Report on Logistics Security in Pakistan
Table of Content
There are certain measures that private sector entities and the Government in Pakistan must take to ensure continued access of Pakistan’s exports to foreign markets:
1. Provide more detailed narrative information on manifests, including the six-digit subheading for each commodity included on the manifest.
2. Arrange for third-party inspections of containerized export cargo, based on a system of risk management.
3. Introduce state of the art container-scanning equipment at export loading points at sea ports and airports.
4. A single entity within the Government should be designated as responsible for the coordination of all activities related to international logistics security. Given current spheres of responsibilities, the best entity to carry out these coordination duties, is the National Trade and Transport Facilitation Committee (NTTFC).
5. A governing private sector entity be designated as responsible for scrutinizing and screening all drivers, daily-wage workers and other port and terminal employees on a prior and priority basis, so that lists of authorized personnel are developed and provided to port and terminal operators from which they will be obliged to engage all staff for any business activities inside the ports and terminals.
6. Immediate steps should be taken to ensure that Port Authorities undertake their respective Security Assessment in the shortest time period feasible, with a view to development of Port Facility Security Plans well in advance of the July 2004 deadlines. Actions called for under each Port Security Plan will differ, but in some cases, port area perimeter barriers and imposition of more tightly controlled assess to port areas will be a major requirements and would appear to represent daunting challenges at this time.
7. The World Customs Organization (WCO) should be requested to bring together the Customs administrations in Europe and North America with the Customs administration in Pakistan to explore collaborative initiatives under the WCO’s Data Model to introduce mutually-agreed facilitation measures, including the designation of authorised traders whose containerised shipments from Pakistan can enjoy simplified cargo movement and clearance procedures.
The purpose of this Report is to make recommendations for a Work Activity program for the Government of Pakistan, the National Trade and Transportation Facilitation Committee, and for the Expert Working Group, outlining steps to be taken by public and private sector interests in Pakistan, in response to security measures introduced by major trading partners.
During the course of the Logistics Security mission to Pakistan (October 25 to November 8) the UNCTAD Project successfully raised the profile of international trade logistics security, and the new requirements related to international trade, in both the private sector and Government circles. For further information on the Mission, please see the Mission Report, which was submitted on November 14.
On November 3, a detailed briefing paper was presented to the NTTFC. Also, on November 5, the paper was discussed at the first meeting of the Expert Working Group.
The Mission Report and Briefing Paper provide quite detailed information on the events leading up to the imposition of international security measures, which will significantly affect Pakistan’s export interests, unless certain specific actions are taken in a timely manner. Consequently, the background information and justification for taking action is not repeated in such detail in this Report.
The need for action on security measures is not actually a subject for debate. In some respects, this is regrettable. However, the reality is that the international community has determined that certain mandatory security assurance measures are mandated by international conditions, and UNCTAD has responded with recommendations pertaining to security initiatives to help safeguard the interests of Pakistan. It is, therefore, the task of this Report to indicate how those interests may be directly served.
There are two main areas that require urgent actions in Pakistan. The first is the Container Security Initiative (CSI). The second is the International Ship and Port Security Code under the auspices of the International Maritime Organization (ISPS Code). There is a third area, which may also be addressed: the Customs-Trade Partnership Against Terrorism (C-TPAT).
The views expressed in this paper are those of the author and do not necessarily reflect the views of the United Nations Conference on Trade and Development (UNCTAD). UNCTAD makes no representation concerning and does not guarantee the source, accuracy or completeness of any statement, data, interpretation, or opinion presented.
- CONTAINER SECURITY INITIATIVE
The Container Security Initiative (CSI) was originally introduced by the United States in response to the terrorist acts of September 11, 2001. While the CSI continues to be led by US concerns, many other countries worldwide, including for example Malaysia, Sweden, Japan and Singapore have adopted the same stringent measures related to commercial container traffic. The CSI initiative supports the “Cooperative G8 Action on Transport Security” adopted by the G8 in June 2002.
CSI is based on the premise that security of the world’s maritime trading system needs to be enhanced and that it will be more secure if high-risk cargo containers are targeted and screened before they are loaded. The initiative aims at facilitating detection of potential problems at their earliest possible opportunity and is designed to prevent the smuggling of terrorists or terrorist weapons in ocean-going cargo containers.
CSI consists of four “core” elements:
(1) using intelligence and automated information to identify and target high-risk containers;
(2) pre-screening those containers identified as high-risk, at the port of departure, before they arrive at port(s) of destination;
(3) using detection technology to quickly pre-screen high-risk containers; and
(4) using smarter, tamper evident containers.
Most of the world’s non-bulk cargo travels in marine shipping containers. Globally, over 48 million full cargo containers move between major seaports each year.
To implement CSI and in particular its second aspect on pre-screening containers, US Customs have been entering into bilateral agreements or partnerships with foreign governments. The agreements provide for the deployment of US officers at foreign ports, who will have to target and pre-screen U.S. bound cargo containers before they are shipped to the United States. U.S. officers are intended to work with host nation counterparts.
The stated goal of CSI is to improve security without slowing down the movement of legitimate trade. Therefore, “wherever possible, containers screenings are carried out during periods of down time, when containers sit on the docks waiting to be loaded on a vessel.”
The initial aim of U.S. authorities was to implement CSI at the ports that send the largest volumes of cargo containers into the United States, in a way that facilitates detection of potential security concerns at the earliest possible opportunity. Several mega ports handling a very large volume of containers bound for the U.S.A. have already signed declarations of principle to join CSI and are at various stages of implementation.
The US Department of Homeland Security has expanded CSI to a second tier of international ports, to embrace new areas of Asia and the Middle East and taking CSI coverage to 80% of containers entering the US.
With respect to relevant cost implications of CSI, it should be noted that while US authorities are paying to deploy their officers and computers in the foreign ports, host seaports have to get equipped with screening and detection equipment, which is not provided by or paid for by the US authorities. Of course, some of the mega ports already have such technology in place. However, for other ports, CSI implementation requires the host country to obtain and finance detectors, IT equipment as well as any other relevant facilities and personnel.
|Top 20 Foreign Ports
(Exports to U.S.)1. Hong Kong *
2. Shanghai *
3. Singapore **
5. Rotterdam **
6. Pusan *
7. Bremerhaven **
8. Tokyo *
9. Genoa *
10. Yantian *
11. Antwerp **
12. Nagoya *
13. Le Havre **
14. Hamburg **
15. La Spezia *
16. Felixstowe *
17. Algeciras *
18. Kobe *
19. Yokohama **
20. Laem Chabang
|Top 10 U.S. Ports
1. New York
2. Los Angeles
3. Long Beach
* Denotes CSI ports
** Denotes U.S. Customs officers have been deployed to the port and it is fully operational.
The main purpose of the CSI and the 24-Hour Rule (see Section 2, below) is to establish precisely what is carried in every container.
This is where Pakistan interests must concentrate priority efforts on a timely basis.
1.1 Information on Manifests
The description of cargo must be precise enough to enable the identification of shapes, physical characteristics and likely packaging of the manifested cargo, so that security officials anywhere can identify any anomalies in the cargo when a container is run through imaging equipment.
Generic descriptions on manifests, such as “FAK” (“freight of all kinds”), “general cargo” and “STC” (“said to contain”) are no longer acceptable, as they do not provide adequate information regarding the goods. Descriptive clauses, which were commonly used and accepted until recently are not longer acceptable and have to be replaced by more specific descriptions.
For each container, the manifest must provide:
- A detailed and precise description of the cargo or the 6-digit Harmonized System Subheading
- Full name and addresses of the owner or owner’s representative, as well as the shipper and the consignee of the cargo
- Seal number
- Accurate weight of the cargo.
Further, the US Customs and Border Service, under the Homeland Security Department has provided lists of examples of unacceptable narrative descriptions of goods on manifests, as well as “acceptable” narrative descriptions of goods. US authorities have provided the following terms as a guide. They are illustrative, not exhaustive, examples of acceptable and unacceptable descriptions. Phrases or words in parenthesis are meant as examples.
Jewellery (may include watches)
|New Auto parts
Used Auto parts
|Actual Chemical Name (not brand name)
Or U.N. HAZMAT Code Identifier #
Consumer Electronics, Telephones
Electronic Toys (can include Gameboys, Game Cubes,
Dancing Elmo Doll etc.)
Personal/Household Electronics (i.e. PDA’s, VCR’s, TV’s)
|Equipment||Industrial Equipment, Oil Well Equipment
Automotive Equipment, Poultry Equipment etc.
|Flooring||Wood Flooring, Plastic Flooring, Carpet, Ceramic Tile,
Packaged Rice, Packaged Grain, Bulk Grain
|Iron||Iron Pipes, Steel Pipes|
|Steel||Iron Building Material, Steel Building Material|
Leather Jackets, Shoes
|Machinery||Metal Working Machinery
Cigarette Making Machinery
|Plastic Goods||Plastic Kitchenware, Plastic Houseware,
Toys, New/Used Auto Parts
Polyurethane Medical Gloves
|Rubber Articles||Rubber Hoses
Rubber Conveyor Belts
Coiled Wire (Industrial)
Further, The USCS has also stated that it would be preferable to have the six digits (subheading) of the Harmonized System incorporated on manifests.
Action on providing better information on manifests is entirely within the power and control of private sector interests in Pakistan.
It is recommended that better commodity descriptions on manifests be introduced immediately, in addition to providing the six-digit HS commodity subheading coding on all manifests of goods exported from Pakistan. It view of the security concerns in the international community, and the need to provide credibility in trade and security circles, is proposed that Pakistan take the lead in providing the six-digit subheading manifest information on all exports, as a matter of course.
This will take some time to introduce, but the long-term benefits in security clearances and trade facilitation will clearly be worth the shorter-term costs to manufacturers and traders.
Indeed, manufacturers and major trading companies already have product identification codes for all their products for their own internal production, storage, inventory management, handling, shipping and other purposes. If all manufacturers who are engaged in international trade were to adopt and incorporate the first six-digits (subheading) of the Harmonized System into their own product codes, then this data could then be automatically included in electronically-generated invoices, packing lists, bills of lading, Customs declarations, and manifests. The remainder of product code identification could be included or suppressed in production of the trade documents. On its own, the HS subheading is not a sufficiently precise coded definition for manufacturers and traders to identify all their products (specifications, sizes, models, etc.) but with the HS subheading included or incorporated into existing product codes, then the rendering of this HS information on trade documents would be made relatively easy.
Once the manufacturer has produced and included the HS subheading into the system, it will then be available to be passed along throughout the entire supply chain.
This proposal could represent a major long-term trade facilitation advance. In a not too-distant future, one could imagine the scenario wherein more detailed information on manifests would obviate the need for export or import Customs declarations – which would be a huge advantage in trade facilitation. Perhaps that day is not close at hand, but the first step in providing more detailed HS codes on manifests would be step in that direction.
1.2. Physical Inspections and Certification of Cargo
As mentioned above, the main purpose of the CSI and the other security initiatives is to establish precisely what is carried in every container. The main task faced by exporters and their agents in terms of the security initiatives is to provide this assurance that goods shipped in containers are as recorded on the shipping documents (packing lists, Customs declarations, bills of lading/AWBs, manifests).
The UNCTAD Mission explored several alternatives for responses to this challenge. Some are feasible, others probably not. There is the consideration of operational effectiveness for security, but there is also the need for any solution to receive political acceptance through credibility. A degree of innovative, lateral thinking is required to come up with practical solutions that will really help the Pakistan to maintain and improve market access.
1.2.1 Manufacturers’/Traders’ Role
One possibility the Mission considered is development of a digital security file for each shipment by private sectors parties.
If we go back to the manufacturer level, a record could be made of each step in the production and packing process, as well as the stuffing of containers at the factory. Options would include a digital video of these processes or a series of digital photos. During the loading of containers, a record would be made of the empty containers, the container number(s), the loading process and the closing of the doors and sealing of the container, including the seal numbers. Export declarations, packing lists, commercial invoices would also be scanned and recorded on the digital file. Once all data is recorded, two RW-CDs would be burned – one to be kept on the manufacturer or agent’s file until the shipment clears Customs in the overseas country of destination. The second CD would accompany the documents with the shipment, subject to review by trade administrators or security officials along the path to the shipment’s destination.
If this recording process had not already been taken at the manufacturer stage, when a separate trader is involved in exporting goods from Pakistan, a possibility would be for the trader to record the stuffing process at his warehouse.
It is not feasible, or even effective, to go further back into the supply chain to record processes for security purposes (e.g., to suppliers of raw materials or articles, which are incorporated into a manufacturing process).
One large manufacturer of garments in Karachi (Kings’ Group) provided an interesting perspective. The company’s chief operating officer thought building a digital security file for each shipment would be a possibility, as his company already runs a 24-hour CCTV system for internal security purposes on the production line as well as in handling, packing and storage operations. This is primarily an anti-pilferage measure.
The possibility was also discussed for installing digital video cameras in locations where containers are stuffed, to monitor the stuffing and sealing operations. The monitoring could be done at remote locations through on-line surveillance. The entire supply chain could, conceivably, be subject to a degree of surveillance in this manner (even by a trade administration in foreign country!). The gentleman from King’s Group stated that he would be able to record the stuffing of his containers – in addition to current use of CCTV for internal security purposes – within 15 days!
However, in reviewing the number of shipments and containers involved in Pakistan’s export trade, these proposals are probably not feasible. It would be a major difficulty to prepare, organize and control all such records for security assurance. At any rate, a digital security file may not enjoy sufficient credibility in the Customs and security administration in the final overseas country of destination.
1.2.2 Customs Examinations
At the present time, the Customs administration in Pakistan inspects all export shipments at the port of embarkation. At least this is the official assertion in the headquarters office in Islamabad, in the regional administrations and even in the port offices. These inspections are for anti-drug, as well as duty drawback purposes. Samples are often removed from the shipment by Customs in the port. But these sample-taking techniques cause shipments to be short, cause problems in re-stuffing of containers in the seaport, and often delay the export process, including even causing shipments to miss the sailing of the vessel intended to convey them. (This is a problem that was identified in the UNCTAD Report on Trade Facilitation in February 2002, so it will not be repeated it in detail here).
In fact, most of these inspections are not effective.
First of all, there is no possibility of carrying out proper, effective inspections on all shipments. It is not realistic. Currently, most inspections are cursory and would not be effective for security purposes (weapons or chemicals can easily be hidden amongst clothing, for example, in a 40-foot container, and would be undiscovered during these cursory examinations). Customs also produces a report on the results of each inspection on export shipments, but these reports currently are not detailed or consistent in the manner of recordings the findings, and to date, these are not used in compiling trader profiles. Complicating the possible use of these reports in establishing security assurance is the fact that most inspection reports are actually written by clearing agents, and in many cases are also signed by clearing agents!
Customs in Pakistan has introduced risk management on the import side of the business and is contemplating the introduction of a risk-management on exports as well.
If these inspections were to be done properly, even selectively, port congestion will increase sharply with a devastating effect on the flow of containerized export traffic. Already, some of the container terminals are operating at maximum capacity (Al-Hamd) with no room to turn around, and to introduce more or better inspections would complicate terminal operations even further. Logistics will have to be planned differently with the participation of all stakeholders, with improved advance movements of containers into the ports. This recommendation also applies to the possible scanning of containers by x-ray or other machines. Introduction of improved logistics planning will be obligatory.
Customs is considering the possibility of conducting export inspections at manufacturers’ factories or at traders’ warehouses. This seems reasonable for large volume stakeholders, but nevertheless, without a system of professional risk management and proper inspection techniques, and report writing, this option is also does not provide the credibility required for security purposes.
1.2.3 Third-Party Inspections
Pakistan has a long and, regrettably, negative history of pre-shipment inspections on imports into the country. However, it should be noted Pakistan certainly is not unique in this regard. In Pakistan this history is rather well known in national and international public circles, and it is unnecessary to be reviewed here. However, this factor does influence even the contemplation of introducing independent third-party private sector inspection service into the export process to provide security assurance.
Nevertheless, in reviewing the current situation in Pakistan, in view of the obligation to develop a plausible solution to help guarantee Pakistan’s ability to continue to export, and after analyzing all possibilities, the best solution at this time appears to be introduction of an independent, professional private sector inspection service into the export supply chain from Pakistan. It is proposed that such and independent inspection service be engaged for an interim period of at least three years, and an assessment made at that time to determine if other options are preferable or possible at that time.
Further, it is recommended that every possibility be explored for this security inspection service to be combined with current inspections at factories for child labour compliance, and product quality, as well as with Customs inspections for drugs and drawbacks. The labour and quality inspections are done at factories, at the request of the customer in the foreign market who is purchasing the Pakistan exports.
As system of risk assessment – and thorough high-calibre inspection and reporting techniques – needs to govern the operational logistics of actually carrying out the physical inspections. In other circumstances, this might go without stating what is really the obvious, but in Pakistan this is not happening currently.
A system of physical inspections, recording the results of inspection and the development of risk assessment profiles is required on an urgent basis. It will be impossible to undertake physical inspections on 100% of containerized export shipments, but it is possible to introduce a Risk Management System to target physical inspections to high or unknown risk containers, goods, shipments, traders, manufacturers or transport and clearing agents.
Inspections should be carried out at factories and warehouses of the larger, well-known (low risk) manufacturers and traders. This inspection proposal applies jointly for Customs inspections for drugs and duty drawbacks, and for security inspections. Inspectors should be available on-site for these inspections (just as excise inspectors were formerly located in factories and warehouses in Pakistan). Whether inspectors need to be posted on-site on a full-time basis or not will depend on the volumes and risk.
It is likely that physical inspections of unknown or high-risk shipments will have to undertaken inside the ports of exit, rather than at inland warehouses or factories. This, in turn, will mandate a greater degree of overall management of the logistics and timing of containerized cargo movements from inland points to the seaports, in order that inspections and container scanning can be carried out to the degree necessary to provide the required assurances, without hopelessly encumbering the efficient movement of cargo into and out of the ports.
The management of cargo movements will have to be coordinated by both private sector interests and management of the ports.
Proper management of the new logistics will be absolutely necessary to alleviate port and terminal traffic congestion, and to allow containers movements in a timely fashion to meet vessel sailing schedules.
The role of the third-party private sector inspection service should not be limited to inspections and inspection reports, but would also include overall logistics management of outward (export) cargo movements, including the timing of arrivals of containers in the seaports, development of intelligence sources and intelligence networks, determination of risk and the decision to scan specific containers. (See the next section for information on container scanner equipment).
1.2.4 Container Scanners
Regardless of risk factors associated with goods, manufacturers, traders, other interested parties, or other related factors, assurance needs to be brought to the supply chain security for all goods, which arrive at the port from inland sources. Over 80% of exports through Karachi ports (PQA and KPT) are transferred in-bond from inland dry ports, factories or warehouses.
This means that scrutiny of exports at the ports is required anyway for security purposes, regardless of even whether inspections were done at inland venues. It is therefore recommended that the ports be equipped with the most effective, state of the art security scanners.
Initially, at least four large fixed-location scanners are required for Karachi (one at Port Qasim, and three at strategic locations in KPT and the container terminals). Further, it is recommended that mobile scanners with the same high-level capability be procured for each of the main airports (Quaid-E-Azam International Airport in Karachi, and Islamabad International Airport). At some time in the future, once regular lorry traffic opens up with India, it is recommended another large fixed-locations scanner be introduced at the main border post on the road from Lahore to India.
In conducting research into this matter, but it would appear that only 3-D computer tomography or coherent x-ray tomography scanners will provide adequate assurance for weapons, radiation, anti-drug and security purposes. Australia has recently introduced lower capability scanners for security purposes, but in the view of the UNCTAD Mission, there is little point of introducing scanners in Pakistan that only do the job in a partial or ineffective manner for certain goods. In other words, there is no point in procuring scanners that can detect drugs, but not plastic explosive materials, or weapons of mass destruction.
Annex 1 to this Report provides detailed information on container scanner specifications. Page 11 of the Annex provides information on the capabilities for scanners, which use the different available technologies.
NOTE: This Report does not make any recommendations or express any preferences for any commercial product. Annex 1 provides an example of the types and capacities of scanning equipment that is now available on the market. There are similar products available from other vendors.
These fixed scanners are extremely expensive. However, there is no responsible alternative.
The National Trade and Transportation Facilitation Committee, on behalf of the Government, should explore funding options immediately. The Government is expected to make some contribution toward the purchase of the scanners. World Bank funding is an option that should be analysed. Other donor grant contributions should be explored, among these, the UNDP; the European Union; the USAID; DTZ; the U.S. Customs and Border Protection Service, in addition to the Homeland Security Department; direct vendor financing, which may be supported by WTO-compliant export incentive programs; or, an inspection services company, which depending on contractual arrangements, could include the supply of scanners on a cost-recovery service basis).
1.2.5 “Smart” Containers and Seals
Because the majority of containerized cargo moves from inland points to Port Qasim and Karachi Port Trust and the various container terminals, concern does exist, that no matter what inspections or other assurances may be made at the inland points, containers can be tampered with en route from the inland points to the seaports.
Examples were cited to the UNCTAD Mission about cases where the hinges were removed from the doors on containers to introduce drugs between the inland shipment points and the port in question. Once the drugs were introduced into the containers, the hinges and doors were replaced and the seals on the doors, obviously, remained intact. These anecdotes were not at all surprising, but apparently, cases of such unscrupulous behaviour were discovered in the past, more or less, by chance.
Over time, it will be up to the Government to require the introduction and use of “smart” containers and electronic seals in all containerized import and export trade in Pakistan. Annex 2 of this Report provides information on smart containers and electronic container seals. The costs for the newer generation of secure containers will be borne largely by private sector container and transport companies, with costs passed on to clients.
- Provide more detailed narrative information on manifests, including the six-digit subheading for each commodity included on the manifest.
- Arrange for third-party inspections of containerized export cargo, based on a system of Risk Management.
- Introduce state of the art container-scanning equipment at export loading points at sea ports and airports.
THE “24-HOUR” RULE
Effective one year ago (December 2002), all container carriers and/or automated non-vessel operating common carriers (NVOCCs) were required to submit a cargo declaration 24 hours before cargo is laden aboard the vessel at a foreign port destined for the United States. On the basis of the information provided on the manifest pursuant to this new Rule, U.S. Customs officers posted in CSI host are to identify high-risk containers prior to loading.
US Customs laws impose certain documentary requirements upon vessels bound for the United States. Among other requirements, vessels destined for the United States and obligated to make entry, must have a manifest meeting certain requirements. The U.S. Customs service is the competent authority to specify the form and data content of vessel manifests, as well as the manner of production and the delivery or electronic transmittal of the vessel manifest.
Prior to December 2002, Customs Regulations simply required the master of every vessel arriving in the U.S. to have the manifest on board the vessel. A copy of it had to be ready for production and had to be delivered upon demand to US Customs. Comprised in the vessel manifest had to be a cargo declaration listing all the inward foreign cargo on board the vessel regardless of the intended U.S. port of discharge of the cargo. No merchandise would be unloaded until Customs had issued a permit for its discharge. In cases where the master of a vessel had committed any violation of Customs laws, for example by presenting or transmitting a forged, altered or false manifest, he was liable for a civil penalty. Following the events of 11 September 2001, new regulations were adopted with the aim of enabling U.S. Customs to evaluate the terrorist risk of cargo containers.
The regulation, known as the “24-Hour Rule,” requires ocean carriers to transmit cargo manifests for cargo being shipped on a container vessel to the United States 24 hours in advance of loading at foreign ports.
Empty containers and transit containers bound for destinations outside the U.S. are equally affected by the rule. Bulk shipments are exempted from the requirements of the new regulations. As for break bulk cargo, exceptions are made on a case-by-case basis.
It must be emphasized that a container, which is transhipped several times until its final destination, will have to fulfil the 24-hour requirements at each port on the way to the US. Also, in case a cargo is cleared under the Rule and loaded on a vessel bound for a specific destination and the vessel is eventually diverted to another country, the carrier will have to comply ones again with the Rule and submit a new manifest.
As the rule seeks to establish precisely what is carried in every container, the description of the cargo must be precise enough to enable to identify the shapes, physical characteristics and likely packaging of the manifested cargo so US Customs can identify any anomalies in the cargo when a container is run through imaging equipment.
Generic descriptions, such as “FAK” (“freight of all kinds”), “general cargo” and “STC” (“said to contain’) are not acceptable, as they do not provide adequate information regarding the merchandise. Descriptive clauses, which were commonly used and accepted until recently are not longer acceptable and have to be replaced by more specific clauses. The information needs to be provided by the ocean carrier. In practice however, this means that shippers must provide the necessary information several days ahead of sailing, whereas in the past manifests were invariably submitted long after the vessel had departed, or sometimes even after the cargo had been discharged.
Carriers participating to the Vessel Automated Manifest System (AMS) are required to provide the vessel’s cargo declaration electronically. The others can present it via old-fashioned paper transferral means.
The NVOCC (Non-Vessel Operating Common Carriers) international community had expressed some concern about filing manifests through the ocean carrier, as far as confidentiality is concerned. Indeed, if obliged to rely on shipping lines to lodge documents with the US Authorities, they will automatically disclose the identity of their clients to sea-carriers, and their main competitors.
In response to this concern, the final rule gives NVOCCs the possibility of presenting their cargo manifests directly to US Customs, by enlarging the notion of a “carrier.” However, to be recognized as a “manifesting party”, parties must post an International Carrier Bond and have elected to provide cargo manifest information to Customs electronically. It must be emphasized that Customs, after having analyzed the cargo information, do not send “load messages” to carriers to authorize them to proceed with loading. Therefore, in order to avoid risking a penalty, carriers need to delay loading operations for 24 hours after the submission of the manifest to US Customs to be sure that there is no problem with a specific container. Of course, this is, unless a “do not load” message has been sent by U.S. Customs.
Upon arrival at a U.S. port, Customs will not issue a permit to unload before having received the cargo declaration information pursuant to the new requirements. In cases in which Customs does not receive complete cargo manifest from the carrier or the NVOCC, Customs may delay issuance of a permit to unload the entire vessel until all required information is received. Customs may also decline to issue a permit to unload the specific cargo for which a declaration is not received 24 hours before loading in a foreign port.
As far as penalties are concerned, if the master of a vessel fails to provide manifest information or fails to present or transmit accurate manifest data in the required time period or is found to have presented or transmitted any false, forged or altered document, paper, manifest or data to Customs, he/she may be liable for civil penalties. In addition, if any NVOCC having elected to transmit cargo manifest information to Customs electronically, fails to do so or transmits false, forged or altered document, paper, manifest or data to Customs, may be liable for the payment of liquidated damages.
As of May 2003, US Customs started fining companies that did not electronically submit their cargo declarations on time and have also started issuing “do not load” messages to vessel operators for cargo that had an invalid or incomplete cargo description.
In large part, the 24-Hour Rule has been successfully adopted. International shipping companies operating from Pakistan have adapted their operations to comply with this security requirement.
SHIP AND PORT SECURITY
In December 2002, the International Maritime Organization (IMO) introduced a new comprehensive security regime for international shipping, by adopting a number of amendments to the 1974 Safety of Life at Sea Convention (SOLAS). The new regime is currently set to enter into force in July 2004 and its timely implementation is mandatory for all States party to SOLAS.
Chapters V and XI of the Convention were amended, the latter being renumbered as Chapter XI-1. Further, a new chapter XI-2 was added, which sets out the new International Ship and Port Facility Security Code (ISPS Code).
These amendments aim at enhancing maritime security on board ships and at ship/port interface areas. They do not directly deal with container security. However, their impact on global trade and transport is such that it is absolutely necessary for Pakistan to take certain actions to comply with the ISPS Code by the deadline.
Timely implementation and compliance of the ISPS Code is mandatory for all SOLAS contracting States, irrespective of their level of development.
Because they come in addition to the container security requirements ship-owners and operators have to meet, it is appropriate to include a brief overview of the obligations that must be fulfilled in relation to security.
These ship security requirements concern an estimated 43,000 vessels and an unspecified number of seafarers worldwide. To comply with them in a timely fashion represents an enormous challenge. Ship-owners and operators have to swiftly take the necessary steps to comply with them.
3.1 Chapters V and XI-1 of Solas Convention
(a) Automatic Identification System
Chapter V of the SOLAS Convention requires vessels to be equipped with Automatic Identification Systems (AIS). Each category of vessel has to comply with this requirement by a certain date, but in principle no later the end of 2004.
Automatic Identification System serves as a shipboard automatic electronic reporting device for the enhancement of safety of navigation and to provide shore based identification and monitoring of maritime traffic. It is a ship-to-ship, ship-to-shore and shore-to-ship broadcast system, which is capable of sending and receiving ship information such as identification, position, course, speed and much other information.
(b) Ship Identification Number
Chapter XI-1 requires vessels to mark their Ship Identification Number in various places, on the hull and in the machinery space. Again, vessels have to comply with this requirement by a certain date, no later than the first scheduled dry-docking after 1 July 2004.
(c) Continuous Synopsis Record
Chapter XI-1 requires also ships to maintain a Continuous Synopsis Record (CSR) as from July 2004.
The CSR is a document, which chronicles the ship’s history. Any change as to be recorded in the document. It contains information such as the ship’s name, identification number, flag state, date of registration, port of registry, classification society, name and address of company and address from where company’s safety management activities are carried out, name of the owner and their address, name of bareboat charterer and address, and name of the organization which issued the company’s Document of Compliance, the vessel’s Safety Management Certificate and the International Ship Security Certificate.
The CSR has to be retained on board throughout the entire life of the vessel, irrespective of new management or ownership and must be available for inspection at all times.
3.2 ISPS Code
The ISPS Code is based on the idea that ensuring security of ships and port facilities is a risk management activity and that an assessment of the risks has to be made in each particular case, in order to determine which security measures are appropriate. The Code is therefore providing for a standardized framework for evaluating risk.
It contains detailed security-related requirements for governments, ports authorities and shipping companies in a mandatory part (A) and a non-mandatory part (B). Part B contains guidelines on how to meet the mandatory requirements.
3.2.1 Ship Security
(a) Ship Security Alert System
The ISPS Code requires all vessels to be fitted with a Ship Security Alert System. This system must be capable to be triggered from the bridge and at least one other location to transmit a ship-to-shore security alert.
(b) Ship Security Assessment
Ship owners and operators have to carry out Ship Security Assessments for each of their vessels. Such assessments are to be documented, retained and reviewed periodically. The aim of this process is to identify the presence of any existing security measures and assess potential threats and vulnerabilities.
(c) Ship Security Plan
On the basis of the outcome of the Ship Security Assessment, a Ship Security Plan has to be developed for each vessel.
The plan must contain a clear statement emphasizing the Master’s authority – making clear that he has the overriding authority and responsibility to make decisions for all safety and security matters – and identify the security officers.
The plan should address several issues, such as measures to prevent unauthorized access, duties of shipboard personnel, responses in case of threat, safeguards to counter unlawful carriage of weapons and many others. It should also describe specific procedures to deal with given situations, such as reporting incidents, evacuating the ship, inspecting, testing and maintaining the vessel’s security equipment or responding to security instructions given by governments.
Procedures must also be provided for the reviewing and updating of the plan itself.
Completed Ship Security Plans have to be submitted to the flag administration for approval.
(d) International Ship Security Certificate
By 1 July 2004, all vessels shall carry an International Ship Security Certificate issued by the flag State.
Such certificates are only issued after the conduct of the Security Assessment, the approval of the Ship Security Plan and the Training of the affected personnel.
(e) Personnel Requirements
In order to comply with the ISPS Cole, ship owners and operators are responsible for the appointment, empowerment and training of certain key individuals.
The first of them is the Company Security Officer (CSO). This person is responsible for coordinating Security Assessments, overseeing the development, submission and approval of the Security Plan, liaising with vessels on security issues, maintaining the security system and ensuring the required verifications.
Another key individual is the Ship Security Officer (SSO), which must be appointed from the existing staff aboard ship. This person’s main duties are to implement the Security Plan on board, carry out ship inspections and report incidents. He/she works of course in close collaboration with the CSO and Port Security Officers.
Both Company Security Officers and Ship Security Officers must be trained, in order to be familiarized with the ISPS requirements and their specific duties. Records must be maintained in that respect.
Finally and as far as the crew is concerned, they all have to be acquainted with the Ship Security Plan. In addition, security drills are to be held on board at least once every three months to promote the effective implementation of the Ship Security Plan, together with a full-scale exercise involving the Company Security Officer once a year.
It is the assessment of the UNCTAD Mission that the international shipping companies, which operate out of Pakistan, have already arranged their operations to comply with both the 24-Hour Rule, and with the Ship Security imperatives.
It is also the assessment of the Mission that at the time of the Mission’s visits, port officials have not taken adequate measures to bring about compliance with the ISPS Code – which must be completed by July 2004. This situation is described in further detail below.
3.2.2 Port Security
As noted above, the Maritime Safety Committee of IMO has developed and introduced new requirements through the International Ship and Port Facility Security (ISPS) Code by which ship operators and port authorities can co-operate to detect and deter acts of maritime terrorism. This is an amendment to the Safety of Life at Sea Convention (SOLAS).
Any Government, through the Port Authority is required to develop and update a port facility security plan. An essential step is to carry out a security assessment by competent persons and shall include the following elements:
• Identification and evaluation of important assets and infrastructure important to protect
• Identification of possible threats to the assets and infrastructure and the likelihood of their occurrence, to establish and prioritize security measures
• Identification, selection, and prioritisation of counter measures and procedural changes and their level of effectiveness in reducing vulnerability
• Identification of weaknesses, including human factors in the infrastructure, polices, and procedures.
A port facility security plan must be developed and maintained based on the assessment and will be a written plan addressing the following:
• Measures designed to prevent weapons or any other dangerous substances and devices intended for use against people, ships or ports and the carriage of which is not authorized, from being introduced into the port facility or on board a ship
• Measures designed to prevent unauthorized access to the port facility, to ships moored at the facility, and to restricted areas of the facility
• Procedures for responding to security threats or breaches of security, including provisions for maintaining critical operations of the port facility or ship/port interface
• Procedures for responding to any security instructions the Contracting Government, in whose territory the port facility is located, may give at security level 3
• Procedures for evacuation in case of security threats or breaches of security
• Duties of port facility personnel assigned security responsibilities and of other facility personnel on security aspects
• Procedures for interfacing with ship security activities
• Procedures for the periodic review of the plan and updating
• Procedures for reporting security incidents
• Identification of the port facility security officer including 24-hour contact details
• Measures to ensure the security of the information contained in the plan
• Measures designed to ensure effective security of cargo and the cargo handling equipment at the port facility
• Procedures for auditing the port facility security plan
• Procedures for responding in case the ship security alert system of a ship at the port facility has been activated.
The UNCTAD Mission is rather concerned abut a perceived inertia in the port authorities, that is going to exact a very heavy cost on Pakistan if the current attitudes are not turned around quickly. Time is now short to meet the July 2004 deadline, and hopefully the visit to Karachi by senior officials from the International Maritime Organization in early December will serve to focus the attention of port authorities to take the necessary actions.
The IMO should deliver the Port Security Officer training course in the same time frame as the Project’s evaluation meeting in early December.
The Karachi Port Trust would appear to have the greatest challenge in complying with the ISPS Code by July 2004. This is not to suggest that the task is impossible, just that given the time constraints, and the particular nature of the KPT areas of responsibility, the job looks intimidating.
There is little control over the movement of vehicle, people or goods into or out of the KPT area. Admittedly, it is a large area to cover, but this just makes the challenge larger. While the container terminals have a more obvious and effective security service in place, even in the terminals there is little scrutiny and no prior security checks of drivers who enter and leave the terminals and ports, and who are responsible for the movement of vehicles and goods around, into and out of the port areas.
Similarly, daily-wage workers are not adequately screened for security purposes.
These are areas requiring immediate attention.
Frankly, the international community does not distinguish between KPT and KICT, for example. For that matter, there is not really a distinction made in international perception between PQA and KPT – it all is dealt with conceptually as the port of Karachi. Consequently, all parties need to work together to achieve the operational security effectiveness that the international community is looking for, or the consequences of failure to meet those obligations will be felt by all. It is like a chain – the weakest link will determine the strength of the entire chain.
If action is not taken rapidly, the results could well be refusal of the international community to accept containerized cargo from Karachi from July 2004.
3.3 Government Coordination
Currently in Pakistan, the General Directorate of Ports and Shipping comes under the Ministry of Communications, while the Civil Aviation Authority comes under the Ministry of Defence.
However, in most countries, security related to international trade is placed under the purview of the Customs administration. Indeed, in Pakistan, cargos inspections on imports and exports are currently the sole responsibility of the Customs Administration, under the Central Board of Revenue. In the future, international contacts and relations related to international trade logistics security may also best be put into effect under the auspices of the Customs Administration.
In the meantime, because of the urgency of the need for actions related to the international security requirements, it is recommended that the Government designate one entity as responsible for coordination of all matters related to logistics security.
Given the current situation, and the need for urgency in coordination of security-related activities between ministries, it is recommended that this responsibility be given to the National Trade and Transportation Committee (NTTFC).
• A single entity within the Government should be designated as responsible for the coordination of all activities related to international logistics security. Given current spheres of responsibilities, the best entity to carry out these coordination duties, is the NTTFC.
• A governing private sector entity be designated as responsible for scrutinizing and screening all drivers, daily-wage workers and other port and terminal employees on a prior and priority basis, so that lists of authorized personnel are developed and provided to port and terminal operators from which they will be obliged to engage all staff for any business activities inside the ports and terminals.
• Immediate steps should be taken to ensure that Port Authorities undertake their respective Security Assessment in the shortest time period feasible, with a view to development of Port Facility Security Plans well in advance of the July 2004 deadlines. Actions called for under each Port Security Plan will differ, but in some cases, port area perimeter barriers and imposition of more tightly controlled assess to port areas will be a major requirements and would appear to represent daunting challenges at this time.
COLLABORATION AGAINST TERRORISM
The Customs Trade Partnership Against Terrorism (C-TPAT) is a joint U.S. government-business initiative aimed at building “co-operative relationships that strengthen overall supply chain and border security.” According to U.S. Customs, “it is intended to enhance the joint efforts of both entities in developing a more secure border environment by improving the security for the transportation of passengers, crew, conveyances and cargo throughout the commercial process.” To date, private sector partners involved in C-TPAT are those having direct business contacts with parties in the U.S. C-TPAT is a non-contractual voluntary agreement, terminable at any time by written notice by either party. Actors of all international supply chain categories may apply for C-TPAT (Licensed Brokers, Air Carriers, Sea Carriers, Rail Carriers, Air Freight Consolidators, Ocean Transportation Intermediaries, NVOCCs, Terminal Operators, etc.). Taking the example of sea carriers, the required documentation includes a C-TPAT Agreement to Voluntary Participate as well as a C-TPAT Supply Chain Security Profile Questionnaire. By signing the Agreement, the applicant accepts to work at establishing, improving, or amending the security processes and procedures along the entire supply chain, in accordance with the C-TPAT security recommendations, for each specific segment of the import chain. C-TPAT partners undertake to secure their supply chain, i.e., to ensure the integrity of their security practices and to communicate their security guidelines to their business partners within the supply chain. They further undertake to ensure that their subcontractors agree to be bound by the terms of C-TPAT. For instance, C-TPAT recommendations for sea carriers include tasks such as:
• Controlling all access to vessels while in port
• Identifying all persons boarding the vessel
• Ensuring that all manifests/bills of lading submitted for cargo to be shipped are complete
• Ensuring that high security seals are affixed on all loaded containers.
In return, the U.S. government, – U.S. Customs and Border Protection Services under the Department of Homeland Security – undertakes to expedite clearance of cargo at the point of arrival in the U.S., and to assist the carriers in enhancing security.
The process was opened on 15 July 2002, with strong support from virtually all of the major companies in the liner shipping industry. As of June 2003, as many as 3,000 companies had signed up to C-TPAT.
International shipping lines operating from Pakistan have already signed on to the C-TPAT, just as they have adapted to the 24-hour rule. For example, Maersk Shipping Lines, which serves Karachi, was one of the first partners to sign on to the C-TPAT.
What more can be done under this partnership for security enhancement and trade facilitation?
International Trade Facilitation Expert, John Raven, has prepared a paper, which pertains to the “authorized trader” concept under the Kyoto Convention, which may be directly to the situation in Pakistan. Please see Annex 3 for Mr. Raven’s paper on “The Authorised Supply Chain.”
4.2 World Customs Organization
The World Customs Organization has undertaken major initiatives in response to the security threats related to international trade –
Resolution of the Customs Co-operation Council
On Security and Facilitation of the International Trade Supply Chain
THE CUSTOMS CO-OPERATION COUNCIL, [Customs Co-operation Council is the official name of the World Customs Organization]
(1) the increased global concern with respect to acts of international terrorism and organized crime, including money laundering;
(2) the importance and vulnerability of global trade;
(3) the need to secure and protect the international trade supply chain from being used for acts of terrorism or other criminal activity while ensuring continued improvements in trade facilitation without unnecessarily increasing costs; and
(4) the critical role and special expertise of Customs administrations in protecting society, combating commercial fraud, facilitating regional and international trade, and controlling the cross-border movement of goods and conveyances.
(1) in the need to ensure that the world Customs community makes a dynamic and vigorous contribution to securing and facilitating world trade;
(2) that the WCO must and can assist in enhancing the capability of Customs administrations to increasingly collaborate to enhance the enforcement and facilitation capabilities of Members by encouraging greater harmonization, standardization and international guidelines, which will create a basis for, better international co-operation;
(3) that Members must co-operate as necessary to develop mechanisms to assist in the exchange of information between them;
(4) in the importance of co-operative relationships between and among Members, other government agencies, relevant international bodies and the private sector;
(5) in the importance of advance transmission of standardized Customs data to identify those goods and conveyances that may pose a security risk and to facilitate the movement of legitimate trade;
(6) in the importance of the effective implementation of risk management, risk assessment and targeting techniques;
(7) that all Contracting Parties to the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention) must accede to the Protocol of Amendment which embodies the principles of modern Customs procedures and administration; and that on entry into force of the Protocol, all other Members who are not Contracting Parties should be urged to accede to the Kyoto Convention as amended; and
(8) that the implementation of pilot projects between or among Members, aimed at enhancing the security and facilitation of international trade, should be encouraged.
RESOLVES AS FOLLOWS :
The Secretary General shall :
(1) Ensure that :
i. by June 2003, the WCO Data Model is reexamined to ensure it includes a standardized set of data elements necessary to identify high-risk goods;
ii. by June 2003, Guidelines are developed to assist Members in developing a legal basis and other necessary steps to enable the advance electronic transmission of Customs data;
iii. by June 2003, Guidelines are developed for cooperative arrangements between Members and private industry to increase supply chain security and facilitate the flow of international trade;
iv. the expeditious use by Members of the tools contemplated in items i to iii is promoted;
v. Members’ needs for assistance in establishing supply chain security regimes are identified and a capacity building strategy is developed to assist Members in implementing this Resolution;
vi. donors are identified and invited to contribute financial, human and other resources to advance the development and implementation of supply chain security regimes;
vii. measures are taken to strengthen the assistance offered to Members wishing to improve the security and facilitation of the international supply chain by, for example, enhancing import, export and in-transit control efforts, improving automation, using risk management and risk assessment techniques to select goods and conveyances for examination, improving technology, and ensuring the integrity of their personnel; and
viii. a data bank is created on advanced technology and techniques to enhance supply chain security and facilitation.
(2) Provide for the development and implementation of the measures contemplated in this Resolution, in the framework of the WCO Strategic Plan and with the assistance of a task force of experts from within the Council Membership who, taking into account the differing capabilities and needs of Members, shall:
i. work with other competent authorities (such as the European Union, Port Authorities, Border Agencies, Transportation Authorities and Customs Unions that have competency in this area); and
ii. consult with, and involve, trade, non-governmental and intergovernmental organization stakeholders.
(3) Beginning in December 2002, report regularly to the Policy Commission and the Council on the progress made with the development and implementation of this Resolution. The Policy Commission and the Council will determine further action to be taken.
P. GORDHAN, Chairperson.”
The WCO has developed the Customs Data Model, which is designed to facilitate trade and enhance security through the use of common trade data elements, which in turn will facilitate advance cargo reporting (see Annex 4 of this Report), the identification of high-risk shipments and the rapid movement of no and low-risk shipments:
WCO CUSTOMS DATA MODEL (from WCO Website)
Information and documentation are key elements in the control of international cross-border trade. In today’s interconnected electronic environment these controls will increasingly include Customs-to-Customs information exchange prior to the arrival of the goods in order to provide the necessary level of security as well as acceptable release times.
Standardized and harmonized information requirements and procedures are essential to establish the common understanding which allows for an effective and efficient exchange of information between all parties involved in the international cross-border movement.
The WCO Customs Data Model provides this common understanding on Customs information requirements. The Data Model will also provide Contracting Parties to the revised Kyoto Convention with a global Customs standard to implement provisions dealing with reduced data requirements and electronic submission of declarations and supporting documents.
The WCO Customs Data Model is based on the following basic principles and best practices:
Business process modeling
The work of the Customs Data Model includes the analysis and modeling of the procedures and processes contained in the revised Kyoto Convention. Based upon this analysis illustrative scenarios are developed.
Use of EDI and e-commerce technology
The Data Model for the various Customs procedures and processes is geared exclusively to the requirements of an automated environment using e-commerce technologies. The Data Model should therefore form the basis for the development of common electronic messages (Cargo and Goods declarations for import and export) on the basis of international standards such as UN/EDIFACT* or XML. This requires the development of common message structures for both the Cargo and the Goods Declaration (import and export), which are compatible with relevant commercial information flows.
Common data repository
Uniform data requirements are key to Customs control and are crucial to trade facilitation. For this reason the harmonization of the data requirements for import and export, creation of common definitions and standardization of the data content and its format are essential building blocks for the Customs Data Model.
Segregation of data requirements
The Customs Data Model also covers simplified procedures as described in the revised Kyoto Convention. This includes in particular the two-step-procedure at import, where Customs administrations release the goods on minimum information required for control purposes and perform other administrative responsibilities such as duty/tax collection and collection of trade statistics based on complementary information submitted after the release of the goods.
The Customs Data Model also follows the concept of a seamless data flow, where export and import data requirements are being aligned and the respective electronic declarations share the same structure. This should allow traders to exchange information more economically and enable the importer to utilize the export information as the basis for the import formalities.
The WCO Customs Data Model will also enable Customs administrations concerned to allow the trader to submit the entire WCO electronic Cargo or Goods declaration provided the message contains the data elements and values required by that administration. The Customs administration may use only those data elements that they require for their purposes and ignore the remaining data elements. This may enable in particular multinational traders to rationalize the maintenance of the various interfaces to
Customs IT systems.
Single window environment
The WCO Customs Data Model will also aim at including other governmental regulatory requirements in order to establish a single window environment. This may allow traders to exchange information only once with a single official body, preferably Customs, to fulfill all regulatory requirements related to an import or an export. This work will require the involvement of other regulatory authorities and international bodies in the work of the WCO Customs Data Model.
The G7 Customs Initiative
The G7 Heads of States and Government, in meetings at Lyon (1996) and Denver (1997), and the G7 Finance Ministers at the Birmingham (1998) and Okinawa-Kyushu (2000) Summits, agreed to standardize and simplify Customs data requirements of the G7 countries and to standardize the format in which data are to be reported electronically in order to facilitate international trade, reduce costs for businesses and governments, and promote economic growth.
G7 countries agreed on a timetable to achieve implementation, by 2005 if possible, of the standardized electronic formats. Some countries plan to establish prototypes during 2002. In June 2001 the WCO Council accepted a request from the G7 to take over the maintenance and management of the G7 Initiative from January 2002 to advance the work into a global Customs standard in form of the WCO Customs Data Model.
The WCO Customs Data Model will be an important contribution to the facilitation of international trade. Hence, it will be crucial for the success of this project to have comprehensive participation of the various sectors of business involved in international trade.
The WCO will encourage international trade and transport associations to become actively involved in this work to ensure compatibility with business practice.
4.3 Strategic Objectives
Pakistan and all of its major trading partners are members of the WCO. Therefore, it is recommended that initiatives be taken to bring about the required collaboration between the Customs administrations concerned, under the auspices of the WCO, to address the specific possibilities of identifying companies doing business in Pakistan that can jointly or collectively be designated as “authorised” perhaps even as C-TPAT partners, and whose containerized shipments from Pakistan will enjoy facilitated clearances and simplified procedures along the supply chain from Pakistan to their market destinations.
The initial phase of designating “authorised” traders may well be restricted to well-known international corporations based in Europe or North America, which are manufacturing and/or operating in Pakistan.
Once the initial designations are seen to operating successfully and securely, the Customs administrations concerned, as well as other security or trade administration services could further their collaboration in jointly scrutinizing and designating additional companies in Pakistan as “authorised” for simplified cargo movement and clearance procedures.
• The World Customs Organization (WCO) should be requested to bring together the Customs administrations in Europe and North America with the Customs administration in Pakistan to explore collaborative initiatives under the WCO’s Data Model to introduce mutually-agreed facilitation measures, including the designation of authorised traders whose containerised shipments from Pakistan can enjoy simplified cargo movement and clearance procedures.