Enhanced screening rules great in principle, but forwarders won’t find RSS and EACE changes easy - AFIF
AirCargo Archive Stories #223
Monday, 27 May 2013
THE AUSTRALIAN Federation of International Forwarders Ltd (AFIF) has made a submission to the government’s ‘Strengthening Australia’s Air Cargo Supply Chain’ discussion paper on behalf of the airfreight sub-committee of the Federation.
In the submission, it says AFIF is particularly interested in issues pertaining to the introduction of proposed Regulated Shipper Scheme (RSS) and Enhanced Air Cargo Examination (EACE) procedures as part of the Government’s wider Supply Chain Security and Counter Terrorism initiatives.
AFIF says that it accepts the need to ensure cargo is secure for export, but believes the proposal (as it stands) will reduce the capabilities of Freight Forwarders (‘forwarders’) to carry out their business; increase the costs of Australian exports in the market place and cause additional and possibly lengthy delays in the export process.
AFIF argues: “We do not believe all shippers will join the Regulated Shipper Scheme (RSS).
In the United Kingdom, for example, fewer than 300 shippers currently are members of that country’s scheme, mainly because shippers see themselves primarily as traders and rely on the forwarder to ensure all security regulations are met on their behalf.
“In Australia, in addition, most shippers sell either ’ex- works’ or ‘FCA’ and will not want the additional costs involved in joining the scheme and maintaining records for no real benefit to themselves.
“We believe many traders will feel that if they themselves do not participate, or facilitate in any way the securing of their own goods, they cannot thereafter be blamed if a device is subsequently found in one of their consignments. Yes, it could be considered to be ‘ignorance is bliss’ but anecdotally, that is what some believe.
“We also believe that allowing cargo from a Regulated Shipper onto an aircraft without further inspection during transit within the supply chain is fraught with danger. It will be necessary as part of the legislation to identify the origin of the cargo being released by a Regulated Shipper prior to it being considered ‘cleared’.
Validation of shippers
There also is a concern over how the government is going to conduct the validation of shippers and continue to regularly inspect them once they are in the scheme. With shippers likely to be located all over Australia, how many validators are going to be needed and at what annual cost?
“(We believe) this will put the onus on the forwarder and again, here we see issues. We believe that most forwarders will be forced to become AACA’s rather than RACA’s as they may not be able to afford to purchase the equipment, train and up-skill adequate numbers of staff and maintain the equipment needed to conduct the requisite enhanced screening of cargo in their warehouses. The geographical diversity of airport locations in Australia will not help the situation.”
AFIF also says that while in Europe most airfreight is exported through a single location in each country, such as London, Amsterdam or Frankfurt, in Australia there will be regular export cargo moving from at least seven locations including: Sydney, Melbourne, Brisbane, Coolangatta, Adelaide, Perth and Cairns – and that the cost of implementing enhanced screening technology in each location would be prohibitive to most forwarders and as such, is unlikely to happen.
This would then affect the forwarders’ ability to do business as they currently do.
For example, most ULDs lodged for export are built in forwarders’ premises off airport. Under the proposed new scheme, this process will be limited to the few (AFIF feels) that will become RACAs.
This will affect profit margins and put the handling of exports out of reach of a large number of forwarders.
It also will change the timing and requirements of when airline Master Air Waybill (MAWB) can be cut and when EDI messaging (FWBs/FHLs) are sent to terminals/carriers. It will no longer be able to be carried out prior to sending cargo to the terminals, thus affecting the acceptance of freight at the terminals. AFIF suggests this alone may be a breach of the Customs Act?
Enhanced screening
Based on the above, AFIF suggests most cargo will be lodged at the CTO for enhanced screening to take place there. This will lead to costs placed on the forwarder which will in turn have to be passed on to the shipper or consignee, because the CTO will of necessity charge for this service. In the United Kingdom, the charge is GBP 0.08kg which is around A$ 0.14kg. AFIF does not expect the figure to be less in Australia and in fact predicts it will be higher due to lower volumes and the high cost of staff and infrastructure.
Also, as most forwarders will not be able to build ULDs, this also will become the responsibility of the CTO, which will charge for assembling cargo into ULDs. When building ULDs, forwarders maximise the space and one concern is that CTOs may not look on the process in the same way and costs may increase if ULDs are not built as cost effectively.
AFIF continues: “We feel CTOs will not be able to cope with increased demand without increasing the lead times for lodgment of export cargo (currently the night before a flight leaves).
“Cargo will have to be lodged earlier to ensure it can be screened prior to departure, which will have a flow-on affect on shippers who currently plan their weekly export cargo to be ready at the end of the week. This may well mean shippers having to alter their procedures, which again will increase costs.
“(Also) we are still, as an industry, unclear on how these procedures will work for trans-shipment cargo, oversize cargo (cargo that does not fit in a x-ray machine) and in particular, perishable cargo which normally originates from a market in the early hours of the morning.
“Another example is that of a touring band that finishes a concert late on a Saturday night in Sydney and is due to perform the following evening in Auckland. How would the equipment make the concert under the proposed scheme? There will be no one around to x-ray cargo at 2.00am in the morning.
“Finally, cargo that originates from either 3PL or 4PL warehouses, run by forwarders or logistics providers on behalf of shippers for whom they pick and pack for export. What is the status of that cargo under this scheme? There are many 3PL providers that currently service the New Zealand market out of Australia and we feel that this business will be severely impacted and could result in companies moving 3PL services back off shore to New Zealand due to increased cost and transit times.”
AFIF summarises by saying it believes: - The scheme will increase the costs of Australian exports, possibly to the point where the consignee looks to buy elsewhere, or at least makes Australia a less competitive country to buy from. - It will slow down the movement of export goods by air, which again could have a detrimental effect on export sales. - It will seriously affect the ability of forwarders to conduct business as they currently do, which might result in more businesses closing down.
“We do not see how this scheme in its current form benefits shippers, forwarders, CTOs, airlines or overseas customers.
“We still firmly believe that the Federal Government has not only an international responsibility as a signatory to Annexe 17 of the ICAO agreement to implement a regulated air cargo security program in Australia, but also a responsibility to provide financial assistance to local industry to attain a viable and sustainable program here.
“We recognise that previously-touted funding assistance programs have been removed, but we believe that the Office of Transport, as the program manager, needs to engage with the relevant Federal Government and Treasury decision makers to bring this back onto the agenda to enable their objectives to be realised.”
References: 1. British Institute Freight Agents - BIFA 2. Incoterms 2010 trade terms - publication of ICC
Enhanced screening rules great in principle, but forwarders won’t find RSS and EACE changes easy - AFIF
AirCargo Archive Stories #223
Monday, 27 May 2013
THE AUSTRALIAN Federation of International Forwarders Ltd (AFIF) has made a submission to the government’s ‘Strengthening Australia’s Air Cargo Supply Chain’ discussion paper on behalf of the airfreight sub-committee of the Federation.
In the submission, it says AFIF is particularly interested in issues pertaining to the introduction of proposed Regulated Shipper Scheme (RSS) and Enhanced Air Cargo Examination (EACE) procedures as part of the Government’s wider Supply Chain Security and Counter Terrorism initiatives.
AFIF says that it accepts the need to ensure cargo is secure for export, but believes the proposal (as it stands) will reduce the capabilities of Freight Forwarders (‘forwarders’) to carry out their business; increase the costs of Australian exports in the market place and cause additional and possibly lengthy delays in the export process.
AFIF argues: “We do not believe all shippers will join the Regulated Shipper Scheme (RSS).
In the United Kingdom, for example, fewer than 300 shippers currently are members of that country’s scheme, mainly because shippers see themselves primarily as traders and rely on the forwarder to ensure all security regulations are met on their behalf.
“In Australia, in addition, most shippers sell either ’ex- works’ or ‘FCA’ and will not want the additional costs involved in joining the scheme and maintaining records for no real benefit to themselves.
“We believe many traders will feel that if they themselves do not participate, or facilitate in any way the securing of their own goods, they cannot thereafter be blamed if a device is subsequently found in one of their consignments. Yes, it could be considered to be ‘ignorance is bliss’ but anecdotally, that is what some believe.
“We also believe that allowing cargo from a Regulated Shipper onto an aircraft without further inspection during transit within the supply chain is fraught with danger. It will be necessary as part of the legislation to identify the origin of the cargo being released by a Regulated Shipper prior to it being considered ‘cleared’.
Validation of shippers
There also is a concern over how the government is going to conduct the validation of shippers and continue to regularly inspect them once they are in the scheme. With shippers likely to be located all over Australia, how many validators are going to be needed and at what annual cost?
“(We believe) this will put the onus on the forwarder and again, here we see issues. We believe that most forwarders will be forced to become AACA’s rather than RACA’s as they may not be able to afford to purchase the equipment, train and up-skill adequate numbers of staff and maintain the equipment needed to conduct the requisite enhanced screening of cargo in their warehouses. The geographical diversity of airport locations in Australia will not help the situation.”
AFIF also says that while in Europe most airfreight is exported through a single location in each country, such as London, Amsterdam or Frankfurt, in Australia there will be regular export cargo moving from at least seven locations including: Sydney, Melbourne, Brisbane, Coolangatta, Adelaide, Perth and Cairns – and that the cost of implementing enhanced screening technology in each location would be prohibitive to most forwarders and as such, is unlikely to happen.
This would then affect the forwarders’ ability to do business as they currently do.
For example, most ULDs lodged for export are built in forwarders’ premises off airport. Under the proposed new scheme, this process will be limited to the few (AFIF feels) that will become RACAs.
This will affect profit margins and put the handling of exports out of reach of a large number of forwarders.
It also will change the timing and requirements of when airline Master Air Waybill (MAWB) can be cut and when EDI messaging (FWBs/FHLs) are sent to terminals/carriers. It will no longer be able to be carried out prior to sending cargo to the terminals, thus affecting the acceptance of freight at the terminals. AFIF suggests this alone may be a breach of the Customs Act?
Enhanced screening
Based on the above, AFIF suggests most cargo will be lodged at the CTO for enhanced screening to take place there. This will lead to costs placed on the forwarder which will in turn have to be passed on to the shipper or consignee, because the CTO will of necessity charge for this service. In the United Kingdom, the charge is GBP 0.08kg which is around A$ 0.14kg. AFIF does not expect the figure to be less in Australia and in fact predicts it will be higher due to lower volumes and the high cost of staff and infrastructure.
Also, as most forwarders will not be able to build ULDs, this also will become the responsibility of the CTO, which will charge for assembling cargo into ULDs. When building ULDs, forwarders maximise the space and one concern is that CTOs may not look on the process in the same way and costs may increase if ULDs are not built as cost effectively.
AFIF continues: “We feel CTOs will not be able to cope with increased demand without increasing the lead times for lodgment of export cargo (currently the night before a flight leaves).
“Cargo will have to be lodged earlier to ensure it can be screened prior to departure, which will have a flow-on affect on shippers who currently plan their weekly export cargo to be ready at the end of the week. This may well mean shippers having to alter their procedures, which again will increase costs.
“(Also) we are still, as an industry, unclear on how these procedures will work for trans-shipment cargo, oversize cargo (cargo that does not fit in a x-ray machine) and in particular, perishable cargo which normally originates from a market in the early hours of the morning.
“Another example is that of a touring band that finishes a concert late on a Saturday night in Sydney and is due to perform the following evening in Auckland. How would the equipment make the concert under the proposed scheme? There will be no one around to x-ray cargo at 2.00am in the morning.
“Finally, cargo that originates from either 3PL or 4PL warehouses, run by forwarders or logistics providers on behalf of shippers for whom they pick and pack for export. What is the status of that cargo under this scheme? There are many 3PL providers that currently service the New Zealand market out of Australia and we feel that this business will be severely impacted and could result in companies moving 3PL services back off shore to New Zealand due to increased cost and transit times.”
AFIF summarises by saying it believes: - The scheme will increase the costs of Australian exports, possibly to the point where the consignee looks to buy elsewhere, or at least makes Australia a less competitive country to buy from. - It will slow down the movement of export goods by air, which again could have a detrimental effect on export sales. - It will seriously affect the ability of forwarders to conduct business as they currently do, which might result in more businesses closing down.
“We do not see how this scheme in its current form benefits shippers, forwarders, CTOs, airlines or overseas customers.
“We still firmly believe that the Federal Government has not only an international responsibility as a signatory to Annexe 17 of the ICAO agreement to implement a regulated air cargo security program in Australia, but also a responsibility to provide financial assistance to local industry to attain a viable and sustainable program here.
“We recognise that previously-touted funding assistance programs have been removed, but we believe that the Office of Transport, as the program manager, needs to engage with the relevant Federal Government and Treasury decision makers to bring this back onto the agenda to enable their objectives to be realised.”
References: 1. British Institute Freight Agents - BIFA 2. Incoterms 2010 trade terms - publication of ICC
