2005 NCBFAA Annual Report

(Part I)

President’s Report
By Federico Zuniga
        This is my final report to you as President of the NCBFAA. As is customary, next year I will be handling the Chairman’s Report. In some ways these two terms as your President have sailed by as I have met some wonderful people and found a wealth of new business colleagues who share my enthusiasm for this tremendous business of ours. My sense of attachment to the Association has only grown over these four years and I truly look forward to serving as its Chairman for however long my tenure may be. 
        Being allowed by you to serve as President of your organization during these last four years has been a distinct honor for me. Our mission has always been to represent our members whether before Customs and Border Protection, in the federal Courts, within the industry or to the media. That is why membership in the NCBFAA is so important to firms in the transportation logistics industry; the NCBFAA influences the outcome of debates about the future of our industry. I sincerely believe that our businesses, our industry and our country are all the better for the valuable contributions of our Association during these four years.
        Our counsel is sought on measures to secure the supply chain, on business processes involved in movement of freight in and out of the country, on legislative changes to improve trade efficiency, on whatever affects our industry; the NCBFAA is there to advise and, often, mitigate the adverse effects that well intended individuals may overlook when planning modifications.
        As reflected in the reports contained here 2005 was a year of intense commercial, legislative and security activity for our industry. But one event that stands out for me because of its significant implications for our Association’s future is the launch of the NCBFAA Educational Institute’s (NEI) Certified Customs Specialist (CCS) Program, a 12-month distance-learning program, available in hard copy or on disk.
        Announced during our Annual Conference in San Diego, California, the CCS Program is modeled after the highly successful program administered by the Canadian Society of Customs Brokers (CSCB). The CCS designation is available to any individual with more than one year of experience in customs brokerage. Coinciding with this program is a new category of membership, the NEI Professional Member available for individuals who are employed by firms not eligible for NCBFAA membership. By becoming an NEI Professional Member, individuals may enjoy significant price savings on NCBFAA courses, conferences, publications and other products. 
        In addition, under a Grandfather option, any Licensed Customs Broker, regardless of NCBFAA membership, may register through this site as a CCS until December 31, 2006. To maintain their designation, these grandfathered Licensed Customs Brokers, like all CCS designates, will have to fulfill the program’s continuing education requirements beginning in 2007 and pay the renewal fee of $95.
        As in most professional fields, the rules are in a constant state of flux; the Customs Brokerage field is no exception. The CCS program is our attempt to keep the people, involved in our profession, updated on the changes being made to the regulations, which affect our industry.
        U.S. Licensed Customs brokers will stay updated on all the new changes to the regulations used to govern the importation of international trade while people involved in the movement of international trade will be made aware of the complex nature of moving goods over international borders.
        The Certified Customs Specialist program reflects the commitment of NCBFAA to its members and of its members to professional development. Knowledge is the cornerstone of customs brokerage, and with the CCS initiative NCBFAA will provide both a reliable learning resource and a hallmark certification for successful candidates. The cost to participate in the CCS program has been kept low to ensure that every individual with an interest to improve their knowledge of customs business has the means to do so.
        The NCBFAA CCS qualification is destined to become the new standard in the customs marketplace – recognized, and demanded, by those who use brokerage services throughout the country. This distance education course is paper based with an on-line component and designed for the adult learner who is interested in pursuing a career where customs knowledge is essential and where recertification has both personal and professional value and recognition.
        Those who recertify as a CCS annually will demonstrate their ongoing commitment to professional development and the high quality of service expected from those with the CCS designation. Timely, complete information is critical to the Certified Customs Specialist and this NCBFAA program will provide these individuals with access to information on new customs policies, administrative programs, and fast changing international trade agreements, so they have the knowledge needed to stay current.
        In closing, I would like to take a moment to thank the many individuals within the organization for their hard work and dedication as well as the Board of Directors whose courage to make the hard decisions enables the NCBFAA to conduct its business successfully. It goes without saying that if not for the tireless and unselfish work of our many Committees and their chairs little would be accomplished. 
        The entire Executive Committee, Peter Powell, Mary Jo Muoio, Jeff Coppersmith, and John Hyatt guide me in the direction we should follow as an organization and for that I am grateful. I especially want to thank Chairman Powell for his generous and continuing advice, counsel and, most importantly, friendship that he has provided me during my term as President.
Our counsel, Harvey Isaacs, Ed Greenberg, and Jon Kent, make sure all our good intentions and ideas are moving the organization in the right path. Their expertise has been of great value to the organization in preserving and expanding its important role of service to our industry.
        An organization could not exist without its membership. The unselfish dedication demonstrated by some individuals within this organization continues to humble me. Without their efforts we would not be able to accomplish the work presented to us. 
Of course where would we all be without the hard work and dedication of the staff in Washington, DC? Their hours of tireless energy are truly appreciated by me as well as all those who come in contact with them.
        Thank you for all your support.

Chairman’s Report
By Peter Powell
        Since the early 90s, I have earnestly served our Association’s membership in many capacities; as an NCBFAA Committee Member, as an NCBFAA Committee Chairman, as NCBFAA President, as NCBFAA Chairman and, soon, I will begin serving as an NCBFAA Senior Counselor. Regardless of the positions I have been honored to fill, my only interest has always been to better our industry and strengthen our Association. All I have done, or sought to do, in these roles has been directed at those twin goals.
        Although the last few years have seen significant changes in regulatory oversight, security demands, and economic factors, the NCBFAA has remained in the forefront of representing the interest of the membership. Whether mitigating the impact of new or proposed regulations, lobbying legislators to, at least, consider the unintended effects of legislation or seeking ways to cope with federal mandates on our resources, our Association has stood shoulder to shoulder with the membership in working to absorb these changes with minimal adverse effects. To a large extent, I believe we have been successful in that effort and that our industry is the better for it.
        The reason we have been successful is primarily because ours is a strong and united organization with many volunteers who give their time and money by "manning the barricades" to protect our business interests. Our total membership is larger than it has been in more than a decade with 634 Regular members, 26 Associate members and 108 Affiliate members. We have also created a new member category, the NEI Professional Membership, open only to individuals employed by firms that are ineligible for NCBFAA membership. Although it is new, by providing otherwise unavailable member discount prices, we expect tremendous support for this membership category, especially in connection with our NEI certification programs, which are just beginning.
        As you will see in the financial report portion of this Annual Report, our Association is on solid footing with dues revenues, Conference income and NCBFAA Educational Institute funding providing significant financial support for our many programs and services. Thanks in large part to the talented management team represented by our outstanding Board of Directors and Executive Committee along with the attentive fiscal management exercised by the professional staff in Washington, the NCBFAA is well prepared to weather whatever challenges may lie ahead.
        Within this Annual Report you will find numerous examples where our standing committees in the customs, forwarders and NVOCC areas have worked diligently to insure that the decisions made by regulatory and congressional agencies were well considered and properly vetted. These subject matter experts are to be congratulated on the effective and professional way they have represented our business community in meetings, forums and hearings throughout the year.
        Participation in advisory groups and on task forces is another way the NCBFAA not only continues to further the interests of our industry but also demonstrates its grasp of the issues affecting the trade. Since December 2000, when Congress first appropriated funds for it, the massive Customs Modernization project has involved 100s of federal and private sector participants as well as thousands of hours to get to where it is today. The success of this Herculean task is essential if the ever-increasing trade flows of international commerce are to continue to move smoothly across national borders.
        ACE was originally intended to improve the commercial aspects of trade by integrating the various programs developed by CBP over the last 25 years and improving the import process for both CBP and the trade. The undertaking assumed an additional critical perspective in the wake of 9/11 as the threat of terrorist attacks thrust security into the most immediate and significant role, further complicating an already daunting job. Much to its credit, Customs, early on, acknowledged the need for stakeholder involvement in the creation of these new systems. To glean this insight, Customs established the Trade Support Network (TSN), a group of trade representatives who provide input into the design and development of Modernization projects, such as ACE.
        This mechanism worked well in the early stages but as research and discussion phases morphed into the actual blueprinting and programming of systems, it became apparent that the size of the TSN made it too unwieldy for involvement in the day-to-day execution of these process approaches. Thus was born the idea of Trade Ambassadors, who are importers, brokers, carriers, and other members of the trade community who have volunteered their time to be a part of this effort. They represent the trade community to the ACE designers and developers to make sure that TSN recommendations and concerns are considered during the important development phases of the program. 
        There are currently 32 Trade Ambassadors and of these, ten serve as core Trade Ambassadors who attend relevant workshop to monitor Customs progress. Three of these core Trade Ambassadors are active members of the NCBFAA Customs Committee: Arthur L. Litman, FedEx Trade Networks Transport & Brokerage, Inc., Torrance, CA; Amy Magnus, A. N. Deringer, Inc., Champlain, NY; Robert A. Perkins, Meridian IQ and YRC Worldwide, Buffalo, NY.
        In addition to our affiliations with the regulatory agencies, our representatives have worked closely with Congressional representatives and their staffs to help craft legislation that can determine how we will conduct our commercial activities. One of our most effective strategies in pursuing this goal is the annual Government Affairs Conference in Washington DC, where you and your colleagues join together to visit Congressmen and Senators in an effort to communicate directly to them the issues and concerns facing our industry. By supporting your Association in this endeavor you not only reinforce our position as preeminent spokesman for the intermediary industry but also make it possible for us to have a place at the table where and when the deliberations surrounding these issues occur. 
        As I conclude my active leadership within the Association, I look back on our accomplishments with pride and forward to greater success as young and invigorated leaders assume their roles on our Board and Committees. These experienced and knowledgeable individuals will bring new ideas and unique perspectives that will serve the NCBFAA very well in the months and years ahead. During my affiliation with the Association I have made many friends, both personal and professional, not only within our industry but also within the many agencies that monitor our business activities. I would like to take this opportunity to thank them for their friendship and support over these many years and to wish them all well.

Executive Vice President’s Report
By barbara reilly
        As will soon become evident from reading this 2005 Annual Report, the NCBFAA is an active and successful membership organization with a long tradition of service not only to its loyal membership but also to its industry. Never during its more then a century of exemplary service has the organization had so many demands made on its resources.
        Our involvement with every aspect of the transportation logistics industry requires us to draw from every corner of our membership for the volunteers with the essential expertise to meet the needs of an ever-changing environment. I am pleased to say that someone has always stepped up to take charge of a pressing issue and it is that sense of involvement that contributes to the resounding success of Association initiatives.
        We thank all our volunteers for their professional and dedicated work on behalf of this organization. And since our member firms employ many of them, I would like to especially thank them for allowing their professional staff to take time to perform these worthwhile tasks for the Association and our industry.
        Let me also thank retiring NCBFAA President Federico "Kiko" Zuniga for his effective four years of dedicated presidential leadership and acknowledge his critical role in bringing the NCBFAA Certified Customs Specialist Program to fruition. During his entire tenure, Kiko supported the goals of our membership and, even more important to us, he respected and appreciated at all times the professional performance of the NCBFAA staff.
        As outgoing President, Kiko will assume Chairmanship of the NCBFAA replacing Peter Powell, Sr., who graduates to Senior Counselor, for as long as he wants to hold that position. He has always been a trusty phone call away and I hope it remains that way for years to come.
        The value of membership in the NCBFAA is continuously under review and we are constantly looking for ways to enhance the worth of participating in the work of the Association. In 2005, we undertook an incentive-based "Member-Get-A Member" campaign that contributed to the addition of 51 new members. Many of these new members are other trade related associations which makes our networking efforts on behalf of our members that much more effective.
        There are simply not enough hours in the day to accomplish all we would like to do for you, our members, at NCBFAA, but I’d be remiss if I didn’t thank our NCBFAA staff. Through the concerted efforts of Kim, Jeff, Tom, Kelly, Lauren, Candice and Griffin, we are able to assist you, the members, to the best of our abilities. This team joins you in moving towards a changing and productive future as we enter NCBFAA's 109th year.
        We’re listening. We hope that we hear more from many of you out there and that you, in turn, consider getting more involved in your industry association. As with any new administration, there will soon be many new roles to be filled, so give some thought to volunteering and working together on goals of mutual concern.

Treasurer’s Report
By Jeffrey C. Coppersmith and David E. Katzman
        First, the very good news. 2005 was a banner year for NCBFAA from a financial and structural point of view. Due to the success of the Conference Committee (both Program and Sponsorship) and the NEI with the CCS project, we were budgeting positive income for 2005 of $6,000 and will end up with positive income of approximately $230,000 (after audit and adjustments). The last two years of profit have allowed us to build up our Retained Earnings to the amount suggested by our outside accountant.
        When we look at the historical figures, we can see that we have two main revenue streams - dues and the annual conference. I have always been told that a two-legged stool is not very steady. This year there is a third revenue stream coming on line - the CCS and NEI. Three legs will make for a steady stool. It is difficult to rely on the first two revenue streams each year. Even though membership totals have crept up a little, the total dues have not (even after a 10% dues increase). I think this is because of the consolidation in the industry. We are seeing some large dues-paying members absorbed by other large dues-paying members, which decreases dues due. 
        The main increase in membership is smaller firms, which do not generate the revenue lost by consolidation at the top. The annual conference has been phenomenally successful due to the hard work of the conference committee - creating a great program and attracting a tremendous amount of sponsorship dollars. The problem is relying on this success each year - we know the commitment from the members of the committee will be there, but will the dollars be there? 
        Therefore, it is incumbent upon us, for two reasons, to invest in creating this third revenue stream. First, and really most important, we are offering a much-needed service to our members and the industry at large. Education is a necessity - for our own employees and employees of our clients. We are working to create the professional atmosphere that we all know is necessary for our survival. So far, we are only touching the surface - you will hear about plans for the CTS program. Second, if we do not do this, someone else will. We know we can do this well and should be the ones to offer this type of program. We also create the third revenue stream that allows NCBFAA to be financially more stable. I envision that these programs will not only generate a much needed revenue stream on their own, but they will also generate more membership and more attendance at our conferences. 
        We do need to make an investment to accomplish this goal. The Board approved, in 2004, 50K for the creation of the CCS program. The Board will be asked to make a similar commitment to create the CTS program. We also need to invest in the resources needed to make sure that the program is developed properly, administered properly and delivered properly. We have put in the budget about 100K to hire an education director and a clerical person. This is no reflection on the current administration of NCBFAA or the NEI committee. You can almost look at this new endeavor as a separate entity. It is already skyrocketing beyond what we can ask of a volunteer committee and a headquarters staff that is already stretched thin. 
        Due to the structure of the CCS grandfathering program, there is a revenue stream from the CCSs who signed up in 2005 that will not kick in until 2007. If we presented a combined budget for 2006 and 2007, there would be a positive bottom line for this budget, due to this revenue stream. My best estimate is a two-year budget would show a total positive bottom line of approximately $60K.         This is the year to make the investment needed to help our members and our industry.
        Here are some other items to keep in mind when considering the budget:

• We are expanding the amenities offered to attendees of the annual conference .
• We are adding eCommerce capabilities, at a cost of 15K, which should benefit our members
• We did manage to keep our paid professionals within their budgets. Fortunately, we did not face major issues in 2005 that involved additional hours from our paid professionals. It is hard to predict what will happen in 2006
• We are more active in international and regional associations of brokers and forwarders
• We are fortunate to have a steady, reliable staff at our national office. We are proposing raises for 2006 that are in line with increases that are typical in Washington.
• We decided to upgrade the accounting position at our office. We are increasing the amount and complexity of our financial transactions and decided that we needed a person with a higher level of skills and knowledge.

        In my last report, I included the below statement, that I think is still very appropriate for 2006:

• The Budget Committee will:
  • Closely scrutinize all expense accounts
  • Monitor more closely all spending against the budget and report any discrepancies
  • Continue to make suggestions on how to improve the finances to the Board through the Executive Committee
  • Work with all parties to explore ways of spending our limited funds to the best benefit of the association.
• The Board of Directors should:
  • Support the work of the association and its committees by actively working with the committees and encouraging firms to attend the seminars and conferences of the association
  • Actively solicit new members and sponsors for the Annual Conferences
  • Actively support and encourage a positive PR effort on behalf of the association
  • Listen carefully to financial suggestions and act in the best interest of all members
• Our Washington staff should:
  • Carefully monitor expenditures, making sure that expenditures are properly approved and coded to the proper account
  • Monitor administrative expenses and make suggestions for possible savings in these expenditures
  • Pursue possible alternative sources such as grant money and reductions in expenses such as the use of interns.

        The year 2006 will present a real challenge to all of us. Our Annual Conference Committee is working hard to make sure that this is the most successful conference ever. We face a year of Government agencies promulgating new regulations based on the laws passed last year. 
        Furthermore, we need to make sure our industry can successful operate under the new Homeland Security Department. The CCS program will go into high gear. The bottom line is that there are going to be increased demands on us to spend money to represent the interests of our members. 
        We all need to help make sure that the money is there to be spent and that it is spent to benefit our members.

General Counsel’s Report
By Harvey Isaacs
        This has been an eventful year for the industry. During 2005, we represented NCBFAA on a number of issues, the more significant of which are summarized below.
        As authorized by the Board, we prepared an amicus brief with the CIT supporting UPS’ position in a case involving the interpretation of the monetary penalty provisions contain in section 641(d) of the Tariff Act of 1930, as amended (19 U.S.C. §1641(d)). CBP claimed that under this provision it was free to assess individual monetary penalties of $30,000 for each prior violation section 1641. Because of the fact that NCBFAA and counsel actually drafted this section, we were in a unique position to argue that it was the intent of Congress that CBP be bound by the $30,000 limitation and that it applied to all prior violations. This matter is still pending decision by the court. 
        In the TSN, CBP has agreed to allow brokers to act as an account proxy for its importer clients. This function may not fall under the definition of "customs business" and raises issues relating to potential liability by the broker in the management of the account portal. Because this presents a unique situation that may not be explicitly covered by our Terms and Conditions of Service, we drafted a special power of attorney, which would bring it within our Terms and Conditions of Service. 
        We commented upon the proposed elimination of the requirement of a bond rider for an importer’s participation in the Periodic Monthly Statement. 
        We had extensive correspondence with CBP relating to a customs broker’s liability under the BTA when acting as a transmitter of a PN. We also drafted a special power of attorney and limitation of liability when a broker acts in this capacity. CBP also responded to our request to amend the Penalty Assessment and Mitigation Guidelines for violations of the Prior Notice requirements under the Bioterrorism Act regulations. While CBP did not agree to revise the Guidelines, the government did acquiesce that "brokers should not be treated as violators by default." 
        We submitted a request for an information letter relating to the compensation of a forwarder under the revised section 111.36 of the Customs Regulations. We are still awaiting a reply. 
        We prepared comments for NCBFAA in connection with certain amendments to section §111.24 of the regulations being considered by COAC. 
        We attended several telephonic and face-to-face meetings with CBP relating to the time limits for filing Post Summary Corrections and were successful in obtaining agreement for a period of nine months in which to file the correction(s).
        In connection with "bond centralization," we worked with the special subcommittee of the Customs Committee in eliminating the requirement that a broker must submit a copy of its power of attorney when terminating a bond.
        In connection with the adoption by NCBFAA of the Canadian Certified Customs Specialist program, we reviewed and revised the proposed contractual commitments.
        We were successful in obtaining several key modifications to the revised CBP From 7501, including the grace period for continued use of the current form. 
        Once again this year, we responded to many of the member’s questions relating to the NCBFAA power of attorney forms, as well as to other related matters.
        In connection with the consideration of the adoption of a "Preferred Providers" designation by supporters of NCBFAA and vendors offering products to our members, we prepared a memorandum relating to the legal considerations in its adoption and the necessary format for these agreements. 
        We also continued to be active on the TSN Legal Policy Committee in its consideration of legislative revisions to accommodate the requirements of ACE.
        Finally, we worked closely with the NCBFAA office in reviewing and preparing our comments in connection with general legal issues as well as reviewing the draft minutes of Board meetings. 
        I must again express my appreciation for the leadership and counsel of our President, Kiko Zuniga, and the Customs Committee Chair, Ken Bargteil. I truly appreciate their counsel and advice.

Washington Representative’s Report
By Jon Kent
        For NCBFAA, the year 2005 was not a year of crisis, but one of preparation and process. With years prior and the year 2006 looking much more chaotic, 2005 was a welcome opportunity to create order and move proactively.
        Security continued to dominate even while Customs repeated its mantra about the "twin pillars" — security and commercial operations. While C-TPAT took its lumps for disappointing numbers of validations (which the agency improved dramatically by year’s end), CBP’s most important coup was agreement within the World Customs Organization (WCO) to baseline security procedures worldwide. TSA put the brakes on its risk-analysis system, as a new administrator, Kip Hawley, reordered priorities and the Indirect Air Carriers regulatory package embarrassingly took yet another year to be issued. And, advance data requirements were prominently debated as the private sector asked that the security rationale for this early data be explained to them.
        NCBFAA has been at the heart of these discussions with its leadership and prominent members serving on the "COAC" (Commercial Operations Advisory Committee), COAC subcommittees, Trade Support Network committees, and ad hoc coalitions addressing security legislation. Our focus has been on ensuring that there be a true balance between competing interests as we constantly remind our government about the importance of commercial operations.
        On Capitol Hill, the Collins-Murray bill has been simmering through the year. At the start, NCBFAA met privately with Senator Patty Murray (D-WA), as well as key staff for Senator Susan Collins (R-ME), to reduce disruption and focus on priorities. Primary points of interest were the bill’s demand for trade-sensitive data, increased priority to ITDS (International Trade Data System), and making C-TPAT subject to federal regulation. As the year passed, the bill evolved and improved — yet still leaving opportunity for even more substantial improvement in 2006.
        2005 was also a year of "moving on" as such luminaries as Robert Bonner, Asa Hutchinson, Stewart Verdery and Andrew Maner left their posts, while Michael Chertoff, Michael Jackson, Kip Hawley and Ralph Basham ascended. This was certainly to be expected in the first year of a president’s second term; however, for NCBFAA, it represents a challenge to re-establish relationships to influence policy.
        A final feature of 2005 has been the frenetic pace of world trade and efforts to develop multilateral and bilateral agreements. DR-CAFTA was a litmus test for our ability to formulate these agreements and NCBFAA took on this challenge from the beginning. Failure of Congress to pass this free trade agreement would have emboldened critics and generated an onslaught of protectionism. With our support along with many others, DR-CAFTA passed by a slim margin, opening the way for numerous other FTAs as well as the Doha Round.
        It has been my sincere honor to represent NCBFAA on these important and meritorious issues. Our success continues to come because of the dedication of your elected leadership, staff and members. NCBFAA continues to be a very dynamic organization.