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Importers Prepare for 24-Hour ‘Terrorism’ Rule

HONG KONG — Importers will keep a close eye this weekend on this city’s port and others around the world, as a new U.S. Customs Service rule requiring shippers to provide the agency with 24-hour notice of what goods they’re loading...

New rules from U.S. Customs requiring 24-hour advance notice of what’s being loaded onto cargo ships are expected to lead to backups in ports in Hong Kong and elsewhere overseas this weekend.

New rules from U.S. Customs requiring 24-hour advance notice of what’s being loaded onto cargo ships are expected to lead to backups in ports in Hong Kong and elsewhere overseas this weekend.

WWD Staff

HONG KONG — Importers will keep a close eye this weekend on this city’s port and others around the world, as a new U.S. Customs Service rule requiring shippers to provide the agency with 24-hour notice of what goods they’re loading onto cargo ships takes full effect .

The requirement is intended to allow Customs to keep closer tabs on the thousands of cargo containers that enter the U.S. every day. The fear is that those 40-foot boxes could be used to smuggle terrorist operatives or materials into the U.S.

But Hong Kong exporters have worked for years to cut the turn time at the port, meaning that goods have often not been packed into their containers until hours before ships sail. That’s reduced the amount of inventory they’ve needed to have in warehouses near the ports, which has cut costs and allowed ships to make it in and out of the port in about 10 hours. But it has meant that the advance manifests telling Customs what goods are on the way to the U.S. have often not been submitted until after the ships have set sail, particularly for deliveries that share containers.

The Customs 24-hour rule took effect on Dec. 2, but the service gave shippers a 60-day grace period to get up to speed before penalties are imposed. That grace period expires Saturday, which also happens to be the second day of the Chinese New Year, a holiday period. Some importers suggested that will diminish the effect of the transition, since many factories will be closed, though some in Hong Kong complained the date was culturally insensitive.

A lot of attention has been paid to Kwai Chung, the home of this city’s main container terminals, which ship about 6,200 containers to the U.S. every day. But importers said their concerns are not limited to Hong Kong.

“Generally, there is some concern not just in Hong Kong, but about any port being able to pull off the 24-hour ruling. Hong Kong is making maximum effort, but it’s complicated,” said Rick Darling, president of Li & Fung USA, the New York office of the international sourcing giant. “I think they’ve done as much as they can do at this particular stage and will need to work with the system for a few weeks.”

While importers and shipping companies have been preparing for this new rule for months, Darling said it’s unlikely that everything will go off without a hitch. That’s because complying with the 24-hour-advance notice rule requires “a fundamental change in the entire process of consolidating and loading the goods,” he said.

“Will it all go smoothly?” he asked rhetorically. “I doubt it.”

Henry Tang, Hong Kong’s Secretary for Commerce, Industry & Technology, said the new rules, although implemented as a safeguard against potential terrorism, are affording Hong Kong companies the chance to modernize.

“There is no doubt that the exporting and shipping sectors must change their established business practices in order to comply with the U.S. Customs’ requirement,” he said. “I sincerely hope that the industry would grab hold of this opportunity to enhance cargo-data compilation and transmission for its own good. This will go a long way to maintaining the competitiveness of the industry and Hong Kong’s position as a leading trading hub.”

The penalties that shipping companies and importers face can be severe. While there is the risk of monetary fines, steamship executives said a greater concern is that companies that do not comply with the 24-hour-notice period face a greater risk of having their cargo stopped and searched, a significant problem in these days of just-in-time delivery.

In addition to being a major producer of apparel, Hong Kong is a key transfer point for many garments made in China. As a result, shipping executives said they plan not to load containers that have not had their manifests — a detailed listing of the contents — submitted to Customs in advance.

“In each and every case, we will be told whether we can load or not based on whether the paperwork is in on time,” said Brian Moore, director of apparel sales for Madison, N.J.-based Maersk-Sealand, one of the world’s leading shipping companies.

He said he expects to see problems at many ports over the weekend.

“Each country has its own issues,” he said. “If you look at some countries, like Japan, that are very regimented, they’re more on top of it. Other countries that are more freewheeling are not so much on top of it.”

He cited the nations of Latin America as an area of concern.

“We really won’t know who’s ready until we get there,” he said.”We don’t know what effect it’s going to have next week. We don’t know if it’s going to be 2 percent of our cargo or 10 percent.”