The Future of Trade in a Virtual World

Terry Cummings: Planning, Preparation and Protection

Everyone knows that major, unexpected events can impact your business. For example: Fire, earthquakes, terrorism, cyber-attacks, systems crashes, government shutdowns, customer bankruptcy. But who could have predicted the huge, adverse impact of the COVID pandemic?

With that in mind, what can businesses do now? You need a proactive strategy in response to future events (AKA “Plan B”). You need to identify risks, prioritize risks by probability and impact, then develop you plans. Remember: Risk, Probability Preparation and Response. ALL your operations must be considered. Are you a Customs broker, a freight forwarder, a trucker, etc? Your strategies will be affected by what your company does.

Things you should consider: Can my company operate remotely? Will our employees have what they need? What about data back up? We should update personnel lists and contact lists AND establish communication procedures. Evaluate how you can get support externally and internally. Be sure to have hard copies of your documents and/or off-site storage—do NOT rely solely on the cloud!!

Preparation TEAM work is key. Brainstorm with key employees, consider the risks to your operations, to property, to personnel (especially human life), to your income, and to your customers.

Amanda Barlow, question: How does a smaller company cope with all of this?

Terry Cummings reply: A company should develop a contingency plan suitable to its size land scope of operations. Having a plan is a HUGE step forward!

Things that should be considered: First aid training; CPR training; Generator/Power contingency abilities; Building inspections that will help identify problems in advance; IT policies; Employee safety plans; employee health/return to work policies; Cloud AND off site storage abilities. A company can review, and incorporate steps already taken under the CTPAT and TSA programs.

In terms of protection what can insurance do for you? Consider the available coverages: Earth quake; Flood and wind storm (you might to have to get this coverage from the Federal Flood Ins Program); Terrorism (if you are conducting cargo screening you MUST have this); Cyber-attacks; Workers Comp/Employee Liability (this is not an option, it is required by law); Property coverage; Business Expense/Contingency Expense (extra expenses or losses not protected under property coverage, it takes into consideration what the incident/disaster did your company in terms of operational losses and income losses); protection against Crime-Social Engineering (falling prey to deceptions, fraud, imposters); Credit insurance to insure what you would have been paid if the disaster did NOT happen; Workplace violence insurance (a sad reality in this day and age).

Why are building inspections important? As an owner you want to stop damage before it happens. As a tenant, your lease can obligate you for repairs. Consider if you have cargo in your facility, you should try to prevent disasters, and you should take proactive measures to ensure the building in sound and safe.

How are insurance companies handling claims for COVID related damages? Insurance will cover actual physical damage to property and subsequent loss of income. A pandemic, however, does NOT involve physical damage, therefore there is not covered loss even though your income is seriously affected. There is plenty of litigation about this currently winding its way through the courts all over the country. Until the courts resolve the issues, collecting damages caused by the pandemic will be unlikely.

Amanda Barlow: The pandemic’s impact on ATA Carnets.
Given that the pandemic has led to worldwide cancellations of conventions, theatrical productions and concerts, ATA Carnets have been hugely affected. There have been cancelled flights, government closures that have resulted in export deadlines being missed. Bookings are scarce, and government services needed to process ATA Carnets have been significantly reduced. Only a few countries have issued pandemic related exceptions to deadlines (Italy has granted a one-month extension; Czech Republic has granted extensions until certain restrictions are lifted). Another problem is that employee visas are expiring, and they must return home even though the Carnet merchandise is still stranded overseas.

What can you do? Be proactive, keep thorough documentation of events and keep copes if supporting evidence. You can request replacement/extension of an ATA Carnet, but keep in mind that validation of replacements can take a long time to be processed. Also, ATA Carnet cargo can get stranded because forwarder and broker offices are closed or operating at seriously reduced capacity, or couriers are closed and/or have no capacity. Make sure that you ALWAYS photocopy or photograph the ATA Carnet, keep all rebooking documentations, proof of hotel reservation extensions or ANY other document that can support penalty mitigation efforts. ALWAYS make copies any time an ATA Carnet changes hands—this is especially important now that everyone is working remotely.

Patrice Lafayette: CBP Response to the Crisis, and Tools to Help Brokers and Forwarders During the Pandemic.

CBP put bond increases on hold for 3 months. But, in September they issued over 500 mandated increases, and in October issued over 700. This is high but still less than the number of increases we saw upon the implementation of Sec 301 additional duties.
CBP also allowed duty payment postponements, which resulted in additional stacking liability. Additional Underwriters concerns: Increased stacking while exclusions to 301 are filed and pending resolution; Economic decline due to the pandemic and the loss of jobs; Civil unrest and riots the affect many retail storage; New problems with reinsurance capacity issues (stacking is a huge problem and the costs of reinsurance have increase substantially).

What is the impact on importers? Importers are shopping around for bonds due to expected collateral requirements. Importers are finding it less easy to renew existing bonds. Debt vouchers from CBP (returned checks) are on the rise due to office closures or financial stress. PLEASE NOTE that claims under $50,000 bonds have increased significantly, and brokers MUST be more diligent in vetting their clients when they seek bond coverage.

Brokers can do a few things to help deal with the new reality. Brokers can review the importer’s history and ask for forward projections. Bond sufficiency reports are available, and a broker can use the Import Bond Sufficiency Calculator which was created when Sec 301 duties were imposed. There is also an Importers Road Map that describes what a surety looks for in terms of financial records, collateral, etc.
Brokers should also rely on their surety’s website for information.

For financial mitigation, a broker should consider:
Get importers on their own ACH; shorten payment terms; obtain a letter of credit with the broker as the beneficiary; seek indemnity agreements and obtain credit insurance.

Are there any POSITIVE developments in response to the pandemic’s impact on our businesses? There have been considerable improvement and enhancement of tech capabilities. There are new STB EDI connections, and CTB API connections (the CTB API connection can help build a CTB renewal over time). Roanoke has inhouse tech developers that can partner with clients to anticipate/achieve solutions to problems before they arise and as they arise.

Amada Barlow: Proper and adequate insurance and your relationship with your insurance provider HAVE NEVER BEEN MORE IMPORTANT!


The Future of Trade in a Virtual World Terry Cummings: Planning, Preparation and Protection Everyone knows that major, unexpected events can impact your business. For example: Fire, earthquakes, terrorism, cyber-attacks, systems crashes, government shutdowns, customer bankruptcy. But who could have predicted the huge, adverse impact of the COVID pandemic? With that in mind, what can businesses do now? You need a proactive strategy in response to future events (AKA “Plan B”). You need to identify risks, prioritize risks by probability and impact, then develop you plans. Remember: Risk, Probability Preparation and Response. ALL your operations must be considered. Are you a Customs broker, a freight forwarder, a trucker, etc? Your strategies will be affected by what your company does. Things you should consider: Can my company operate remotely? Will our employees have what they need? What about data back up? We should update personnel lists and contact lists AND establish communication procedures. Evaluate how you can get support externally and internally. Be sure to have hard copies of your documents and/or off-site storage—do NOT rely solely on the cloud!! Preparation TEAM work is key. Brainstorm with key employees, consider the risks to your operations, to property, to personnel (especially human life), to your income, and to your customers. Amanda Barlow, question: How does a smaller company cope with all of this? Terry Cummings reply: A company should develop a contingency plan suitable to its size land scope of operations. Having a plan is a HUGE step forward! Things that should be considered: First aid training; CPR training; Generator/Power contingency abilities; Building inspections that will help identify problems in advance; IT policies; Employee safety plans; employee health/return to work policies; Cloud AND off site storage abilities. A company can review, and incorporate steps already taken under the CTPAT and TSA programs. In terms of protection what can insurance do for you? Consider the available coverages: Earth quake; Flood and wind storm (you might to have to get this coverage from the Federal Flood Ins Program); Terrorism (if you are conducting cargo screening you MUST have this); Cyber-attacks; Workers Comp/Employee Liability (this is not an option, it is required by law); Property coverage; Business Expense/Contingency Expense (extra expenses or losses not protected under property coverage, it takes into consideration what the incident/disaster did your company in terms of operational losses and income losses); protection against Crime-Social Engineering (falling prey to deceptions, fraud, imposters); Credit insurance to insure what you would have been paid if the disaster did NOT happen; Workplace violence insurance (a sad reality in this day and age). Why are building inspections important? As an owner you want to stop damage before it happens. As a tenant, your lease can obligate you for repairs. Consider if you have cargo in your facility, you should try to prevent disasters, and you should take proactive measures to ensure the building in sound and safe. How are insurance companies handling claims for COVID related damages? Insurance will cover actual physical damage to property and subsequent loss of income. A pandemic, however, does NOT involve physical damage, therefore there is not covered loss even though your income is seriously affected. There is plenty of litigation about this currently winding its way through the courts all over the country. Until the courts resolve the issues, collecting damages caused by the pandemic will be unlikely. Amanda Barlow: The pandemic’s impact on ATA Carnets. Given that the pandemic has led to worldwide cancellations of conventions, theatrical productions and concerts, ATA Carnets have been hugely affected. There have been cancelled flights, government closures that have resulted in export deadlines being missed. Bookings are scarce, and government services needed to process ATA Carnets have been significantly reduced. Only a few countries have issued pandemic related exceptions to deadlines (Italy has granted a one-month extension; Czech Republic has granted extensions until certain restrictions are lifted). Another problem is that employee visas are expiring, and they must return home even though the Carnet merchandise is still stranded overseas. What can you do? Be proactive, keep thorough documentation of events and keep copes if supporting evidence. You can request replacement/extension of an ATA Carnet, but keep in mind that validation of replacements can take a long time to be processed. Also, ATA Carnet cargo can get stranded because forwarder and broker offices are closed or operating at seriously reduced capacity, or couriers are closed and/or have no capacity. Make sure that you ALWAYS photocopy or photograph the ATA Carnet, keep all rebooking documentations, proof of hotel reservation extensions or ANY other document that can support penalty mitigation efforts. ALWAYS make copies any time an ATA Carnet changes hands—this is especially important now that everyone is working remotely. Patrice Lafayette: CBP Response to the Crisis, and Tools to Help Brokers and Forwarders During the Pandemic. CBP put bond increases on hold for 3 months. But, in September they issued over 500 mandated increases, and in October issued over 700. This is high but still less than the number of increases we saw upon the implementation of Sec 301 additional duties. CBP also allowed duty payment postponements, which resulted in additional stacking liability. Additional Underwriters concerns: Increased stacking while exclusions to 301 are filed and pending resolution; Economic decline due to the pandemic and the loss of jobs; Civil unrest and riots the affect many retail storage; New problems with reinsurance capacity issues (stacking is a huge problem and the costs of reinsurance have increase substantially). What is the impact on importers? Importers are shopping around for bonds due to expected collateral requirements. Importers are finding it less easy to renew existing bonds. Debt vouchers from CBP (returned checks) are on the rise due to office closures or financial stress. PLEASE NOTE that claims under $50,000 bonds have increased significantly, and brokers MUST be more diligent in vetting their clients when they seek bond coverage. Brokers can do a few things to help deal with the new reality. Brokers can review the importer’s history and ask for forward projections. Bond sufficiency reports are available, and a broker can use the Import Bond Sufficiency Calculator which was created when Sec 301 duties were imposed. There is also an Importers Road Map that describes what a surety looks for in terms of financial records, collateral, etc. Brokers should also rely on their surety’s website for information. For financial mitigation, a broker should consider: Get importers on their own ACH; shorten payment terms; obtain a letter of credit with the broker as the beneficiary; seek indemnity agreements and obtain credit insurance. Are there any POSITIVE developments in response to the pandemic’s impact on our businesses? There have been considerable improvement and enhancement of tech capabilities. There are new STB EDI connections, and CTB API connections (the CTB API connection can help build a CTB renewal over time). Roanoke has inhouse tech developers that can partner with clients to anticipate/achieve solutions to problems before they arise and as they arise. Amada Barlow: Proper and adequate insurance and your relationship with your insurance provider HAVE NEVER BEEN MORE IMPORTANT!
CBFANC Newsletter - copy of November 2020 - Info Expeditor