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Simplify, or Perish?

Simplify, or Perish?

U.S. Customs Commissioner Alan Bersin came to the National Customs Brokers and Forwarders Association of America conference in Phoenix the first week of April with a blunt message: Don’t stand in the way of reforms to improve Customs efficiency. Instead, Customs will help change your business model, create new services, and increase your value to importers.

By Eric Kulisch

   Bersin, now in office for one year, said he is pushing to simplify the entry process and expedite cargo release for trusted shippers. As part of the overhaul, he indicated a desire to update antiquated regulations that govern the activities of licensed customs brokers.
   ‘The world is changing faster than ever before. And when a person, or a profession or a nation gets to a turning point, history is very unkind to those who don’t turn. The changes that are toughest are the changes that are resisted to the point where things move quickly as opposed to evolving,’ he warned.
   In addition to improving entry and cargo release, Customs and Border Protection’s fledgling modernization effort intends to streamline financial processing, manage importers on an account basis, and create teams of industry-specific experts to help shippers and border officers make better compliance decisions.

   Bersin reiterated his strategy of expediting legitimate trade by using risk analysis of cargo data and intelligence to focus enforcement procedures on suspicious or unknown cargo, saying trade that flows rather than sits actually enhances security because it is less vulnerable to criminal or terrorist infiltration.
   To achieve those goals his stated priorities include improving relations with other parts of the government as well as within the agency itself, partnering with industry and delivering the long-stalled Automated Commercial Environment (ACE) project.
   In that context, he also asked the broker community to support his effort to reduce friction for commercial shipments at the border by demanding that federal agencies with responsibility for regulating imports within their jurisdiction do a better job coordinating their actions.
   Delays and confusion for the shipper often result when CBP clears a shipment for entry but the Food and Drug Administration or Environmental Protection Agency, among others, issues a hold based on its own criteria, industry officials complain.
   ‘Two out of every three exams at ports of entry for trade purposes are actually ordered by an agency other than CBP,’ Bersin said. ‘Everything we do with respect to security of the supply chain is critical but for naught in terms of American economic prosperity if in fact we’re stopping these containers and it’s not in a coordinated way.’
   Shippers can pay several hundred dollars every time a container is physically stripped for an inspection, as well as run up container storage and late pickup fees at warehouses and ocean terminals.
   Last October, CBP convened an Import Safety Conference that brought together for the first time leaders of all key agencies involved with monitoring the flow of commerce at ports. The agency chiefs agreed to use a risk-based system for checking shipments and share information through a common platform. Several also committed to station personnel at a joint office for analyzing shipping data and making decisions on which shipments need to be examined. Working side-by-side is intended to lead to faster determinations on cargo clearance.

A new customs broker model
CBP’s preliminary ideas for revising broker regulations include:
‘ Tightening eligibility requirements to become a broker.
‘ Improving the broker exam so questions are more relevant to the world.
‘ Continuing education requirements.
‘ Increasing responsibility for vetting of clients.
‘ Allowing brokers to offer more compliance consulting to smaller importers.
‘ Discontinuing filing of triennial report.

   In the past 16 months, CBP also stood up a Commercial Targeting and Analysis Center, where personnel from the Consumer Product Safety Commission, FDA and Immigration and Customs Enforcement are co-located with CBP to share data and jointly target imports that pose a safety or trade compliance risk.
   ‘This coordination needs to become the rule and not the exception’ if the government intends to drive down transaction costs at the border and make U.S. importers and exporters more competitive, Bersin said.
   ‘There is no more important priority than for CBP to catalyze the development of a single U.S. government face at the border,’ the commissioner added at the April 12 meeting of the Commercial Operations Advisory Committee in Washington.
   Leading that mission is Al Gina, the new assistant commissioner for trade.
   Bersin repeated that he wants to reduce the cost of transiting the border by 10 to 15 percent, although some officials are more circumspect about quantifying the potential savings. In a brief interview, the commissioner added the cost reductions could be as high as 20 percent at land ports ‘where we are not actually combining available information, appropriate risk segmentation and corresponding enforcement actions.
   ‘If we do that in a consistent way we can actually expedite legitimate traffic and in that way enhance our security profile.’
   An outgrowth of the safety conference is a new mechanism to resolve disputes between CBP and other agencies, Bersin said.
   The Border Interagency Executive Council was formed under the White House’s National Security Council as a forum for regular meetings among the 10 agencies with substantial responsibilities for imports. Its goals include:
   ‘ Sharing information on enforcement actions such as shipment holds, redeliveries or detentions.
   ‘ Developing full document imaging capacity.
   ‘ Furthering partnership programs to the point that one agency could accept the members in good standing from a similar program.
   When the executive advisory board, which is comprised of assistant administrators and assistant commissioners, can’t reach a consensus a matter may be forwarded to the NSC’s Trans-Border Interagency Policy Commission, according to Gina.
   ‘If you have that mechanism in place most issues never actually get there because everyone has a big incentive to resolve it at the lowest possible level,’ Bersin said.
   He has proposed establishing a private sector committee to advise the council, according to a CBP summary of recent meetings with trade stakeholders posted online.
   Getting entrenched bureaucracies to change their traditional work pattern and closely partner with CBP requires grassroots pressure, Bersin said. He urged customs brokers to make their voice heard in Washington if they favor such an outcome.
   Rodolfo Delgado, a co-owner of Rodel International in Laredo, Texas, suggested after the speech that FDA import inspectors that are stationed at some ports of entry should be incorporated into CBP the way Animal and Plant Health Inspection Service inspectors were transferred from the Department of Agriculture to CBP in 2003 when the Department of Homeland Security was created.
   The key to making the interagency system work at the border is the pending International Trade Data System, a component of ACE designed as a single platform for sharing information and to eliminate redundant private sector filing. The CBP chief said he is waiting until later this year to reach key milestones in ITDS’s development before negotiating with other agencies to develop common trusted partner programs and harmonize release processes.
   Any FDA and Consumer Product Safety Administration programs that allow companies some degree of self-policing should be brought in line with CBP’s Customs-Trade Partnership Against Terrorism so companies only have to follow one set of rules for demonstrating regulatory and security controls, Bersin said.
   C-TPAT is a voluntary supply chain security partnership program that provides reduced levels of exams and other benefits to validated importers.
   In reality, those agencies aren’t quite as far along with their partnership programs. CPSC and CBP teamed in late 2008 on a pilot program to create an import safety component for CBP’s Importer Self-Assessment program, which allows companies that demonstrate they have strong internal controls and processes to voluntarily assess their own compliance with trade regulations in exchange for avoiding cumbersome audits and inspections.
   Only J.C. Penney and toymaker Hasbro have signed up for the program, which is designed to promote compliance with all product safety requirements.
   The Food Safety Modernization Act enacted in January calls for the FDA to establish a voluntary qualified importer program.
   Meanwhile, Bersin revealed to reporters that Homeland Security Secretary Janet Napolitano has instructed CBP and the Transportation Security Administration to integrate their industry partnership programs.
   Bersin put a positive spin on what he acknowledged will be a slow reform process.
   ‘It’s actually not a bad thing that some things take time because that’s how you really build the cultural change and build it into the DNA of an organization. Otherwise it gets swept away quickly.
   ‘But the important thing is to get started down that path. And that I’m confident we can do it if you insist that we can’t have three separate holds and no discussion among the parties issuing the holds,’ Bersin said.
   The commissioner explained that the recent transfer of Dan Baldwin from assistant commissioner of trade to director of cargo and conveyance security in the Office of Field Operations was designed to ensure that CBP internal components are similarly in sync.
   Customs, as the largest organization within the DHS, has almost 59,000 personnel, a budget of more than $11.5 billion and is responsible for protecting 8,400 miles of maritime and land borders. It operates 331 ports of entry and last year inspected 352 million travelers, and more than 105.8 million cars, trucks, buses, trains, vessels and aircraft.
   ‘It’s an organization with many moving parts, but that’s no excuse for not having coordination so that you see one CBP and you see one U.S. government,’ Bersin told the large audience at the NCBFAA conference.
   He said Assistant Commissioner Thomas Winkowski, head of Field Operations, and port directors will be held accountable for expediting legitimate traffic through ports of entry.
   And he expressed strong support for Baldwin, saying he has ‘enormous confidence’ in the veteran regulator’s trade acumen.
   ‘But I want that insight in the Office of Field Operations, and I want Al Gina’s knowledge about the way ports operate in the Office of Trade so that we in fact build a single CBP that operates as seamlessly as it can.
   ‘Port directors, and import specialists, and entry summary specialists and fines, penalties and forfeiture specialists need to be on one team. And we will do that,’ Bersin said.
   Al Gina previously led international affairs and intelligence organizations within CBP, as well as several maritime cargo security programs.

Simplification. Just as real estate brokers guide less experienced clients through the complex home buying process, so too do customs brokers help importers navigate the minutia of customs statutes so they can get goods to market as fast as possible and without penalty.
   They handle preparation of the customs entry for cargo release and follow-on entry summary, admissibility verifications, classification and valuation, payment of duties and fees, collection of duty refunds and a host of other functions.
   Now Customs is exploring how to reduce the frequency or number of data filing requirements on importers to get cargo released, align the way it receives entry and entry summary information with how businesses transmit data in the course of normal operations and possibly minimize fines, officials say. In theory, streamlined regulations could mean less work for intermediaries.
   Bersin challenged the brokers to look past their immediate self-interest and embrace opportunities that could arise from a new relationship with CBP.
   ‘Traditional broker activity,’ he said, ‘involves actually knowing how to get around absolutely absurd barriers. I go to a broker because the system is so incomprehensible that I need somebody to negotiate a way through a series of bureaucratic mazes.’
   The commissioner also asked brokers to help shape a new policy by supplying ideas on how to fix a cumbersome process for declaring goods and documenting compliance with trade, security and safety regulations. Modernizing customs clearance will not be possible without their help, he stressed.
   ‘I want you to be partners because it’s the right thing to do for America,’ Bersin said. ‘And I believe that we can actually create a relationship that will permit brokers to do things you’ve never done before.’
   Rather than cling to outdated practices, brokers should aspire to elevate their professional status, which would increase their value to customers, make them more competitive and bring in more business, he said.
   ‘You will not find anyone who doesn’t understand that it is professionals like you who are the catalysts for making this whole system work. We cannot do this without the private sector. And the private sector needs you to actually bridge the gap. But let’s not do it on the basis of negotiating incomprehensible systems, labyrinths, but rather because we bring a service capacity and expertise that you will not find anywhere else. If we can do that together, we’ll see a more prosperous broker community and a more prosperous America,’ he told the NCBFAA audience.
   Bersin realizes the need to build consensus for his vision, which means that if simplification is achieved it will be done through close cooperation rather than ramming it down industry’s throat, as one former commissioner famously tried with technology systems by telling brokers to ‘automate or perish.’ But he has clearly identified the need for the agency and the trade community to modernize if they are to succeed at protecting the nation and enabling companies to reach their potential.
   Bersin first broached the idea of improving CBP’s relationship with brokers at the Western Cargo Conference last fall. And the NCBFAA itself is behind several of the proposals. In fact, association officials have held talks with the Office of Trade since 2007 on how to improve broker compliance and the agency’s enforcement approach.
   But earlier this year CBP terminated a program designed to do just that. CBP accepted four companies to participate in the Broker Self-Assessment pilot, allowing them to self-monitor and report compliance with trade regulations. CBP reviewed whether the brokers were able to update and improve internal controls such as maintaining an audit trail linking financial records to entries filed with CBP. The agency said it discontinued the trial because it couldn’t determine a connection between a broker’s internal controls for processing documents and reduced risk for trade law violations.
   In a streamlined compliance regime, brokers would become facilitators of shipments from trusted parties by certifying their supply chain security procedures, arranging for electronic processing of account payments and handling any problems that arise in a post-release world, Bersin said, without going into detail about how the intermediaries would actually carry out those functions.
   One possibility, he suggested, would be for brokers to consolidate less-than-containerloads and certify them as trusted shipments.
   The former U.S. attorney and San Diego school superintendent said CBP needs to attract small-and-medium-size business to C-TPAT by making it more affordable to participate and providing different benefits. Shipments that are co-mingled for multiple importers are not eligible for C-TPAT benefits, preventing many smaller companies from participating because they may not have sufficient volume to book a full container. CBP’s logic is that it can’t trust as secure a box that is filled with C-TPAT and non-C-TPAT shipments.
   ‘It seems you’re in a position to create networks in which you will actually be the certifier and the trusted shipper. It’s a new role and it involves new responsibilities and new accountabilities. But it also entitles you then to a new fee. There’s nothing wrong with that.
   ‘Fee for service, right?’ he said.
   In fact, brokers never touch the freight unless they’re acting in the additional capacity of a freight forwarder or non-asset-based carrier, and even then many shipments are already under seal when delivered.
   ‘Will the fact that the consolidator at origin is a member of the broker’s C-TPAT supply chain alone make Customs sufficiently comfortable that any certification is possible? I think frankly the answer is no, with some notable exceptions,’ said Susan Kohn Ross, a Los Angeles-based trade attorney at Mitchell Silberberg & Knupp, in an interview.
   ‘I’m not sure that concept has been sufficiently scrubbed that it’s doable.’
   Perhaps, she added, such a certification regime could be executed in the air cargo environment when melded with the TSA’s Certified Cargo Screening Program. CBP’s sister agency implemented the voluntary program during the past two years to help industry meet the congressional mandate to screen 100 percent of cargo on passenger planes. Fearful that airlines would be overwhelmed by cargo to X-ray, TSA officials allow shippers with approved security measures for facilities, personnel and onward truck delivery to self-inspect cargo during packing. Forwarders can also conduct physical checks or use X-ray or explosive trace detection devices on their clients’ cargo, which is labeled and doesn’t need to be screened at the airport.
   ‘There’s just no way somebody can validate what’s in the shipment unless they watch it being packed, and that’s not going to happen ‘ At least with those in CCSP somebody has looked at their goods and has some sense they are kosher,’ Kohn Ross said.
   ‘Conceptually, I think everybody likes the idea that (trade facilitation) is high on Customs’ radar and that they are partnering with the brokers in a way that they’re partnering with other trade associations. That’s all positive.
   ‘I think it would have made more sense to present it as a concept. He (Bersin) almost made it sound as something that is more concrete than perhaps it is,’ she said.

   And left to be resolved is the issue of liability in the event that a shipment certified by a broker actually contains contraband or weapons that were missed at the point of stuffing, Kohn Ross noted.
   As trusted certifiers, brokers could also be expected to notify CBP of documentation or operational deficiencies, but such an act would strain customer relationships that are based on confidentiality, she added.
   Brokers are required to maintain the confidentiality of documents they handle on behalf of clients, but there is no broker-client privilege in the strict sense of the word that protects them from having to disclose violations as deemed necessary by the government, according to industry experts.
   Bersin made clear that he understands the difference between a broker and a forwarder, and how the industry has transformed in recent decades. Pressed by a reporter on how a domestic broker could vouch for cargo stuffed overseas, he said the answer lay in allowing the broker to take on new roles.
   ‘That would mean changing the function of brokers to some extent to put them in a position where they could validate supply chains’ under the right mechanism, he said.
   ‘Inventing that, designing that is something we’d cooperate in at CBP. But it’s first and foremost an industry decision,’ he added.
   ‘Brokers are not tapping out forms exclusively on Royal typewriters anymore. They are freight forwarders, they are freight consolidators. They are logistical managers. The occupation has evolved enormously. The number of functions being played by brokers has multiplied.
   ‘This simply says keep going, and then we, on the Customs side, have to create a regulatory framework that accommodates that.’

Cargo Release. CBP is also contemplating how to expedite release for trusted shippers if there’s a way to view a minimal amount of data elements before normal filing deadlines, officials said.
   CBP reviews many shipments and resolves questions after cargo has been released to the consignee, but Bersin expressed interest in moving back more documentation requirements until the time of entry summary for shippers that have high compliance rates.
   Entry summary can be filed, along with estimated duties, up to 10 days working days after entry.
   The simplification projects are aimed primarily at certified importers as a way to provide more benefits for companies that invest in tightening their internal security and compliance systems, added Brenda Brockman Smith, executive director of trade policy and programs.
   By segregating cargo traffic based on risk factors, CBP eventually hopes to permit cargo from authorized traders to bypass ports of entry, Winkowski said at a U.S.-Mexico Chamber of Commerce event on Capitol Hill in mid March.
   Bersin expressed similar sentiments at an April 12 federal advisory panel meeting, when he suggested the ‘green lane’ and simplification could be the reward for certified shippers.
   Two days later, in a roundtable with a small group of reporters during CBP’s annual Trade Symposium, he took the concept a step further, saying, ‘We’re moving toward the point where we should be able to do pre-arrival releases for that cargo that is genuinely trusted.’
   The commissioner’s vision bears similarity to an idea favored by some industry groups that would allow vetted companies with strong internal controls to obtain consolidated releases at the port of final departure from all agencies with jurisdiction over imports. The release would resemble a pre-admission privilege that could be overturned upon arrival if any agency suspects a problem with a shipment.
   The discussion of trade facilitation represents the first tangible steps towards fulfilling the ‘grand bargain’ Bersin has touted the past year, under which companies that share extra proprietary information with the government are treated as trusted shippers and granted expedited clearance at ports of entry.
   At CBP’s annual Trade Symposium the next day, Bersin laid out an ambitious goal of expanding C-TPAT from some 10,000 members to 40,000 members within five years. In a moment of reflection, he later allowed that he’d be satisfied if the effort could be achieved in seven years.
   Expedited release depends on getting information from shippers even earlier, expedited responses from CBP to resolve any questions that arise about a shipment, and completion of cargo release functionality in ACE, he said at the press briefing.
   Bersin described a future system that mirrors what CBP is doing in a limited pilot with air express carriers to obtain pieces of manifest information that are generally known much earlier in the shipping process, such as the cargo description and shipper/consignee addresses, well before the entire manifest is required to be delivered, so the data can be run through an automated targeting system for pre-departure risk assessment.
   Under existing rules, carriers must electronically transmit the advance manifest four hours prior to arrival, or at takeoff from closer locations. Customs is now receiving key data elements 24 to 48 hours ahead of departure ‘ and sometimes up to 70 hours in advance ‘ according to agency officials. The rest of the information in the manifest that pertains to the flight itself is not being sought any sooner.
   And CBP has agreed not to penalize the air carriers if the pre-advance information they provide in good faith has a technical mistake or needs to be corrected.
   The pilot was rushed into action over the winter in response to the failed Yemen package bomb attack on UPS and FedEx planes in late October.
   The same practice could be used in the maritime sector, according to Bersin. That means shippers and carriers could incrementally transmit pieces of the Importer Security Filing (required 24 hours prior to vessel loading) and the ocean manifest (required 24 hours prior to departure) as they become available rather than waiting to collect all the data and submit it as a package.
   He acknowledged to the press that he still had to check whether there are legal or technical impediments to gathering ISF data sooner than normal.
   The second piece to pre-arrival release is for CBP to be more responsive and quickly clear up any discrepancies or questions that arise from the automated targeting process, he said.
   ‘In the world we live in today, there should be a way in which we can raise issues and have them resolved electronically in a much compressed, telescoped time,’ he said during a Trade Symposium break.
   ACE, he emphasized on several occasions, is the lynchpin that can eventually handle those information flows and make expedited release possible.
   There is no contradiction between the notion of supplying extra data to obtain the green lane at ports of entry and a simplification initiative that would require less commercial data for approved shippers, Bersin explained to American Shipper.
   Shippers that agree to provide more information early on would do so before release for security and trade enforcement purposes, while ‘simplification actually comes at the back end of the process in terms of how are we going to bill for duties, how we are going to process audits,’ he said.
   Brokers would become the trusted, fiduciary for transmitting that pre-release information for smaller companies, Bersin suggested at the NCBFAA event. The broker, he said, would create and manage the agreements between companies and the government for exchanging data.
   Larger importers would be able to handle the bargains and data exchanges on their own.
   And that data should flow both ways, he suggested.
   ‘I think we want to share it with other government agencies,’ Bersin said, ‘and we want to share it with the private sector if we have safeguards that make sense.’
   One example of private data brokers could help CBP share with companies involves intellectual property rights violations, he said.
   CBP would like to change the rules so that if officers suspect a counterfeit or unlicensed product entering the country they can share more of the shipment information, or a sample, with the brand owner that is being infringed upon to determine whether the product is legitimate or not.

   ‘There are hundreds of examples in which the sharing of information needs to be done within a negotiated framework. And I believe that your profession is the one to do that. Every bit as much as a lawyer gives legal advice and shares communications, there needs to be a broker privilege,’ Bersin said.
   C-TPAT members have long-complained that sharing information is a one-way arrangement, and Kohn Ross speculated that Bersin might be willing for CBP to be more forthcoming with tips that would help them take precautions at the first sign of trouble. Those types of companies want to know if there is a problem with a particular overseas manufacturer, carrier, terminal operator or other bad actor and there should be a way for CBP to sanitize the information and share it with trusted partners, she said.
   A SAFE Port Act reauthorization bill introduced in the Senate on April 14 would require CBP to set up a program for sharing classified and unclassified information on supply chain vulnerabilities and threats with Tier 3 members of C-TPAT and other parties with appropriate clearances. (click here to continue)

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