BOW WAVE 211

Maritime Security Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2003 WavyLine.com	Issue No 211 08 Dec 03
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. The New Maritime Security Regime
3. WSC CEO Remarks on New Bio Terrorism Rules
4. Panama Web Site Picks
5. Insurance Insider on Dex
6. And Finally...

1. Welcome

New Readers this week include:

F Brooks Royster of the Port of Miami Terminal Operating Company John Francis of Thompson Clarke Shipping in Melbourne Marianela Dengo of the Panama Canal Authority
Onesimo V Sanchez of the Panama Canal Authority
Capt Joseph Servidio, Chief of the USCG's Office of Compliance Capt (rtd) Michael Brown of the USCG's Port Assessments Dept Jose I Morales, US Naval Attache in Panama
Molly Heng of 24 Hours Marine Services Pte Ltd
Peter Dixon of Miller Insurance
Jim Davis of IMIF

Back in England again and not too jetlagged courtesy of Iberia.

Enjoy.

2. The New Maritime Security Regime

Your editor's Quarterpoints Column in last week's Lloyd's List covered the ISPS Code and other points of concern:

The shipping and ports industry is now just a few days short of 7 months away from the need to be in compliance with the ISPS Code. Given this proximity to the deadline, the Panama Canal Authority on Monday held a day long conference on the problems of implementation. Realisation is dawning in Panama that there is the beginnings of a good old regulatory muddle in Central America. What also comes to mind is how security mindedness is becoming a differentiating factor in the fight for the preference of cargo customers.

The first task is to get one’s head around the new security regimes now applicable to transport and shipping. The ISPS Code itself, due to come into effect on 01 July, 2004 requires ships and port facilities to take security with a whole new seriousness, to develop executives with expertise, to assess the security status of their operations and to come up with an auditable plan with which to address security. But this IMO led international legislation, annexed to SOLAS, is by no means the whole caboose. There are also a number of measures and initiatives which also help define the new security realities of our times. There is the 24 Hour Rule, the CSI Initiative for Ports, the C-TPAT designed to sharpen up the security practices of the transport industry and those supplying services and products to cargo interests. There is also the 96 Hour Rule, requiring those arriving in the US to give long notice.

So here you have the famous bottleneck of the Panama Canal, through which passes around 15 per cent of US related shipping volumes, asking itself a series of what if questions. What if its own preparation and compliance with the ISPS Code is not entirely matched by the operators and ports around Central America. The Canal, for the purpose of the ISPS Code is considering itself as a "facility" for the purposes of the Code. Ship Operators are asking themselves similar questions. What is the status of cargo picked up at Port A (which has neglected to comply with the ISPS Code) before cargo picked up at Ports B,C,D, and E at compliant ports. And what happens to these consignments when the ship arrives at the destination ports in America? The Answer given by the large US Coast Guard compliance unit which attended the Conference is that delay was one of the likely consequences, public naming of Port A and in serious cases, an order to the ship to go away.

Like so many other modern roads to reform, the new approach to security rests very much upon the rapid capture and analysis of data. In a year some 240 million teus are moved in the world. Random checking looking for the needle in the haystack is unlikely to produce very dramatic results. So there is emerging a new profession in response to the new security demands. This is the profession of traffic data analyst, an occupation which probes the bare information contained in shipping documents and EDI transactions and finds combinations of facts and identities which lead the observer to reasonably suspect that the consignment is worth intercepting for a closer look.

So far the introduction of the 24 Hour Rule requiring manifest information 24 hours before departure has proceeded remarkably smoothly. The Container Security Initiative (CSI) under which US Customs officials are stationed in many of the world’s high volume ports and able to inspect containers which have been singled out for inspection, is also a reasonably impressive project in progress. Under the CSI, ports also agree to have a non-intrusive inspection device available (a scanner to you and I). These are not exactly cheap and may constitute one of the reasons why Port B becomes a CSI Port and Port A does not. Down in South America, non CSI Port Operators look on and mutter about non-tariff barriers. It seems to me already clear that danger in the cargo flows of the world is likely to be highest at the fringes of the industry.

Two more than moderately interesting things I learned at the Conference. The first, from the US Coast Guard is that foreign ships calling upon the US will not be required to present their security plans to the Coast Guard,as some voices have lately suggested.

The second is that with effect from 12 December 2003, under the new US Food and Drug measures on Bio Terrorism, those producing food products for the US market, a very wide constituency (represented by a full fifth of all in bound containers into the US) are required to register their "facilities" with the FDA. Does this include the Nicaraguan melon magnate? The keepers of container reefer depots up and down the world’s coasts, the operators of road distribution warehouses all over the globe? It rather looks as if it does.

3. WSC CEO Remarks on New Bio Terrorism Rules

Christopher Koch's well received speech to the Panama Canal's Conference on Maritime Security contains some clear guidance on the new FDA Food Import Regulations:-

The U.S. Congress recently passed the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ("Bioterrorism Act"), which requires food facility registration and prior notification of certain imported food be provided to the U.S.Food and Drug Administration (FDA) before its arrival in the United States. While these regulations become effective on December 12, FDA and CBP recognize that this new system is untested and replete with potential problems, and therefore have indicated their intent to not enforce penalties or delay cargo shipments in the first several months of the rules’ implementation.

Because the United States imports approximately $50 billion worth of food products, and because these rules are so extensive and new, considerable effort and adaptation by food shippers, brokers and carriers will be needed.

First, these regulations require every facility in the world that produces or holds FDA-regulated food products shipped to the United States to register with the FDA and have a U.S. agent. Second, they require every FDA regulated food shipment to file detailed information about the product prior to its arrival in the United States, and they identify carriers as the parties through whom the government will stop cargo that is not compliant with the new rules.

While some issues remain unclear, some things about these rules appear likely:

Documentation of FDA regulated food shipments that travel to or through the U.S. will become much more complicated, and failure to comply will mean that, after the initial transition phase is over in early 2004, the imported food will not be released from the U.S. port of arrival.

Foreign food shipments to Canada and Mexico will encounter much simpler documentation requirements if they are unloaded at a Canadian or Mexican port than if they travel through a U.S. port.

Foreign food shipments to the U.S. are likely to encounter less chance of documentation problems if they are unloaded at a U.S. port than if they are
brought to the U.S. via Canadian or Mexican ports.

FDA has invited another round of public comments on these rules to be submitted by December 24. The World Shipping Council and many others will be filing comments.

For more information on these new food import regulations, visit the FDA’s website at:-

http://www.fda.gov/oc/bioterrorism/bioact.html

To read the complete text of Chritopher Koch's speech go to:-

http://www.worldshipping.org/panama_speech.pdf

4. Panama Web Site Picks

The Panama Canal Site--full of information, circulars, history, maps, lock cams and weather radar

http://www.pancanal.com/eng/history/index.html

The site of Manzanillo International Terminal based in Colon Free Trade Zone--everyone said SSA were mad to go there ten years ago. This year they passed the 1 million TEUs handled mark. Very modern.

http://www.mitpan.com/

The heavily refurbished Panama Railway Company-moving boxes and cruise passengers the business of this latest incarnation of the world's first intercontinental railway. One hour transit coast to coast along the canal.

http://www.kcsi.com/corporate/pcrc.html

There is a homage site established by people who lived in the old US administered canal zone in former years. A heavy theme of nostalgia runs through the site, but also a lot of knowledge of the Canal and its history.

http://www.czbrats.com/

5. Insurance Insider on Dex

An article in this month's Insurance Insider, edited by Peter Hastie, says the Franchise Performance Directorate at Lloyd's has asserted its requirment that no single gross line written by a syndicate can exceed 10 per cent of the of its total capacity and rather than comply, Dex 2241 has decided to leave the Lloyd's market at the end of 2003, and the Swiss Re's capital will be replaced by Groupama Transport.

The Insider comments:

"..sources suggest that Swiss Re pulled out because they were unhappy at the Syndicate's performance. With support from Swiss Re and access to UK P&I Club through managers Thomas Miller, Dex 2241 was expected to achieve. But Dex allegedly undercut the market, launched a wordings initiative that failed and under performed,

Results in Syndicate 2241's brief LLoyd's tenure don't make good reading. The 2000 year closed with a 32.6 per cent loss on £12.27 million capacity. Latest SQR analysis estimated a 28.3 per cent loss on £12.22 million capacity and a 17.5 per cent midpoint loss on £22 million capacity."

Not the first sign that the theory of "convergence" between the various sectors of marine insurance (hull and P&I) is tosh. One seems to remember the ambition during the bubble years of the late 1990s that this venture would break the mould of the hull insurance market. In the end the market's tide of red ink lapped around the doors of Dex in the traditional way.

So it goes.

http://www.theinsider.co.uk

6. And Finally...

Many thanks to Jack Post in Rotterdam for this breaking cross cultural news:-

Subject: New California governor

The new California governor has just announced an agreement whereby English will be the official language of the state, rather than German which was the other possibility. As part of the negotiations, The Terminator's government conceded that English spelling had some room for improvement and has accepted a 5-year phase-in plan that would become known as "Austro-English" (or, if nobody will be offended, "Austrionics") .. In the first year, "s" will replace the soft "c". Sertainly,this will make the sivil servants jump with joy. The hard "c"will be dropped in favor of the "k". This should klear up konfusion, and keyboards kan have one less letter. There will be growing publik enthusiasm in the sekond year when the troublesome "ph" will be replaced with the "f". This will make words like fotograf 20% shorter. In the 3rd year, publik akseptanse of the new spelling kan be expekted to reach the stage where more komplikated changes are possible.Governments will enkourage the removal of double letters which have always ben a deterent to akurate speling. Also, al wil agre that the horibl mes of the silent "e" in the languag is disgrasful and it should go away. By the 4th yer peopl wil be reseptiv to steps such as replasing "th" with "z" and "w" with "v". During ze fifz yer, ze unesesary "o" kan be dropd from vords kontaining "ou" and after ziz fifz yer, ve vil hav a reil sensibl riten styl. Zer vil be no mor trubl or difikultis and evrivun vil find it ezi tu understand ech oza. Ze drem of a united urop vil finali kum tru. If zis mad yu smil, pleas pas it on to oza pepl.

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