TT Talk - Treat authorities with respect

Customs authorities the world over have a vital role to play in international trade. In different jurisdictions there will be concentration variously on imports and exports, and the responsibilities will represent a balance - amongst other things - between trade facilitation, controls and protections, and revenue collection. Constructive dialogue with authorities is generally a responsible approach.

The priority of the diverse responsibilities under which Customs authorities operate, and the way in which they are carried out, will vary around the globe.

The increased activity by UK’s HM Revenue & Customs (HMRC) in fining third-party supply chain service providers, such as warehouse operators, hauliers and other logistics providers, for unpaid duty on goods they may be storing or have had a part in moving, even where the operator may be unaware that such excise duty is outstanding on the goods, may seem surprising or unwelcome. However, as an insurer providing liability cover throughout the supply chain, the TT Club has in the past experienced comparable situations in continental Europe and other parts of the world. The Club has also assisted insured companies in the UK when unexpected fines have been levied for unintentionally transporting illegal immigrants into the country.

While such actions by the authorities are often unanticipated and therefore shock the industry when they occur, the TT Club would urge a calm review of the situation. In some parts of the world authorities’ actions may seem – or in fact be – perplexing, unreasonable or unjustified, and the Club has actively challenged such actions where appropriate. Nevertheless, precautions can be taken by operators to protect themselves from unforeseen liability and TT Club’s fines and duties insurance covers such eventualities.

In many cases, where a vigilant operator has any suspicions about the circumstances surrounding the goods or their shippers, these should in the first instance be investigated with the operator’s insurer or the relevant Customs authority. Taking such reasonable precautions will generally stand you in good stead with the authority and protect you with regard to any insurance cover you have (the ‘prudent uninsured’ principle). Moreover, alerting an insurer with the global reach of the Club will enable thorough and independent assessment of the situation, and potentially dialogue with the relevant authority, not simply to resolve specific cases but also to understand the context of particular actions and identify with the authority appropriate mitigation.

Concerns were raised with the International Group of P&I Clubs (IGP&I) and the TT Club recently following a decision in a number of Indian ports, including Nhava Sheva/Mumbai, Chennai and Cochin, to permit the opening of containers and inspection of cargo without production of bills of lading or delivery orders. Permission for this practice was given under, for example, the JNPT Custom facility circular of 5 Dec 2012, the Chennai Customs Circular No 12/2010 and Cochin Trade Facility circular 03/2013. The purported advantage was improved efficiency in customs clearance, but the change in practice facilitated an examination of the cargo by the importer or another party.

In terms of pure trade, the consequence of the receiver having an opportunity to view cargo, possibly prior to payment for the goods, potentially leads to non-payment, price negotiation and disputes over quality or packing. Rather than easing trade, this would likely lead to lengthening ‘dwell times’ at the ports and potentially abandonment of the cargo. Furthermore, the fact that seals are in the process broken, usually without a carrier’s agent being in attendance, meant that there was increased risk of loss or damage to cargo. This inevitably exposes the carrier to claims in relation to the condition of the consignment as well as fines for any discrepancies found.

Following lobbying by the IGP&I, it is understood that the Indian Customs will now require an attested copy of the bill of lading and payment of duty (35% of the FOB value) prior to opening containers. This is clearly an improved situation, although no additional circulars are planned to revoke the earlier permissions. Thus, carriers and their agents need to be aware that containers should no longer be opened without any evidence of title to the goods, which should provide some protection against inappropriate rejection of cargo, and claims for loss or damage and related fines.

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Through Transport Mutual Insurance Association Limited and TT Club Mutual Insurance Limited, trading as the TT Club. TT Club Mutual Insurance Limited, registered in the UK (Company number: 02657093) is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and Prudential Regulation Authority. In Hong Kong, TT Club Mutual Insurance Limited is authorised and regulated by the Hong Kong Insurance Authority, in Singapore by the Monetary Authority of Singapore and in Australia by the Australian Prudential Regulation Authority. In the United States, TT Club Mutual Insurance Limited is approved as a surplus lines insurer in all states and is accessible through properly licensed surplus lines brokers. The registered offices are: 90 Fenchurch Street, London, EC3M 4ST.

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