.S. consignee, rather than the foreign owner of the goods, is the true entity who has decided that the goods should be disposed of in the U.S., the consignee is the actual shipper. In essence, this is a closed supply chain that begins when the cargo arrives in the possession of consignee’s freight forwarder. This situation poses a lesser security risk.

A change in this business practice to require the issuance of separate house bills of lading will impose significant costs upon commerce for very little added security. Carriers will now have to issue multiple bills of lading for each container of consolidated cargo, and they will charge a fee for each additional bill of lading, even though the contents of the container have been tendered by a single entity, the freight forwarder, in a single container, destined to a single consignee.

As an alternative, CBP could determine that these types of consolidated container shipments destined to a single consignee do not require separate house bills of lading when the consignee and its forwarder participate in the Customs-Trade Partnership Against Terrorism (“C-TPAT”). This exception would be justified by the additional assurance that the supply chain is indeed closed and therefore presents a low security risk. In addition, this exception would provide shippers and forwarders with a strong incentive to participate in C-TPAT.

To the extent CBP requires the information that otherwise would be found on the house bill of lading, there are substantially less costly alternatives. The real reason for requiring house bills of lading on consolidated shipments is that AMS is not currently programmed to accept information on both the consolidator and the vendors. Therefore, the easiest, and perhaps least costly, solution is to modify the AMS so that it can receive vendor information for consolidated shipments without requiring the entry of entirely separate bills of lading. This also would reduce the number of entries that CBP must review. Thus, rather than putting thousands of shippers to the enormous trouble and expense of modifying their business practices, it makes more sense for CBP to adapt its data collection system to current business practices.

IV. COMMENTS ON AIR CARGO RULES

The Proposed Rules for air freight shipments are a vast improvement over the “Strawman Proposals,” but compliance remains the most difficult and expensive of all the modes. Because air freight, by its nature, already is the most costly and time-sensitive of all the modes, the Proposed Rules still present operational challenges for air cargo service and U.S. global trade. As such, certain elements of the air freight rules still cause concerns for industries that are dependent on the movement of air cargo.[1]

Most notably, the entities eligible to file electronically do not include foreign freight forwarders acting as agents for U.S. freight forwarders. As a practical matter, only U.S. destination based entities are eligible. But this makes very little sense, since these entities have relatively little advance notice and depend heavily on the accuracy and performance of pre-advise received from their foreign air forwarder partners. As such, U.S. destination based entities cannot guarantee the accuracy of the information. The foreign freight forwarder is the entity with the most direct and accurate knowledge of the cargo and, therefore, is in the best position to provide the required information. Under the Proposed Rules, however, the forwarder can only provide the information to a third party for electronic filing. By default, this responsibility will fall to the air carriers, which will need to have substantial resources in place to handle these reporting volumes. This system imposes significant risks and responsibilities upon the air carriers, without a corresponding benefit in security, since the most knowledgeable entity is not directly involved in reporting cargo data.

The Proposed Rules also will have an adverse impact upon “same day” air shipments. Even the reduced time frames for reporting inbound cargo data will add a day to most air shipments because the parties will have to allow even more time to ensure the documentation has been provided and is accurate. Air carriers will need to ensure that all information is available prior to departure or risk a costly diversion of the aircraft in the event a forwarder or other party fails to provide the cargo data to the carrier in a timely manner after the aircraft has departed. This problem is magnified on outbound shipments, which require the submission of information at least two hours prior to departure. At a minimum, such information should not be required on outbound air shipments until departure from the gate. Since the nature of air freight is to transport the most time-sensitive shipments, the negative impacts on same day service will be highly detrimental to air freight service.

The League strongly urges CBP to adopt a system that allows foreign freight forwarders to file cargo information electronically. This will streamline the process, make the information more reliable, and alleviate a significant risk and burden that air carriers must bear under the current Proposed Rules, if a forwarder fails to provide timely information.

Finally, the League seeks clarification regarding the treatment of “on-board” air courier shipments. Some shippers use on-board courier services, by which the cargo is hand-carried on a commercial flight or checked in passenger baggage. These shipments should be classified as passenger baggage and included in the passenger baggage declaration.

V. COMMENTS ON RAIL AND TRUCK CARGO RULES

The League is pleased with the Proposed Rules for rail and truck cargo and believes that most of its concerns over the “Strawman Proposal” have been addressed. In particular, the League strongly supports CBP’s proposal to exclude cargo that originates and terminates in the U.S., but transits a foreign country by rail or truck, from the advance electronic filing requirements. In these comments, the League seeks clarification of a point that is relevant to both rail and truck movements.

This clarification concerns cross-border tank car and tank truck movements. The movement of a tank car or truck typically involves a round-trip loaded segment followed by a return empty segment. The League’s request for clarification concerns the treatment of the return movement of empty tank cars and trucks. When unloaded at destination, tank cars and trucks rarely are completely empty. A residual amount of product, referred to as a “heal,” usually remains unless and until the car or truck is cleaned. The League asks CBP to clarify whether roundtrip documentation is required in order to cover the return of empty tank cars and trucks across the border, and if so, how information concerning the heal should be reported.

VI. CONCLUSION

The League respectfully requests that the above comments be taken into account as CBP revises the Proposed Rules to implement the requirements of Section 343 of the Trade Act of 2002.

The National Industrial Transportation League

1700 North Moore St

Suite 1900

Arlington, Virginia 22209

By its Attorneys:

Nicholas J. DiMichael

Jeffrey O. Moreno

Thompson Hine LLP

1920 N St. N.W.

Suite 800

Washington, D.C. 20036

Dated: August 22, 2003

[1] Air cargo accounts for over one-third of the value of world trade in merchandise. Organization for Economic Cooperation and Development.