US Customs Response to HAFFA List of Questions

(This note does not purport to be comprehensive or constitute legal advice and is not a substitute for legal or other professional advice on individual cases.)

NOTE

US Customs - 24 Hour Advance Vessel Manifest Rule

Part One

(General)

1. In this Note:

"Customs' means the US Customs;

"FAQs" means the Frequently Asked Questions on the 24 Hour Advance Vessel Manifest Rule currently posted on Customs Website: http://www.customs.gov/impoexpo/24hour_rule.pdf; and

"Final Rule" means the final rule "Presentation of Vessel Cargo Declaration to Customs before Cargo is Laden Aboard Vessel At Foreign Port for Transport to the United States" published in the Federal Register, Volume 67 page 66318.

References to US regulations or laws in this Note are references to those currently appearing on the relevant websites.

2. Information contained in this Note is of necessity a summary of complicated or complex issues and are only intended for general information purposes. It does not purport to be comprehensive or constitute legal advice and is not a substitute for legal or other professional advice on individual cases. Please note that certain information is included subject to further advice or confirmation by Customs. 3rd party information referred to in this Note has not been verified.

Part Two

(Questions Put to US Customs on 21.11.2002)

NVOCCs

1. What is the difference between a licensed NVOCC and a registered NVOCC as referred to in 19CFR4.7(b)(3)(i) ?

It is noted that the new regulation refers to but does not define "registered NVOCC". Customs representatives advised that they would consult their legal counsel and would provide answers to the Questions 1 to 8. Meanwhile, members may refer to FMC website: http://www.fmc.gov. Subject to Customs' advice, it appears that:

(a) A "Licensed NVOCC" is a NVOCC which is licensed by the US Federal Maritime Commission ("FMC"). It is understood that no person in the US may act as an NVOCC unless he holds a license issued by FMC. A person is considered to be in the US if that person is resident in or incorporated or established under US laws.

(b) A foreign-based NVOCC not in the US does not have to be licensed. A foreign based NVOCC, however, may establish a presence through an unincorporated office that is resident in the U.S.

(c) No person may act as a NVOCC unless that person furnishes a bond or proof of insurance or other surety in a form and amount determined by FMC and issued by a surety company acceptable to the FMC (such bond or proof or surety is referred to in this Note as "OTI Bond"). Further a NVOCC who is not domiciled in the US must designate a resident agent in the US for receipt of service of judicial and administrative process.

(d) It appears that a foreign-based NVOCC who is not licensed with the FMC, but has provided the requisite OTI Bond and complied with other formalities is considered a "registered NVOCC".

2. Must a NVOCC (licensed or registered and US or foreign based) provide an ocean transportation intermediary bond ("OTI Bond") to the FMC? In the absence of such a Bond, is it not permitted to provide NVOCC services?

Pending Customs' further advice, please see 1(c) above.

3. Is a foreign based NVOCC holding an OTI Bond a registered NVOCC? Can a foreign based NVOCC apply to become a licensed NVOCC?

Pending Customs' further advice, please see 1 above.

4. Please confirm that the International Carrier Bond is different from the OTI Bond.

Customs representatives advised that the International Carrier Bond is different from the OTI Bond.

5. What are the procedures for a foreign based NVOCC to apply for the International Carrier Bond and the OTI Bond and what are the respective bond amounts? Is there a list of Customs accredited or approved agents who may act for the foreign based NVOCC in such applications?

Advice from Customs is awaited. Reference may be made to the website: http://www.roanoketrade.com/24hrrule.htm. (Please see HAFFA News 68 dated 13 Dec 2002). It is understood that the OTI Bond amounts are: licensed NVOCC - US$75,000, unlicensed (foreign) NVOCC - US$150,000. (Please see FMCFAQs website: http://www.fmc.gov/Help/OTI.htm) As regards International Carrier Bond the minimum amount is US$50,000 (Please see FAQs 14).

6. How can a foreign based NVOCC become qualified to participate in the vessel AMS programme referred to in 19CFR4.7(b)(3)(i)?

Please refer to letter dated 8 November 2002 from Assistant Commissioner Office of Field Operations entitled "Ability for NVOCCs to Participate in the Sea Automated Manifest System (AMS)" (website: http://www.customs.gov/impoexpo/24hour_rule.pdf). Reference may also be made to the website: http://www.roanoketrade.com/24hrrule.htm.

7. Where a foreign company acts as an agent for a US based NVOCC and issue the US based NVOCC's bills of lading in the foreign territory, is it correct that the manifest reporting party should be the US based NVOCC?

Awaiting advice of the Customs.

8. Is it correct that Freight Forwarders may not issue (house) bills of lading?

Customs representatives confirmed that Freight Forwarders do not issue bills of lading. (Note that this question is raised and answered in the context of carriage of goods by sea to the US. In the new regulation 19CFR4.7(b)(3)(ii) "Freight Forwarders" are expressly excluded from the term of NVOCC. Under 19CFR112.1 a "freight forwarder" is one who engages in the business of dispatching shipments on behalf of other persons, for a consideration, in foreign or domestic commerce between the United States, its territories or possessions, and foreign countries, and of handling the formalities incidents to such shipments, and is authorised to operate as such by any agency of the United States.

Election by NVOCC

9. What are the procedures for a NVOCC to apply for participation in the vessel AMS programme ? How long will it take and what are the fees or charges therefor? Is there a list of Customs' approved or accredited agents who may assist in such applications?

Please refer to the letter "Ability for NVOCCs to Participate in the Sea Automated Manifest System (AMS)" mentioned in 6 above. Note that for procedural matters contact may be made to Ms. Kimberly Nott, Office of Field Operations at kimberly.nott@customs.treas.gov.

10. Please confirm that a NVOCC (who has become an AMS participant) is not required under the new 24 hour advance regulations to pass the relevant information to the vessel carrier. (It is noted that the information may still be passed to the vessel carrier for preparation of bills of lading, but this appears to have nothing to do with the 24 hour advance rule and the information can be passed to the carrier after loading.)

See FAQs 20 and 34. Customs representatives confirmed that to comply with the requirement to maintain a copy of the cargo declaration onboard the vessel, a hard copy of the cargo declaration has to be submitted to the vessel carrier, such hard copy may be submitted in a sealed envelop. It is understood that "vessel carrier" means the carrier with whom the NVOCC has contracted. Where, for example, the NVOCC contracts with a "slot charterer", "vessel carrier" means the "slot charterer" and not the vessel operating carrier. Note the use of the term "contracting vessel carrier" in FAQs 34.

11. Can an AMS participant NVOCC choose to transit information for certain shipments through the AMS and pass the information to the vessel carrier for other shipments?

Subject to confirmation by Customs, it appears that this is probably not permitted.

Transmission by NVOCC

12. Can a NVOCC at a CSI port submit paper manifest information to Customs representative at the CSI port directly?

Please see FAQs 4, 5, 8 & 34. It appears that apart from the interim arrangements mentioned in FAQs 4, 5 & 8, NVOCCs may not submit paper manifests directly to Customs.

13. What are the alternative reporting procedures where the electronic system breaks down?

Please see FAQs 27.

14. Is there a list of automated Service Providers, Port Authorities or Vessel Agents approved or certified by Customs who may provide automated services for foreign NVOCCs who are not otherwise automated?

A list has been distributed to members via HAFFA News [4.12.2002]. HAFFA has requested Customs to provide an updated list which will be circulated to members when received. Please note that NVOCC using the service of 3rd party service providers is also required to provide the International Carrier Bond (Please see FAQs 34 (bullet 4) and FAQs 14).

Co-Loading

15. What are the reporting procedures where all the co-loaders are automated and where all the co-loaders are non-automated?

Please see FAQs 37. (Please also see Final Rule page 66325 - Co-Loading)

16. Where a co-loader is not required to pass the relevant information to the co-loader who presented the container to the vessel carrier (the "Main Co-loader"), how would the Main Co-loader know that the required information has been transmitted to Customs or disclosed to the vessel carriers.

Customs representatives felt that where the reporting co-loader and the Main (Master) Co-Loader are both automated, the Main (Master) Co-Loader should be the second notify party. It appears that where the Main (Master) Co-loader is not automated, there should be arrangements in place between the parties whereby the Main (Master) Co-Loader will be kept timely informed. Further clarification is being sought from Customs.

17. Can a non-automated co-loader choose to disclose the relevant information to the vessel carrier or the Main Co-loader?

Please see FAQs 37.

Confidentiality

18. Please provide information on the biennial certification and the relevant procedures. It is understood that NVOCC manifest information filers may request appropriate importer and consignee in the US to file certification on their behalf. How does the system work?

Please see FAQs 7. Customs representatives advised that the separate rule making is in the process.

Required Information

19. Please confirm that: (a) where the consignee box of the bill of lading is marked "To Order" without adding the name of any consignee, the owner of the goods or its representative need to be disclosed; and (b) where the goods are consigned to, for example, a bank or its order, such consignee is not considered as a true consignee and the owner or its representative must also be disclosed.

Please see FAQs 32, and Final Rule (page 66324 - Clarification of Data Elements). Note that according to FAQs 32, "the owner or the owner's representative will require that a U.S. name and address be provided".

20. It is observed that to determine who is the owner of the goods may at times be legally complicated.

Please see FAQs 32. HAFFA pointed out that ownership is a legal question which may be very difficult to determine. Contacts for the sale of the goods, financing arrangements etc. may all have an impact. Multi-parties may be involved and ownership may change during the course of the voyage. Customs representatives advised that they would consider this matter in consultation with their legal counsel. Please also refer to 32 and 33 below.

21. Please confirm that a NVOCC may rely on information supplied by the shipper as regards the owners or their representatives (to the extent that there is no reason for the NVOCC to suspect the accuracy of the information).

Please see FAQs 13 & 14. Subject to further advice from Customs referred to in 20 above, it appears that the reporting NVOCC is responsible for the completeness and accuracy of information submitted to Customs. HAFFA suggests that NVOCCs receiving information from shippers for transmission to Customs should obtain from them a warranty (and indemnity) that the information is complete and accuracy.

22. Must the numbers of all the seals be disclosed or only the number of the seal of the last person (usually the vessel owner) to load the container?

Customs representatives advised that probably only the seal of the last person to load the container is required. They would re-check and advise. Please see Final Rule page 66324 - Clarification of Data Elements. Please also see FAQs 33.

23. Please confirm that (to the extent that there is no reason for the NVOCC to suspect the accuracy of the information) the NVOCC may rely on the shipper's information relating to description, quantity and weight of the cargo even if the cargo is not received from the shipper in containers or pallets?

Please see 20 above.

24. Is it necessary to provide marks and numbers of the cargo to the Customs? It appears that if the consignee Harmonized code is given, this should be sufficient.

Customs representatives advised that the focus is on the description of the cargo.

25. Please confirm that the NVOCC may rely on vessel carrier's information which is within the knowledge of the carrier (for example, voyage number, last foreign port, scheduled a arrival time etc.).

Please see 20 above. HAFFA suggests that NVOCC obtaining information from the vessel carrier for transmission to Customs should likewise obtain a warranty and indemnity.

26. Presumably for electronic transmission through AMS program, CF Form 1302 will not be used. Does the AMS provide a format by which all the required information under the new regulations will be inserted. If it does, please provide a paper copy of such form.

Customs representatives agreed to provide a new CF Form 1302.

Vessel AMS

27. Is it indeed the intention that the reporting NVOCC will be considered at fault if cargo manifested by it is left behind unloaded?

Please see Final Rule (page 66323 - Liability Concerns and Legal Responsibilities). head 7 Please also see FAQs 14 re establishment of mitigation guidelines.

28. Please confirm that if cargo manifested by NVOCC is loaded prematurely, the NVOCC will not be liable.

Please see Final Rule (page 66322/3 - Bonds for Non Vessel Operating Common Carriers). head 5 Please also see FAQs 14 re establishment of mitigation guidelines.

Amendments

29. Please advise to what extent Customs would accept amendments to information contained in the original submission.

Please see Final Rule (page 66329 - Correction of Manifest Information) and FAQs 26.

30. There is an urgent need to make rules permitting amendment to information. Customs referred to "current regulations" concerning manifest discrepancy reports. What are these regulations?

According to FAQs 26 the current procedures can be found within 19CFR4.12. However it appears that these procedures only deal with shortage and overage of cargo and may not be sufficient to deal with discrepancies of other information now required under the 24 hour advance rule. The new rule making relating to manifest discrepancy reports has not yet been published. Further clarification is requested from Customs.

31. Does the deletion of the previous section 4.7a(c)(4)(x) from the final rule mean that shippers can initially provide the quantity information according to their best knowledge, and that such information may be amended after the cargo is loaded?

Customs would revert.

Part Three

(Other issues put forward to Customs Representatives on 10th December 2002)

32. Switch Bill of Lading

The attention of Customs representatives was drawn to the "switch bill of lading" practices which are quite common in the trade. By "switch bill of lading" it is meant that the bill of lading originally issued by the carrier or NVOCC is surrendered to the carrier or NVOCC in exchange of a new set of bills of lading. Invariably, the "switch" takes place after the vessel has sailed, and the shipper and consignee of the new bill of lading are different from that of the original bill of lading. Whilst the cargo is for discharge in the US, it is quite possible that none of the shippers and consignees is a party in the US. Customs representatives were asked how such shipments should be handled under the 24 hour advance rule. It appears that such practices might not have been previously considered. Customs representatives agreed to consult with Headquarters and would let us have their response.

33. Bill of Lading Information

(a) It was pointed out to Customs representatives that the requirement to provide information relating to actual shipper, owner of the goods, etc. may cause problems and complications in the preparation of the bills of lading. Information required by Customs under the new rule is for security purpose. On the other hand, a bill of lading (inter alia) contains or evidences the contract of carriage. It may also be a negotiable/transferable document by which the rights/liabilities of the contract of carriage and right of possession or property of the goods may be transferred. If information in bills of lading must tally with the information in the manifest, the intended contractual arrangements may be disturbed and the transferability/negotiability of the bill of lading may be affected. [It is noted that there is a [strong] reluctance on the part of the carriers to provide information in bills of lading which is different from the corresponding information in the manifest.]

(b) The usual practice for NVOCC operations is (a) the NVOCC contracts with its customer and issues its own (house) bills of lading naming the customer as the shipper; (b) in turn the NVOCC contracts with the vessel carrier who issues its own (ocean) bill of lading naming the NVOCC as the shipper. If it is necessary for the ocean bill of lading to name the NVOCC customer as the shipper or to name the NVOCC as the shipper on behalf of its customers, the contracting arrangements will be upset. In the case of a claim, the shipper can claim against the NVOCC under the house bill of lading, but it is doubtful whether the NVOCC can claim the ocean carrier under the ocean bill of lading. Further, an order bill of lading (made out to order of the shipper or to a named consignee or its order) is generally negotiable/transferable by indorsement and delivery. The naming of the "owner" may create uncertainties as to the capacity of the indorsor.

(c) This matter is complex. An observation was made to Customs representatives that there should be no requirement that the bill of lading information must tally with the manifest information. Customs representatives agreed to look into this matter together with their legal counsel and let us have their response.

34. FROB Cargo

(a) The volume of FROB cargo (including cargo destined for Canada, South America and Europe) is not insignificant. It is noted that the 24 hour advance rule applies to FROB cargo. Problems relating to FROB cargo were discussed with Customs representatives.

(b) Unlike cargo for discharge in the US, the ocean transport intermediaries for FROB cargo are mostly freight forwarders. Like NVOCCs they do not operate vessels but contract with their customers for the carriage of goods. They are, however, not NVOCCs registered or licensed or bonded with the FMC, and are therefore not eligible to participate in the vessel AMS. They have no option but to provide (confidential) cargo declaration information to vessel carriers. The biennial certification system is probably not available to them as there should be no buyer or consignee in the US. The problems mentioned in 33 affect such forwarders as well. The problems may be greater in that vessel carriers may be persuaded to issue ocean bills of lading naming automated NVOCCs as "shipper", they are unlikely to be prepared to do so as regards such forwarders (who are not automated and do not hold the OTI Bond or International Carrier Bond).

(c) HAFFA will repeat to Customs the concerns mentioned above. Members whose activities involve FROB cargo are encouraged to present their views to HAFFA Secretariat.

Dated: 23 December 2002