U.S. Customs & Border Protection’s (“CBP”) anticipated requirement for importers to provide additional data elements in advance of cargo departing a foreign port is not a new concept for the trade, however, the proposed 10+2 data elements will certainly raise the bar on required coordination prior to shipment.

Background

In the months immediately following 9/11, former Commissioner Robert Bonner made it very clear that CBP had a firm intent to “push back the borders” when it came to securing the homeland. It is anticipated that receiving advance electronic cargo information from all transportation modes will allow CBP to identify and intercept high-risk cargo before it enters the commerce of the U.S. (or departs and cannot be recovered). By identifying high-risk cargo earlier, the movement of low-risk imports and exports will be facilitated.

In addition to measures such as the Container Security Initiative and the Trade Act of 2002 (“The 24-Hour Rule”), CBP has been working with the trade for the past two years through the Trade Support Network (“TSN”) to identify what additional data elements are needed for effective targeting to increase border security. The Advance Trade Date Initiative (“ATDI”), a pilot program developed as a result of these efforts, considered dozens of possible data elements. Further efforts by CBP and the TSN Advance Commercial Shipment Subcommittee narrowed those data elements down to a more manageable number — what is now referred to as the “10+2” Data Elements.

SAFE Port Act

In accordance with the SAFE Port Act, signed by President Bush on October 13, 2006, CBP was assigned the task of improving the targeting of high-risk cargo destined for the U.S.. As instructed by Section 203 of the Act, CBP has put together the additional data elements that importers will be required to provide to CBP before cargo is loaded onto ships at foreign ports (“10+2”).

It should be noted, that the 10+2 data elements are not the result of the SAFE Port Act. They have been under development for the past couple years.

The Act simply codifies what CBP was planning to mandate in 2007.

Currently, CBP uses the data elements established by the 24-Hour Rule to analyze the risk of a particular shipment before cargo is loaded onto the vessel. However, Congress agreed that possessing more complete advance shipment data would enable CBP to conduct more effective and vigorous cargo risk assessments.

Rather than have the additional data elements be voluntary (as with ATDI), Congress will be making such additional data reporting a legal requirement Accordingly, CBP has developed a draft proposal, in conjunction with TSN and the Departmental Advisory Committee on Commercial Operations of Customs and Border Protection (“COAC”), to assist in the development of regulations on this topic.

Proposed Data Elements

Once the regulations take effect, importers will be required to provide the following additional data elements to CBP prior to vessel loading, in addition to those data elements required under the 24-Hour Rule:

1. Manufacturer name and address

2. Seller name and address

3. Container stuffing location

4. Consolidator name and address

5. Buyer name and address

6. Ship to name and address

7. Importer of record number

8. Consignee number

9. Country of origin of the goods

10. Commodity Harmonized Tariff Schedule Number (to the 6th digit)

Moreover, ocean carriers will be required to provide two additional data sets to CBP:

1. Vessel stow plan

2. Container status message

The purpose of the vessel stow plan is to transmit information to CBP regarding the containers that are loaded aboard a vessel. This information must be provided to CBP no later than 48 hours after the vessel’s departure from the last foreign port.

The container status message information can be used to report change in status of containers (e.g., empty or full) and container movements (e.g., loading and discharge of vessel). The data in these messages will give CBP additional insight into who has custody of the containers before and after their arrival in the United States, which is anticipated to contribute to U.S. security.

The information that CBP is seeking from importers (and/or their “agents”) and ocean carriers are proposed to be transmitted via the Automated Broker Interface (“ABI”) and the Automated Manifest System (“AMS”).

Considerations

Although the data elements CBP is seeking appear straightforward, the intricacies of international trade can complicate what may otherwise seem to be simple information - especially when it will be required 24 hours prior to loading at the foreign port. Consider the following situations:

• Who will provide the manufacturer’s name and address if the importer is buying through a selling agent overseas who wants to keep that information confidential? Further complications exist for specific commodities such as textiles - e.g., will the manufacturer be the mill or another location where further processing takes place?

• How will data elements be handled for goods that are sold while on the water (buyer name/address not known in advance)?

• Who will provide consolidator name/address and container stuffing location for LCL cargo that moves on back-to-back NVOCC co-load agreements?

• How will exceptions be handled (e.g., used machinery, spare parts, U.S. Goods Returned)?

• Who will be the ultimate consignee in situations where goods are sold through a third party and ultimate consignee is kept confidential?

• Will the “definitions” of the data elements be consistent with definitions used by other government agencies (e.g., ITDS), as well as for other customs business?

• What will be the penalties for non-compliance and who will be the “responsible party”?

The above are just a few of the many questions that must still be answered as CBP, COAC and TSN continue their discussions on this topic.

To complicate matters, consideration must be given for how this CBP initiative will impact efforts at the World Customs Organization (“WCO”). The WCO SAFE Framework includes 25 data elements with regard to “security” which have been adopted by the WCO members and are intended to provide consistency among the member countries - something that the trade has insisted is critical for them to operate effectively in a global arena. Unfortunately, however, 8 of the 10 data elements in CBP’s 10+2 data set are not in the WCO data set. CBP has indicated that, in April 2007, it will submit a proposal for the WCO’s review to add the additional eight data elements to the WCO set. Whether this will open the door for other countries to do the same is yet to be seen. If it does, companies could face varying requirements from country to country at the WCO level, something that the trade has fought hard to avoid.

Conclusion

The SAFE Port Act has provided the vehicle for CBP to move ahead quickly with their requirement for additional advance shipment data elements 24 hours prior to loading at the foreign port. Trade can expect COAC to provide their recommendations to CBP on the proposed data elements by mid-February 2007. It is expected that the TSN subcommittee will also review the COAC recommendations and provide feedback to CBP.

CBP is projected to publish a Notice of Proposed Rulemaking in the Federal Register in early spring of 2007, followed by a public comment period, with the goal of starting phased implementation in the summer of 2007.

With many questions unanswered and CBP looking for workable solutions, it is critical that companies review the proposal and prepare to provide feedback to CBP during the public comment period. There is a strong likelihood that public comment will help shape the final regulation in this particular case. This is especially important for small and midsize enterprises who will find this rule the most challenging to comply with due to the nature of their shipments and the number of parties involved. Failure by trade to provide feedback on the proposed rules could result in regulations that the trade will find difficult at best to comply with.