Proposed customs regulations weigh on air freight market
David Hannon, News and Transportation Editor -- Purchasing, 2/20/2003 2:00:00 AM
The air freight market has been caught in a tug of war for more than a year. The government is pulling the industry one way to increase security and implement more restrictions while big business is pulling it the other way, looking to cut costs and streamline efficiencies in the depths of a recession. And there is a growing feeling among shippers and carriers that more changes are on their way—especially in the way U.S. Customs will handle inbound international shipments.
In early 2003, customs introduced the idea of a mandatory electronic prenotification for all air cargo coming into the U.S., similar to the 24-hour rule implemented for ocean freight. Customs held a public meeting in January to gather comments on a proposed system where air cargo carriers would be required to file manifests with Customs eight hours prior to lading for courier shipments and 12 hours prior to lading for other shipments.
According to the proposal discussed at the Jan. 14 meeting, all parties affected will be required to use the existing Air Automated Manifest System and begin transmitting electronic manifest information within two months of the publication of the final rule and meet the data quality standards within three months. Customs is considering exempting inbound air shipments from Canada and those valued under $2,500 to let the majority of mail through.
Adding to the security concerns even further was a December 2002 report from the General Accounting Office (GAO), which found that "numerous government and industry studies have identified vulnerabilities in the air cargo system. These vulnerabilities occur in the security procedures of some air carriers and freight forwarders and in possible tampering with freight at various handoffs that occur from the point when the cargo leaves a shipper to the point when it is loaded onto an aircraft." The report suggests implementing stricter employee background checks and a computerized cargo profiling system to address security concerns.
But air shippers and carriers today are already complaining about slower shipment times from overseas, making air a less attractive option to high-end shippers. Even if an air shipment reaches a port in time from overseas, stricter customs inspections could leave the shipment tied up for hours or days, negating the benefits of air shipment.
Perhaps the sector hit hardest by the existing restrictions is the high-end custom shipment or air charter market. According to Kevin McClellan, managing director-air expedite for FedEx Custom Critical, the air charter market is in its severest depression in its history since peaking in late 1999. McClellan says a number of fleet operators whose primary business is responding to domestic industrial demand, have gone out of business because their former customers no longer had the money to pay for the shipments.
"There are a lot of carrier companies hanging on in the premium side of things, but that market is in poor shape and won't recover until the supply chain starts tightening," he says, adding that LTL trucking is taking huge chunks of the low-end domestic air freight market. Drew Serbin is president of Strategic Project Services, a New York-based third-party logistics consulting firm serving high-end, customized shipments. As an example of the current customs situation, he says an international shipment that used to take two days to get through customs at JFK airport in New York, now typically takes four days.
The port of origin seems to determine the level of scrutiny a shipment gets in customs, according to Serbin. A recent project at Strategic Project Services involved a hotel that decided to use a Moroccan theme and imported a number of one-time shipments from ports in North Africa and the Middle East. Those shipments often took a week to clear customs in Miami, where drug-related security concerns also slow the clearance process.
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