China, U.S. inch forward
Supply chain security MOU means step towards broader C-TPAT collaboration.
By Eric Kulisch
U.S. and Chinese customs administrations in late May signed a memorandum of understanding on supply chain security and facilitation.
The document is a small step forward towards regularizing U.S. Customs and Border Protection's ability to conduct security verifications of facilities in China that supply merchandise to U.S. importers belonging to the voluntary Customs-Trade Partnership Against Terrorism program.
Under C-TPAT, CBP extends expedited import clearance to companies that have approved procedures for maintaining control of shipments at origin and in transit to prevent criminals or terrorists from smuggling weapons or contraband in a container.
Until now CBP supply chain security specialists have only had sporadic access to China, which has limited many companies from graduating from the program's base level to a higher tier that provides additional benefits, such as lower rates of cargo inspections. Trade benefits vary depending on how a company's security controls match potential risks in its shipping lanes.
There are 312 companies in Tier 3 of the program that have taken extra steps to become trusted shippers and are eligible for more trade advantages.
In February, CBP completed its third round of joint audits with China Customs, resulting in validations for 22 more importers, C-TPAT Director Bradd Skinner said at a federal advisory committee meeting in Miami.
Agency specialists last visited Chinese manufacturing facilities in November 2008 and before that in March 2007 following years of negotiations. China was the only country that refused to allow CBP teams entry to validate that foreign suppliers are following security plans submitted by their U.S. import customers and approved by CBP.
There are more than 400 companies that have most of their import operations in China and are stuck in Tier 1 because CBP has been unable to verify their supply chain practices.
Forty importers have had their Chinese supply chains reviewed through the first three verification rounds. CBP supply chain specialists also provided technical assistance to Chinese counterparts regarding supply chain security procedures and best practices for evaluating trusted traders.
China has still not completely opened its doors to CBP specialists, but the new agreement allows for technical discussions to develop a plan for how to move ahead with more validation activity, CBP officials said.
As of June 8, C-TPAT has 9,838 certified members, including 1,200 new participants during the previous year, according to the latest CBP figures.
The agency has conducted more than 14,892 validations in 87 countries, including 3,420 audits in 2009. Two-thirds of last year's on-site visits were revalidations in which CBP evaluated companies a second time, usually after three years, to check whether their security practices met or exceeded minimum standards.
Last year, CBP removed or suspended 297 companies from the program. Sanctions normally are taken against C-TPAT members that experience a security breakdown, such as a trucker caught at the border with drugs concealed in the cargo.
Skinner said there was also an uptick in suspensions due to members that failed to respond to concerns CBP identified during the validation process. CBP is starting to hold participants accountable for meeting deadlines to submit information about their security efforts or make recommended improvements, he said. He predicted the number of suspensions would come down this year as companies get the message about the need to respond promptly to their validation reports.
CBP also has a reciprocal responsibility to quickly deliver the validation reports following an on-site visit so that corporations know what resources they need to correct any security gaps, Skinner said. Program officials are now averaging about 45 days to complete reports.
Another improvement in customer service, he added, is the creation of an internal evaluation and assessments branch tasked with making sure validations are conducted in a consistent and uniform manner. In response to industry concerns of diminished returns for C-TPAT security investments, CBP also plans to move toward a four-year revalidation cycle for Tier 3 importers.
Meanwhile, CBP continues to make progress towards making several existing mutual recognition agreements a reality for the first time.
The United States has agreements with Japan, Canada, New Zealand and Jordan to recognize each other's supply chain security partnership programs as compatible so that companies certified by either party can qualify for the other's trade benefits. The World Customs Organization is encouraging governments to harmonize their trusted trader programs along global supply chain security standards.
The bilateral agreements reflect that both sides have harmonized security standards on paper, but more coordination is necessary before U.S. Customs will accept certificates of validation conducted by a foreign customs service and provide the same expedited clearance to exporters in another country as it does for its own domestic importers.
Skinner said CBP has accepted 130 validations from other nations (mostly from Canada's Partners in Protection program), which translates into cost savings for CBP because it can do fewer redundant validations on companies that do business, or have suppliers, in the other countries.
CBP is working closely with South Korea to help it stand up its own version of C-TPAT, known as an authorized economic operator program in WCO parlance, Skinner said. Dialogue slowly continues with the European Union on a roadmap toward mutual recognition. The challenge, Skinner said, is trying to include all 27 EU member nations in any agreement when some governments are further along than others with their security programs. That makes it difficult to determine what policies those countries would have for suspension and removal from the program, revalidations, and information sharing, he added.