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MSC Loses Preferred Customs Status Over Cocaine Bust On Ship

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MSC Loses Preferred Customs Status Over Cocaine Bust On Ship

Following a second large drug bust aboard its box-ships this year, international ocean container shipping line Mediterranean Shipping Company has had its Customs Trade Partnership Against Terrorism (C-TPAT) certificate suspended by the U.S. Customs and Border Protection agency. The agency acted after two of MSC's ships this year were found to have large volumes of illegal drugs smuggled aboard them.

In short, C-TPAT is a voluntary program in which supply chain participants receive a variety of benefits such as quicker border clearances in return for risk-assessing, auditing and tightening up their facilities and supply chain from terrorists and criminals.

In a note to customers released last night, MSC highlighted that the C-TPAT certificate was "temporarily suspended – not revoked." The container shipping line added that it expects only minimal disruption.

"MSC has not been restricted from doing business in, or suspended from operating in, the U.S. market and this action does not prevent customers doing business with MSC."

MSC added, "Furthermore, customers should only expect minimal disruption as a result of the C-TPAT certification issue. For example, there could possibly be additional inspections on certain containers coming from South and Central America to the USA. There will be no impact on customs clearance for cargo, which is flowing regularly in and out of the USA. We are actively seeking to assure the authorities that our certification can be reinstated as soon as possible," the customer advisory note reads.

Set up in November 2001, C-TPAT was codified into law by the Security and Accountability for Every Port Act 2006. That Act requires Customs and Border Protection to suspend membership if a member does not meet program requirements.

"Reasons for suspending/removing a Partner's benefits include, but are not limited to, failure to: adhere to the C-TPAT Partner Agreement to Voluntarily Participate; meet the minimum security criteria; meet eligibility requirements; comply with other rules, laws and regulations," the Customs and Border Protection agency says in its document "Suspension, Removals, Appeals and Reinstatement Processes."

That document indicates that suspension is on a case-by-case basis. Following a "security incident," the agency will carry out an investigation. It may then decide to take no action, suspend membership or remove benefits, or, finally, remove the supply chain participant from the program for a period of time. A "corrective plan," detailing what the C-TPAT member must do to fix gaps and vulnerabilities may be issued. Members who have been removed or suspended have the right to make an appeal within 90 days.

Suspension of MSC's C-TPAT certificate follows-on from the seizure of a large amount of cocaine aboard the MSC Gayane in Philadelphia by law enforcement authorities a few days ago. Crew members were arrested and have been charged. And earlier this year, law enforcement authorities seized over 1,185 pounds of cocaine from the MSC Desiree, again in Philadelphia, in March this year.

One former ship master told FreightWaves of some of the difficulties for the crew, the company and the authorities, when drugs are smuggled on a ship.

"You can stuff heap-loads on a ship and it is hard to find, let me tell you. I was on a ship as a mate from Port-Au-Prince, Haiti, en route to, I think, Boston. Then all of a sudden there were all these U.S. Coast Guard guys. They'd had a tip-off that there were drugs aboard. We were questioned. It was intrusive. ‘Who were you with? When? Where did you go?' And you know where they found the drugs? Under the hull. It was a positive I.D. The ship did have the drugs."

The ship master told FreightWaves,"But what if it is in a container? It could be anywhere. It could be stuffed inside frozen chickens. It could be anywhere. No one would know, not even the shipper. I could hide something on a ship and give you six months to find it and you would not find it. Not unless you cut up the ship."

One customs-broking expert consulted by FreightWaves was initially shocked by the news of MSC's C-TPAT suspension, but was then sanguine about MSC's plight.

"Wow, MSC carries an awful lot of cargo from Asia to the U.S.," he said, but then added that, as C-TPAT is a voluntary program and as MSC has not been prevented from doing business with the U.S. there is little impact on trade.

"It looks like there will be little wider impact. It's [C-TPAT] is voluntary, so it's not an issue for trade. As it's voluntary, the impact will be low," he said.

Still, it's not a good look for MSC as the C-TPAT revolves around the concept of a "trusted" trader, carrier, importer, broker or other supply chain participant.

C-TPAT has its immediate origins in the aftermath of the appalling tragedy of the 9/11 terror attacks on the United States. There were concerns that global trade and the international supply chain could be used by terrorists both as a cover for their activities and also a vector of attack. A particular concern was the possibility that terrorists could use a standard international shipping container to smuggle in a "dirty" bomb (an otherwise standard explosive device packed with radioactive material).

And so politicians and security officials tried to address this perceived weakness. One initial plan was to scan and x-ray every container entering the U.S. There were numerous technical problems, some of which were solved by having trucks drive through a passive radiation detector. But the so far insolvable problem is reconciling the desire to scan and image every single box against the sheer volume of international trade into the United States. According to the U.S. Customs and Border Protection agency, just under 25 million international shipping containers cross the country's borders every year. That's 11 million by sea, 11 million by truck and 2.7 by rail.

Trade volume of that size would make it exceedingly difficult, if not impossible with currently available technology, to check every single container.

And the problem of finding the dangerous container in all that volume is only becoming more difficult because the volume of international imports into the U.S. is growing all the time (see graphic). It would also be prohibitively expensive. A Congressional Budget Office 2016 study found that scanning and imaging all U.S. destination boxes at ports overseas would cost US$12 billion to US$32 billion over 10 years.

One partial solution is to have lower-risk participants in the supply chain, which is the purpose of the C-TPAT. It's a voluntary program under which supply chain participants make an application to join, agree to be inspected by and work with U.S. security officials to identify supply chain gaps and to block them. There are different requirements depending on the type of supply chain participant. For instance, "sea carriers" must be actively engaging in business with, and have a staffed office in, the United States. The sea carrier must also designate an officer aboard their vessels as a liaison with Customs and Border Protection and it must agree to maintain its supply chain security according to an agreement with the agency. There are other requirements. Highway carriers would have very similar obligations.

In return, that supply chain partner is regarded as "trusted," which is why in other jurisdictions similar programs are called "trusted trader." There are a number of benefits, including fewer customs inspections and the possibility of "stratified exams." A container targeted for inspection may be just one of several boxes in a shipment. A stratified exam will allow the non-targeted containers to be moved on to a secure location operated by the C-TPAT member, which enables faster onward dispatch when the inspected container is released. Another major benefit is the so-called "front-of-line" benefit which means that C-TPAT member boxes targeted for inspection are sent to the front of the queue ahead of non-members. There's also a reduced number of inspections by officials and possible further benefits from mutual recognition by foreign customs administrations.

C-TPAT today has more than 11,400 certified members including importers and exporters to/from the U.S.; highway carriers; rail and sea carriers; licensed customs brokers; marine terminal operators; manufacturers and more.

Another part of the solution so far as been to adopt a risk-based approach. Under the Container Security Initiative, the aim is to identify all high-risk containers and screen them before they even arrive in the U.S., usually at the port of departure.

Image Sourced by Pixabay

Posted-In: Freight Freightwaves MSCNews Legal Global Markets General

 

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