American Shipper

Matter of trust

Matter of trust

U.S., EU work towards fast lane for secure cargo.



By Eric Kulisch



   The United States and the European Union expect to finalize an agreement by the end of October 2011 to mutually recognize each other's trusted shipper programs and make it easier for companies to meet their standards for supply chain security.

   An EU delegation made the announcement Dec. 17 following a meeting between customs chiefs participating in the Transatlantic Economic Council forum in Washington.

   It will take about a year for U.S. Customs and Border Protection to check how all 27 EU member states certify that companies have adequate policies and procedures for securing cross-border shipments and making them eligible for expedited clearance, Bradd Skinner, director of the Customs-Trade Partnership Against Terrorism program, said five weeks earlier at a meeting of CBP's federal advisory committee on commercial operations.

   CBP supply chain specialists have conducted joint validations with customs officials in four EU countries since the beginning of November, Skinner said in a recent interview. The exercise involves tagging along with overseas counterparts to observe security reviews in practice after the agency determined the EU program compares favorably on paper with C-TPAT.

   Importers that belong to C-TPAT have voluntarily implemented measures at their own expense to strengthen internal controls over physical facilities, personnel, information technology systems, container inspections and stuffing, and require their overseas business partners to follow similar steps so that criminals and terrorists can't slip contraband or weapons into a U.S.-bound container. The security measures must meet minimum CBP standards. Agency specialists conduct on-site checks of a sample foreign supply chain before admitting the company to the program and reducing their risk rating so shipments can avoid most cargo examinations.

   The EU has instituted an Authorized Economic Operator program that follows similar principles for detecting high-risk shipments and expediting the movement of legitimate cargo in line with standards outlined by the World Customs Organization. CBP officials also want to use the joint exercises to better understand how the EU manages its program for uniformity and consistency across all members.

   Since June 2007, CBP has recognized the supply chain security programs and verification procedures of New Zealand, Jordan, Canada, Japan and South Korea as meeting its requirements. Once a bilateral agreement is signed the two sides must establish procedures for actual cooperation, including sharing information about companies in their respective programs. The goal of harmonization is to allow CBP to accept the validation findings of so-called industry partnership programs in other countries, and vice versa, so customs administrations don't have to conduct redundant audits of international traders and their suppliers.

   Skinner said CBP has accepted 92 validations of companies conducted by the Canada Border Services Agency and Japan Customs. Canada's C-TPAT equivalent is called Partners in Protection.

   The collaboration saved the agency more than $250,000 in transportation and other costs, and allowed resources to be redirected to other areas of need within the C-TPAT program this year, he said.

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   Arrangements between the United States and European Union have bogged down the past few years because CBP officials have not had confidence until now in EU standards for managing shipper security. Both sides previously said they expected to achieve reciprocal fast-lane customs clearance for shippers that meet joint security standards by 2009. The negotiations and legwork with the EU and others underscore the slow nature of building a global supply chain security regime piece by piece, and country by country.

   Officials eventually want to further align these types of bilateral programs so that companies can follow similar application procedures or only have to apply to one trusted trader program.

Shipper takeaways
' Evaluate the amount of risk for your products and business operation as they move through the global supply chain, and consider joining the Customs-Trade Partnership Against Terrorism, Canada's Partners in Protection, the Transportation Security Administration's Certified Cargo Screening Program and other security partnership programs that aspire to give shippers with proven security controls a path around normal enforcement filters.

' Provide periodic feedback to local and national trade associations about whether C-TPAT is helping your business productivity, or what types of improvements would help make your security investments worthwhile.

' Offer to partner with Customs and Border Protection in pilot programs testing the viability of account-based import and export processing. The agency likely will be looking for corporate volunteers to participate in programs that would change the way customs compliance is handled.

   As of Dec. 20, there were 10,083 companies in C-TPAT. A CBP survey of members published in September indicated relatively high satisfaction with the program, despite frequent complaints by industry officials that the benefits of participation do not meet expectations for more predictable and expedited processing through ports of entry. Among the chief concerns is the rise in inspection rates and additional border fees without taking into account the risk level of the shipment or the compliance record of the importer. Inspections result in shipment delays and extra fees to cover the cost of the exam.

   Forty-two percent of respondents said the benefits outweighed the cost and a quarter said they were the same. C-TPAT reduced the number of inspections and delays in inspection lines, as well as improving the security of their workforce, companies said. Most respondents said the revalidation process met expectations and they were happy with recommendations provided for improving their security plans. Highway carriers said they have experienced reduced wait times at land borders, but 16 percent said they didn't know whether their participation expedited movement across the border.

   Participating companies said they incurred costs for improving physical security such as video cameras, developing a process to evaluate new suppliers and educating foreign suppliers about security requirements. Some large companies spend more than $100,000 in up-front costs to join the program before long-term compliance costs are considered.

   Satisfaction tends to increase the longer a company is in the program, according to the survey.

   CBP officials stress that C-TPAT importers have benefited in recent months from the phase in of the Importer Security Filing rule, requiring advance cargo data before departure from an overseas port, because shipments now are immediately recognized as associated with a highly compliant company and receive a substantial scoring credit in the targeting system that identifies containers for inspection. CBP took longer than expected to systematically input the ISF data into its automated targeting system for risk assessment, the Government Accountability Office said in October.

   In the 10 months he has been in office, CBP Commissioner Alan Bersin has repeatedly talked about the need to take trusted shipper and traveler programs such as C-TPAT to the next level.

   'Yes, we are very proud that we have 10,000 partners in C-TPAT, but we need to increase that dramatically' in order to segment legitimate trade to the fast lane so that CBP officers can focus resources on the limited number of high-risk and unknown containers that require more scrutiny, Bersin said in a Dec. 9 address at the U.S. Chamber of Commerce.

   Expanding C-TPAT's reach to foreign companies through mutual recognition is a good way to achieve that goal, but 'we need to do this in a more concerted, effective way and in a quicker time frame,' he said.

   The other avenue for increased participation is overcoming the notion prevalent in the private sector that the reduction in bureaucratic requirements doesn't match the investment required. Bersin said changing attitudes requires more education about the significant reduction in inspection rates for C-TPAT members and the creation of additional benefits.

   A key to rewarding companies for securing their supply chains, he said, is developing a 'single identifier' that would be associated with the shipment from the moment it left the overseas manufacturing floor until it reached the department store shelf. CBP could then track the shipment and member companies would be responsible for validating that the security arrangements at intermediate transfer points meet their standards.

   'Yes, there will be an investment of time and money, but the return would be a much earlier release time' for the cargo upon arrival in the United States, he said.

   Bersin set a goal of increasing trusted traveler programs such as SENTRI (Secure Electronic Network for Travelers Rapid Inspection), NEXUS, FAST (Free And Secure Trade) and Global Entry from 800,000 to 3.5 million participants within the next two to three years, but didn't put a specific figure on how much C-TPAT should grow.

   SENTRI and NEXUS are southern and northern border programs, respectively, that allow registered travelers to speed through border checkpoints, and Global Entry offers the same benefit at airports for international travelers.

   Global Entry, which uses automated kiosks to quickly move preapproved, low-risk passengers through international arrival areas simply by swiping a passport and transferring their fingerprints to a touch screen for a biometric match, doubled in size to 200,000 participants in 2010.

   FAST allows carriers and truck drivers that have undergone background checks and haul cargo for C-TPAT member companies to access dedicated lanes where processing is usually limited to quick ID verification. Border stakeholders, however, say that congested access roads to land ports of entry often prevent FAST and NEXUS participants from getting to their dedicated lanes.

   Speaking with a couple of reporters after his speech, Bersin added that CBP needs to convince more of the 3,000 top importers to join C-TPAT and also induce a larger number of firms to achieve Tier 3 status by offering earlier cargo release. There are at least 312 companies in the program's top tier that have taken extra steps to become trusted shippers and are eligible for more trade advantages.

   Customs last year instituted a small improvement for Tier 3 companies by putting them on a four-year, rather than three-year, revalidation cycle in recognition of their strong security measures, which include periodic self-testing and evaluation of controls to adapt to changing threats.

   A number of importers and carriers in the survey, conducted by the University of Virginia, said they didn't know if they were being moved to the front of the line when their containers or trucks are selected for inspection, as promised under C-TPAT. Skinner said his office would soon take steps, such as creating a message in existing automated systems, to notify importers that they are receiving this privilege. Some ports already do a good job of informing companies when they are allowed to cut in line for inspections and the goal is to communicate better nationwide, he added.

   The U.S. Chamber of Commerce in 2009 offered several recommendations for improving C-TPAT and northern border management, including more lenient policies toward less-than-truckload carriers and companies that experience an isolated security breach.

   LTL and package delivery companies typically cannot use FAST lanes for clearance because under CBP's rules all shipments on board must be for C-TPAT companies. Piece shipment carriers, by definition, carry loads of cargo from multiple customers compared to single-customer truckloads, and it is unusual for every shipment to be from a certified importer's supply chain given the limited size of the program. That means certified carriers can't benefit from the expedited processing lanes.

   Two years ago, 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.

   In fiscal year 2010, CBP suspended 134 members (30 because of a contraband seizure and 104 for problems with their validation) and removed 152 companies from the program (50 because of a security incident or seizure and 102 for failing a validation), according to agency figures. Companies that are removed from the program because of their validations usually provide false information about their security plans or demonstrate a lack of commitment to maintain the program's standards.

   Many trucking companies complain they are punished when they self-report that one of their vehicles was compromised by drug gangs on the way to the border, said Nelson Balido, president of the Border Trade Alliance.

   Commercial stakeholders have indicated through multiple avenues that they want more transparency into how post-incident analyses are conducted and flexible punishment based on the circumstances. They also want CBP to conclude investigations within a set timeline and spell out clear steps for gaining readmission to the program.

   The Chamber of Commerce said a 'zero-tolerance policy' discourages participation and unjustly punishes law-abiding companies and drivers. 'Expulsion should only happen after an investigation determines company and/or driver complicity,' it said.

   CBP reinstates companies to C-TPAT after they have demonstrated to CBP's satisfaction that quick and sustained corrective action has been taken to prevent further security breaches.

   Companies in C-TPAT need to take seriously their security responsibility, Ken Koningsmark, senior manager for supply chain and aviation security compliance at Boeing, said at the chamber's supply chain competitiveness forum.

   Koningsmark, who has been to 35 countries to help suppliers upgrade security, said he often observes lax practices. 'You do find manufacturing facilities that may not have the desired security. You do find, particularly with the inland trucking that they may not have the good security needed. And it's up to us in industry to make sure that the standards are being met and that your cargo is truly secure. Then, in exchange for doing that, I think we need to look at additional benefits for C-TPAT members,' he said.


'We believe that just as C-TPAT membership should come with tangible benefits, a decision not to join the program will have its downside as well.'
Border Trade Alliance

   Perks for highly compliant companies could include waiving penalties for inadvertent mistakes in some other area of the importation process, melding information from the Importer Security Filing for ocean containers with other advance data so the C-TPAT member shipments get a larger credit on their risk rating scores that determine whether inspections are needed, and mutually recognizing certified operators in other countries so that cargo gets green-lane treatment at the border.

   The Border Trade Alliance has asked CBP to launch a pilot program at the El Paso, Texas, commercial crossing under which the Bridge of the Americas, one of two commercial crossings there, would only be accessible to C-TPAT members after 2 p.m. The group recommended that CBP extend operations by one hour to 7 p.m. and limit the final five hours to C-TPAT traffic.

   'So now FAST is going to be fast,' Balido said, assuming CBP implements the idea.

   In a Dec. 3 letter to Skinner, the BTA said, 'There would likely be some pushback from non-C-TPAT carriers in the area who would have to shift their traffic to the Ysleta port of entry. However, we believe that just as C-TPAT membership should come with tangible benefits, a decision not to join the program will have its downside as well. Under our proposal, non-C-TPAT traffic would still have access to Bridge of the Americas in the hours before 2 p.m.'

   The chamber's report also called for development of a trusted shipper program for small and medium-size businesses that cannot justify the expense of the current trusted shipper programs and expansion of U.S. and Canadian trusted shipper programs to businesses that are regulated by other government agencies at the border, such as the Canadian Food Inspection Agency, and the U.S. Food and Drug Administration and the Department of Agriculture.

   Agricultural shippers would be willing to participate in a trusted shipper program, but could only justify the cost if they were exempt from secondary inspections whenever agencies respond to food-borne threats with wholesale tests that tend to lump companies together irrespective of risk, the nation's largest business organization said.

   (The Transatlantic Economic Council was created in 2007 as a regular forum for U.S. and EU officials to discuss ways to better synchronize regulations and economic policies.)