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Shipping Act Violations: FMC Informal Small Claims

Part of the Federal Maritime Commission’s (FMC) job is to regulate international ocean transportation as it relates to U.S. exporters, importers and consumers.  One way the FMC fulfills its mission is by protecting the trading community from financial harm through dispute resolution and proceedings.  The FMC can hear disputes that arise under the Shipping Act of 1984 as amended by the Ocean Shipping Reform Act of 1998, which governs international ocean shipment of goods, codified at 46 U.S.C. § 40101-41309.  So what does this mean for you, the importer, exporter, or consumer?

 

You may have found yourself in the situation where, as a shipper, you cannot determine the location of your cargo, or your cargo was lost or damaged and you are having problems processing your claims.  You may have economic problems with an NVOCC that is defaulting, or you might not be able to agree with a carrier on a service contract.  As a freight forwarder, you may have difficulty collecting compensation from a carrier, or you may have issues with a carrier objecting to your document preparation.  If any of these issues involves a claim of less than $50,000.00, then FMC small claims proceedings are one of the ways you can go about resolving your problem.[1]

 

The FMC provides a standard format for preparing a small claim, whether prepared by an attorney or on your own, and it must include the following[2]:

 

  • a statement of which section of the Shipping Act you believe has been violated (46 U.S.C. Ch. 411)
  • a dated, signed, sworn, and notarized statement that the information contained in the claim is true and correct

 

In addition to those requirements, you would generally set out the facts of your case briefly and succinctly then send to the FMC the original claim along with two copies of the claim and any documentation you have that supports your claim.  Keep in mind that your claim must be filed within three years from the date of the violation.  As of this publication, the filing fee for a small claim complaint is $67.00[3].

 

Once you have filed your claim, the FMC will allow the person or company against whom you are complaining (the respondent) 25 days to object to the informal small claims procedure.  If the respondent objects, then the claim would go through the formal process in front of an Administrative law judge as required under Subpart T of the FMC rules.  If there is no objection, an FMC Settlement Officer appointed by the FMC’s Alternative Dispute Resolution Specialist will decide the issue on behalf of the parties.[4] 46 C.F.R. §502.304 The Settlement Officer will issue a decision that is final after a 30 day period as long as no individual Commissioner decides to review the decision and neither of the parties involved asks for reconsideration.

 

Going through the informal procedure can be faster and less onerous than more formal proceedings, and may be a good option for you if you find yourself harmed by someone’s violation of the Shipping Act.  For more information on small claims and other proceedings before the FMC, please contact us by phone at (800) 583-0250 or (850) 893-0670; by fax at (850) 391-4228; by mail at 1911 Capital Circle N.E., Tallahassee, FL 32308; or by email at smorrison@customscourt.com or nmooney@customscourt.com.  You may also find more information by visiting the FMC website at www.fmc.gov.

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TRADE POLICY: OBAMA vs ROMNEY

International trade is vital to our economy, so much of the debate in the upcoming Presidential election has surrounded the candidates’ foreign trade policies. President Barack Obama (D) and his challenger, Governor Mitt Romney (R), have each publicly stated support for free trade; however their trade philosophies are very different.

 

President Obama introduced the National Export Initiative (“NEI”) in 2010 and stated his goal of doubling exports over the following five years.[1]The U.S. is currently on track to not only reach, but also to exceed this goal with a current annual increase in exports of 16%.[2] Although President Obama has not opened any new trade negotiations, he has worked with Congress to pass three free trade agreements that were previously languishing:  Panama, South Korea, and Colombia.[3]  The Obama administration has also participated in negotiating a trade pact with Pacific nations known as the Trans-Pacific Partnership (TPP).[4]  Although he acknowledges and supports the necessity of international free trade, President Obama still endorses the need for Americans to “Buy American”.[5]

 

Governor Mitt Romney has been thorough in outlining his foreign trade policies, a main objective of which is to create a “Reagan Economic Zone”, similar to that which President Reagan attempted during his presidency.[6]  Gov. Romney anticipates that the Zone would standardize practices and create a network of “like-minded” nations that are committed to free enterprise and open markets.[7]    According to Romney, “for every $1 billion in U.S. exports, another 5,000 jobs are created in the U.S.”.[8]  Thus, continued pursuit of current and new trade agreements will help stimulate the economy.

 

China is a hot topic for trade, and it is one of the key points for both Romney and Obama’s campaigns.  Among Romney’s objectives is the decision to take Chinese businesses to court and litigate against unfair trade practices, as well as declaring China a “currency manipulator”.[9]  In contrast to Gov. Romney’s stance, President Obama has never openly reprimanded China for manipulating its currency to fit its needs; however, the President’s administration has litigated unfair trade cases against China.[10]

 

The purpose of this blog post is solely to help inform our readers and not as a means of endorsing either candidate.  We hope that all our readers will be better informed to make the decision on November  6, 2012 that best fits their values and beliefs.

 

For more information on the 2012 Presidential Candidates please visit the links referenced in this post or the nominees’ websites directly at http://www.barackobama.com/ and http://www.mittromney.com/. For more information on the 2012 Presidential Election, how and when to vote visit http://www.presidentialelection.com/.


[1] U.S. Dept of Commerce, International Trade Administration: National Export Initiative http://trade.gov/nei/nei-introduction-state-of-the-union-012710.asp

[4] Executive Office of the President, Office of the U.S. Trade Representative: The U.S. in the Trans-Pacific Partnership http://www.ustr.gov/about-us/press-office/fact-sheets/2011/november/united-states-trans-pacific-partnership

[5] Business without Borders: Trade Off, Obama vs Romney on the politics of foreign trade http://www.businesswithoutborders.com/industries/importexport/trade-off/

[6] Mitt Romney’s Campaign Website: Issues, China & East Asia http://www.mittromney.com/issues/china-east-asia

[7] Id.

[8] Business without Borders: Trade Off, Obama vs Romney on the politics of foreign trade http://www.businesswithoutborders.com/industries/importexport/trade-off/

[10] Business without Borders: Trade Off, Obama vs Romney on the politics of foreign trade http://www.businesswithoutborders.com/industries/importexport/trade-off/

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The OSCARs: Creating Greater Efficiency in Transpacific Agricultural Shipping

The United States Department of Agriculture has teamed up with members of the Westbound Transpacific Stabilization Agreement[1] to enhance shipping and exports in the agricultural market by creating weekly projected equipment and container availability reports designed to increase efficiency and transparency of containers flows.

Current carriers including data for the initiative are APL, COSCO, Evergreen, Hanjin Shipping, Hapag Lloyd, Yang Ming Transportation Corporation, OOCL, NYK Line, K Line, and Hyundai Merchant Marine.[2]  The data is compiled each week to offer from information provided by these carriers from each of 18 intermodal locations regarding estimated container availability and supplies and is “based on up-to date bookings or reservation information in the westbound transpacific trade lane.”[3]

Weekly data on container availability as well as overview data for up to 6 prior months is available from these lines in the following 18 locations:

  • Charleston, SC
  • Chicago, IL
  • Cincinnati, OH
  • Columbus, OH
  • Dallas, TX
  • Denver, CO
  • Houston, TX
  • Kansas City, MO
  • Los Angeles and Long Beach, CA
  • Memphis, TN
  • Minneapolis, MN
  • New Orleans, LA
  • New York, NY
  • Norfolk, VA
  • Oakland, CA
  • Savannah, GA
  • Seattle and Tacoma, WA

Shippers can find the weekly reports, which also container more information on the initiative and how to read the reports, by visiting http://www.ams.usda.gov/AMSv1.0/ATContainerReport.

The Federal Maritime has also weighed in on the new initiative, applauding the efforts of the USDA and the WTSA and urging full shipper participation.  More information here:  http://www.fmc.gov/chairman_lidinsky_applauds_new_usda_container_availability_report_and_urges_full_shipper_participation/.


[1] The “Westbound Transpacific Stabilization Agreement (WTSA) is a research and discussion forum of container shipping lines operating in the trade lane from the U.S. to Asia.”  http://www.wtsacarriers.org/home_nf.html

[3] Id.

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Rail and Ocean Carriers: Transition to the ACE e-Manifest

Customs recently published an important reminder for all rail and sea carriers regarding the impending transition from the Automated Manifest System (AMS) to the Automated Commercial Environment (ACE) e-Manifest system.  As you’re probably aware, ACE is the gradual consolidation and automation of Customs’ current border processing systems, which is being implemented through the constantly-improving ACE Secure Data Portal.  In August of last year, Customs updated the e-Manifest system, previously used only for the processing of truck cargo, to be an alternative to the AMS for rail and sea carriers as well.  The latest planned shift, scheduled to occur on September 29, 2012, marks yet another step towards consolidation by eradicating the AMS entirely.  So if your company hasn’t yet started to transition to the new e-Manifest system, it is advisable that you heed the advice contained within this Customs bulletin (reproduced below) and contact your software provider as soon as possible.[1]

——————————————–

Are you ready for ACE e-Manifest: Rail and Sea (M1)?

The 60 day countdown has begun!

 In less than 60 days, effective September 29, 2012, ACE will be the only approved EDI for transmitting required advance rail and sea cargo information and ABI in-bond transactions to CBP.

As of July 31, 2012, 96% of ocean carriers and 83% of ABI software developers impacted by the transition to M1 have either completed or are in the onboarding process. All rail carriers are either in production or currently testing.

** If you are part of the 4% of the ocean carriers or the 17% of the ABI software developers who are NOT yet testing ACE Rail and Sea Manifest, NOW is the time to contact your Client Representative for assistance.**

CBP is finding that many software developers have misinterpreted sections of the Implementation Guidelines that have resulted in programming changes to trade software. If you have not been in touch with your Client Representative to begin certification testing, please do so immediately!

If you submit sea or rail cargo information, file ABI in-bond transactions, or receive broker download information via ABI, you or your software provider must transition to ACE, or your transactions will fail when the current Automated Manifest System (AMS) for rail and sea is decommissioned.

In order to ensure that EDI messages for rail and sea manifest and ABI in-bond transactions do not fail, it is essential that by September 29, 2012:

  1. The required programming changes are completed,
  2. Certification testing is completed in coordination with your Client Rep, AND
  3. The switch to production for ACE e-Manifest: Rail and Sea is made.

For additional information, please refer to the recently-conducted webinar available on CBP.gov at

https://connect.hsin.gov/p67194661/?launcher=false&fcsContent=true&pbMode=normal. 

Further information on ACE e-Manifest: Rail and Sea is available at

http://www.cbp.gov/xp/cgov/trade/automated/modernization/manifest_railsea/.

As of July 29, only 60 days remain to complete all of the steps necessary to make the transition to ACE rail and sea manifest filing.”[2]

 

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Wholesalers To Colombia Beware: Your Business Could Be Part Of An International Money-Laundering Scheme

The Black Market Peso Exchange (BMPE) is a long lived and widely used method for converting Colombian pesos into US dollars and vice versa.  Boasting the ability to exchange money at a much lower rate, the BMPE evolved from the black market exchange that existed in Colombia for decades and was used by legitimate businessmen and drug dealers alike for the singular purpose of saving money.  The BMPE is now one of the most sophisticated (and common) money laundering schemes employed by the cartels in the Colombian drug trade.  Raymond Kelly, former Commissioner of the US Customs Service calls it the “ultimate nexus between crime and commerce, using global trade to mask global money laundering.”

 

Here is a brief outline of how it works (though there are multiple variations of this basic model):

 

  1. Colombian traffickers or their US counterparts contact a ‘Black Market Peso Broker’ (money brokers who purchase US dollars that are derived from street drug sales) to negotiate an exchange rate.  The rate is often approximately 40% less than the official rate.

 

  1. Once the rate is agreed upon, the drug dealers deliver the cash to the Broker’s US office or some other agreed upon location for the exchange.  At this point, all risk for movement of the money from the US to Colombia falls onto the Broker.  Should anything go wrong, e.g. the money is seized, the drug dealers and traffickers look to the Broker for repayment.

 

  1. The Broker then processes the cash by employing runners to deposit the cash into US banks throughout the nation in increments of less than $10,000.00 to avoid the bank’s reporting requirements under the US Currency and Foreign Transactions Reporting Act, 31 U.S.C. §5311-5355.

 

  1. Simultaneously, the Broker’s Colombian office exchanges pesos (also at a lower rate than the official rate) with legitimate Colombian businesses who are looking for cheaper US dollars, which will enable them to do more business with legitimate US exporters.

 

  1.  Once the legitimate Colombian businesses give the Broker their pesos, the Broker then pays the business’s debts in the US via wire transfer or direct deposit, allowing for the facilitation of legitimate international trade.  The pesos in turn go back to the drug dealers and traffickers to spend in Colombia.

Part of what makes this scheme so attractive to the drug cartels is that the transactions in step (5) above appear like ordinary international trade transactions so the authorities are far less likely to investigate them (if at all), even though the payments are made by unrelated third parties.  As a result, many U.S. businesses (large and small)[1] are completely unaware that they actually have a role in the illicit drug trade.

 

Unfortunately, it seems very difficult for U.S. enforcement officials to sympathize with the businesses involved. In a classic case of the public and private sectors failing to understand each other, the United States cannot see how businesses could possibly participate in such a system unwittingly.  In many cases where this scheme is uncovered, entire U.S. bank accounts are seized and forfeited based on the assertion that the owners must have been aware that the money was dirty.  In some cases money is seized before it is even proven to be of illicit origins!

 

Here are two warning signs that your business may be inadvertently participating in this sophisticated money-laundering scheme:

  • You ship goods to Colombian clients, but the goods are paid for by a separate entity in a different country
  • You receive payment in multiple small amounts
  • You receive payment through third party checks
  • You receive this payment in lump-sum wire transfers, with the balance to be credited towards future purchases

 

Although there is every possibility that a buyer with the above warning signs may be perfectly legitimate, it may not be worth the risk that their money isn’t as legitimate.  Your hard-earned money could be seized and you don’t want that, because once the United States has seized your assets, it’s a long, hard road to getting them back, if you ever do.


[1] Hewlett Packard, Ford, Sony, General Motors, Whirlpool, General Electric are all entities that have been inadvertently involved in the BMPE and have taken steps to correct their involvement.

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Behind the Scenes: CBP Fines, Penalties, and Forfeitures Processes

Yesterday, the American Bar Association’s Section of International Law hosted a program for its members to hear from and speak directly with CBP Office of Regulations and Rulings, represented by Chief of the Penalties Branch, John Connors.  Mr. Connors told the group in attendance (live and via phone conference) that while he is not authorized to discuss recent or pending cases, he would be discussing the general process within CBP when it is either contemplating or has issued a penalty or seizure notice.

Mr. Connors first explained that many people are confused as to which CBP offices have authority in different cases, and that there are also 3 headquarter branches that deal with penalties either after review by the Fines, Penalties, and Forfeiture Officers in the field at the 300+ ports or concurrent with such review in certain cases dealing with penalties over $100,000.00.  If a case is deemed referred to “Headquarters” it could be with 1)the Office of Field Operations, 2) the Office of International Trade (commercial enforcement), or 3) the Office of Regulations and Rulings.  Thus, there is a need to clarify exactly which office your case is being assessed.

Backing up to the beginning of the process:  First, when goods are being imported or exported, field officers at each port will make initial determinations of whether there are any issues with the goods in question or with the process of importing and exporting the goods.  For example, CBP Officers will look to see if there are any issues with the vessel’s manifest, trademark or copyright infringement, drawback penalties, misclassification of goods, etc.  If there are issues, the field officers will report it to a Fines, Penalties, and Forfeitures Officer (“FPFO”) at their respective ports.  There are currently 42 FPFOs that deal with penalty actions.  These officers then determine whether there is a need to issue a penalty or pre-penalty notice or to simply cancel the case without further inquiry.  Mr. Connors reported that cancellation at this stage is extremely rare.

Pre-penalty notices are required to be issued for the following:

Commercial fraud and negligence (19 USC 1592)

Drawback penalties (19 USC 1593a)

Customs Broker penalties (19 USC 1641)

Recordkeeping penalties (19 USC 1509)

Falsity of lack of manifest (19 USC 1584(a)(1))

Equipment and vessel repairs (19 USC 1466).[1]

Once the pre-penalty or penalty notice is issued (depending on the statute), the interested party to whom the notice is issued then has a specified number of days in which to submit a petition requesting relief or to simply pay whatever penalty is assessed.  The relief petition should be sent to the FPFO from whom it was originally issued.  A general rule is that if the penalty is issued for $100,000.00 or less, the initial review of the petition stays with the FPFO who would then respond based on a review of the newly presented facts and arguments within the petition.  If the penalty is issued for greater than $100,000.00 the FPFO would review it then send it directly on to the Chief, Penalties Branch, Office of Regulations and Rulings (ORR), that is, Mr. Cooper.

If the initial relief petition is denied and if there are any further facts or arguments that would potentially mitigate the issue that were not originally presented, then the interested party may submit a supplemental petition.  The FPFO (or ORR depending on the amount of penalty) will review again and decide whether to relieve the interested party or send the petition to either the Office of Field Operations or the Office of International Trade for further review.

If the penalty is already with ORR, Mr. Connors, will funnel the case out to one of the 18 attorneys working in his office for findings of fact and conclusions of law, which are then sent back to the FPFO for relay to the interested party.  Supplemental petitions are processed in the same manner as those with FPFO, i.e. they start with FPFO for initial review and further fact finding prior to being sent to ORR.  If a supplemental petition is denied, the case then proceeds to Border Security for final review and disposition.  Border Security takes into consideration the recommendations and comments of ORR, but ultimately makes the decision of whether to uphold the denial.

Mr. Connors also discussed the nature of timing when dealing with penalties and told attendees at the luncheon that when the process seems slow, it is because there are many parts that ultimately come together in making a final decision:  FPFO investigations at the outset and further investigations as necessary; hundreds of thousands of cases requiring processing; interested parties asking for extensions; etc.  Therefore, while the process can seem long and arduous, Mr. Connors assured his audience that CBP does what it can to speed things along even in light of the realities of running what amounts to a very, very large company.

The information in this article is meant as a review of Mr. Connors’s discussion of the penalty process and not as an exhaustive review of all that occurs or can occur with respect to CBP issued fines, penalties, and forfeitures.  If you find yourself in the situation of having received a detention notice, a pre-penalty or penalty notice, a seizure notice, or other type of CBP action, we can help you through the process and work towards release of your seized items or mitigation of your potential penalties.  With over 30 collective years of expertise in the field of international trade and customs, the attorneys at the Mooney Law Firm have seen hundreds of cases through this process and are well-equipped to present your best case to Customs in recovering your seized goods or in mitigating or removing your penalties.  Please do not hesitate to contact us (via email at nmooney@customscourt.com or smorrison@customscourt.com or by phone at 800-583-0250) with your issue or with questions regarding this and other processes dealing with international trade and customs.

For more information, either contact us or visit http://www.cbp.gov/xp/cgov/trade/priority_trade/penalties/.

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