U.S. Customs and Border Protection in June said it plans to test a holistic trusted trader program similar to the World Customs Organization’s Authorized Economic Operator model that combines security and trade compliance certification.
The pilot program represents another step toward integrated government cargo clearance at the border that relies on a common approach toward risk management instead of various agencies using separate criteria for enforcing safety and other standards. CBP said the 18-month pilot program will be run in collaboration with the Consumer Product Safety Commission and Food and Drug Administration. A key objective of pre-checking firms is to focus government resources on companies that don’t have proven track records of compliance and self-policing capability, and to reduce costs for the private sector by streamlining application and validation processes.
Customs currently operates two voluntary industry partnership programs that relieve companies from regular levels of scrutiny if they demonstrate strong internal controls for international shipping. The Customs-Trade Partnership Against Terrorism is a supply chain security program that places responsibility on shippers and their suppliers to keep contraband and terrorist weapons out of import containers so CBP doesn’t have to check cargo about which it has a high level of confidence and can focus inspections on cargo from unknown or suspicious sources. Shippers that implement approved security plans for their international supply chains are certified, and their cargo, on average, is five- to seven-times less likely to receive a non-intrusive imaging exam, depending on the tier of security they have achieved. Under the Importer Self-Assessment, importers that prove they have strong internal controls are allowed to monitor their compliance with trade regulations in return for fewer Customs audits. Companies must participate in C-TPAT to be eligible for ISA.
CBP officials began talking two years ago about the possibility of combining the two programs.
Both C-TPAT and ISA are under-subscribed considering that there are tens of thousands of importers in the United States. C-TPAT has more than 10,700 members and about 300 companies participate in ISA. Many shippers aren’t convinced the cost of investing in necessary management processes and applying to the programs is worth it because benefits tend to be less than promised.
Trade professionals say ISA’s requirements are too burdensome for most companies given limited benefits. One reason the self-audit program never got off the ground is because of provisions that some find distasteful, such as having to immediately report a compliance violation to Customs rather than first trying to correct the problem.
Similar complaints have been lodged against C-TPAT. Some importers also say advertised perks, like moving to the front of the line when cargo is selected for an x-ray exam, fail to materialize. Subscription levels and surveys indicate greater satisfaction with the program than ISA, especially in reducing delays and indirectly improving operations by forcing companies to gain better control of their supply chains.
Expanding the trusted trader concept to other government agencies could provide the necessary incentive for more importers to sign up because other government agencies frequently are the roadblock for easy cargo clearance at ports of entry. Industry groups have been advocating for multiple agencies to follow the same risk-management principles that provide expedited clearance and reduced paperwork requirements to low-risk shippers.
CPSC and FDA do not have trusted trader programs of their own. However, in 2008 CBP and CPSC embarked on a pilot program called ISA-Product Safety aimed at providing privileges to companies that demonstrate a high level of product safety compliance and the ability to prevent the import of unsafe products. There are only five companies participating in the program.
A joint CBP-CPSC working group is evaluating the results of the pilot program and is expected to make recommendations on whether to expand or terminate the program, according to a notice in the Federal Register.
The AEO program implemented in the European Union offers simplified customs procedures to companies that have a strong track record of customs compliance, financial stability and record keeping. Another component offers trade facilitation benefits to companies with adequate security and safety controls for shipments. Full certification is available for companies that are willing and able to meet all the standards. Having similar U.S. and EU industry partnership programs could prove helpful to international firms because the programs eventually could be aligned to streamline redundant requirements.
CBP said it is accepting applications from companies interested in participating in the demonstration program. The agency said if an overarching trusted trader program is established shippers will still have the option of only joining C-TPAT or ISA-Product Safety. CBP said if it decides to implement the trusted trader program after the test period, it will transition all existing ISA partners to the program and discontinue ISA. Companies will have the option to opt out of the broader program.
In addition to normal C-TPAT and ISA privileges, pilot program participants will benefit from an exemption from random container security exams, reduced FDA risk scores in its targeting system for examinations and potential offsets, or credits, against any compliance penalties received. Importers will also be able to take possession of merchandise listed in a single entry but shipped in multiple containers whenever Customs has issued a hold for an exam, except for the goods specifically subject to the exam.
CPSC is also offering to reduce certain requirements for importers that complete the product safety portion of the trusted trader application.
The Stimson Center, a Washington-based think tank on security issues, in its May report on public-private cooperation for mitigating transnational threats called for CBP to also develop a trusted trader regime for logistics service providers because they play such a critical role in global trade.
This article was published in the August 2014 issue of American Shipper.