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By Kenneth E. Siegel*
The government of Mexico has announced a list of additional U.S. grown and U.S. manufactured products on which it is imposing retaliatory tariffs that range as high as 25 percent. It also has cut some products that were on the original list and reduced the applicable tariff on others.
The tariffs originally were imposed by Mexico eighteen months ago in retaliation for the failure of the U.S. to abide by its obligations under the...
By Kenneth E. Siegel*
Comments must be filed by August 30, 2010 in response to an Advance Notice of Proposed Rulemaking (ANPRM) published by the Food & Drug Administration (FDA) to implement the Sanitary Food Transportation Act of 2005 (SFTA-2005). This legislation directed the Department of Health & Human Services (which includes FDA) to promulgate regulations requiring shippers, motor and rail carriers, receivers, and other persons engaged in the transportation...
By Kenneth E. Siegel*
In response to a petition filed by the Canadian government, the Federal Motor Carrier Safety Administration (“FMCSA”) has amended its liability insurance regulations for motor carriers. In another long-overdue step toward full reciprocity, it will now allow Canada-domiciled motor carriers and freight forwarders to maintain – as acceptable evidence of their required financial responsibility for accident liability – insurance policies issued...
By Kenneth E. Siegel*
Although many freight brokers play a useful role in bringing shippers and small motor carriers together, it is no secret that the three-way relationship between shippers, brokers and carriers creates opportunities for abusive practices and legal controversies. These problems have now attracted bipartisan attention in the United States Senate.
Senators Olympia Snowe (R-Maine) and Amy Klobuchar (D-Minn) have introduced...
By Francine Breckenridge*
Ms. Clasifyed has independent contractor agreements with all of her bakery delivery drivers. She also supplies the delivery trucks, gas, schedules the drivers’ work hours and pays the drivers by the hour. She knows that the twenty-factor common-law test (now found at IRS Rev. Rul. 87-41) to determine if a worker is an independent contractor or an employee is confusing and frustrating, and she really can’t tell by reading...
By Kathy Garber*
When Congress abolished the Interstate Commerce Commission in 1995, a little-noticed provision of the ICC Termination Act added transportation brokers to the scope of federal laws barring “price, route, or service” regulation of freight transportation providers by States. In Huntington Operating Corp. v. Sybonney Express, Inc., the federal district court in Houston held on May 11, 2010 that the broker preemption provision means what it says. This...
By Mark J. Andrews*
To anyone in the carrier community who might have thought the U.S. Supreme Court would use the K-Line case[1] for a summary smackdown of Sompo,[2] the divergent views expressed by the Justices at the K-Line oral argument on March 23, 2010 must have been a disappointment. There will be no single-sentence reversal and remand with a citation to Kirby.[3] I doubt there will even be a unanimous opinion as in Kirby. But the carriers...
By Kenneth E. Siegel*
The Commercial Vehicle Safety Alliance, the organization of state officials involved with truck safety, has issued a bulletin to its members announcing a moratorium on the enforcement of 2010 fees imposed under the Unified Carrier Registration Agreement. The moratorium was brought about due to the failure of the Federal Motor Carrier Safety Administration, the agency charged with this job under federal statute, to announce a fee schedule of 2010. The...
By Kenneth E. Siegel*
On December 17, 2009, the Senate Commerce Committee reported out S. 2889, the Surface Transportation Board Reauthorization Act of 2009. The bill, which is still subject to amendment and reconciliation with any corresponding legislation that passes in the House of Representatives, would be the most significant revision of federal regulation of the rail freight industry since enactment of the Staggers Act in 1980. The bill was introduced by Commerce Committee...
By Kenneth E. Siegel*
The Federal Motor Carrier Safety Administration (FMCSA) took further action on December 29, 2009 with regard to its “Roadability” rules that make intermodal equipment providers (IEPs) subject to certain Federal Motor Carrier Safety Regulations (FMCSRs). See Logistics Blog item posted January 30, 2009. The agency’s recent year-end action included technical amendments, a response to petitions for reconsideration, and a delay in...
By Kenneth E. Siegel*
The Federal Motor Carrier Safety Administration (FMCSA) has announced that it will hold three public listening sessions as part of its reopening of the agency’s Hours of Service (HOS) Rules. This third reopening in a decade has resulted from a settlement by the Obama administration with Public Citizen and others of a judicial challenge to the HOS rules adopted by the agency in 2008. On October 26, 2009, the administration agreed that the...
Submitted by Kenneth E. Siegel*
Michael K. Schreffler, International Trade Liaison, U.S. Customs and Border Protection (CBP), has issued a reminder to commercial motor carriers that they should be submitting their orders to renew annual user fee transponders to CBP’s Decal / Transponder Online Procurement System (DTOPS). The annual Commercial Vehicle User Fee is $(U.S.)205, which includes a $(U.S.)100.00 CBP fee, and a $(U.S.)105.00 Animal and Plant Health Inspection...
By Mark J. Andrews*
The U.S. and 15 other countries stepped up today at Rotterdam, the Netherlands, for a signing ceremony showcasing the proposed “Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea.” The Convention, commonly known as the “Rotterdam Rules,” received approval from the United Nations General Assembly last December after 12 years of work by the United Nations Commission on International Trade Law (UNCITRAL). The...
Please see September 3 Blog posting for more details on the increases.
Submitted by Kenneth E. Siegel*
The Transportation Security Administration (“TSA”) has published a Federal Register notice (74 F.R. 47671) setting forth interim final rules for the agency’s Certified Cargo Screening Facility (“CCSF”) program and requesting public comments on the rules and related fees. The purpose of the program is to help implement the Congressional mandate that 100% of all cargo placed on passenger aircraft...
Submitted by Kenneth Siegel*
In its July 17, 2009 issue of Customs Bulletin and Decisions (Vol. 43, No. 28, p. 138), U.S. Customs and Border Protection (“CBP”) issued a ruling that requires importers to prepare a manifest for containers entering the U.S. with any residue of a chemical product previously transported in the container. Under this ruling (HQH026715, June 19, 2009), such containers may no longer be manifested as “empty”. The manifest must...
Submitted by Kenneth Siegel*
The Federal Motor Carrier Safety Administration (“FMCSA”) has published a Federal Register notice inviting public comment on a request by the Uniform Carrier Registration Agreement (“UCRA”) Board of Directors to implement a significant increase in UCRA fees for registration year 2010. The FMCSA’s recommended fee increase is even higher than the increase requested by the UCRA Board.
Submitted by Kenneth Siegel*
As of August 31, 2009 the rules of the U.S. Department of Transportation (“USDOT”) on Return-to-Duty and Follow-up drug testing will now require that a same-gender observer check for prosthetic and other devices that could be used to cheat a drug test. This is in addition to the observer’s subsequently watching the employee urinate into the collection container.
On May 15, 2009, the United States Court...
By Kenneth Siegel*
Congress eliminated the 60 year old distinction between motor common and motor contract carriers in 2005 as part of the “Safe, Accountable, Flexible, Efficient Transportation Equity Act; a Legacy for Users” (affectionately known as SAFETEA-LU). Effective January 1, 2007, the statute directed the Federal Motor Carrier Safety Administration (“FMCSA”) to cease issuing common and contract carrier permits and instead to issue a motor carrier...
Submitted by Kenneth E. Siegel*
Since at least 1980, there has been no serious requirement for proof that prospective new interstate trucking companies can and will follow federal safety regulations. Under deregulation, the daily licensing bulletin from USDOT has shown for years that hundreds of new motor carriers are being registered each week after duly checking the safety certification boxes on the application form, while hundreds of others surrender their registrations after...
By Kenneth Siegel*
The Federal Motor Carrier Safety Administration (“FMCSA”) has issued regulatory guidance to clarify how a motor carrier should determine its principal place of business. Federal statutes and regulations require that a motor carrier designate its principal place of business. The regulatory guidance appears in the July 29 issue of the Federal Register (74 F.R. 37653). The carrier’s principal place of business is, among other...
By Kenneth E. Siegel*
As of July 14, 2009 any Mexican national wishing to enter Canada must obtain a Temporary Resident Visa in addition to having a passport. The visa requirement applies to all Mexican nationals wishing to visit Canada, whether for business or pleasure, including truck drivers who only pick up or deliver freight in Canada.
Under Canadian law, a business visitor is someone who comes to Canada to engage in international business activities without directly...
By Kenneth E. Siegel*
This is the year when Congress is supposed to take up and act on a bill to reauthorize highway and other transportation programs. The last such bill, SAFETEA-LU (Public Law 109-59, 119 Stat. 1144), was enacted in 2005 and is set to expire on September 30th of this year. I do not recommend, however, that anyone bank on seeing any legislation pass this year, no matter how desperate our economy or infrastructure becomes. True, the Highway Trust Fund...
By Kenneth E. Siegel*
The Federal Motor Carrier Safety Administration (“FMCSA”) has announced that it will hold two public sessions of its Motor Carrier Safety Advisory Committee (“MCSAC”). The purpose of the MCSAC meetings is to assist the FMCSA in developing and implementing a new cross-border trucking program between the United States and Mexico. The first of the MCSAC meetings will be held on Monday, May 18, 2009, from 10-11 AM (EDT), and will include a discussion between FMCSA management and the MCSAC committee on setting up a new cross border program. The meeting will be held via conference call. The second of the public meetings will be a face-to-face session allowing more active public participation. It will be held May 20, 2009, from 1 - 4 pm (EDT) at the U.S. Department of Transportation, Media Center, West Building, Ground Floor, 1200 New Jersey Avenue, S.E., Washington, D.C. 20590. You must register with FMCSA to participate in or attend either meeting.
If you are interested in the cross-border trucking issue, it is urgent that you attend or be represented at one or both of these meetings. Forces opposing cross-border trucking between the U.S. and Mexico will be using MSCAC as a forum to pressure the Advisory Committee and the Administration into maintaining the current prohibition against opening the border so as to protect their parochial interests and further their anti-Mexican sentiments.
For more information concerning the meetings or to arrange for one of our D.C. attorneys to represent your company at these meetings, please contact Ken Siegel at (202) 742-8602 or via e-mail at Kenneth.siegel@strasburger.com.
*Editor’s Note: Ken Siegel is Of Counsel with Strasburger’s office in Washington, DC. For more information with respect to the cross-border trucking issue and Ken’s background on the matter, please see the article entitled “NAFTA TRUCKING: The Issues, the Facts and the Solution,” previously posted to the Strasburger Logistics Blog on April 24, 2009.
MAJOR SAFETY GROUP CALLS FOR END TO EXEMPTIONS
FROM HOURS OF SERVICE FOR TRUCK DRIVERS:
Agriculture, Utilities, Oil Field Operations Would Be Among Industries Affected
By Ken Siegel*
The Commercial Vehicle Safety Alliance (CVSA) has called on Congress and the U.S. Department of Transportation to end all exemptions from the rules of the Federal Motor Carrier Safety Administration (FMCSA)...
NAFTA TRUCKING: The Issues, the Facts and the Solution
By
Kenneth E. Siegel and Mark J. Andrews*
Strasburger & Price, LLP
On March 11, 2009, the President signed into law the Omnibus Appropriations Act, 2009, Public Law 111-8, 123 Stat. 524 (the “OAA”). Section 136 of the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2009 (Division I,...
Adapted by Kenneth E. Siegel from U.S. Coast Guard and American Trucking Associations source documents*
As the trade knows, many problems have arisen with the distribution of Transportation Worker Identity Cards (TWIC cards) to motor carrier drivers operating in port areas. To minimize disruptions to import-export traffic, the U.S. Coast Guard has developed an alternative method by which owners or operators of Maritime Transportation Security Act (MTSA) regulated...
By Ken Siegel*
The Senate Judiciary Committee has approved S. 146, the Railroad Antitrust Enforcement Act of 2009. The Bill was introduced by Senator Kohl [D-WI] and has eight co-sponsors including senators Dorgan [D-ND], Feingold [D-WI], Kaufman [D-Del], Klobuchar [D-MN], Leahy [D-VT], Rockefeller [D-WV], Schumer [D-NY] and Vitter [D-LA]. If enacted the proposed law would:
Amend the Clayton Act to ALLOW INJUNCTIVE RELIEF against rail common...
Title XII of Public Law 111-5, February 15, 2009, in a Nutshell (Okay, a Very Large Nutshell)
By: Kenneth E. Siegel*
Kenneth.siegel@strasburger.com
*Editor’s note: Ken Siegel is Of Counsel in Strasburger’s Washington, D.C. office. His telephone number is 202.742.8602. For information on other aspects of the stimulus bill, please go to Strasburger’s new Legislative Blog at www.strasburger.com/legislativeblog.
Summary: The...
By Ken Siegel and Sam Hallman*
If you are in the trucking business, use independent contractor owner operators, and are subject to the Texas Margin Tax, Strasburger & Price may be able to help you reduce your Texas Margin Tax. Since Texas Margin Tax reports must be filed by April 15, it is urgent that you take action now.
For more information contact Ken Siegel at 202.742.8602 or kenneth.siegel@strasburger.com, or Sam Hallman at 214.651.2125 or sam.hallman@strasburger.com.
By Kenneth E. Siegel
Fifteen years after the motor carrier industry first asked the Federal Highway Administration to adopt rules which would require intermodal equipment providers (“IEP”) to maintain chassis and other intermodal equipment (“IME”) in a condition suitable for use on the highways, and several years after being directed to adopt such “Roadability” rules by Congress,1 the Federal Motor Carrier Safety Administration (“FMCSA”)...
By Kenneth E. Siegel*
On January 20, 2009, President Obama issued a memorandum to the heads of U.S. federal executive departments and agencies, published in the Federal Register on January 26,2009 (74 FR 4435). The memorandum ordered a delay in all final or proposed federal regulations so as to allow his appointees and designees an opportunity to review new or proposed federal regulations. The memorandum directed that:
no proposed or final regulation...
By: Kenneth E. Siegel
The SAFETEA-LU Technical Corrections Act of 2008, Pub. Law No: 110-244 (June 5, 2008) (“Corrections Act”) retracted the 2005 redefinition of the term “motor carrier” enacted as part of SAFETEA-LU1 and re-imposed the pre-2005 definition of the term. SAFETEA-LU had revised the definition so as to limit the application of the term “motor carrier” to those companies that transported property in Commercial Motor Vehicles as defined...
By Kenneth E. Siegel
U.S. Customs & Border Protection (“CBP”) has announced that every truck entering the U.S. in 2009 must pay a fee of $10.75 per crossing or be equipped with a transponder, good for a year, which will cost $205. CBP has been working on a project which would allow motor carriers to renew their current transponders electronically (known as “DTOPS”), but DTOPS was not available for this year’s transponder renewal period. ...
By Kenneth E. Siegel
The Federal Motor Carrier Safety Administration (FMCSA) has published the final rule for its New Entrant Safety Assurance Process, 73 Federal Register 7642 (December 16, 2008). The new rule is effective February 17, 2009 and has a December 16, 2009 compliance date. The New Entrant Process requires that any applicant to register or transfer a motor carrier operating license must be the subject of a FMCSA safety audit within 18 months of having registered...
By Mark Andrews
[Editor’s note: This posting is an update of a report prepared in June 2008 for the leadership of the ABA Section of International Law by a working group within the Section’s International Transportation Committee. The update is authored by Mark Andrews of Strasburger’s Washington, DC office, who headed the working group and is a co-chair of the International Transportation Committee.]
Introduction and Summary: In 2003, the American Law Institute (“ALI”, of which I am a member) and the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) adopted the first revisions in 52 years to Article 7 of the Uniform Commercial Code (“UCC”). Article 7 originally was entitled “Warehouse Receipts, Bills of Lading and Other Documents of Title,” but this was simplified to “Documents of Title” in the 1993 revision (hereafter, “New UCC-7”). The UCC, of course, has been highly successful in creating a harmonized legal environment for commercial transactions in all fifty States of the U.S. At this writing, New UCC-7 already has been adopted by 31 States and is pending in one other. A complete list of these States can be found at http://www.nccusl.org/Update/uniformact_factsheets/uniformacts-fs-ucc7.asp.
The main focus of New UCC-7 is on the functions of negotiable bills of lading and warehouse receipts as documents of title. As described in an excellent NCCUSL summary of New UCC-7, “[t]he great addition to Article 7 … is the new rules” for creation, transmission, and negotiation of “electronic documents of title.” Secondarily, New UCC-7 recognizes recent trends toward reduced governmental regulation of transportation services when it eliminates various outdated “references to tariffs and regulations.” See discussions on pages 2 and 4 of document found at http://www.nccusl.org/Update/uniformact_summaries/uniformacts-s-ucc7.asp. Not mentioned by NCCUSL is a related innovation in New UCC-7: its explicit recognition that the UCC – which remains state law even though adopted by every U.S. jurisdiction – is subject to preemption by U.S. federal laws and ratified treaties. See New UCC-7, sec. 7-103(a). Although New UCC-7 also briefly covers liability standards for transportation providers and warehouse operators with regard to goods entrusted to them, these standards would apply only in the absence of more specific standards in other law at the federal or state level. See id. and secs. 7-204, 7-209. By contrast, carrier liability under contracts of carriage is the primary concern of the “Draft convention on contracts for the international carriage of goods wholly or partly by sea.” While not yet a ratified treaty, this draft is the product of years of work and consensus-building by the United Nations Commission on International Trade Law (“UNCITRAL”) and its Working Group III on Transport Law. The primary thrust of the draft convention (recently renamed the “Rotterdam Convention”) is to resolve longstanding issues between shippers and carriers over the appropriate extent of carrier liability for loss of, or delay or damage to, international cargo moving by sea, while also establishing more uniform rules for extending that liability to related inland cargo movements. See, generally, Sturley, “Major Aspects of the UNCITRAL Draft Convention” (paper delivered at spring meeting of ABA Section of International Law, April 4, 2008). Secondarily, however, the Rotterdam Convention does parallel New UCC-7 by establishing (principally in Articles 8 through 10) a hospitable legal framework for creation, transmission and negotiation of electronic transportation documents.
At this writing, the United Nations General Assembly appears likely to approve the Rotterdam Convention within the next few months, and a signing ceremony in Rotterdam, The Netherlands, has been tentatively scheduled for the autumn of 2009. U.S. shipper and carrier interests appear sufficiently unified on this issue that ratification by Congress is believed to be a strong possibility shortly after the signing ceremony. Consequently, now is not too soon to examine whether anything in the Rotterdam Convention (if it becomes a treaty ratified by the U.S.) would conflict with the provisions of New UCC-7 that have made such gratifying headway through state legislatures in the past five years. Although the primary objectives of these two instruments are different as noted above, there is enough overlap in such areas as cargo liability and electronic documentation of title to make such an examination worthwhile.
For the reasons detailed in the remainder of this posting, I have concluded preliminarily that U.S. ratification of the Rotterdam Convention would not necessitate amendments to the black letter text of New UCC-7, principally because (i) its section 7-103(a) already recognizes the primacy of U.S. federal statutes and ratified treaties, (ii) most of its transportation-related subject matter is already covered by U.S. federal statutes with expressly preemptive effect, and (iii) most of its warehousing-related subject matter is not addressed either in Rotterdam or in preemptive U.S. federal law. True, there are limited areas where highlighting of inconsistencies between the Rotterdam Convention and New UCC-7 would be useful to transportation users and providers. For example, it might be useful to flag certain non-traditional terminology defined in Article 1 of the Rotterdam Convention, and to alert port warehouse operators that they might come under federal law for the first time by reason of being considered “maritime performing parties” under Article 20 of that instrument. These alerts, however, need not be inserted in the black-letter text of New UCC-7. They could be provided either through amended Comments to New UCC-7 (in States where the Comments do not form part of the enacted UCC text), or through pre-planned floor colloquies when Congress takes up ratification of the Rotterdam Convention.
Discussion: As a commentary on the lengthy gestation period of the Rotterdam Convention, it is interesting to note that earlier drafts of that convention are mentioned in at least four places within the 2003 drafts approved by NCCUSL and ALI for New UCC-7 and for conforming amendments to UCC Article 1. See reference to “other relevant law” following sec. 7-105; see “purposes” following sec. 7-302, and see respective revised definitions of “document of title” in paragraphs 15 and 16 of the Official Comments to Alternatives A and B for amendment of sec. 1-201. Without doubt, numerous potential conflicts were avoided by the fact that the drafters of New UCC-7 were proceeding in general awareness of the UNCITRAL project.
Despite this awareness and despite the differing primary objectives of the two instruments, my review of the respective texts and commentary has revealed at least the following areas of possible overlap:
Section references in New UCC-7
- 7-101(2): definition of “carrier” as “a person that issues a bill of lading.”
- 7-105: reissuance of an electronic document of title (“EDT”) in paper form, and vice versa.
- 7-106: “control” of an EDT, as a counterpart to endorsement and possession of a paper document of title (“PDT”).
- 7-301: misdescription of cargo; “said to contain”; “shipper’s load and count.”
- 7-302: through bills of lading; “performing” carriers.
- 7-303: diversion and reconsignment.
- 7-304: tangible bills of lading in a set (exception allowing same in “international transportation”).
- 7-307: carrier liens.
- 7-309: duty of care; contractual limitation of carrier’s liability.
- 7-403: carrier’s obligation to deliver; when excused.
Article references in Rotterdam Convention
- 1: definitions of “contract of carriage,” “carrier,” “performing party,” “maritime performing party,” “holder,” “transport document,” “electronic transport record” and “issuance” of such a record; no definition of “bill of lading.”
- 8-10: use and effect of electronic transport records; interchangeability with paper transport documents if negotiable.
- 11: general obligation of carrier to transport and deliver goods. Subsequent detailed articles defining carrier liability for loss, damage or delay – and limitations on same -- go far beyond anything in New UCC-7.
- 20: maritime performing parties (which could include warehouses in port areas) assume same obligations and can invoke same defenses as Rotterdam Convention provides for carriers.
- 47-49: carrier’s delivery obligations for goods covered by negotiable or non-negotiable transport documents or electronic transport records.
- 51: Convention does not derogate from carrier liens under Contracting States’ laws.
- 52-56: Diversion and reconsignment on instructions of a “controlling party.”
- 59-60: Transfer of negotiable transport documents or negotiable electronic transport records.
Although these areas of overlap may seem extensive at first glance, actual conflict is minimized by the fact that the UCC, wherever enacted, is a state statute rather than a federal one. Even as matters stand currently, the impact of New UCC-7 (or its predecessor where still in force) is extremely limited in the transportation sector because of express preemption under federal law. See, generally, 49 U.S.C. §§ 10501(a), (b) (as to railroads), 14501(c) (as to motor carriers, transportation brokers and surface freight forwarders), and 41713(b) (as to direct and indirect air carriers). See also Article III, section 2, clause 1 of the United States Constitution, which establishes the exclusive jurisdiction of federal courts over admiralty and maritime cases. Far from being a mere allocation of jurisdiction, this “maritime grant” endows federal courts with substantive “authority to make decisional law for the interpretation of maritime contracts.” See, e.g., Norfolk Southern Ry. v. Kirby, 543 U.S. 14, 22 (2004). Should the Rotterdam Convention be ratified by Congress, of course, it too will become part of the “supreme law of the land” to which the UCC must yield under Article VI, section 2 of the Constitution.
As to transportation, therefore, the deferential language of sec. 7-203(a) in New UCC-7 merely expresses what would be the case even in its absence: “This article is subject to any treaty or statute of the United States …” It is true that warehousing, unlike transportation, historically has been regulated almost exclusively by state law and is not within the scope of the preemptive federal statutes cited previously. Ratification of the Rotterdam Convention, however, would not change this fact because its provisions would have only peripheral impact on warehousing – with the possible exception of warehousing in port areas as discussed below.
For the foregoing reasons, I conclude that amending the black-letter text of New UCC-7 to acknowledge the primacy of a ratified Rotterdam Convention would be a mere exercise in surplusage. The same conclusion, however, does not necessarily follow as to the commentaries that accompany the black-letter text. (At least in Texas, Maryland, Virginia and the District of Columbia – the States with which I am most familiar – the commentaries are not part of the enacted statutory text, and therefore should be capable of amendment without formal legislative action.)
For example, an expanded commentary to sec. 7-102 of New UCC-7 could include comparisons of the definitions of “shipper” there and in the Rotterdam Convention; an explanation that the Rotterdam Convention dispenses with the term “bill of lading” in favor of the terms “contract of carriage” and “transport document,“ and an analysis of how the terms “performing party” and “maritime performing party” as defined in the Rotterdam Convention relate to the term “carrier” used throughout New UCC-7. Similarly, the commentary to sec. 7-302 of New UCC-7 should be amended to explain that the “performing carrier” referenced but not defined in the black letter text of sec. 7-302 is the same as a “performing party” under the Rotterdam Convention. Of course, all commentaries to New UCC-7 that currently refer to earlier UNCITRAL drafts should be amended with updated references, preferably including article numbers from the ratified instrument.
As a final example of a potentially useful amendment to the commentaries accompanying New UCC-7, I would point to numbered paragraph 2 of the “Purposes of Changes” commentary for sec. 7-204. That paragraph currently contains a blanket statement that “a warehouse may limit its liability for damages … to the goods by a term in the warehouse receipt or storage agreement.” Under article 20 of the Rotterdam Convention, however, this would not be true for a warehouse falling within the definition of a “maritime performing party” by reason of rendering services entirely within a port area (see article 1(7)). Article 20 makes a maritime performing party and the carrier equally liable to the shipper, and this Rotterdam-prescribed liability can be reduced only in the narrow range of circumstances described in Articles 81 through 83. In this particular instance, therefore, the rights of a warehouse under sec. 7-204 of New UCC-7 would be limited by overriding federal law for the first time if the Rotterdam Convention were ratified.
There may be other instances in which revised commentaries to New UCC-7 would play a useful role by highlighting differences in substance and terminology between that instrument and the Rotterdam Convention. The examples I have cited are products of my experience with cargo liability disputes and transportation contract negotiations; others dealing primarily with commercial transactions under New UCC-7 may be able to adduce additional suggestions from that perspective. At present, however, I would venture to suggest that the areas of disharmony between New UCC-7 and the Rotterdam Convention are surprisingly few and far between – which is a tribute to the foresight of the drafters of both instruments.
Editor’s note: Mark Andrews (mark.andrews@strasburger.com ) is the Partner-in-Charge of Strasburger’s Washington, D.C. office, a co-leader of the firm’s Transportation & Logistics practice team, and a member of the firm’s International practice team. He can be reached at 202.742.8601.
By Doug Jacobson
Ocean carriers and their customers should be aware that the long-awaited interim final “10+2 rule,” officially known as Importer Security Filing and Additional Carrier Requirements, was published in the November 25, 2008 Federal Register (PDF). While the interim final rule makes a number of changes to the rule initially proposed by U.S. Customs and Border Protection (CBP), such as providing some flexibility on the filing time frame for two of the 10 importer elements (container stuffing location and consolidator), most of the other aspects included in the proposed 10+2 rule are unchanged. Importantly, the interim final rule does emphasize that carrier filing responsibilities rest with vessel-operating common carriers by water (VOCCs), not with the non-vessel-operating common carriers to which the VOCCs may subcontract.
The interim final rule will go into effect 60 days after publication. In order to provide the trade sufficient time to adjust to the new requirements, and in consideration of the business process changes that may be necessary to achieve full compliance, CBP has stated that it will show restraint in enforcing the rule as long as importers are making satisfactory progress toward compliance and are making a good faith effort to comply with the rule to the extent of their current ability. This "flexible enforcement period" will last for 12 months after the effective date.
New Requirements
Additional Carrier Requirements (2 new data elements)
In addition to the existing carrier requirements pursuant to the 24-Hour Rule, the interim final rule requires carriers to submit the following information for vessels carrying cargo containers destined to the United States.
- Vessel Stow Plan: In addition to the existing carrier requirements pursuant to the 24 Hour Rule, the interim final rule requires carriers to submit a vessel stow plan for vessels destined to the United States. Carriers must transmit the stow plan for vessels transporting containers so that CBP receives the stow plan no later than 48 hours after the carrier’s departure from the last foreign port. For voyages less than 48 hours in duration, CBP must receive the stow plan prior to the vessel’s arrival at the first port in the United States. Bulk and break bulk carriers are exempt from this requirement for vessels exclusively carrying bulk and break bulk cargo.
- Container Status Messages: In addition to the existing carrier requirements pursuant to the 24 Hour Rule, the interim final rule also requires carriers to submit container status messages (CSMs) to CBP daily for certain events relating to all containers laden with cargo destined to arrive within the limits of a port in the U.S. by vessel.
Additional Importer Requirements (10 elements)
The interim final rule requires Importer Security Filing (ISF) importers to provide the following eight data elements no later than 24 hours before the cargo is laden aboard a vessel destined to the United States:
- Seller;
- Buyer;
- Importer of record number/FTZ applicant identification number;
- Consignee number(s);
- Manufacturer (or supplier);
- Ship to party;
- Country of origin; and
- Harmonized Tariff Schedule of the United States (HTSUS) number.
The ISF also needs to include two data elements that must be submitted "as early as possible," but no later than 24 hours prior to the ship's arrival at a U.S. port:
9. Container stuffing location; and
10. Consolidator (stuffer).
The rule provides that the following four elements will be subject to special filing requirements:
5. Manufacturer (or supplier);
6. Ship to party;
7. Country of origin; and
8. HTSUS number.
Importers, in their initial filing, can submit a range of acceptable responses for these four data elements based on facts available to the importer at the time, in lieu of a single specific response. Importers will be required to update their filings for these elements as soon as more precise or more accurate information is available, in no event later than 24 hours prior to arrival at a U.S. port.
CBP has published some FAQs on the new Importer Security Filing and Additional Carrier Requirement here.
Editor’s note: Doug Jacobson is a partner in Strasburger’s Washington, DC office. He is a member of the firm’s International and Transportation practice teams, and heads the International Trade Compliance practice area.
By Kenneth E. Siegel
President-elect Obama has indicated that a stimulus bill will be the first matter to be considered by the new Congress and that the bill will be aimed at creating new jobs through rebuilding our country’s sagging infrastructure, including highways. But besides determining what and whose infrastructure projects will be included in the bill, the new Congress must determine how the projects will be paid for. The Highway Trust Fund is virtually bankrupt. The 110th Congress had to provide the Fund with an emergency transfusion of over 7 billion dollars just to enable it to meet fiscal 2008 commitments under the 2005 Highway Reauthorization Bill known as SAFETEA-LU. Where will the moneys for the new projects come from? The 111th Congress will have to tackle some very difficult finance issues when it takes up both the stimulus bill and the new highway reauthorization bill in 2009. The president-elect has indicated that he is willing to run a deficit to help the economy and improve the nation’s infrastructure. Mr. Obama has also voiced his support for an Infrastructure Bank, although the details of how the bank will be funded and projects selected for financing have not been made clear.
The make-up of President-elect Obama’s transportation transition team can also provide a hint at the interests which will have the strongest influence with respect to the new U.S. DOT and the new administration’s legislative approach. Representatives of Labor and the so called safety advocates constitute a significant number of the team’s members.
I. THE MOTOR CARRIER INDUSTRY
A. Highway Reauthorization
It is time again for Congress to address reauthorization of highway funding as well as money for aviation and for hazardous materials safety programs. The largest question looming ahead may well be how to fund future highway and other transportation projects. As mentioned above, the 110th Congress had to bail out the Highway Trust Fund to the tune of $7 billion this last year. The future for the Fund is not bright. In September of this year Americans drove 2 billion miles less than they did in September 2007. Less driving means less gas tax revenues for the Highway Trust Fund. This trend is not likely to change in coming years. Cars and trucks will continue to become more fuel efficient; people and industry are searching for more fuel efficient means of transporting both passengers and freight. Miles driven will continue to decline significantly – both for private and commercial vehicles. Alternative, untaxed, fuels will become more and more available. Although still the option of choice for the Bush administration and some cash strapped States, programs for privatization of highways -- that is, the transferring of the ownership, operation and development of highways to the private sector as the principal means of financing new highways as well as maintaining existing routes -- have not been as successful as many supporters predicted or wished. Political opposition, reduction in traffic and thus, potential toll collections, have all worked to take the petals off of the bloom of privatization. Other Bush administration proposals such as “hot lanes”, congestion pricing, and tolls in general have not received the backing of the public or industry.
Some see large increases in the federal fuel tax as at least a partial solution, but this approach would seem to fly in the face of the new administration’s pledge not to increase taxes on the middle class. Another approach that has been advocated is a distance tax or fee. Similar in nature to the ton mile taxes imposed in some states, the tax would be based on the number of miles a vehicle travels on certain highways. The infrastructure that would be required to calculate, enforce and collect such a tax would not only require a massive investment, but would take years, if not decades, to develop and put in place. Further, if the number of miles being driven is falling, a distance tax faces the same dismal future as fuel taxes. In the meantime our existing highways and bridges are in desperate need of repair and restructuring and the economy needs improved infrastructure to recover, both through the investment and jobs that would be derived from highway and intermodal projects and through the improved distribution services that would result from the availability of an adequate and efficient infrastructure.
Several bills were introduced in the last Congress proposing various fees and taxes on imports and exports to help finance improvements in infrastructure at and leading to port facilities. Many of the sponsors of such legislation, e.g. Illinois Congressman Jesse Jackson, are likely to find themselves in better positions to promote these concepts in the new Congress.
There will be heavy competition between highway, high speed rail, mass transportation and other transit projects, bridge replacement, improvement to intermodal facilities and new freight rail lines for the limited funds that will be available for the infrastructure.
The reauthorization bills will address many issues other than funding and highway maintenance and construction. The legislation also is likely to address questions involving:
· Expansion of mass transportation networks;
· Passenger bus safety and operations;
· Handling of hazardous materials;
· Creating a federal clearinghouse for positive drug and alcohol test results of Commercial Driver License (“CDL”) holders;
· Whether to require speed governors on commercial vehicles;
· Whether to re-impose a national maximum speed limit;
· Idling restrictions;
· Providing more and safer parking areas on the interstate system for commercial vehicles; and
· Whether to allow Mexican motor carriers to continue to operate in the U.S.
B. Labor and Employment
The presidential election and the strengthening of the Democratic Party’s control of Congress, whether filibuster-proof or not, will also bring about more attention to labor and employment issues that will directly affect the trucking industry. Among those labor and employment proposals that we can expect to be addressed by the 111th Congress are measures that would make it much easier for labor unions to gain a foothold in a company and that could change independent contractor classification.
The Employee Free Choice Act, which passed the House of Representatives in 2007 on a party-line vote and had the support of all Democrats in the Senate, would require the certification of a union at a non-union company if the union obtains the signature on sign-up cards (“card check”) of a majority of employees in the bargaining. While opponents have raised numerous objections, arguing especially that denying employees the right to a secret ballot would lead to intimidation, and while the bill had no chance of success in the 110th Congress, those opposing the bill have lost one major “firewall” – the presidency – and have a much smaller margin for enforcing a filibuster.
The Employee Free Choice Act had the strong support of President-elect Obama as did the Independent Contractor Proper Classification Act. The Classification Act would authorize the Treasury Department to issue new criteria for determining independent contractor classification. Whistleblower protections would be imposed to encourage disgruntled owner-operators to contest classification, and the IRS would adjudicate the disputes. The current safe harbor provisions allowing motor carriers to rely upon industry standards to determine a driver’s independent contractor status would be repealed.
Another legislative proposal that the President-elect and other pro-labor advocates strongly supported in the 110th would grant OSHA jurisdiction over job safety standards for all occupations. In the case of industries, such as trucking, in which another federal agency has substantial responsibility for the safety of workers, OSHA rules would apply unless OSHA made a finding that the independent agency’s rules provided sufficient protection.
C. Fair Labor Standards Act
Various highway safety advocacy groups and unions are likely to try to further restrict the trucking industry’s exemption from the Fair Labor Standards Act’s federal overtime rules. The 110th Congress eliminated the exemption for motor carrier employees involved with the safe operations of non-commercial vehicles (trucks with a gross vehicle weight rating or GVWR of 10,000 lbs. or less). Labor and the so called safety advocates have longed argued that elimination of the overtime exemption for all truck drivers would result in shorter driving hours and safer operations, ignoring the question as to where to find all the additional truck drivers that such action would necessitate.
D. Other Safety Rules
An Obama administration may have the opportunity to reconsider some major safety regulations regarding motor carriers. The Federal Motor Carrier Safety Administration (“FMCSA”) has issued a final rule that would retain the current hours-of-service rules adopted in 2005 and successfully challenged by the safety advocates and Teamsters on technical and procedural grounds. Several Congressional leaders including Speaker Pelosi and House Transportation & Infrastructure Committee Chair Oberstar have expressed concern with the rules, especially the part permitting CDL operators 11 hours of driving time in every 14 hour shift. The FMCSA has just sent its proposed rule governing electronic onboard recorders (“EOBRs”) to the Office of Management & Budget (“OMB”) for review. The chances for approval before the Bush administration departs are dwindling. Should the new Congress or the new head of U.S. DOT finally decide to take more control of these issues, as did the 110th with respect to rail workers’ hours of service, the trucking industry and its customers can probably expect significant reductions in the permissible driving hours as well as extended mandatory rest periods and mandatory use of EOBRs.
E. International Trade and Security
Legislation banning the further entry of Mexican trucks into the U.S. twice passed the House of Representatives and had strong support in the Senate. In spite of factual findings that the Mexican truckers currently operating in the U.S. have stronger safety records than their American counterparts, it is likely that the anti-Mexican sentiment and the solicitude for union job security that was pervasive in the last Congress will continue to rage.
Measures to increase security of the trucking and other transportation modes will also be likely in a new Congress. The imposition of rules requiring tracking devices on hazardous materials shipments; expansion of the Transportation Workers Identification Card or TWIC beyond use in the ports; cargo inspections and tracking; and other security related actions have all been mentioned.
II. RAILROAD ISSUES
The push for reregulation of the rail industry will begin anew, although with the enactment of rail safety legislation in the 110th Congress, the coalition of shippers and labor will not be as strong.
A. Amtrak
Vice-President Biden has been one of Amtrak’s strongest supporters and that support is likely to continue through the administration. Biden’s support will probably mean increased funding and support for high speed rail projects.
B. Freight Railways
In a letter to the NITL President-elect Obama stated that rail modernization was essential to the economy and that funding for track and roadbed improvements had to be found, e.g. through an infrastructure bank. The rail freight industry would also benefit from EPA grants for carbon capturing plants resulting in growth in the clean coal industry. Other issues of concern for the freight railways include: common carrier obligation; limited versus full liability for carriers with respect to hazardous materials transportation; elimination of antitrust immunity; and economic reregulation or increased protection for “captive shippers”. The latter has some support from Senate leaders such as Jay Rockefeller, incoming Commerce Committee chair, but lacks support within the membership of the committee.
III. AIR
The Federal Aviation Administration and its related programs are also up for reauthorization in the new Congress. Issues involving air labor, safety, open skies, and national security (such as a review of the 100% cargo inspection mandate) will be before the new Congress.
IV. MARITIME
The continued existence of the Federal Maritime Commission (“FMC”) may also become an issue in the new Congress. The FMC has been taking a strong stand against the efforts of the Ports of Los Angeles and Long Beach to launch a “Clean Truck Plan”. The Plan has the strong support of California’s pro-environment politicians and many in the House and Senate, rightfully or wrongly, are now threatening to call the agency before them to explain its position. The original bill which eventually became the Interstate Commerce Commission Termination Act also proposed to do away with an independent FMC. Although not high on anyone’s to-do list, many on the Democratic side of Congress are wondering what it is the agency does and why they need to keep it around. At time when Congress will be looking for every possible penny to put in the stimulus package, an agency which has come into disfavor with a significant portion of the leadership may find that its ship has sailed – or sunk.
Another maritime related issue may be ratification of the Rotterdam Convention, a new cargo liability regime drafted by the United Nations Committee on International Trade Law or UNCITRAL. No matter how important this may be to ocean shippers and carriers, however, it likely will take a back seat in Congress to more glamorous issues such as 100% container inspections, the alternative proposed by Customs and Border Protection (“CBP”), and the10+2 Program which CBP recently published in the Federal Register. (See separate blog posting by Strasburger’s Doug Jacobson.)
V. TAX ISSUES – A BRIGHT SPOT?
It is obviously difficult to move most domestic transportation operations or employment offshore. Therefore, most railroads, trucking companies, and logistics companies will be eligible for proposed tax credits to companies creating jobs in America. Most of the industry would also benefit from a proposed reduction in the corporate tax rate for American based companies on their American generated income.
In summary, the 111th Congress will be an active one for the transportation industry. It will be important for those that might be affected by these new laws and regulations to keep informed and active.
Editor’s note: Ken Siegel, of counsel with Strasburger’s Washington, DC office, has represented the trucking industry on legislative issues for upwards of two decades. His experience includes serving as Deputy General Counsel and Vice President of Law with the American Trucking Associations before entering private practice in 2000.
By Mark J. Andrews and Kenneth E. Siegel
Almost 15 years ago, the United States and Mexico made a commitment to allow carriers based in each country to haul international freight throughout the territory of the other country. According to the North American Free Trade Agreement (“NAFTA”), all restrictions on this cross-border hauling were to be phased out between the beginning of 1994 (when NAFTA took effect) and the beginning of 2000.
As we all know, this did not happen. Publications ranging from SMU Law School’s The International Lawyer to the San Antonio Express-News have documented the unrelenting efforts of the Teamsters union, self-described safety advocates, independent-trucker organizations and their political allies to obstruct the border-opening process at every turn.
It was not until May of 2007 that the U.S. Department of Transportation (“USDOT”) took the first concrete step forward. It announced a “demonstration project” under which up to 100 Mexican trucking companies could operate throughout the U.S. (and up to 100 U.S. carriers could do the same in Mexico) after thorough scrutiny of their safety programs by regulators in the host country. Since then the project has dodged a hail of bullets from legislators and litigators. It took effect on September 6, 2007, and USDOT announced in August of 2008 that it plans to continue the demonstration project for two more years.
But the fight is not over. As recently as September, new efforts were being made in Congress to quash the demonstration project through a pre-election rider to some piece of “must-pass” legislation. A court challenge to the project continued as well in California. The same old arguments were trotted out again: Mexican trucks are unsafe; poorly-paid Mexican truckers will take away American jobs, and in any event, the carriers themselves have shown little interest in the program.
The facts are otherwise. According to USDOT records as of mid-August, Mexican carriers had made approximately 1300 trips into the U.S. without a single accident. In roadside safety inspections, 9.2 percent of Mexican-based trucks were put out of service, but the rate for U.S. trucks is 22 percent. As for job impacts, remember that the demonstration project is limited to international freight only. Mexican carriers cannot haul domestic freight from, say, Dallas to Denver any more that U.S. carriers can do so between Monterrey and Mexico City. The project also does not permit the participating Mexican carriers to transport hazardous materials.
As for the supposed disinterest in the project, obviously carriers of both countries will be leery of investing in a service that can be snuffed out by the stroke of a politician’s pen. After all, necessary investments include driver training, preparation of facilities for constant regulatory scrutiny, and sales efforts in an unfamiliar market. Even so, it is interesting to look at statistics showing growth in the program from March to August of 2008. The number of Mexican carrier participants has increased from 12 to 27, and the number of U.S. carrier participants has doubled from 5 to 10 (who have made 2443 border crossings) even with all the doubts about the staying power of the project. These figures suggest that despite the political barriers, the industry recognizes the efficiencies of single-truck cross-border service – replacing the cumbersome traditional system of transferring goods from long-haul carriers in one country to cross-border “drayage” truckers to long-haul carriers in the other country.
Although the attacks on the demonstration project stalled during the adverse economic developments in late September, renewed attacks can be expected after the election. If Congress and/or the courts do snuff out the demonstration project, the traditional cross-border trucking system will be enshrined along with all of its adverse impacts on traffic flow and air quality at the border crossings. But “safety” advocates will not achieve their objective of keeping Mexican trucks out of the U.S. Ironically, cross-border operations will continue not only by “drayage” trucks, but by U.S.-owned truck fleets based in Mexico, by Mexican carriers holding pre-NAFTA “grandfather” rights in the U.S., and by Mexican carriers transiting the U.S. to and from Canada. None of these trucks are subject to the intense safety scrutiny that has accompanied the demonstration project.
Also being ignored by project opponents is a decision issued in 2001 by a NAFTA dispute-resolution panel. It found that the U.S. prohibition on Mexican truck access violated the terms of the Agreement, and could subject the U.S. to billions of dollars in retaliatory tariffs and other damages if Mexico should decide to exercise those remedies. On top of that, the national association for the Mexican trucking industry has initiated another NAFTA complaint proceeding against the U.S. on behalf of its members.
It remains to be seen whether future deliberations on U.S.-Mexico cross-border trucking will be any more rational than what we have witnessed so far.
Editor’s note: Mark Andrews (mark.andrews@strasburger.com ) is the Partner-in-Charge of Strasburger’s Washington, D.C. office, a co-leader of the firm’s Transportation & Logistics practice team, and a member of the firm’s International practice team. He can be reached at 202.742.8601.
By Kenneth E. Siegel
U.S. Customs and Border Protection (CBP) recently announced that it will permit Third Party Logistics Providers (3PLs) meeting certain criteria to enroll in the Customs-Trade Partnership Against Terrorism (C-TPAT) program starting in January 2009. Although CBP purports to be following a Congressional mandate in section 212 of the SAFE Ports Act (Public Law 109-447, enacted October 13, 2006), a close review of the announcement indicates that few additional providers of logistics services, if any at all, will be able to meet the 3PL eligibility criteria. In order to be eligible for participation in the C-TPAT program, the 3PL must:
- Be directly involved in the handling and management of the cargo throughout the international supply chain, from the point of loading of trucks (or stuffing of containers) up to the first U.S. port of arrival. CBP has indicated that non-asset-based 3PLs who perform duties such as quoting, booking, routing, and auditing but do not own warehousing facilities, vehicles, aircraft, or any other transportation assets, will be excluded from C-TPAT enrollment.
- Manage and execute logistics functions using its own transportation, consolidation and/or warehousing assets and resources, on behalf of the client company.
- Not allow subcontracting of service beyond a second party other than to other C-TPAT members. CBP does not allow the practice of "double brokering", that is, the 3PL may contract with a service provider, but may not allow that contractor to further subcontract the actual provision of this service.
- Be licensed and/or bonded by the Federal Maritime Commission, Transportation Security Administration, U.S. Customs and Border Protection, or the Department of Transportation (Federal Motor Carrier Safety Administration). Note that a 3PL acting as an inland transportation broker would not be subject to any such licensing or bonding requirement unless it is domiciled in the U.S.
- Maintain a staffed office within the United States.
Although CBP has taken several years to develop these requirements, the final product appears to have made little if any change in the scope of the C-TPAT program and perhaps to have actually restricted eligibility to participate in the program. The traditional non-asset-operating broker does not qualify for eligibility in C-TPAT, even if it controls the selection of carriers transporting goods into the U.S. Further, since the C-TPAT program is intended to provide increased security for the supply chain of goods being imported into the United States, it is difficult to understand the relevance of the requirements that the Logistics Provider must be licensed by a U.S. regulatory agency and maintain a staffed office in the U.S. Shouldn’t the focus of the program be on how 3PLs will ensure supply chain security before the goods are imported into the U.S., rather than afterward? These requirements appear to disqualify Canadian and Mexican domiciled logistics companies that would otherwise be eligible to participate in C-TPAT, and be in the best possible position to advance the objectives of C-TPAT with regard to securing the land borders of the U.S. The requirement for a staffed office in the U.S. would also appear to violate the terms of NAFTA. Finally, most of the 3PLs that could meet CBP's new requirements were already eligible to participate in C-TPAT as motor carriers, freight forwarders or NVOCCs. The inclusion of the licensing and U.S. staffed office requirements may actually restrict the eligibility of foreign based logistics companies that would otherwise qualify in one of these other categories.
-- Business Partner Requirements
1. Service provider screening and selection
2. Customer screening
-- Security procedures
-- Container/Trailer Inspection, Seals, Storage, Security (where applicable)
-- Physical Security and Access Controls
-- Procedural Security
1. Document processing
2. Manifesting
3. Shipping & receiving
4. Handling of Discrepancies
-- Information Technology Security
-- Security Training and Threat Awareness
If you have any questions or need assistance in preparing a C-TPAT application as a 3PL, please contact Ken Siegel at:
Strasburger & Price, LLP
1800 "K" Street, N.W. Suite 301
Washington, D.C. 20006
General: 202.742.8600
Direct: 202.742.8602
Fax: 202.742.8692
Editor’s note: Ken Siegel is of counsel to Strasburger in its Washington, DC office, and is a member of the firm’s Transportation & Logistics and International practice teams.
By Kenneth E. Siegel
The Transportation Worker Identification Credential Card (TWIC), a biometric security credential, will soon be required for all personnel, including truck drivers, who need unescorted access to secure areas of maritime or inland-waterway ports around the country. The first ports to require compliance with TWIC will be the New England ports. The compliance deadline for New England required commercial truckers to have the TWIC card by October 15, 2008. See chart below for compliance dates in other ports.
Individuals meeting TWIC eligibility requirements will be issued a tamper-resistant credential containing the worker's biometric data (fingerprint template), allowing for a positive link between the card and the individual. Compliance dates for possessing TWIC cards vary by Captain of the Port (COTP) zone, but again—New England ports’ compliance deadline required commercial truckers to have the TWIC card by October 15, 2008.
The “implementation” of the TWIC program at this time will involve a manual inspection of the individual card, comparing the card picture with the party presenting the card and inspecting the card for any evidence of tampering. The specifications for electronic card “readers” have not yet been developed. TSA is still involved in “pilot” programs with respect to developing acceptable reader technology, and must conduct a public rulemaking before adopting a specific technology. For now, and for the apparent near future, the TWIC card is merely a very expensive picture ID duplicating other ID programs such as the hazardous materials endorsement on a commercial drivers' license or a merchant mariners' card.
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Date
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COTP Zone(s)
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October 15, 2008
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Northern New England, Boston,
Southeastern New England
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October 31, 2008
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Buffalo, Duluth, Detroit, Lake Michigan, Sault Ste. Marie
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November 28, 2008
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Corpus Christi, Port Arthur, North Carolina, Cape Fear River
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December 01, 2008
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Long Island Sound, Charleston
Savannah, Jacksonville
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December 30, 2008
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Baltimore, Delaware Bay, Mobile,
Pittsburgh, Ohio Valley, Lower Mississippi River, San Diego
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January 13, 2009
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Hampton Roads, Morgan City,
New Orleans, Upper Mississippi River
Miami, Key West, St. Petersburg
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February 12, 2009
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Honolulu, South East Alaska
Prince William Sound, Western Alaska
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February 2009
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Puget Sound, Portland (OR),
San Francisco Bay
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March - April 2009
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New York, Guam, Houston/Galveston
Los Angeles/Long Beach, San Juan
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Federal Register notice will be provided at least 90 days before each port implementation date. Implementation dates may be revised depending on the port’s readiness to implement the program. For further information about TWIC, visit www.tsa.gov\twic or contact Maurine Fanguy, TWIC Program Manager, Transportation Security Administration, at (571) 227-3741 or e-mail her at maurine.fanguy@dhs.gov.
Editor’s note: Ken Siegel (Kenneth.siegel@strasburger.com ) is of counsel to Strasburger in its Washington, DC office. He can be reached at (202) 742-8602.
*The Export Compliance breakfast seminar scheduled for September 17 has been postponed due to Hurricane Ike and will be re-scheduled in the coming months.
Export compliance professionals in Houston, Texas are invited to attend an Export Compliance breakfast seminar on September 17, 2008 that is sponsored and presented by Kewill Trade & Logistics and Strasburger & Price, LLP. The program will be held from 9 a.m. to noon at Oracle USA's office in downtown Houston.
This program will feature a presentation by Strasburger partner Douglas N. Jacobson on Hot Topics in Export Controls Compliance and Enforcement, an overview of Kewill Trade & Logistics solutions presented by John McGurk, and a round table discussion of compliance issues facing U.S. exporters today.
The topics that will be covered include:
• The Newly Issued Mandatory AES Regulation
• IEEPA Enhancement Act and Export Enforcement Update
• Deemed Export Advisory Committee's Impact on the "Deemed Export" Rule
• Merger and Acquisition Due Diligence: Reviewing Compliance With Export Controls and Sanctions Laws
• Elements of Effective Export Compliance Programs
For more information and to register, see the following site: www.tradepointsystems.com/marketing/breakfast/houston.html
By Mark Andrews, Doug Jacobson and Laura Martino
Earlier this year, a Minnesota company was hit with $800,000 in criminal and civil penalties for omitting certain facts in license applications submitted to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) for the export of seismic testing equipment to India. These penalties were assessed for violations of the Export Administration Regulations (EAR), which impose licensing requirements and other controls on the export of controlled goods, software and technology. Last year, the maximum penalty would have been $122,000 for the same infractions.
The increased penalties resulted from the enactment of the International Emergency Economic Powers Enhancement Act (“IEEPA Enhancement Act”) on October 16, 2007, which raised the maximum civil penalty from $50,000 per violation to the greater of $250,000, or twice the amount of the transaction that is the basis of the violation.1 The law also raised the maximum criminal penalty for violations of U.S. export control laws from $50,000 to $1,000,000 and imposed a maximum jail sentence of 20 years.
The U.S. government has signaled that it will pursue a wide range of violations of U.S. export laws with greater vigor than ever before. In addition to bringing more criminal cases for export control violations, the government has indicated that it will start enforcing even relatively minor violations of export laws, such as late or inaccurate filing of export data required by the U.S. Census Bureau. In response to this enforcement crackdown, companies can prevent violations of export control laws and reduce the risk of exposure to the enhanced export penalties by reviewing, updating and improving their export compliance programs.
IEEPA Enhancement Act
The dramatic increase in potential civil and criminal penalties under the IEEPA Enhancement Act marks a major change in the enforcement landscape for companies involved in U.S. export transactions. The new IEEPA penalties apply not only to EAR violations detected by BIS, but also to various economic sanctions programs established and enforced by the Office of Foreign Assets Control (OFAC).
When IEEPA was originally passed in 1977, the maximum civil penalty was only $10,000 per violation. Other than an inflation adjustment raising the maximum penalty amount to $11,000, the first time that export penalties were increased was in 2005, when the civil penalties were raised to a maximum of $50,000 per violation.2 In the belief that even this amount was insufficient to deter violations of export control laws, BIS and other agencies involved in export enforcement pressed Congress to increase the penalties. The result of this effort was the IEEPA Enhancement Act with its $250,000 maximum for civil penalties and escalation of criminal penalties. Even after this latest legislation, BIS is still seeking even higher penalties. A bill now pending in Congress, the Export Enforcement Act (S. 2000), would increase the maximum civil penalties for violating export control laws to $500,000 per violation and increase the criminal penalties on companies violating export laws to the greater of $5 million or ten times the value of the exports involved.
Exporters should also be aware that IEEPA Enhancement Act civil penalties may be applied retroactively. Under current law, BIS and OFAC have the discretion to apply the increased civil penalties on violations that occurred prior to the October 16, 2007 effective date of the IEEPA Enhancement Act. For example, a company planning to file a voluntary self-disclosure for a violation that occurred prior to that effective date could be subject to the increased penalties.
Stepped-Up Justice Department Export Enforcement
Other departments of the U.S. government, including the U.S. Department of Justice (DOJ), have stepped up enforcement of criminal penalties for violating export control laws. Last year, DOJ and several partner agencies launched the Export Enforcement Initiative. Led by DOJ’s National Security Division, the initiative is now training law enforcement officers, federal prosecutors and others to work in task forces to investigate and prosecute illegal exports and technology transfers. As a result of the new initiative, U.S. attorneys are better equipped to prosecute criminal cases involving export controls, which has resulted in more such cases being brought. For example, according to DOJ statistics in fiscal year 2007 there was more than a 50 percent increase in defendants charged with violating the primary export control laws compared to the previous year.
Recent Cases
While only a small number of cases brought under the enhanced penalty provisions of the IEEPA Enhancement Act have been closed to date, it is clear that BIS and DOJ are moving aggressively to use their new powers, oftentimes pursuing parallel civil and criminal cases involving the same export violations.
For example, BIS assessed increased IEEPA penalties in the amount of $400,000 against MTS Systems Corporation, the Minnesota company noted above. BIS charged MTS Systems with violating U.S. export law because its application to export seismic testing equipment to India failed to mention that the equipment would be used to test nuclear power plant components. The company also failed to mention in a second export license application that a U.S. restricted party in India provided funding for the sale or the possibility of a nuclear end-use. For each violation, BIS assessed a $200,000 civil penalty – 80 percent of the maximum under the IEEPA Enhancement Act.
In a companion criminal case, DOJ obtained a sentence of two years probation and a criminal fine of $400,000 against the same company for the same misrepresentations discussed above in its license applications. The plea agreement also required MTS Systems to implement and maintain a model export compliance program and sponsor an export compliance conference. This case is just one example of DOJ’s expanded role in export enforcement.
As part of a similar multi-pronged attack, BIS assessed a civil penalty of $132,791 against Engineering Dynamics, Inc. for violating export laws. The company was charged with conspiring with its agent in Brazil to sell Iran a U.S.-origin engineering software program for designing offshore oil and gas structures. The civil penalty assessed was equivalent to 53 percent of the maximum penalty under the IEEPA Enhancement Act. Furthermore, OFAC imposed an additional penalty of $132,791 on Engineering Dynamics for violating OFAC’s Iranian Transactions Regulations.
These civil penalties were supplemented with criminal penalties assessed against Engineering Dynamics’ corporate owners and officers and the co-conspirator in Brazil for the same transaction. In the criminal case, DOJ obtained a guilty plea by two owners and officers of the company for one count of conspiracy to violate U.S. export laws by exporting engineering software to Iran through Brazil without proper government authority. Each of these defendants will face a maximum of five years in prison and a $250,000 fine when they are sentenced in August 2008.3 The Brazilian co-conspirator was recently sentenced to 13 months in prison, while also being ordered to pay $100,000 in fines and to forfeit more than $109,000 in profits for his role in the prohibited exports to Iran.
Other Enforcement Initiatives
Another area of stepped up enforcement is the mandatory filing of Electronic Export Information (EEI), previously known as Shipper’s Export Declarations (SEDs). The U.S. Census Bureau recently issued a new rule requiring exporters to submit export data electronically on the Automated Export System (AES) prior to exporting goods from the U.S.4 The new regulation will go into effect on July 2, 2008 but will not be enforced until September 30, 2008. It imposes criminal penalties for knowingly failing to file EEI or for knowingly submitting false export information, while increasing civil penalties for filing mistakes or late filings. This new regulatory scheme transforms what used to be routine paperwork requirements into a new area for export enforcement.
Previously, the Census Bureau allowed exporters to submit export data either by filing paper SEDs or by transmitting the data electronically. As a result of the new rule, exporters, freight forwarders and carriers may only file such data electronically and must do so within stated time frames prior to exportation. The time frames depend on the mode of transportation used to carry the goods out of the U.S. For example, exporters must file EEI for ocean cargo with the exporting carrier 24 hours prior to loading of the cargo on the vessel at the port of export, while EEI for truck shipments must be filed one hour prior to arrival of the outbound truck at the U.S. border crossing.
Under the new regulation, exporters, forwarding agents and carriers are subject to civil penalties of $1,100 per day or a maximum of $10,000 per violation for filing failures or delays. Exporters may also face criminal penalties of up to $10,000 or up to five years imprisonment (or both) for knowingly submitting false or misleading export information through AES.5
The Census Bureau has indicated that BIS and the Department of Homeland Security (DHS) – including Customs and Border Protection (CBP) – will have enforcement authority over export violations under the new rules, such as filing errors made via AES. The escalated penalties and enhanced enforcement authority under the new regulation require a new level of due diligence by exporters, freight forwarders and carriers in submitting export data.
Export Compliance Programs
As U.S. export enforcers intensify their enforcement activities, there is a greater need for companies to increase their compliance efforts. An effective internal compliance program can help prevent companies from committing violations of export control laws and regulations, and can also help to substantially reduce penalties when violations occur. According to BIS’s penalty enforcement guidelines, the presence of an effective compliance program is a mitigating factor to which BIS accords “great weight” in determining penalty amounts.
BIS’s Office of Export Enforcement has set out nine specific factors that are considered in assessing whether a compliance program is effective, such as the existence of a customized training program for personnel and management, compliance manuals, centralized oversight, and evaluation plans that prompt remedial measures for violations.6 BIS will also consider such factors as to whether a party’s export compliance program was effective in uncovering a problem (thus suggesting that the program will help prevent further violations), and whether the party has taken steps to correct deficient internal procedures that may have led to the violation.7
Conclusion
The U.S. government now has greater discretion and capacity than ever before to enforce U.S. export laws and to apply higher penalties for export control violations. It is clear that companies having effective compliance programs can reduce their exposure to penalties for export control violations. It is increasingly important, therefore, for companies and their management -- working with export compliance experts as appropriate -- to understand the laws that apply to the export of their products and to enhance their export compliance programs.
1 Pub. L. 96-110, 50 U.S.C. § 1705.
2 USA Patriot Improvement and Reauthorization Act of 2005, Pub. L. 109-177, March 9, 2006.
3 DOJ has agreed not to impose the increased IEEPA criminal penalties retroactively.
4 See Foreign Trade Regulations: Mandatory Automated Export System Filing for All Shipments Requiring Shipper’s Export Declaration Information; Final Rule, 73 Fed. Reg. 31,548 (June 2, 2008).
5 15 CFR § 30.71 (effective July 2, 2008).
6 www.bis.doc.gov/complianceandenforcement/pec_program.pdf.
7 See 15 CFR Part 766, Supplements 1 and 2.
Editor's Note: Mark Andrews is the partner-in-charge of Strasburger’s Washington, D.C. office and a co-leader of the firm’s transportation and logistics practice team. Doug Jacobson is a partner in the Washington, D.C. office of Strasburger & Price, and serves as the practice area leader for the firm's International Trade Compliance team. Laura Martino is an associate in the firm's Washington, D.C. office.
By Ken Siegel
NOTE: This item has been updated with a new posting by Ken Siegel on January 14, 2009.
In 2005, Congress passed a transportation reauthorization measure known as the SAFE, ACCOUNTABLE, FLEXIBLE, EFFICIENT TRANSPORTATION EQUITY ACT: A LEGACY FOR USERS (“SAFETEA-LU”). Two unintended effects of riders to this legislation were:
(1) to make drivers, loaders, and helpers for motor vehicles with gross vehicle ratings (“GVR”) of l0,000 pounds or less subject to the overtime pay requirements of the Fair Labor Standards Act (“FLSA”); and
(2) to exempt interstate motor carriers of property that exclusively operated these small vehicles from the registration (operating license) requirements of the Federal Motor Carrier Safety Administration (“FMCSA”) under 49 U.S.C. §13902.
These unintended consequences resulted from Congress’ redefinition of the term “motor carrier” to mean only those companies that used “commercial motor vehicles” to transport property or passengers. Prior to SAFETEA-LU the term “commercial” was not included in the definition, and a motor carrier meant any party that used a “motor vehicle” to transport property, regardless of the GVR of the vehicle. The term “commercial motor vehicle” (“CMV”) had been defined to include (for most purposes) only trucks with a GVR exceeding 10,000 pounds.
What Congress did not take into account when adopting the revised definition was that 1) the hours of service for drivers and other safety-related employees of “motor carriers” within the jurisdiction of the Secretary of Transportation were exempted from the overtime provisions of FLSA, and 2) that all interstate motor carriers of property (with the historic exceptions of agricultural and other specified commodities) had to obtain an operating license from the FMCSA regardless of the size of the motor vehicles used by the carrier. The redefinition of “motor carrier” meant that the drivers of small trucks not classed as CMVs were no longer subject to the Secretary’s jurisdiction and thus no longer exempt from FLSA, and that any company operating exclusively vehicles with a GVR of 10,000 pounds or less no longer had to obtain an FMCSA operating license.
In a recently enacted law making technical corrections to SAFETEA-LU, Congress has once again redefined the term “motor carrier” so as to restore the pre-2005 status quo on operating licenses but not on overtime pay. Congress has reverted back to the pre-SAFETEA-LU definition of “motor carrier” that included the operation of all motor vehicles, not just CMVs. Thus, companies operating only vehicles with a GVR of five tons or less are once again subject to FMCSA licensing requirements. At the same time, however, Congress codified the application of the FLSA overtime provisions to motor carrier employees who drive (or perform other safety-related functions relating to) those smaller trucks. The wording used by Congress will require further interpretation regarding FLSA coverage of employees who are involved with both the smaller vehicles and CMVs.
Recognizing that most motor carriers operating the smaller vehicles were unaware of the application of the overtime provision when it took effect in 2005, Congress enacted a provision protecting motor carriers from liability for any violations of the overtime provisions occurring for a one year period after the original enactment of SAFETEA-LU.
If you have any questions or would like additional information about this legislation, please contact Ken Siegel at 202.742.8602 or Kenneth.siegel@strasburger.com.
Editor’s note: Ken was intensively involved in the legislative process leading to SAFETEA-LU and the technical corrections bill. He was among the first to point out to the industry how the legislative language ultimately drafted by Congressional staff had unintentionally changed the coverage of federal registration and overtime requirements for motor carriers. The technical corrections bill was signed by the President on June 5, 2008 and this provision took effect immediately.
By Mark Andrews
Welcome to Strasburger’s new Logistics Blog. As one of my first postings, I'd like to share a few observations about the Supreme Court's landmark decision issued February 20, 2008 in Rowe v. New Hampshire Motor Transport Ass’n (2008 U.S. LEXIS 2010).
As you probably have read by now, the Court unanimously held that the federal preemption provisions of the ICC Termination Act (ICCTA) precluded Maine from regulating the tobacco delivery procedures used by motor carriers. The most widely reported basis for this decision was that States cannot force motor carriers to provide particular services that the marketplace doesn't demand and carriers don't want to offer (see 2008 U.S. LEXIS at 2010 *13). Behind the headlines (and headnotes), however, the Court made numerous other points that surface transportation providers can use to their advantage on a wide range of state regulatory issues. Here are some implications of Rowe that few observers seem to have noticed:
1. ICCTA preemption is not limited to areas of "traditional" economic regulation, such as the pricing, service and route controls formerly enforced by the old Interstate Commerce Commission (id. at *17). This was an implicit rebuff to a line of Ninth Circuit cases that have refused to enforce ICCTA preemption against state regulations that indirectly affected trucking prices and service, such as minimum wage orders and California's unique "meal break" rules. In all likelihood, the trucking industry will use this holding to attack the "clean air" trucking concession rules proposed by the Port of Los Angeles, if the port makes good on its threat to limit concessions to carriers using employee drivers (not owner-operators).
2. Professed good intentions will not save state restrictions that violate the plain preemptive language of ICCTA (id. at **21-22). This holding would appear applicable to the stated environmental goals of the Port of Los Angeles, just as it covers Maine's expressed desire to control underage tobacco use.
3. "Governmental commands" that carriers provide particular services are particularly unacceptable when "the State seeks to enlist the motor carrier operators as allies in its enforcement efforts" (id. at **13, 20). This holding appears to confirm the position I have argued on behalf of several clients when specialized "bounty hunter" auditing firms attempted to make them undergo multistate unclaimed property audits under the theory that any unapplied transportation revenues should be reported and ultimately escheated to the States. These bounty hunters are still around, and still attacking large carriers of all modes. The forced-enlistment language of Rowe should be very helpful if these people come after you.
4. A "state regulatory patchwork" of conflicting rules is especially "inconsistent with Congress' major legislative effort to leave [service-related] decisions, where federally unregulated, to the competitive marketplace" (id. at **15-16). The "patchwork" argument clearly applies to state unclaimed-property rules, among others.
5. Preemption should apply if a state requirement has a "significant impact" on "essential details of the carriage itself' (id. at **11, 16). The Court did not explicitly equate "significant impact" to significant economic impact, and instead held that significant governmentally-commanded services were enough to invoke preemption. The Court probably took this approach because the extent of the economic burden of Maine's rules was disputed on the record before it. On reflection, I think the Court actually did the industry a favor by declining to transform every preemption case into a battleground for dueling economic experts. In situations where the economic burden of the state rules is undisputed, the industry still can argue that the case for preemption is even stronger than in Rowe.
6. Finally, please recall that the expanded scope of preemption after Rowe is not limited to motor carriers. The statutory provision construed in Rowe (49 USC 14501(c)) extends as well to transportation brokers and surface freight forwarders, which often are "hats" worn by third-party logistics providers (3PLs). One of the corollaries of ICCTA preemption is that state-law theories of liability (arguably including negligent selection of underlying carriers) are preempted except to the extent that the transportation provider's contract with a customer voluntarily assumes a particular duty (such as a duty of care with regard to selection of carriers). See American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995). It would be appropriate for 3PLs to review their standard customer contract forms (if any) with this principle in mind.
If particular state-law issues are on your radar screen at the moment (for example, proposed restrictions on inner-city delivery times?), I would be happy to take a closer look at the potential for preemption in light of Rowe. Please feel free to contact me with questions about any of the foregoing points. My telephone is 202.742.8601 and my e-mail is mark.andrews@strasburger.com . Thanks and best regards. Editor’s Note: Mark Andrews is the partner-in-charge of Strasburger’s Washington, D.C. office and a co-leader of the firm’s transportation and logistics practice team.
By Ken Siegel
The Pipeline and Hazardous Materials Safety Administration within the U.S. Department of Transportation (“PHMSA”) has amended its hazardous materials table to add new descriptions for gasoline/ethanol fuel blends based on the percentage mixture of the two substances. See Gasoline/Ethanol Fuel Blends ([49 CFR] §§ 171.14, 172.101, 172.102, 172.336), 73 F.R. 4699 (January 28, 2008). Each of these gasoline/ethanol blends poses a distinct hazard and requires different responses by emergency response personnel. In addition to providing each blend with a unique description in the PHMSA hazardous materials table, the agency will make appropriate revisions to its hazardous materials communications requirements, including its rules on the labeling and placarding of shipments. For example, multi-compartment tank cars and trucks will now be required to be placarded for each blend they contain. These new rules do not go into effect for two years, but voluntary compliance is permitted as of January 28, 2008.
Once the new rule is in effect, a multi-compartment cargo tank trailer or rail tank car containing an alcohol-fuel blend in one compartment, together with petroleum distillate fuels such as gasoline in another compartment, must be marked with the new identification number applicable to the fuel blend, in addition to the existing identification number of the petroleum distillate fuel. The example provided by PHMSA in the Federal Register notice was that, under current requirements, a compartmented cargo tank containing Gasoline, UN1203; Diesel Fuel, UN1993; Flammable liquid, n.o.s. (E85), UN1993; and Denatured Alcohol, NA1987, must display identification numbers “1203,” “1993” (for the diesel and the E85), and “1987.” After the effective date of this final rule, a compartmented cargo tank carrying the same materials will be required to display identification numbers “1203,” “1993” (for the diesel), “3475” (for the E85), and “1987.” In this scenario, the only modification is replacement of the identification number “1993” (for the E85) with new identification number “3475” for gasoline and alcohol blends containing more than 10% alcohol.
Among the additional revisions made by PHMSA are the following:
- To maintain consistency with the current requirements and to reduce potential compliance costs, PHMSA is allowing transportation of ethanol and gasoline blends containing no more than 5 percent petroleum product, and described as “Denatured alcohol” or “Alcohols, n.o.s.,” to continue being marked with the existing identification number “1987” instead of “3475.
- Although PHMSA is not introducing a new shipping description that corresponds to the identification number “1987”, it states that the proper shipping names “Alcohols, n.o.s., UN1987” and “Denatured alcohol, NA1987” are acceptable alternatives to the new proper shipping name “Ethanol and gasoline mixture or Ethanol and motor spirit mixture or Ethanol and petrol mixture, with more than 10% ethanol, UN3475” for ethanol and gasoline mixtures containing not more than 5 percent petroleum products.
- In relation to adding the new proper shipping name quoted above, PHMSA is adding a new Special Provision 177 in 49 CFR § 172.102 to specify the proper applicability of this new description.
- To correspond with the new shipping descriptions in this final rule, PHMSA is also revising the entry for “Gasohol gasoline mixed with ethyl alcohol, with not more than 20 percent alcohol, 3, NA1203, II” to limit this entry to gasoline blends with not more than 10 percent alcohol.
For further information on the above changes and other revisions to these highly technical rules, please contact Kenneth E. Siegel in the Washington, D.C. office of Strasburger & Price. Ken may be reached at 202.742.8602 or kenneth.siegel@strasburger.com.
Editor’s Note: Ken Siegel is of counsel is Strasburger's Washington, D.C. office.
By Mark Andrews and Laura Martino
The Certified Cargo Screening Program (“CCSP”) is a voluntary program that allows certified manufacturers, exporters and forwarders to screen air cargo before it is shipped. The Transportation Security Administration (“TSA”) is now deploying the CCSP in nine pilot cities— Atlanta, Chicago, Dallas, Los Angeles, Miami, New York, Philadelphia, San Francisco and Seattle. By the end of 2008, TSA expects to set up ten to fifteen facilities and deploy TSA Field Teams in each of the selected cities.
The CCSP is intended to ease compliance with the Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 (the “9/11 Commission Act”), which requires 100 percent screening of cargo carried on passenger aircraft by August 2010. Currently, air carriers perform most cargo screening. As a result of the increased screening required by the 9/11 Commission Act, much of the burden of cargo screening is likely to shift from air carriers to manufacturing and freight forwarding facilities.
The 9/11 Commission Act requires air cargo screening to reach the same level of security as screening of passenger checked baggage. This means that each individual item of air freight will be subject to some type of screening. To meet the 100 percent screening requirement, CCSP will enable certain facilities to voluntarily screen their own cargo before delivering it to the freight forwarder or air carrier. Eligible facilities must first become a Certified Cargo Screening Facility (“CCSF”). Manufacturers, 3PLs, warehouses and distribution centers may apply to TSA to become a CCSF if their facility directly tenders cargo to a freight forwarder or air carrier. Freight forwarders may also apply.
The benefit of becoming a CCSF is that manufacturers and exporters may screen cargo early in the air cargo supply chain. Under the program, CCSFs are able to screen their own cargo on their own schedule before acceptance at the freight forwarder or air carrier, and without potential damage from invasive screening by the airlines. Shippers using CCSFs may also avoid cargo screening fees. Although CCSP is a voluntary program, the only alternative available to shippers of air freight is to rely on airline screening. However, due to the increased security standard imposed by the 9/11 Commission Act, airline screening of cargo is expected to cause significant delays.
TSA has established “entity standards” for CCSFs. These standards require stringent security measures at participating facilities and throughout the supply chain. For example, CCSFs are required to permit onsite validations and periodic inspections by TSA, and to screen cargo at the piece level. CCSFs must also ensure cargo integrity through chain of custody measures. The following is a summary of the security standards CCSFs must maintain in order to participate in CCSP:
- CCSFs must set forth procedures to prevent unauthorized entry to facilities where certified cargo is screened, prepared, and stored.
- CCSFs must control employees, contractors and visitors and protect company assets.
- CCSFs must screen prospective employees and contractors to TSA standards and periodically check current employees having continued access to passenger air cargo.
- Certified facilities must erect physical barriers that guard cargo handling and storage facilities against unauthorized access.
- CCSF must establish password protection of user accounts on automated systems, and be able to identify improper access.
- Certified facilities must allow initial and ongoing validations by TSA.
- CCSFs and supply chain participants must ensure that data is documented and accompanies each shipment.
- CCSFs and supply chain participants must apply tamper evident devices to cargo packaging prior to departure.
- Documentation must be authenticated upon receipt at each processing point in the chain of custody.
Shippers and carriers should note that the type of screening required for air cargo is left to TSA’s discretion in the 9/11 Commission Act, as long as the level of security is commensurate to that for passenger baggage. Because the 9/11 Commission Act requires TSA to publish implementing regulations in a final or interim final rule, TSA will likely propose a full regulatory framework for cargo screening over and above the multi-city pilot program in the near future.
Editor's Note: Mark Andrews is the partner-in-charge of Strasburger’s Washington, D.C. office and a co-leader of the firm’s transportation and logistics practice team. Laura Martino is an associate in the firm's Washington, D.C. office.
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