From shipping lobbyist to McCain adviser

WASHINGTON The proposed program called "10+2" points out a key problem in the age of terrorism: How much can the government expect U.S. importers to pay to help ensure the country's safety?

A former chief of staff to McCain, Christopher Koch in 2000 set up the World Shipping Council to lobby on behalf of some 40 foreign-based and U.S. ocean carriers. The companies transport half a trillion dollars worth of U.S. exports and imports annually. The group has spent $1.7 million seeking to influence the federal government on a range of maritime issues.

In May, Koch de-registered as a lobbyist, took a leave of absence from the World Shipping Council and joined McCain's campaign. He plans to return to the shipping council after the election.

In keeping with what McCain says is a strict policy to free his campaign from lobbyist influence, Koch has recused himself from dealing with the topics on which he has lobbied. He said in an e-mail that if a specific issue regarding regulation of the liner shipping industry were to arise as a presidential campaign issue, he would not participate in any campaign policy decisions about it.

Koch served as a federal regulator in the 1990s, becoming chairman of the Federal Maritime Commission in the administration of President Bush's father.

As an industry lobbyist serving on an advisory panel to the Department of Homeland Security, Koch's job reflects the complicated partnership between the business community and the government in a post-Sept. 11 world.

After the Sept. 11 terrorist attacks, the government proposed that the ocean carriers gather information about the millions of shipping containers arriving at U.S. ports.

At the time, the ocean carriers already were preparing to provide the government a substantial amount of data about containerized cargo under a homeland security initiative called the "24-hour rule." The carriers said information beyond that level should be provided directly to the government by those who actually had the information: U.S. importers.

The data is vitally important because anti-terrorism officials regard shipping containers as potential delivery vehicles for weapons of mass destruction.

The Bureau of Customs and Border Protection wants to know the chain of custody from point of origin to destination of containerized cargo so that the government can spot high-risk shipments in foreign ports before the containers are loaded on ships headed for the United States.

In regulatory filings, congressional testimony and speeches, Koch and the World Shipping Council argued that burdening the ocean carriers with the additional requirement would be severely disruptive to international trade, logistically impossible to carry out and contrary to federal law. Koch said the only accurate source for such information is U.S. importers, adding that they are reluctant for commercial reasons to share the data with others in the private sector.

Customs officials issued a final rule in December 2003. A week and half before the requirement was to go into effect, CBP officials delayed it, saying the government wanted to review a petition from the World Shipping Council and three other groups of freight forwarders, retailers and industrial importers.

Four and a half years later, no final rule is in place and the government is still not getting the additional information it says it needs.

Richard Di Nucci, a Customs official in charge of the Secure Freight Initiative, said it took time to come up with the right approach to securing shipping containers.

"When you sit down with the trade community it can be a time-consuming process to get the proposal right," said Di Nucci, who has been working on the issue for the past three years. "Are we exactly ecstatic that it took almost three years to get it right? The answer is 'no.' I do think we have gotten it right."

The proposed program, 10+2, would shift most of the regulatory burden to the importers where Koch and others in the shipping industry say it should have been all along. It is "absolutely the thing to do," Koch told a trade symposium late last year. The program's name is derived from the fact that the importers must provide 10 information elements and the ocean carriers two, in addition to the data the ocean carriers already provide.

The reaction of many importers ranges from concern to outrage.

In more than 200 comments filed with the government this year, many importers said the initiative is too burdensome and that the government is underestimating costs to business by billions of dollars. Some say the proposal is so misguided that it actually will increase the terrorist threat rather than reduce it.

Those with concerns range from the U.S. Chamber of Commerce to individual retailers, including Best Buy and Target Corp.

Influential names in the Washington lobbying community have weighed in, among them the Information Technology Industry Council, whose 86 member companies include Microsoft, IBM, Time Warner and Hewlett Packard. A Sony executive says containers will sit at foreign terminals for days waiting for security data to be processed, increasing the threat of terrorism.

Don O'Hare, the vice president of the shipping council, calls the abandoned 2003 rule "unworkable. The government continues to correctly believe that it will benefit from additional information about the shipments, but it recognized that the original rule suffered from practical problems."

O'Hare said 10+2 fixes those problems and will greatly enhance CBP's cargo screening capabilities.

"We know that many importers are opposed to 10+2 for a variety of reasons. Hopefully, they will come to understand the merits of the proposal," he said.

The evolution of the original rule into 10+2 involved a yearlong trip through the federal bureaucracy and Congress, a journey in which Koch played a part.

As a member of the Commercial Operations Advisory Committee, Koch assisted in the effort that became 10+2. The committee made recommendations to the Department of Homeland Security as 10+2 developed.

After a subcommittee of COAC said importers should be the ones who supply most of the cargo data to the government, Koch told the Senate Commerce Committee -- McCain is a member -- that the World Shipping Council "agrees with this recommendation."

Eight months later, Congress passed the Security and Accountability for Every (SAFE) Port Act, authorizing homeland security officials to obtain the information on containerized cargo from those most likely to have firsthand knowledge of the data. The result is 10+2, with importers designated as the ones with that knowledge.

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