CBP Proposes Two Amendments To Broker Recordkeeping Requirements

On March 23, 2010, Customs and Border Protection issued a notice of proposed rulemaking wherein the agency proposes to amend certain of the Regulation’s recordkeeping requirements.

First, the proposed rulemaking would allow a broker to store his or her records at any location within the United States, so long as the recordkeeping contract identified in the broker’s permit application makes all records available to CBP within a reasonable period of time should they be requested.

Second, the proposed rulemaking would amend the Regulations as they pertain to a broker’s obligation to retain entry documents in their original format for 120 days from release of conditional release of merchandise. CBP recognizes that brokers today often maintain entry documents in electronic format. The same entry document may exist in paper format, too, which the current Regulations would require to be kept for 120 days following release or conditional release, without regard for the fact that the document is also stored in electronic form. CBP’s proposed rulemaking would eliminate the requirement that the paper entry document be retained, so long as the electronic version were readily available to CBP. Importers of record, however, would continue to be required to maintain original entry documents for the 120-day period.

The proposed rulemaking would not change a broker’s general obligation to maintain records relating to his or her customs business for five years. CBP has invited the trade to comment upon the proposed rulemaking on or before May 24, 2010.

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Goodbye COGSA, Hello Rotterdam Rules

By passing the Carriage of Goods by Sea Act of 1936 (COGSA), the United States adopted as domestic legislation the Hague Rules, which govern liability for loss in ocean carriage. At that time, ocean cargo was transported largely by barrel and crate, and bills of lading covered cargo from port to port. Today, cargo is containerized and may travel long distances by rail or truck before or after ocean transport on through bills of lading. Despite the advent of multimodal transportation, COGSA, and the domestic law of most nations, has remained largely unchanged and grounded in the transportation realities of more than a half century ago.

The United Nations sought to bring transportation law into the modern era by promulgating the Rotterdam Rules. The Rotterdam Rules are an international convention that was adopted by the United Nations General Assembly on September 23, 2009. Twenty-one countries, including the United States, have signed the Rotterdam Rules, although the United States and many other countries have yet to ratify them. If and when they go into effect following ratification by 20 countries, the new Rules would replace the substance of COGSA as U.S. law as well as other countries’ Hague Visby-based legislation.

If the Rotterdam Rules go into effect, how will the law change? Below, we discuss several substantive changes concerning the rules’ broader scope, period of responsibility and limitation of liability.

The Rotterdam Rules’ scope of application is broader than COGSA in that the Rules would cover carriage of goods where no bill of lading or electronic record has been issued. COGSA, on the other hand, applies only to documents of title. The Rotterdam Rules mirror COGSA in that they would apply to all shipments to or from the United States.

COGSA applies from “rail to rail,” which means from the time of vessel loading to the time of discharge. Because modern multimodal shipping is door-to-door, the Rotterdam Rules would make the carrier responsible for goods from the time it receives them for carriage, and end the period of responsibility only when the goods are delivered. Thus, the period of a carrier’s responsibility would be broader under the Rotterdam Rules than COGSA.

The Rotterdam Rules would additionally modify COGSA’s package liability limitation of $500, instead imposing a limitation based upon a “unit of account” per package that would be tied to the Special Drawing Right of the International Monetary Fund. This converts to approximately $1,400 per package. While raising the liability figure, the Rotterdam Rules would at the same time make it more difficult for a claimant to avoid its limiting effect, meaning that the package limitation would be unenforceable only when the loss at issue was caused by a personal act or omission that was done with the intent to cause such loss, or done recklessly and with knowledge that such loss would probably result. In other words, unless a cargo claimant can show that a loss was caused by a carrier’s bad intent or by a carrier’s reckless actions, the limitation provision would be effective. The Rotterdam Rules would extend its limitation of liability to all “maritime performing parties,” which would include terminal operators and stevedores. Inland carriers, however, would not be automatically protected under the Rotterdam Rules, and they would remain subject to legislation covering inland transport, such as the Carmack Amendment.

Substantively, many of the changes that would be brought about by the Rotterdam Rules are minor departures from COGSA. Accordingly, federal courts can be expected to look to existing case law interpreting COGSA in applying the Rotterdam Rules, were they to become the law of the land. Forwarders have spoken out against the Rotterdam Rules because, in their view, the regime is too complex. This is true, but it is also true that multimodal transportation has become increasingly complex since the era when COGSA was enacted, and the Rotterdam Rules are an admirable, multilateral proposal meant to bring transportation law up to date.

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