Beginning August 1, 2010, every shipment of cargo by passenger aircraft in the United States must be screened before loading, according to the 9/11 Act, Steven Silverstein, CEO, New York City office of the Israel Diamond Institute, writes on www.israelidiamond.co.il. While all cargo shipments aboard passenger aircrafts in the U.S. face the potential risk of significant delays, damage and spoilage, the new legislation holds practical consequences for cargo shipments originating from overseas, including Israel.
The authorities in the United States classify importers and exporters in one of two categories: ‘Known Shippers’ and ‘everyone else’. Only goods from a ‘Known Shipper’ may be transported on a passenger plane. Everyone else's goods must be transported on a specified cargo flight which carries no commercial passengers.
In order to become a ‘Known Shipper’, one has to undergo a process of verification and authentication with the U.S. Authorities. The list of ‘Known Suppliers’ was recently closed to new applicants, but before it was closed, many Israeli and other foreign companies registered and were granted ‘Known Shipper’ status, which they enjoy to this day.
X-Ray Scanning on All Shipped Goods
Two changes are due to be implemented by the United States authorities on August 1st 2010. The first change is that all shipped goods must be x-rayed prior to being cleared for shipping. Until now, x-raying was performed randomly, and was carried out on no more than a third of goods - now it will be 100%.
This change was expected, and shouldn't have a major impact on the diamond community. It is expected that shipping companies such as Brinks/Malca Amit will add a small x-ray charge to cover the administrative costs of compliance - but this should be only a few dollars.
Foreign Companies May No Longer Enjoy ‘Known Shipper’ Status
The second change, which was not expected and has only just been announced, has far-reaching implications. The change is that non-US companies will no longer be allowed to enjoy the status of being ‘Known Shippers’. If a company is currently a ‘Known Shipper’ (as many foreign companies are) this status will be taken away at the end of July 2010.
According to senior officials in secured shipping and their customs brokers, such a move was not expected to happen, but a last minute decision was made to severely tighten the rules.
The Implications for Israeli Importers/Exporters
The fact that only ‘Known Shippers’ can ship goods on a passenger aircraft is not new at all. What is new is that foreign companies can no longer enjoy being ‘Known Shippers’.
There are no approved cargo flights travelling between the US and Israel directly - and no goods sent by an Israeli company from the US can be transported on the usual El Al flights. When goods are shipped on approved cargo flights (via Europe using specific airlines) the obvious implication is that such a shipment will take longer to arrive than before.
It is expected (though not confirmed) that the costs to Israeli companies will rise, as cargo flights cost the shipping company more. Such costs would presumably be passed on to customers, though there haven't yet been decisions taken by the shipping companies which are used to dealing with Israeli and other foreign companies.
Trade Show Exhibitors Affected
This change could be particularly relevant for Israeli diamond companies who ship goods to the US for either a trade-show, or for a travelling salesperson to sell. In such scenarios, the Israeli company would also be the exporter who returns the goods to Israel - and therefore can only send the goods back via cargo flights.
When an Israeli company ships goods to a US customer on consignment - the return of those goods can be done by the US customer, who may enjoy the ’Known Shipper’ status.
These new rules are not yet set in stone – and judging by the recent decision to take away the opportunity to enjoy the ‘Known Shipper’ status from non-US companies, further changes may well be made, the effects of which cannot yet be foreseen.
Once the legislation comes into effect, the burden on foreign and Israeli diamond companies can be better assessed.
