The 24hr Rule

USA Customs 24 Advance Manifest Rule

Following the tragic events of 11th September, 2001 the US Government put in place various security measures to assist the US Customs Service (recently renamed the Bureau of Customs and Border Protection) in locating import containers and shipments which could pose a terrorist threat.

At the beginning of 2003 the US Customs introduced the 24-Hour Rule. This Rule requires sea carriers loading containerised cargo for the USA at foreign ports to provide cargo manifests containing full details of cargo to the US Customs through the US Customs Automated Manifest System (AMS) 24 hours prior to loading on the ship. Although much has been written on the subject, ITIC has delayed providing its comments until the impact of the Rule on sea carriers and their agents became more apparent. Although the impact of the 24 Hour Rule is still not entirely clear, in response to numerous enquiries from Members we set out below our current understanding of the position.

The details of cargo which must be entered into the AMS are very specific and must include the following:

(i) name of last foreign port before the ship departs for the USA;

(ii) carrier SCAC (the unique Standard Carrier Alpha Code assigned to each carrier) – this can relate to the ship owner, a joint service partner or an NVOC;

(iii) carrier-assigned voyage number;

(iv) date ship is scheduled to arrive at first US port in Customs territory;

(v) numbers and quantities from the carrier’s ocean bills of lading, either master or NVOC, as applicable;

(vi) name of first foreign location (which need not be a sea port) where carrier took possession of cargo destined for the USA;

(vii) precise description (or Harmonised Tariff Schedule [HTS] numbers under which cargo is classified) and weight of the cargo or, for a sealed container, the shipper’s declared description/weight;

(viii) shipper’s complete name and address, or identification number, from all bills of lading;

(ix) complete name and address of the consignee or the cargo owner or owner’s representative, or identification number, from all bills of lading;

(x) name of ship, country of registry, and official ship number;

(xi) name of foreign port where the cargo is laden on board;

(xii) internationally recognised hazardous material code when such materials are being shipped;

(xiii) container numbers (for containerised shipments); and

(xiv) numbers of all seals affixed to containers.

Carriers of break-bulk cargo (defined as non-containerised cargo which is packaged or bundled) may be exempted from the 24 hour rule but the US Customs will evaluate each application for exemption on a case by case basis. However, carriers of break-bulk cargo will still have to file their cargo declarations 24 hours prior to arrival at the us port. Carriers of bulk cargoes (defined as homogeneous cargoes stowed loose in holds) are exempted from the 24 hour rule.

Penalties for failure to transmit manifest details in a timely manner, or for transmitting incorrect or incomplete details:

• fines on sea carriers (by which is meant the carrier identified by the SCAC) - US$5,000 for first offence and US$10,000 each offence thereafter;
• refusal to issue, or delays in issuing, permits to discharge the incorrectly declared cargo, or even the entire ship;
• liquidated damages for NVOCs (US$5,000 for each offence).

The following should be noted:

• the US Customs will conduct post-departure audits to review whether the requisite 24-hour notice was given;
• generic cargo descriptions, such as “FAK” (“freight of all kinds”), “general cargo”, and “STC”(“said to contain”) are not acceptable;
• the US Customs will penalise false information (e.g. providing incomplete information with the intention of correcting it after the 24 hour time bar);
• there is no need for a container to be at the load port 24 hours before loading – the Rule only calls for cargo details to be provided 24 hours prior to loading;
• FROB - freight remaining on board (by which is meant cargo loaded at a non-US port for a non-US port which will be on board the ship whilst it is at a US port) also needs to be fully declared to US Customs under the 24 hour rule, and will be treated exactly the same as cargo intended for the USA;
• sea carriers (as identified by the SCAC) will be held responsible for misdeclarations by shippers which they have accepted in good faith. It will then be for the sea carriers to attempt to recover from the shippers;
• US Customs may initiate penalty actions against any party responsible for providing the required information;
• it is not permissible to enter the name of an NVOC as the shipper and the NVOC’s agent as the consignee; the US Customs require the name of the actual shipper/consignee. It is also not permissible to leave the consignee blank, or to enter “To Order” or “To Order of Shipper” without entering the corresponding information in the consignee and notify party fields of the AMS.

Potential problems for ship agents:

Although the main impact will be felt by sea carriers, ship agents will also be affected by this change in US Customs procedures.

• agents outside the USA will be liable to their principals for losses resulting from their failure to pass on instructions not to load containers which are declared as “held” by US Customs. With several carriers (eg. ship owners, joint service partners, NVOCs, etc.) all entering cargo details into the AMS for cargo loaded on the same ship, the agents for the ship at the load ports will have to carefully monitor US Customs “do not load” instructions from the various carriers to make sure that terminals/stevedores are notified in a timely manner;
• agents in the USA acting for principals who do not have their own International Carrier Bond, may face customs fines against their own Bond for infractions by those principals;
• there may be multiple fines for minor infractions which principals may attempt to pass back to the agent;
• there may be attempts by principals to pass on responsibility to agents for misdeclarations by shippers.

ITIC insurance:

Ship agents are insured for liabilities to reimburse losses which result from their own negligence. An example of such a liability would be the loss caused by an agent making a mistake when entering information provided by the shipper in the manifest. However, if the shipper misdeclares the cargo (either accidentally or deliberately) then the agent would not be liable for any fines/delays/losses caused to the principal. The principal would, however, be liable for misdeclaration by the shipper and agents must (with the assistance of ITIC) reject attempts by principals to pass on such liabilities to them.

Conclusion

To date there has been little evidence of the widely anticipated problems envisaged when the 24 hour Rule was introduced. ITIC has not seen anything other than minor claims against ship agents. However, this is not to say that the US Customs will not in future enforce the Rule more rigorously. In view of the cost of administering the Rule, it is possible that there will come a time when the US Customs attempt to recoup some of these costs by rigorous enforcement of the Rule. Agents should continue to act with care and to strictly follow the instructions of their principals.

The official document concerning the 24 hour Rule is the US Federal Register, Vol. 67. No 211 (ITIC can provide a copy if required). We also recommend that you read the “frequently asked questions” in the import section of the US Customs Service website at: www.customs.gov