Restricted access to China shapes U.S. supply chain inspection program

Restricted access to China shapes U.S. supply chain inspection program U.S. Customs and Border Protection plans to soon solicit outside auditors to help verify security practices in Chinese factories. But if the agency succeeds in convincing the Chinese government to permit its own officers into the country to do supply chain security reviews, it could undermine the rationale for the pilot third-party program.
   CBP has opposed outsourcing validations of importers and their suppliers who participate in the Customs-Trade Partnership Against Terrorism on the grounds that such security reviews are inherently a governmental function. The SAFE Port Act last year required the Department of Homeland Security to conduct a pilot program to study the feasibility of using third-party validators. CBP is designing the pilot program to be used in China because it is the only country in the world that won't grant access to U.S. inspectors. About 300 U.S. importers who source 75 percent or more of their goods from China have no prospect of moving to a higher trusted tier within C-TPAT — and significantly reducing container security inspections that can delay shipments — because CBP does not have insight into whether their Chinese suppliers are following C-TPAT minimum security standards.
   The importers will have the option of paying for certified private-sector auditors to survey their suppliers and submit the results to CBP.
   CBP officials said at a recent meeting that they continue to negotiate with China Customs to allow supply chain specialists into the country to conduct security validations. Negotiations took place three weeks ago at the Chinese embassy and during a December visit to Washington by a delegation from China, said Todd Owen, executive director of cargo and conveyance security, who also visited Beijing last August.
   'We continue to keep the heat on China,' said Michael Mullen, CBP's assistant commissioner for international affairs and trade relations, at last week's Commercial Operations Advisory Committee meeting. 'We are discussing this constantly, and making it clear that we do expect that in some reasonable amount of time that they will approve' CBP specialists to conduct verifications.
   Mullen said the Chinese should understand that it's in their own best interest to allow the inspectors because it would lead to more rapid facilitation of goods from their manufacturers into the United States.
   Mullen said he is optimistic about the chance for a breakthrough that would give U.S. personnel access to China after several years of fruitless negotiations, but CBP Commissioner Ralph Basham said the agency's strategy right now 'seems more based on hope.'
   The 300 U.S. importers would have the option of using C-TPAT officers or the outside vendor if China changes its position on CBP access during the one-year pilot period, Owen told Shippers' NewsWire. He publicly questioned whether companies would opt to pay for a service that they can get for free from the U.S. government.
   Together the comments suggest that there could be little need for a third-party validation program if CBP officers can work in China, unless Congress gets involved again and pushes for the private sector to lend additional manpower to the process.
   Anthony Barone, director of global logistics policy for Pfizer Inc., dissented with the COAC's consensus view in favor of a trial run using third-party auditors, and said the U.S. government should use its economic leverage to get China to cooperate with the inspection process.
   'Security is a governmental function. Outsourcing security probably is not a good idea,' he said.
   Barone said DHS should get the State Department involved in the negotiations to pressure China to open its doors to CBP, especially since Food and Drug Administration inspectors already have permission to enter the country to check pharmaceutical and medical device factories for safety issues.
   'I can’t see why the Chinese won't permit security inspectors to do a similar job, especially since we are China's single biggest customer,' he said.
   Given that the C-TPAT pilot program was mandated by Congress, Barone argued that it should be expanded to allies such as Mexico and Canada to help CBP conduct security reviews and speed up the ability of companies to receive reduced inspections and other related benefits.
   CBP wants to keep the pilot small to have better control of the situation during the learning process, responded Jayson Ahern, assistant commissioner for field operations.
   Owen said CBP doesn't need private-sector help in Canada because it has hired enough supply chain specialists and has frequent access to that country. Mexico is too risky of an environment for outsourcing, he said, because it is the sector that has had the most companies suspended or removed from the program because of security breaches, mostly due to Mexican highway carriers being caught with drug shipments hidden inside the cargo.
   CBP should not outsource more security reviews, argued Earl Agron, vice president for security at ocean container line APL Ltd. The learning curve for supply chain security is steep, and outside parties would not have the same level of competence as CBP supply chain specialists, said Agron, one of 10 new COAC members.
   'I would not feel comfortable having various private parties traipsing through my portion of the supply chain. The more people that know what you do, the less security you have,' and the problem is compounded when people change companies, he added.
   Outside vendors seeking to qualify for C-TPAT business will need to maintain liability insurance, sign a confidentiality agreement, establish that they have no conflict of interest with the company they are validating, have a strong presence in the designated country, and a strong program for training the inspectors, among other requirements.
   Companies that already perform social compliance and supply chain security consulting for clients will be barred from going back and revalidating their own work, Owen explained.
   CBP will also make sure that the vendors publish their fees in the same upfront manner required of privately run centralized examination stations in the United States, as recommended by a COAC subcommittee, Owen said.