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International
Trade After September 11 - Port Security Initiatives and International
Business
By
Russell L. Smith and Ilissa A. Kabak of Willkie Farr & Gallagher
The terrorist attacks of September
11, 2001 have changed the way Americans live and work. Security
measures that were unheard of just over one year ago are now commonplace
as Congress and the Bush Administration strive to prevent future
terrorist attacks. This trend is especially true for the transportation
sector. While we are familiar with the security measures implemented
at U.S. airports, many of us are unaware of the profound changes
affecting U.S. maritime ports and foreign ports of origin as well
as the manner in which companies conduct international trade. All
of this will ultimately have a significant impact on the U.S. economy.
Since the September 11 attacks, U.S. ports have been operating under
heightened security to prevent the smuggling of weapons of mass
destruction into the United States. The Bush Administration has
been working to develop a more far-reaching, permanent security
plan to deter such potentially disastrous activity. As part of this
effort, the U.S. Customs Service has developed new programs to address
the threat that terrorism poses to U.S. ports. These programs have
forced companies with imports at any point in their supply chain
to understand the ramifications of the various Customs programs,
changes to import processing activities, and ongoing efforts to
increase potential port security, and to align their operations
accordingly.
While Customs has developed, and is in the process of implementing,
various security-related programs, this article discusses one program,
the Container Security Initiative (“CSI”), and regulations
developed under CSI that have a profound effect on how U.S.-based
businesses reliant upon imports operate in this new environment.
CSI and the 24-Hour Rule
As part of the effort to address the threat of terrorism to U.S.
ports, Customs launched the CSI in January 2002. CSI is designed
to deter terrorists from utilizing international shipping lines
to smuggle weapons of mass destruction. According to Customs, the
key elements of CSI are to establish security criteria for identifying
high-risk containers based on advance information, prescreen containerized
cargo at the earliest possible point in the shipping process, use
technology to quickly prescreen containers deemed to be high-risk,
and develop secure shipping containers.
Under CSI, upon agreement with foreign governments, U.S. Customs
agents will be stationed at foreign ports to identify and inspect
high-risk shipments for smuggled goods or weapons at those ports
of lading. To date, the governments of Canada, Singapore, the Netherlands,
Belgium, France, Germany, Sweden, Italy, United Kingdom, Spain,
China, Hong Kong, Japan, and South Korea have agreed to participate
in CSI. As of this writing, the CSI program is already operational
at the ports of Antwerp, Bremerhaven, Hamburg, Rotterdam, LeHavre,
Montreal, Halifax, and Vancouver.
To enhance the effectiveness of CSI, Customs developed the 24-hour
Advance Vessel Manifest Rule (“24-hour Rule”). The Rule,
which Customs began to enforce on February 2, 2003, requires parties
to transmit to Customs specific and detailed cargo declarations
for ocean freight on vessels that call on U.S. ports at least 24
hours prior to lading at the foreign port. Carriers and eligible
Non-Vessel Operating Common Carriers (“NVOCCs”) must submit
such information to Customs either electronically through the vessel
Automated Manifest System (“AMS”) or in paper form. If
Customs does not receive the required manifest information 24 hours
prior to lading, Customs will instruct a shipping line not to load
the cargo on the intended vessel, thus stopping the shipment at
the foreign port. Customs has already issued such “No Load”
directives to various shipping companies since the agency began
enforcing the rule.
Customs’ 24-hour Rule exempts bulk cargo (homogenous cargo
that is stowed in bulk, is loose in the vessel hold, and is not
enclosed in any container such as boxes, bales, bags, cases, etc.)
and break bulk cargo (cargo that is not containerized but is otherwise
packaged or bundled ) on a case by case basis. To apply for an exemption,
carriers must submit a written request to Customs. Unless and until
an application for exemption is granted, companies are required
to comply with the 24-hour Rule. Companies that are exempt from
the 24-hour Rule must submit cargo declaration information to Customs
24 hours prior to arrival in the United States if they participate
in the vessel AMS, or upon arrival if they are non-automated carriers.
Implications of 24-Hour Rule
Prior to the implementation of the 24-hour Rule, Customs Regulations
stipulated only that parties have a cargo manifest available upon
entry into the United States and upon request by a Customs agent.
By requiring the presentation of vessel manifest information 24
hours prior to the loading of cargo onto the vessel at the foreign
port, Customs is insisting that such information be transmitted
days, or in some cases weeks, earlier than what had been required
of carriers under prior Customs Regulations. Thus, exporting companies
will be required to provide their carriers with detailed shipment
information at an even earlier stage in the shipping process to
ensure that the carriers can properly, and promptly, submit the
manifest information to Customs according to the requirements set
forth in the 24-hour Rule. This, in turn, will likely force U.S.
importers, especially those that maintain facilities dependent upon
just-in-time deliveries, to implement a system that will allow for
the early identification of their need for imported products.
Given the necessary changes companies must make to comply with these
new regulations, Customs’ 24-hour Rule is changing significantly
the manner in which importing parties, their suppliers, and their
ocean carriers, arrange and account for ocean shipments. This has
the potential to place substantial burdens on parties who must comply
with the Rule.
Ilissa
A. Kabak, C.
H. Kwan,
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