So how long do I have to retain shipping records and for whom?

What follows focuses solely on one topic, albeit a very important one, addressed by the regulations of the principal agencies that oversee activities of shippers and shipping services - document retention.

Date published

31/05/2017

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What follows focuses solely on one topic, albeit a very important one, addressed by the regulations of the principal agencies that oversee activities of shippers and shipping services - document retention.

The essential purpose of document retention is to ensure records are available to an agency for future reference, especially if a violation of the agency’s regulations is being investigated. Aside from legal requirements, it’s also a matter of good business practices for shipping agents and services responsible for handling cargo to retain records for the purposes of efficiency, productivity, and avoiding liability.

Background

The plethora of administrative regulations transportation service companies and their customers must or may have to comply with is potentially legion. The regulations can relate to licensing of transportation services, the import or export licensing of goods, the commodities themselves such as hazardous or dangerous goods, food and drugs or agricultural products, handling and packing and documenting of shipments, and cargo security in general. And this only scratches the surface.

The core agencies that govern service companies and regulate document retention by service companies and shippers involved in trade and transportation of goods, are U.S. Customs and Border Protection (CBP), the Federal Maritime Commission (FMC), the U.S. Department of State, Directorate of Defense Trade Controls (DDTC), the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce, the Office of Foreign Assets Control (OFAC), the Federal Motor Carrier Safety Administration (FMCSA), the Bureau of Consensus (BOC) and the Transportation Security Administration (TSA).1

The scope of responsibilities of each of the listed agencies covers all the provisions of each statute assigned to it by Congress, and in some instances, support of sister agencies' responsibilities. For example, as the “gate keeper” for goods entering and leaving through U.S. ports, CBP has its own responsibility to enforce the Tariff Act. But it's also responsible for enforcing the regulations of almost every other “Partner Government Agency” that has any control over merchandise when imported or exported, as well as any companies providing services to importers and exporters.2

Document retention and compliance

The most important requirements to keep track of regarding compliance with agency document retention rules are (1) how long the records must be retained and, (2) when the retention period begins and terminates. The best means of keeping track of the foregoing and other possible requirements is to have a written compliance procedure. Preferably the procedure should be administered by a compliance manager dedicated to ensuring all rules and regulations that must be observed are adhered to, not just document retention alone. In this superheated regulatory climate, a full time compliance manager is more a necessity than a luxury.

It is important that both regulated transportation intermediaries and their customers understand they share responsibility for retaining and maintaining records and documents. If a customer cannot produce documents demanded by the government, it may not be an excuse that it relied on its forwarder, IAC, NVOCC or CHB for retention of those documents. A customer’s liability to retain documents is in addition to and independent of its agent’s document retention duty.

The retention periods of documents or files that must be retained to comply with the regulations of the core agencies specified above, are as follows:

Agency Retention Time Initiating events Cite to full regulation details
CBP Five (5) years    From the date of entry   19 C.F.R. Part 163
FMC Five (5) years    See Fn "2"4 46 C.F.R. § 515.33
BIS Five (5) years    See Fn"3"5      15 C.F.R. Part 762
BOC Five (5) years    From the date of the export  15 C.F.R. 30.10
FMCSA  See Fn "4"   See Fn "4"  49 C.F.R. Part 379 Appendix A
ODTC Five (5) years      22 C.F.R. § 122.5
OFAC Five (5) years    After the date of transaction  31 C.F.R. § 501.601
TSA    Five (5) years See Fn "7"

See Fn "7"


When called upon by the government to produce files or other records, a transportation service company, shipper, importer, exporter and others, such as motor carriers transporting goods to port for export, must have them available. Documents required to be retained can be physically or, in most instances, electronically stored. Inability to comply with a demand for document production can lead to sanctions of varying degrees of severity, which is sufficient reason to ensure that a good document retention and destruction protocol is in place to avoid such an eventuality.

Document retention for business purposes and avoiding liability

There are, however, other compelling reasons for documents to be properly retained.

We are regularly engaged to defend transportation service clients in connection with civil claims and resulting litigation for loss, damage or delay to goods in transit or errors and omissions in the performance of their services, as well a wide range of commercial litigation. Likewise, we frequently have to defend clients against claims asserted by a federal agency for violations of its regulations.

In all such situations the document record of the transaction(s) which are the subject of the claim or commercial dispute is an absolute necessity for assessing the merits of the claim and determining how best to defend or dispose of the claim. Conversely, the records may also help support the claim, but it's better to know the worst case than be in the dark. And in our experience the absence of documents and communications which a client is otherwise compelled by regulation to retain, not only may frustrate the defense of the client but can give rise to a negative inference as to the merits of the client’s defense when the claim is adjudicated.

In addition to the foregoing, there may be commercial needs on the part of the service company or its customers to have the documents available for future reference. Moreover, as shipper service agreements continue to replace traditional standard terms and conditions or contract of carriage terms, many require that service providers maintain these files long term for shippers to access, whether or not subject to government retention rules. Service providers should be concerned with document retention for similar business-related reasons.

A sound document retention policy, in line with the rules of the relative administrative agencies, serves both the company’s business and legal interests. So while a possible burden on the resources of a company, document retention has its uses beyond mere regulatory compliance.

 

1 In very general terms, CBP issues the Customs Regulations with which importers, exporters and customs brokers must comply, among others; FMC issues the FMC Regulations, with which equipment operation ocean carriers, marine terminals, ocean freight forwarders and non-vessel operation common carriers, among others, must comply; DDTC administers the International Traffic in Arms Regulations (ITAR) which governs anyone involved in the export or import of munitions list items (part of the ITAR); BIS enforces the Export Administration Regulations which regulates exports other than those subject to the ITAR, and anyone involved with exporting or providing exporting services on behalf of exporters such as freight forwarders; OFAC enforces economic and trade sanctions under authority of the Foreign Assets Control Regulations; FMCSA oversees licensing and the conduct of motor carriers, interstate surface freight forwarders and property brokers pursuant to the Interstate Commerce Act; BOC enforces the Foreign Trade Regulations/Electronic Export Information; finally, TSA oversees enforcement of the Transportation Security Administration Regulations, as they apply to all modes of transport and any shipper or service provider that handles or arranges shipments of goods.

2 See footnote 1.

3 This article is for information purposes only and should not be relied upon as legal advice. It is most important that the specifics of each agency’s retention regulations be referred to so as to ensure full knowledge of and compliance with the respective rules. Aside from other matters not addressed by the article, some of the agencies document retention regulations list specific documents that must be kept for the required period. In addition, it is highly recommended that any and all communications, notes, diaries and any other document relating to a transaction be kept, not just those specified in a particular agencies rule.

4 The regulation does not specify a particular event or date from which document retention commences. It is suggested that the date of shipment be used.

5 Five years from the latest of the following times: (1) The export from the United States of the item involved in the transaction to which the records pertain or the provision of financing, transporting or other service for or on behalf of end-users of proliferation concern as described in §§ 736.2(b)(7) and 744.6 of the EAR; (2) Any known re-export, transshipment, or diversion of such item; (3) Any other termination of the transaction, whether formally in writing or by any other means; or (4) In the case of records of pertaining to transactions involving restrictive trade practices or boycotts described in part 760 of the EAR, the date the regulated person receives the boycott-related request or requirement.

6 The FMCSA’s retention policy is document specific and is spelled out in Appendix A to 49 C.F.R. Part 379.

7 There is no TSA regulation per se that stipulates how long an indirect air carrier (IAC) must retain shipping and related documents. However, in an IAC’s Standard Security Program which it is required to establish by TSA, there are specific documents identified which must be retained for periods of time, varying from 30 to 180 days. Because such programs are considered “sensitive security information” under TSA’s IAC regulations, we may not in the context of this article provide specifics as to what documents must be retained and for how long. Notwithstanding the lack of a TSA mandated long-term document retention rule, erring on the side of caution it is strongly suggested that the best practice is for an IAC to retain, at the least, those documents specified by the TSA for short term retention, along with the rest of the shipping file, concurrent with the five  year retention period required by BIS’s regulations.