U.S. agencies team up on import safety
But streamlined inspections don't cut enough red tape, cargo pre-clearance advocates say.
By Eric Kulisch
Ten federal agencies with responsibility for controlling the entry of products into the United States committed Oct. 20 to coordinate efforts to protect the public from unsafe imports and follow a risk-based methodology for scrutinizing shipments.
Four of the agencies also agreed to contribute expertise to the Commercial Targeting and Analysis Center (CTAC) for Import Safety, a fusion center for sharing shipping data and jointly targeting contaminated or adulterated products from overseas for possible inspection.
The announcements coincided with a conference convened by Customs and Border Protection Commissioner Alan Bersin near Dulles International Airport to discuss import safety with top officials from the Animal and Plant Health Inspection Service (APHIS), Immigration and Customs Enforcement and other agencies. Participation was limited to agency heads or their top deputies in an effort to focus attention on the issue and exchange ideas among those with decision-making power.
The meeting was the most extensive gathering of agencies on import safety since President Bush established an interagency working group on import safety in 2007.
'By working together we can obviously pool information in important ways and target our activities more effectively,' said Food and Drug Administration Commissioner Margaret Hamburg in a briefing with reporters. The goal is to 'leverage each other's authorities, expertise and responsibilities' and 'break down stove pipes.'
In a memorandum of understanding, the officials promised to:
' Share information and develop common systems for doing so.
' Enhance efforts to help the private sector comply with import safety requirements in an expedited and confidential manner.
' Use consistent enforcement measures to deter unsafe imports.
' Continue the dialogue from the Oct. 21 meeting by sending senior representatives to future interagency forums on import safety.
The most significant principle guiding the collaboration involves the use of risk-management strategies to separate lawful and dangerous cargoes, enabling limited inspection resources to be focused on the latter, and expediting clearance of the former, according to officials.
Working smarter is necessary, they say, because the continued growth in import volumes has outstripped the government's ability to check every shipment. About 40 percent of fresh fruit and produce, for example, and 75 percent of seafood sold in the United States comes from overseas. Pinpointing inspections helps the economy by letting businesses operate more productively.
'We can really work with companies to better understand their products, their products' vulnerabilities and better understand the supply chains involved with those products and then really target our activities to where the greatest vulnerabilities are,' Hamburg said.
'So the more we can identify who are the well-established producers, shippers with good track records, the more we can identify the products that represent the greatest risk in terms of health concerns and target our efforts, and the more we can help speed through those products that represent the lowest risk,' which is especially important for foods stuffs with a short shelf life, she said.
ITDS. One way to make life easier for shippers is to quickly get supporting documentation about a detained shipment to border officers so they can resolve any concerns. That is on the verge of possibility, Bersin said, through a new process that would allow importers and customs brokers for the first time to scan documents and electronically forward them to CBP.
When CBP officers request a document, such as a shipment questionnaire or country-of-origin certification, the entry filer can create a document image, tag it with relevant data elements and transmit it to the agency through the Automated Broker Interface or two other existing message conduits, Cynthia Allen, executive director of trade modernization and ACE Coordination Office, explained afterwards.
(ACE, or Automated Commercial Environment, is Customs' automated import and export processing system that is still under development.)
CBP inspectors and their counterparts at partner agencies will be able to view the data through their respective ACE portals.
Importers similarly will be able to submit third-party laboratory results of tests for lead in children's toys as well as certifications that products conform to U.S. laws, as required by the Consumer Product Safety Commission. 'This makes it easier to spot violative products,' Chairman Inez Tenenbaum said.
Allen said CBP just began testing the document imaging process with the Environmental Protection Agency and a handful of trade partners, but expects the FDA, Food Safety and Inspection Service and National Highway Traffic Safety Administration (NHTSA) to be able to receive images too during the limited pilot phase.
The new technical capability represents a big step for the troubled ACE program in finally delivering something that improves government oversight and benefits industry. Document imaging represents one of the top priorities identified last year by agencies participating in the International Trade Data System (ITDS), a component of ACE intended to streamline information exchange between agencies and companies involved in foreign trade.
Import safety took center stage in 2007 after a series of safety problems and recalls associated with products from China and other nations. Government agencies quickly came together at the direction of then-President Bush to come up with an action plan for import safety. Congress tightened regulations in the Consumer Product Safety Improvement Act of 2008. Import safety enforcement has since received more attention at agencies such as the CPSC, but for the most part they have gone their separate ways dealing with their areas of jurisdiction.
|'Just like the government doesn't trust these companies, I don't think these agencies have a great deal of trust for each other. But I give kudos ' that they were willing to at least sit down and address the issue.'|
executive vice president,
Sandler & Travis Trade Advisory Services
The trade perspective on how well agencies work together at the border was presented at the interagency meeting by Sam Banks, executive vice president at Sandler & Travis Trade Advisory Services; Geoff Powell, director of operations at C.H. Powell Co. and treasurer of the National Customs Brokers and Forwarders Association of America (NCBFA); Marianne Rowden, president of the American Association of Exporters and Importers (AAEI); Laurie Bryant, executive director of the Meat Importers Council of America; and Lisa Schimmelpfenning, vice president of direct imports administration and logistics for Wal-Mart Stores.
The conference was closed to the press.
Government offices involved in import safety deserve credit for trying to make progress despite their natural inclination to meet congressional mandates on their own, Banks said.
The agencies 'are institutionally incapable of cooperating. They have all got their own different mission, have their own business practices,' Banks told American Shipper. 'I think it's very difficult. Just like the government doesn't trust these companies, I don't think these agencies have a great deal of trust in each other. But I give kudos to Bersin, the FDA, the Department of Agriculture that they were willing to at least sit down and address the issue.'
CBP stood up the import safety CTAC last October to centralize federal monitoring and analysis of imports for potential safety violations. The center relies on the agency's automated targeting system, supplemented by leads from other sources, to flag suspicious shipments. The CTAC differs from the national targeting centers for cargo and passenger security in that it conducts a lot of monitoring after goods arrive and the customs entry/entry summary have been filed, while also analyzing electronic ocean carrier manifests filed in advance by carriers for security purposes.
The CPSC was the first outside agency to station personnel at the facility and help identify dangerous or defective goods for inspection. Co-locating agencies at the CTAC gives CBP access to more information on potential import safety risks and gives outside agencies increased access to CBP's advance manifest data so that quicker determinations can be made on cargo clearance. Advance shipment data (10+2) collected from importers currently may not be used for trade enforcement purposes.
Sharing shipment data with CPSC staff in real time has led to a high hit rate for inspections, with 55 percent of targeted shipments proving to be in violation of product safety regulations, Tenenbaum said. Collaboration with CBP is critical, she said, because CPSC is a small agency with limited resources.
Bersin said in a follow-up interview that the FDA, APHIS, Immigration and Customs Enforcement, and the Food Safety Inspection Service now plan to station personnel at the CTAC.
CBP has worked closely with CPSC officials on recalls of unsafe products in recent years. In November 2007, they jointly devised a plan to seize and recover shipments of Chinese-made Aquadots that were recalled after it was discovered that some of the imported toys contained a toxic chemical that resulted in the illness and hospitalization of some children who ingested the toys.
CPSC also teamed up in late 2008 on a two-year 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 in place to voluntarily assess their own compliance with trade laws and regulations in exchange for avoiding cumbersome audits and inspections.
J.C. Penney and Hasbro are the only two companies that have been accepted into the ISA-Product Safety, which is designed to promote compliance with all product safety requirements. Among the corporate best practices sought by the agencies are management's commitment to product safety, training, internal safety reviews, risk assessment procedures and good recordkeeping. Beyond ISA's traditional benefits, import safety participants are eligible for reduced product safety tests, front-of-the-line treatment when a product is held up for a lab inspection, destruction instead of redelivery of recalled product, and other administrative benefits.
CBP officials say an undisclosed third company is in the final stages of the program's application process.
Compliance Writ Large. Banks, a former acting commissioner of U.S. Customs who now sits as an industry member on the Commercial Operations Advisory Committee to the Department of Homeland Security, said he told the assembled officials that the NHTSA is the agency that does the best job of ensuring compliance with product safety regulations.
It checks that automobile manufacturers have quality control measures for making sure all components that go into a car meet its safety requirements and then certifies the companies and each model, instead of trying to inspect each shipment of cars. That approach allows all imports to be released immediately upon arrival.
'There's no bureaucracy. They're the only ones that are really taking an account approach to import safety,' Banks said. 'And even better than that, when somebody violates the terms of their agreement, NHTSA lowers the boom.'
That's what happened with Toyota the past year when it had problems with unintended acceleration and brakes. After getting hit with a record $16.4 million fine for trying to sweep the problem under the rug, Toyota has been quick to disclose other product defects, initiate recalls and change its internal practices in recent months. NHTSA has also increased pressure across the industry to initiate recalls right away. On Oct. 21 Toyota's U.S. division announced it is recalling 740,000 vehicles for faulty brake master cylinders related to non-Toyota branded brake fluid. Honda's U.S. division three days later announced a recall of almost a half-million cars for similar reasons.
In an interview with the Detroit News, NHTSA chief David Strickland said, 'Toyota is taking safety much more seriously than they did before I took office' in January and pointed to a 'change in how (Toyota) approaches defects.'
One of the reasons Toyota officials are going to such extremes is that 'they don't want to lose NHTSA's pre-approval process. They don't want to lose that relationship and that trust that they have with NHTSA,' Banks said.
'If you want an agency that's making a difference in promoting safety and promoting compliance, it's NHTSA,' he added. 'And you've got to ask yourself why can't FDA do that with pharmaceutical companies, why can't Customs do it for trade compliance?'
Joint data mining at the CTAC and cooperation on the ITDS ' the single government window for trade-related transmissions ' are good steps, but don't constitute a holistic overhaul that synchronizes the business processes of each agency, Banks emphasized.
'That's what they need to do. Align how they operate together and act as a single government.'
Sophisticated companies, he said, already are centralizing their international purchasing and supply chain data to satisfy all business requirements for shipment security, product quality, finances, customs compliance and taxes from the same set of information.
Measuring companies based on their overall compliance posture would require a change in the existing inspection regime.
Several industry groups, including the National Association of Manufacturers, say they're willing to have their internal supply chain controls vetted to prove that they comply with safety, security and trade requirements and can catch mistakes when they do occur. But they want to get a consolidated release at port of final departure from all the agencies with jurisdiction over imports. The release would resemble a pre-admission privilege that could be overturned upon arrival if any agency suspects something amiss with a shipment.
A Customs reauthorization bill proposed by Senate Finance Committee leaders in August 2009 calls on CBP to create a Customs Facilitation Partnership Program to provide benefits to certified importers that have a strong history of complying with U.S. customs and trade laws. CBP would have to periodically check that participants are upholding their end of the bargain.
'The current process of having to operate on a shipment-by-shipment basis is ludicrous. Many shippers import the same components from the same suppliers on the same trade lanes and then they are treated like every other importer' regardless of whether they are highly compliant, a first-time importer, or an unknown entity, Banks said.
By establishing a working relationship and evaluating risk, an agency can approach a company in a partnership program to tighten certain production, transportation or other procedures so a potential problem can be corrected at origin before affected shipments get dispersed around the world, according to reformers.
The difficulty in creating a common government approach to product safety is that each agency defines acceptable risk differently, which makes life confusing and expensive for companies trying to manage risk in the supply chain, AAEI's Rowden said.
She endorsed the idea that companies with low-risk profiles should be allowed to self-police their activities, with periodic verification by the regulatory bodies. Medium and high-risk companies would then be required to furnish more data about each transaction.
Bersin, who took the helm of CBP in April, has articulated a 'grand bargain' that conceptually embraces the concept of trusted shippers benefiting from expedited trade flows in exchange for sharing more detailed information about their trade partners and shipments. He has consistently stated that CBP needs to do much more to differentiate between low-risk and high-risk traffic that deserves more scrutiny, although it's not clear that his idea goes as far as pre-clearance.
'Each agency has different missions, but basically compliance is compliance. If you set up a standardized process that has all of the compliance requirements for each of the agencies, industry will meet them. And then the agencies can go in and certify that their processes are adequate. But if companies make that investment they expect to be processed more expeditiously than people that aren't willing to meet those standards,' Banks said.
'The idea of having to make all these separate declarations is insane. Instead, deal with the company in terms of how they set up their internal controls and how they achieve compliance,' he added.
Banks said the process should be similar to the way the credit card industry and other bill processors treat customers differently depending on whether they are financially stable, new to the market or have bad credit.
But at last year's annual Trade Symposium, then-acting Commissioner Jayson Ahern, pointing out the challenges of account management, said private firms aren't always well-integrated themselves, even though they expect government to function as a unified enterprise.
The lack of true incentives is the primary reason only 206 companies have signed up for the Importer Self-Assessment program, according to trade industry professionals. Even the voluntary Customs-Trade Partnership Against Terrorism, which recently surpassed 10,000 members and is touted as the most successful public-private trade program, is undersubscribed compared to the total universe of 166,000 frequent importers. C-TPAT offers some reduction in security inspections, front-of-the-line treatment when inspections are required, and occasional administrative favors.
Those carrots seldom make a material difference in a company's daily operation, industry officials regularly complain. Increased predictability about the flow of their goods into the country is the key benefit they want for participating in partnership programs.
Brenda Brockman Smith, director of trade policy and programs at CBP, at a public meeting last May expressed disappointment that only two companies had applied for ISA-Product Safety out of 62 potential candidates in ISA that imported more than $1 million per year of products regulated by the CPSC.
The recession and uncertainty associated with new product safety legislation contributed to the low adoption rate, she said.
An informal evaluation determined that the economic downturn reduced the number of resources that compliance departments had available to implement a new program. And the Consumer Product Safety Improvement Act, passed shortly after the trial program was announced, put pressure on compliance departments to meet an extensive and complex set of mandates, many of which did not go into effect for several years.
'So I think companies were hesitant to start applying to a program where they didn't know what they would be responsible for showing compliance with,' Brockman Smith said.
But she acknowledged that CBP also may have miscalculated the extent to which companies would find value in the program compared to the necessary upfront investment.
Companies that must compete for business are always looking for innovative ways to increase their customer base, whereas CBP doesn't have competitors and the same sense of urgency to enlist more participants, Banks said.
'They've really got to attack the product safety issues at the place of manufacture, otherwise it's too late. Building all these checkpoints in the supply chain will get some of it, but not everything,' Rowden said.
FDA's Hamburg indicated her agency is headed in that direction. It has set up offices in China, Europe, India, Latin America and the Middle East to help foreign counterparts develop their own regulatory systems and harmonize them with U.S. safety standards, preventive controls for overseas producers and oversight mechanisms. The offices also permit the agency to gather data about regulated products and conduct more inspections.
'We're pushing out our presence well beyond the border because our goal is to prevent problems from happening in the first place rather than identify them at the border and then try to scramble to address them,' she said.
Two reports released Oct. 27 by the Government Accountability Office detail how the increased volume of food and drug products imported by the United States has stretched thin the FDA's resources.
The GAO found that while FDA has made some progress in closing its inspection gap, it still conducts relatively few foreign inspections. For example, FDA in fiscal year 2009 inspected about 11 percent (424) of all foreign drug firms exporting to the United States compared to about 40 percent of domestic firms. At that rate, it will take FDA about nine years to inspect each firm one time versus once every 2.5 years for a domestic manufacturer.
The congressional auditor said the FDA has yet to fully adopt its recommendation to create a risk-based inspection system to better prioritize its scarce inspection resources.
The FDA's draft strategic plan for 2011-2015, published on Sept. 29, recognizes that the border must be viewed as a final checkpoint for preventive controls, rather than the primary line of defense against unsafe imports.
The agency predicts that more than 20 million discrete shipments of food, devices, drugs and cosmetics will arrive at U.S. ports of entry in fiscal year 2010, more than three times the number of imports 10 years ago. There are more than 130,000 importers of record and about 300 ports of entry in United States, and regulated products come from more than 300,000 facilities in more than 150 countries.
'FDA must require more ' and better ' information about product supply chains and monitor this information throughout the product life cycle, and regulatory standards must foster corporate responsibility to identify, protect and control risks,' the draft strategy said.
'Such an effort will entail more and better coordination among foreign, federal, and state counterparts as well as novel and updated enforcement tools. We must create a greater global safety net that consists of a global alliance of regulators, new authorities to allow for the creation of proactive tools for food safety, adequate funding to allow for more inspections, and updated systems (including IT support) to assist with the increased workload.'