29 July 2016

Kate Hollis, Senior Claims Executive at TT Club in Sydney, discusses the risks faced by licenced customs brokers and mitigation steps to take:

“As the international trade regulatory landscape continues to change and the commercial environment becomes increasingly competitive, the balancing act for forwarders and customs brokers between providing services to clients and complying with obligations to customs becomes more complicated.

“Customs brokers assume responsibility for acting correctly between cargo interests and customs. As a result, there is the potential to provide advice to customers or carry out actions that result in the cargo interest suffering financial loss, for which you can be alleged to have been negligent. Closely related to the liability exposure of your customer is the potential for customs to levy fines or penalties through infringement notices.

“Identity fraud is perhaps a less obvious area of risk. In some cases authorities find that brokers have committed an offence where checks on the identity of clients have not been performed and that simple verification of the identity would have alerted the broker to the fraud. Consistent with previous advice, we recommend dealing with your clients directly (rather than through an intermediary) and always perform your own background checks, both in regard to the entity itself as well as the statements being made to customs.

“One recent incident saw rice wine being imported into Australia from Korea, but it was declared as apple cider vinegar. This directly resulted in extra costs for handling the container and for storage costs under the customs bond. Following the inspection, duty was charged at the rate for rice wine – not cider – which the freight forwarder pre-paid on behalf of the importer. It proved impossible to reclaim the duty and additional costs because it transpired that the consignee company no longer existed. There have also been cases of people fabricating an identity in an attempt to import goods without paying the full amount of duty. When the companies were not successful, they simply disappeared.

“Customs brokers also need to be aware of the risk of identity theft. While the variety of scams is broad, TT Club has identified three areas that require particular attention for Customs Brokers:

1. Piggybacking – where an unscrupulous entity uses the identifying details of a legitimate entity on a Cargo Report or Import Declaration, generally with the aim of importing consignments containing illicit substances or smuggled goods.
2. User access security – the nature of access to customs entry systems and digital certificates means that individual login details need to be carefully guarded to avoid misuse and illegal activity.
3. Mandate fraud – where fraudulent diversion of payments occurs. It is primarily the responsibility of the party making a payment to ensure that the bank details are correct.

“Customs Brokers should be aware that their licence might be at risk in a situation where the authorities consider that the broker has intentionally or recklessly facilitated a fraud.  Such situations can also lead to fines being imposed on the Customs Broker as an individual, as well as actions against the forwarding business as a company.

“Mitigation of these risks is possible. In the first instance, it is important to review your own internal processes and systems. Recognise that the risk exposures are business critical and implement robust technology systems and standard operating procedures accordingly, particularly considering access rights and controls.

“Secondly, ensure that well drafted standard trading conditions are properly incorporated into your interactions with all clients. Many national trade associations provide ideal models You should seek legal advice to ensure that contracts are appropriate for your specific business. A third obvious mitigation is to purchase adequate and appropriate insurance. You should discuss this with your broker to ensure that your specific needs are properly covered.”

-End-

Notes to editors

TT Club

TT Club is the international transport and logistics industry’s leading provider of insurance and related risk management services. Established in 1968, the Club’s membership comprises ship operators, ports and terminals, road, rail and airfreight operators, logistics companies and container lessors. As a mutual insurer, the Club exists to provide its policyholders with benefits, which include specialist underwriting expertise, a world-wide office network providing claims management services, and first class risk management and loss prevention advice.

TT Club is managed by Thomas Miller

www.ttclub.com

Thomas Miller

Thomas Miller is an independent and international provider of insurance, professional and investment services.

Founded in 1885, Thomas Miller’s origins are in the provision of management services to mutual organisations, particularly in the international transport and professional indemnity sectors; where today they manage a large percentage of the foremost insurance mutuals. Thomas Miller also manages insurance facilities for all the self- employed barristers in England & Wales, as well as trustees of pension schemes, patent agents and housing associations.

Principal activities include:

• Management services for transport and professional indemnity insurance mutuals
• Investment management for institutions and private clients
• Professional services
• Managing general agents

www.thomasmiller.com

Peregrine Storrs-Fox, Risk Management Director at TT Club, discusses the need for increased rigour in the handling of dangerous goods:

“The explosion at Tianjin Port last August should be seen as a spectacular example of why those operating throughout the global supply chains should examine their work practices and risk procedures more thoroughly. With estimated insured losses between US$2.5 and US$3.5 billion, this incident becomes a focal point, drawing attention to underlying vulnerabilities within global supply chain processes. It underlines how cargo in transit, potentially mis-declared, or packed or handled incorrectly, can cause widespread damage and loss of life.

“TT Club’s analysis of its claims history reveals that incident causation is concentrated within just five classifications. Approximately two thirds by both value and number relate to the sum of vehicle accidents, including both road traffic and cargo handling equipment collisions, fire, theft and poor cargo packing. This rolling five year analysis takes in over 7,500 insurance claims, with a total insured claim value of around US$500 million. The total economic costs, which studies have indicated could be many multiples of the insured losses, should in reality account also for hidden losses, such as management time and distraction, and reputational damage. While there is substantial consistency in the relative significance of each major causation year-on-year, it is notable that the costs related to fire are almost invariably disproportionate to the number of incidents.

“Risk assessment surveys at ports over the last 12-18 months have found worryingly little adherence to segregation requirements for dangerous goods. As with the well-established rules for transport by each mode, there is relevant guidance for activity within the port area. At international level, this is provided in the International Maritime Organization’s (IMO) document ‘Recommendations on the Safe Transport of Dangerous Cargoes & related Activities in Port Areas’ (MSC.1/Circ.1216 (2007). National guidance or regulations are likely also to be applicable

“Considering the continuing need in other parts of the supply chain, not only to review regulation and guidance, but also to promote sound corporate culture, it is perhaps time that the existing IMO recommendations are reviewed and some teeth added to bring about greater adoption at national level. Clearly, such matters need to be better integrated globally, in order to improve practice in handling dangerous goods, resulting in the safety of workers and third parties, as well as maintaining the integrity of cargo and transport infrastructure.”

ENDS

Notes to editor

TT Club

TT Club is the international transport and logistics industry’s leading provider of insurance and related risk management services. Established in 1968, the Club’s membership comprises ship operators, ports and terminals, road, rail and airfreight operators, logistics companies and container lessors. As a mutual insurer, the Club exists to provide its policyholders with benefits, which include specialist underwriting expertise, a world-wide office network providing claims management services, and first class risk management and loss prevention advice.

Thomas Miller

Thomas Miller is an independent and international provider of insurance, professional and investment services.

Founded in 1885, Thomas Miller’s origins are in the provision of management services to mutual organisations, particularly in the international transport and professional indemnity sectors; where today they manage a large percentage of the foremost insurance mutuals. Thomas Miller also manages insurance facilities for all the self- employed barristers in England & Wales, as well as trustees of pension schemes, patent agents and housing associations.

Principal activities include:

• Management services for transport and professional indemnity insurance mutuals
• Investment management for institutions and private clients
• Professional services
• Building defects insurance

[[With the effective date of the container weighing regulation, known as Verified Gross Mass (VGM), at hand, the freight insurance specialist TT Club is accentuating the positive and assures the industry that help remains available.  The mutual insurer, which sees VGM as one of the key safety measures for container operations worldwide, has published a pithy, user-friendly summary for all those involved

London 30 June 2016

Clarity is what TT Club believes is required when tackling the amendment to SOLAS[1], requiring a Verified Gross Mass (VGM) for all packed containers loaded onto ships from 1^st July.  Clarity and collaboration.

The mutual insurer’s latest pithy, ‘Stakeholder digests’, providing guidance to the regulation and how it affects various parties in the container supply chain, from shippers to forwarders and terminals though to carriers, has been made available on its website[2].  The guidance is simple to follow and seeks to build on the everyday cooperation between all stakeholders in the diverse and efficient containerised industry that exists today.

In launching the Stakeholder digests, as part of an extensive micro-site on container weighing, TT Club’s Peregrine Storrs-Fox commented, “VGM is a safety initiative that many in the industry have been seeking. TT Club’s commitment continues, its discussions with industry figures having started years before the initiation of the work at the IMO[3]. In a true spirit of collaboration, representatives of all parties involved in the container trades have been consulted during the four years of IMO debate.  The regulation, effective tomorrow, is the result of an industry working together to improve safety, efficiency and its own professional practices.”

Reaction from many quarters of the industry has been positive, engaging to resolve the complexity and potential difficulties.  According to the regulation VGM shall be obtained either by weighing the packed container [‘Method 1’] or weighing all constituent parts in the load [‘Method 2’].  A substantial number of container terminals around the world have now announced arrangements to assist shippers with ‘Method 1’.

Shipping lines are posting the tare weights of their containers online to assist with the calculation inherent in ‘Method 2’, a compromise process that was included in the SOLAS amendment as a result of shipper representation.  Furthermore, BIC[4] has announced the launch of its ‘Technical Characteristics Database’[5], intended to provide easy access to tare information. Thus, while harmony will never reign supreme in any industry, the container business has come together well in this case.

On the other hand Government bodies, the competent authorities to which the IMO is looking to consistently enforce the regulation across the globe have been surprisingly reticent.  Despite encouragement from the IMO for governments to communicate fully with industry stakeholders, around 80% of SOLAS signatory States have yet to publish guidance on national implementation. There are, of course, notable exceptions, where national competent authorities have engaged actively with industry and other maritime administrations to ensure common understanding of the processes and interpretation of the regulation.

Consistency, however, across the international governmental spectrum has been lacking, causing much frustration. TT Club highlights the less-than-helpful and confusing messages from some governmental bodies.  It has, therefore, been left to industry partners to step into the breach and provide practical support for implementation of this mandatory international regulation. Working with World Shipping Council, ICHCA and Global Shippers’ Forum, TT Club has twice published ‘Industry FAQs’, however, it is recognised that national governmental authorities and enforcement officers will ultimately be responsible for final interpretation.

Collaboration across the container industry remains key, since it epitomises the ‘global village’. For TT Club, Storrs-Fox concludes, “The broad safety issues that VGM goes part way to addressing should be our chief concern.”

ENDS

[1] International Convention for Safety of Life at Sea, 1974 as amended

[2] www.ttclub.com/loss-prevention/container-weighing/stakeholders-digest

[3] International Maritime Organization

[⁴] Bureau International des Containers et du Transport Intermodal

[5] www.bic-code.org/bic-tcd

News to editors

TT Club

TT Club is the international transport and logistics industry’s leading provider of insurance and related risk management services. Established in 1968, the Club’s membership comprises ship operators, ports and terminals, road, rail and airfreight operators, logistics companies and container lessors. As a mutual insurer, the Club exists to provide its policyholders with benefits, which include specialist underwriting expertise, a world-wide office network providing claims management services, and first class risk management and loss prevention advice.

Thomas Miller

Thomas Miller is an independent and international provider of insurance, professional and investment services.

Founded in 1885, Thomas Miller’s origins are in the provision of management services to mutual organisations, particularly in the international transport and professional indemnity sectors; where today they manage a large percentage of the foremost insurance mutuals. Thomas Miller also manages insurance facilities for all the self employed barristers in England & Wales, as well as trustees of pension schemes, patent agents and housing associations.

Principle activities include:

• Management services for transport and professional indemnity insurance mutuals
• Investment management for institutions and private clients
• Professional services
• Building defects insurance

www.thomasmiller.com