C. F. Lynch & Associates

Turkeys in the Straw

By Clifford F. Lynch

DC Velocity, October 2003

It probably shouldn’t come as a surprise to anyone that the "strawman" proposals floated by the Bureau of Customs and Border Protection in January were roundly derided as, well, turkeys. The proposals, aimed at tightening security over imports and exports, intended to accomplish with truck, rail and air operations what Customs did with ocean operations a year earlier. Though it apparently slipped the agency’s memory, the ocean rule was derided at the time as "difficult" and "draconian." (That rule, which took effect in December, mandated that importers provide detailed cargo manifests to the agency 24 hours before the freight was loaded on to ships bound for U.S. ports, rather than within two days after the ship’s departure as they had in the past.)

It follows that when Customs introduced its strawman proposal for the other modes, the reaction was both swift and harsh, demonstrating how fragile things made of straw can be. Virtually everyone in the import and export community felt the requirements were too broad and threatened to disrupt efficient supply chains. And they didn’t hesitate to say so.

Their reaction was understandable. Ocean freight doesn’t tend to be time sensitive, but with express air and truck service, for example, minutes count. So it’s no surprise that strawman proposals calling for 12-hour notice in advance of most foreign lading and eight hours in advance of express shipments drew fire. Truckers, for example, pointed out that in the case of just-in-time operations, parts may not even be ordered four hours in advance of when they’re needed on the factory floor, let alone 12. Others were quick to lodge complaints about mandates that would force carriers, brokers, importers and exporters to learn unfamiliar automated systems.

Customs did listen and modified its proposals somewhat. Nevertheless, many import and export firms still are not pleased with the new regulations, which would "require advance information in electronic format on cargo being sent to and from the United States by land, air or sea." More than 125 statements were filed, many suggesting that Customs had deliberately underestimated the financial implications in order to keep the impact figure below the $100 million that would trigger a review by the White House Office of Management and Budget. FedEx has been a particularly vocal opponent; the company has publicly stated that its costs alone would be a "significant portion" of the $100 million. Other objectors include the American Trucking Association, Wal-Mart, General Motors, the Department of Defense and Japan. Grocery manufacturers are particularly concerned because the FDA is proposing similar, but separate, rules.

Still, the flashpoint issue seems to be the requirement that companies submit the data electronically. New technologies will be necessary to accumulate, manage and report shipment information, and many of the affected parties are still struggling with the technology basics.

Homeland Security Secretary Tom Ridge has defended the new rules, saying, "These security measures…are important to the protection of America and the American people. Advance cargo information is essential not only to preventing instruments of terrorism from being shipped into this country, but also to speed the flow of legitimate cargo across our borders."

Nobody denies the need for security regulations (though I’ve often wondered whether someone who’s attempting to smuggle weapons and other contraband into the country would really list them on the shipment manifest). The larger question is how disruptive the rules will be. That will depend on exactly what rules finally become law, how much dislocation is needed for compliance and the stringency of enforcement. Stay tuned.



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