NEW U.S. SECURITY PROGRAMS AFTER SEPTEMBER 11, 2001 FREEHILL HOGAN & MAHAR, LLP 80 PINE STREET NEW YORK, NY TEL: FAX:

Linburg - Before

Linburg - After

The mission of the United States Customs and Border Protection Service: We are the guardian’s of our Nation’s borders – America’s frontline. We serve and protect the American Public with integrity, innovation and pride. We enforce the laws of the United States, safeguard the revenue, and foster lawful international trade and travel.

After 9/11 CBP developed new tools to implement its mission in the face of terrorist threats: Container Security Initiative - “CSI” 24 Hour Manifest Rule Customs-Trade Partnership Against Terrorism – “C-TPAT” “C-TPAT” Advance Passenger Information System – “APIS” Advance Passenger Information System – “APIS” Related Actions: Elimination of Crew List Visas Elimination of Crew List Visas Marine Safety Transportation Act Marine Safety Transportation Act

Container Security Initiative - “CSI” 16 Million Containers move through U.S. ports annually 40% of all containers in the world pass through U.S. ports annually $475 Billion in commerce 70% of U.S. bound containers originate in 20 foreign ports Only 4%-7% of incoming containers are inspected by CBP Post- 9/11 CBP’s concerns expanded beyond narcotics and contraband to terrorism. The challenge: how to monitor container traffic

Container Security Initiative Four elements: Using automated information to identify and target high-risk containers Pre-screening those containers identified as high risk before they arrive at U.S. ports Using detection technology to quickly pre-screen high-risk containers Using advance, more tamper-resistant containers CBP has entered into bilateral CSI agreements with 41 ports worldwide Those foreign ports host U.S. CBP agents to help identify and screen high- risk containers before loading. What information does CBP review to pre-screen containers?

24 Hour Manifest Rule Pre- 9/11 – cargo manifests had to be filed 48 hours before vessels arrived at U.S. ports Post- 9/11 – cargo manifests must be filed 24 hours before cargo is loaded on board a U.S. bound vessel at a foreign port (containerized cargo and break-bulk cargo) The cargo manifest must be filed electronically with CBP via the Automated Manifest System (“AMS”) Bulk cargoes – cargo manifest must be filed 24 hours before vessel arrives in U.S. No vague cargo descriptions such as “said to contain” or “freight all kinds” Importers can request confidentiality from CBP for themselves and their shippers Any violation of 24 Hour Rule exposes carrier to penalties - $5,000 for first offense and $10,000 for second offense. Plus, CBP may prevent unloading of cargo.

International Carrier Bond Anyone who transmits cargo declarations to CBP must file an International Carrier Bond CBP Port Directors have discretion to set amount. Minimum is usually $50,000 Who must file the International Carrier Bond – Owners or Charterers? Who must file the Cargo Declaration – Owners or Charterers? CBP will not decide – but will ultimately hold Master and vessel liable for failure to comply Negotiate in charter parties: –who is responsible to comply with CBP filing regulations –who is will be liable for cargo not loaded due to a CBP Do Not Load order –who will bear costs of delay and extra expenses if CBP will not permit discharge –who files the International Carrier Bond

Customs-Trade Partnership Against Terrorism – “C-TPAT” Voluntary program Voluntary program Importers, carriers and terminals comply with U.S. guidelines for supply-chain security programs Participants document their supply chain security measures, pre- screening of employees, etc. Participating companies who qualify will be designated “low risk” Benefits: –fewer CBP inspections –faster CBP inspections –potential eligibility for CBP self-audit program, where importer, not CBP, audits its own security measures

Advance Passenger Information System – “APIS” Requires reporting of crew and passenger information in advance of vessel’s arrival in U.S. –voyage of more than 96 hours – submit 96 hours before entering port –voyage between 24 hours and 96 hours – submit 24 hours before entering port –voyage less than 24 hours – submit before departing foreign port Failure to comply or filing false data results in penalties Failure to comply or filing false data results in penalties –first violation - $5,000 –second violation - $10,000 No action will be taken against carrier’s bond until appeals exhausted

Maritime Transportation Security Act (“MTSA”) Requires Vessel Security Plans Requires Vessel Security Plans Similar to ISPS (International Ship and Port Facility Security Code) vessel security plans USCG accepts compliance with ISPS as compliance with MTSA 33 CFR 104 requires Vessel Security Plans that include: –designation of a Vessel Security Officer –training crew to respond to security threats –annual security drills – conducted in conjunction with USCG, industry group, port authority or by owner/operators on their own

Elimination of Crew List Visas U.S. State Department established Crew List Visas, permitting one visa for entire crew Regulation rescinded in July, 2004, resulting in Requirement of individual visas for each crew member If crewmembers do not have visas, they will be denied entry and vessel may be required to hire security guards Who is responsible for costs of security guards and other extra expenses - Owners or Charterers? - Immigration authorities and USCG will not decide - Owners and Charterers need to negotiate charter party clauses clearly stating who is liable form extra expenses - BIMCO ISPS clause does not deal with problem - BIMCO ISPS clause does not deal with problem

CONCLUSION Security measures and requirements will only increase, not decrease Monitor developments and plan well in advance to comply Where responsibility for compliance as between Owners and Charterers is unclear, negotiate clear charter party clauses allocating responsibility