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NCBFAA Customs Committee

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080123 v.1.0<strong>NCBFAA</strong> <strong>Customs</strong> <strong>Committee</strong>draft Meeting Notes – January 19, 2008Westin Mission Hills Resort & Spa71333 Dinah Shore DriveRancho Mirage, CA 92270(760) 328-5955Meeting Room: Rancho<strong>NCBFAA</strong> <strong>Customs</strong> <strong>Committee</strong> RosterVoting Name Position PresentArea 1 Amy Magnus Member NoArea 2 Bill Skinner Member YesArea 3 Ken Bargteil Chairman YesArea 4 Penny Ricas Member NoArea 5 Joe Trulik Member YesArea 6 Gary Ryan Member YesArea 7 Darrell Sekin Member YesArea 8 Neto Roser Member YesArea 9 John Peterson Vice Chairman YesNon-VotingAdvisor Alan Klestadt <strong>Customs</strong> Counsel YesAdvisor Harold Brauner Senior Counselor YesAdvisor Art Litman Senior Counselor YesAdvisor Michael Dugan Senior Counselor NoAutomation Subcommittee Cindy Allen Chairman NoLB&F Subcommittee Chip Bown Chairman NoDrawback Subcommittee Michael Cerny Chairman YesCarrier Best Practices Subcommittee John Hyatt Co-Chairman NoCESAC Representative Stewart Hauser Chairman NoPresident Mary Jo Muoio ex-Officio YesChairman of the Board Federico Zuniga ex-Officio Yes08:30 – Call to orderOpening Remarks and IntroductionsISF NPRM – A.KlestadtBroker Self Assessment – A.LitmanEdit Lite – A.LitmanRLF Uniformity – J.PetersonAnnual Conference – K.Bargteil11:30 – AdjournMeeting AgendaPage 1 of 1


080123 v.1.0NOTE: The Chairman wishes to thank John Peterson, Bill Skinner and Gary Ryan forcontributing the meeting notes on which this report is based.08:30 – Call to orderOpening Remarks and Introductions (K. Bargteil)Welcoming remarks and introductions were made. Note taking responsibilities wereaccepted. A sign-in sheet was circulated. Ken Bargteil advised the <strong>Committee</strong> that one of thematters of interest to the European Anti-competitiveness Commission’s investigation ofcertain global logistics companies involves discussions during a trade association meeting.The Chairman asked <strong>Customs</strong> Counsel to guide member comments away from anyanticompetitive communication. Alan Klestadt indicated that talk of pricing, services,markets, and profit strategies cross the line. The <strong>Customs</strong> <strong>Committee</strong> should focus on issuesof policy, implementation and process, and technical matters. Market forces must be left toresolve business concerns. Especially with new issues like the Importer Security Filing.ISF NPRM (A. Klestadt)The much anticipated “10+2” ISF NPRM (cit. 73 FR 90) clearly envisions a pivotal rolefor customs brokers in achieving CBP’s goal of enhancing automated targeting whileminimizing any disruption of the supply chain. It also raises many questions and concerns.Alan Klestadt reported that more than 150 members participated in the <strong>NCBFAA</strong> 10+2webinar on Wednesday, January 16 th , which provided a process overview and practicalunderstanding based on a reading of the NPRM and what had been learned through <strong>NCBFAA</strong>engagement with CBP on this matter. The webinar did not venture into judgments on theproposed rule itself. It was reported that a good deal of deliberation and discussion will benecessary in order for the <strong>NCBFAA</strong> “10 + 2” Work Group to resolve basic policy beforeAssociation comments on the proposed rule can be drafted.Alan Klestadt advised the <strong>Committee</strong> that comments received from webinar participantswere fairly specific, and focused on how the Importer Security Filing (ISF) will work;specifically, how will it effect selectivity; who will have visibility; will there be accessthrough the ACE secure account portal; will the standard power of attorney forms providenecessary authority for preparation and filing the ISF? The webinar will be posted online atwww.ncbfaa.org.Ken Bargteil asked all meeting attendees to read the NPRM very carefully and submitcomments to Alan Klestadt with copies to John Peterson and the Chairman prior to February2 nd for compilation and consideration for inclusion in the <strong>NCBFAA</strong> comments. Mary JoMuoio advised that the <strong>NCBFAA</strong> Forwarding and NVOCC <strong>Committee</strong>s will also compilemember comments in support of the “10 + 2” Work Group. <strong>NCBFAA</strong> joined AAEI in itsrequest for an extension of time for comment. While we have a problem evaluating theproposal without record layouts, and can’t be sure what role, if any, CBP envisions for thetrade in working through those critical elements, restrictions on CBP public communicationsduring the comment period are so burdensome that we can’t get any insight into this issue.Ken Bargteil reported that during a teleconference held by CBP with the TSN TradeAmbassadors and Leadership Council he addressed our concerns regarding both the lack ofrecord layouts for filing the ISF and reporting the data elements, as well as the inadequacy inthis case of the normal 60-day lead time for the trade to effect programming changesPage 2 of 2


080123 v.1.0following CBP announcement of a systems change. With respect to the former issue, CBPsaid that they would welcome comments that extended beyond the four corners of the NPRM,including comments on such things as the record layouts. With respect to the latter, acommitment was extracted from Assistant Commissioner for the Office of InternationalAffairs and Trade Relations, Michael Mullen that the trade would have sufficient time toprogram for “10 + 2”, and not be expected to complete that task in 60 days. AssistantCommissioner Mullen indicated that the lead time would be at least 120 days.Alan Klestadt recommended that the <strong>Customs</strong> <strong>Committee</strong> focus on the broad policy issuesfor the time remaining on the agenda for this issue. The <strong>Customs</strong> <strong>Committee</strong> should form aconsensus on which basis drafting of comments on the NPRM can proceed. Alan Klestadtemphasized his belief that this is a watershed moment for <strong>NCBFAA</strong> and its members.Darrell Sekin said that <strong>NCBFAA</strong> is uniquely equipped to provide the “how to” answersfor “10 + 2”, and that if we can find a way to demonstrate that capability our members will bethe filers. The opportunity to be the “go to” guys for importers on this requirement is withinour grasp. Ken Bargteil observed that there was nothing in NPRM on “No Load” messages.Since “No Load” as a consequence of failure to make a complete and timely filing in properform had been a constant feature of discussions with the trade preparatory to the NPRM, theabsence of any mention of it is an interesting and puzzling development.Cary Weinberg inquired whether the <strong>Committee</strong> hadn’t concluded that the preparation andfiling of a “10 + 2” record was customs business. Alan Klestadt replied that makingjudgments and filings involving classification, valuation and admissibility is customsbusiness. Ken Bargteil said that he had been on both sides of this issue as the analysisproceeded and different arguments emerged. Alan Klestadt has taken both sides as well. Theconstant has been that securing the supply chain is the goal. Dan Meylor said that he thoughtthat a “No Load” was a more appropriate consequence for failure to comply with the “10 + 2”rule. He suggested that if there was no filing 24-hours prior to loading the shipment shouldnot load. If evidence for a false filing came to light after arrival, then a monetary penaltywould make sense. If security is the issue, then CBP should do their job and issue “No Load”messages when appropriate.Ken Bargteil speculated that CBP could not build a system to provide for the visibility,query capability, and logistical consequences that the prospect of “No Load” messages wouldnecessitate. It is also possible that contingencies for those features were determined to requireunacceptable security compromises. It may have been decided that the only practical meansto enforce this rule was liquidated damages. Art Litman said that the process should besimple, but that an acceptance message with identifier code was essential. Mary Jo Muoioadded that visibility is critical. Cary Weinberg questioned whether there were legalimplications with respect to various usages of the terms “file”, “transmit” and “submit” in theproposed rule. Gary Ryan said that 80% of importers have ten or fewer shipments per year,and wondered how foreign filers would be audited and held accountable for noncompliancewith the proposed powers of attorney provision. He suggested that CBP would be unable toenforce penalties against foreign filers.Alan Klestadt asked why the identifier code was not included in the NPRM, and notedthat CBP appears to have abdicated responsibility for working through the practicalconsideration for this process and have left a number of the elements for industry to workthrough. Art Litman said that we need to be positive in our comments and to make this work.Page 3 of 3


080123 v.1.0Ken Bargteil remarked that the definition of “Importer” is very different from current usage,and poses significant problems in the context of I.E.’s, T&E’s and FTZ admissions.Gary Ryan wondered what impact the proposed ISF would have on the use of singletransaction bonds. Darrell Sekin questioned the requirement for customs brokers to obtain abond for filing the ISF when there is no equivalent requirement for a customs broker to file adeclaration and entry; that is clearly inconsistent. He also wondered how bond sufficiencywould be determined. Gary Ryan underscored the fact that “10 + 2” has been mandated bylaw, that it’s going to happen. He asked if we need to have a full day meeting just on 10+2.Ken Bargteil replied that if work on the comments required a meeting he would arrange for ateleconference. Art Litman added that if we do have a meeting we should ask the Forwardingand NVOCC <strong>Committee</strong>s to join us. Mary Jo Muoio agreed that the comments need to reflectthe input of these three <strong>Committee</strong>s and that our challenge is to achieve a consensus position.Art Litman reported that “10 + 2” will likely be implemented at the same time as the ACEA2 drop. The <strong>Customs</strong> <strong>Committee</strong> should work on how we can mitigate the impact of theseprocess and systems changes to our core business. Art Litman thinks it could be really ugly inJanuary 2009 when ESAR A2 hits. Harold Brauner said that we need to give CBP guidanceon how to correct the ISF and make it agree with the entry. Alan Klestadt said that the NPRMrequirement for the filer to verify reasonably the ISF data is similar to section 4.7 in the24-Hour Rule, and we need to comment on it.Broker Self Assessment (A.Litman)Art Litman advised that CBP has been looking to increasing the maximum penalty for1641 violations to $300,000. The Large Broker and Forwarder Subcommittee conceived ofthe Broker Self Assessment proposal as a way to change the subject from penalties tocompliance improvement.Ken Bargteil recalled that at the <strong>Customs</strong> <strong>Committee</strong> September 26, 2007 meeting aSubcommittee was formed to work with CBP in developing a voluntary program that wouldprovide a framework for customs broker compliance management, and facilitate theevaluation of participating firms from a holistic perspective. Chip Bown, Amy Magnus andKen Bargteil are the primary contacts for CBP in this engagement. The subcommittee hasbeen working on the broad features of this program.Kiko Zuniga reported that CBP introduced the idea of a Broker Self Assessment programat the last COAC meeting. He said that this would have to be a voluntary program with thepurpose of self improvement based on internal controls, not CBP audit. Alan Klestadtcautioned that we must be careful what we wish for. He came away from discussions withKen Bargteil, Dan Baldwin and Angela Downey in August persuaded that CBP sees BSA as ameans to enforce standards on customs brokers in a similar manner as they have done withC-TPAT. There would be little practical difference in substituting CBP validation forregulatory audit, and learning that if you meet minimum standards, you are O.K. and if notthere is exposure. Alan Klestadt recommended that we have to proceed carefully. Thisprogram leads to uncharted territory and there are no guarantees.Ken Bargteil said be that as it may, we can’t back out. In fact, we need to accelerate ourefforts and take care to keep our progress in synch with CBP’s timeline for this. The programshould focus on management controls, internal procedures and methods that a customs brokercan use to provide for compliance. Anne-Marie Bush said that it sounded a lot like an ISOdiscipline. Alan Klestadt said that we may be over thinking BSA; that CBP doesn’t reallyPage 4 of 4


080123 v.1.0know what they want, and this could very easily become just a tool for penalties. He believesCBP is thinking along the lines of standards and best practices to be used as benchmarksagainst which performance can be measured and substandard results penalized.It was observed that most <strong>NCBFAA</strong> members have internal controls, measurablestandards, and prescribed processes that employees follow for making entry. BSA has to bevoluntary and be sufficiently flexibility to allow the entire gamut of firms comprising<strong>NCBFAA</strong> membership an opportunity to subscribe. It should provide a CBP sanctioned wayfor our members to self-regulate, and our sector to enhance its image. Better performance isthe goal. Ken Bargteil suggested that the BSA Subcommittee should focus on the “process”and not the “product”, like entry rejects.Darrell Sekin said that we’ve already bought into this with our CCS program! DanBaldwin is looking for another hammer. Alan Klestadt said that this gives us an opportunityto obtain a prior disclosure provision for customs brokers. The question is what will it costus. Dan Meylor asked if this could simply morph into a guideline for customs broker audits.Anne-Marie Bush expressed her concern that BSA could take on the aspect of C-TPAT, witha “make work” web-based fill in the blanks requirement. Art Litman added that CBPindicated that the want C-TPAT to be a prerequisite for BSA.Edit Lite (A.Litman)Art Litman advised that the CATAIR for ESAR is coming together. The first draftCATAIR was made available to the TSN Trade Engagement and the goal is to make itavailable to the trade by March. Current A2.2 implementation plans will involve transactionsin both ACE and ACS. Art Litman said that he thinks the biggest challenge we will face isadapting our business processes as automation moves from ACS to ACE.CBP has completed most of the data edit decomposition and presented a catalogue ofthose that will not be reproduced in ACE to Art Litman and Celeste Catano. Art Litmandistributed copies of that catalogue at the meeting. He will lead the TSN “Edit Lite”Subcommittee that will study the data edits CBP has determined to be expendable and make asuitable response. CBP has committed to consider any objections raised by the trade to theelimination of specific edits, but it will fall to software vendors and self-programmers toenhance their systems in order to compensate for any edits CBP fails to reproduce in ACE.CBP’s strategy includes programming controls to ensure that the trade has compensated foreliminated edits; rather than reproduce the edits they will audit the input.There is reason to suspect that this is a top down decision that is not supported by theprogram managers. There can be no doubt that “Edit Lite” exposes the trade community toliability for errors in ACE that would have been rejected by ACS data edits. Inconsistenciesin CBP policy and legal arguments have been exposed, but to no avail. One of thesearguments involves a recent court case which resulted in CBP being held responsible for theirfailure to provide a system edit. The lesson CBP took from the case is that their propensityfor edits gave the court reason to accord the trade an undue reliance on system edits. CBPreasons that only by reducing edits will the court hold the trade responsible for knowing therules. CBP also relies on the Mod Act standard for reasonable care to justify “Edit Lite”, butthey do not admit to challenges that the parallel principle calling for shared responsibilityargues for duplication of ACS edits in ACE. Likewise, CBP does not allow that “Edit Lite”will compromise there responsibility to protect the revenue.Page 5 of 5


080123 v.1.0Data edits for entry will not be affected in the ESAR drops. The question was raised howwill the edits operate when cargo release is certified from entry summary. The answer givenis that notwithstanding certification is made on the entry summary, cargo release (entry) andsummary take different system paths.RLF Uniformity (J.Peterson)At the <strong>Customs</strong> <strong>Committee</strong> September 26, 2007 meeting a work group was formed tosupport Angela Downey in her efforts to improve this NCAP test for customs brokerperformance and RLF utility. CBP agreed to participate in the NEI Third Thursday programwith an RLF installment, to draft an informed compliance document, and to look atestablishing an actual use tariff listing while seeking an electronic solution to documentaryrequirements. John Peterson will update the <strong>Customs</strong> <strong>Committee</strong> on progress since ourSeptember meeting, and near term plans for this project.Ken Bargteil appointed John Peterson, Amy Magnus and Elisha Vasquez to the RLFWorkgroup with its mission to support Angela Downey in her efforts to improve customsbroker performance and RLF usefulness in this NCAP test. John Peterson reported that in theinitial meeting Angela Downey was amenable to making RLF more encompassing. Theability to remove RLF entries from statement was also on the agenda. There is presently noprescribed and recognized method for doing this. It sometimes works to contact the RLFcoordinator at the port of entry and request that they remove the entry, but some resist doingthis because it creates extra work for them and it requires submitting paperwork. JohnPeterson believes that this is critical for brokers, and that a solution must be found. As withother issues in RLF, the challenge is to avoid paper records.Another goal for this engagement includes the removal of restrictions on ADD/CVDentries and entries involving documents such as CITES permits that are not really filed withCBP. One problem CBP wants to resolve is that they frequently don’t know who to contact ifthe need arises on an RLF entry. This might be accomplished by devoting a data field tocontact name and phone number. CBP also identified incomplete and/or inaccurate AIIinvoices as an intractable problem. CBP requires that AII duplicate the commercial invoice,including all, rather than minimum or selected data from the invoice. John Petersonsuggested that a good start could be made if <strong>NCBFAA</strong> would impress upon its members thatthe AII is supposed to be a mirror image of the actual invoice, line for line, with descriptions.A follow-up meeting has been scheduled for next week by teleconference. CynthiaWittenburg has been appointed as Branch Chief for Entry, including RLF.There was general agreement from everyone on the conference call that a good start hadbeen made. CBP recognizes that training for import specialists, RLF coordinators andofficers in the field is necessary, and we recognize that information and training for ourmembers is also necessary. Angela Downey and Cynthia Wittenburg will meet with theirstaff at CBP HQ to go over the agreed issues, and John Peterson will continue report onprogress to the <strong>Customs</strong> <strong>Committee</strong> Chairman. This will allow the entire <strong>Customs</strong> <strong>Committee</strong>to remain engaged on this important issue.Ken Bargteil informed the <strong>Committee</strong> about a warning letter received from CBP inCleveland taking note of an entry that should not have been filed RLF because it includedgoods subject to antidumping duty. The warning letter went on to threaten revocation of RLFprivileges in case of another such mistake. Ken Bargteil characterized the letter asrepresenting the height of arrogance for an agency that makes mistakes every day, but sees fitPage 6 of 6

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