CARGO SECURITY UPDATE
(Published in the Journal of Commerce on February 27, 2002) 

Every container is a possible bomb, every vessel, plane, railcar and truck a possible delivery device and every port a possible target! That's the threat which continues to circulate on Capital Hill. Homeland Security has been tasked by the White House to take the lead in addressing this national security issue. However, as with any effort as massive as this undertaking, those most affected companies in the international supply chain will have to wait for some time for anything concrete to be finalized. In the meantime, no one wants to sit idly by and wait. International traders want to shore up their supply chains now! 

Moving to the forefront, the United States Customs Service quickly adopted the recommendations of the Commercial Operations Advisory Committee (COAC), a group of 20 private sector individuals who advise the Treasury Department about Customs issues. Appointees serve a two-year term. 

In November 2001, Treasury Under Secretary of Enforcement James Grulle approached COAC asking for quick but solid advice about best practices for companies wanting to protect their cargo and how that process could be improved in light of the events of Sept. 11. To respond, COAC created a special subcommittee which then reached out further to the private sector. Anyone who wanted to participate was given a seat at the table. About 50 individuals representing all sectors of the trade community responded. Although the focus was on imports, exports were discussed in depth. 

The end product of the COAC's efforts was produced in a remarkably short 40 business days and consisted of recommendations in a wide variety of disciplines. [JoC Online readers can obtain a copy of the report from Susan Kohn Ross by emailing skross@skralaw.com.] COAC's subcommittee divided itself into working groups: Production and Manufacturing; Transportation and Distribution, and Import/Data Exchange. As deliberations proceeded, it was also decided to add a Technology group which continues its work even today. While each group met independently, the recommendations were remarkably similar, quoting from the Executive Summary: 

1. Cooperative Effort. The security initiatives must be a vehicle that is sensitive to the competitiveness of the United States. We are pleased that both Treasury and Customs, from the outset, have recognized a dialogue with the trade was critical to devising a system that would attack the security issue while preserving the needs of modern-day international trade imperatives. This dialogue should continue. 

2. Flexible Guidelines. The security initiatives should be flexible to fit differing industries and their existing security systems. The government should not devise a new protocol for all companies to meet. There is no one system that can work for all. More significantly, many companies have in place effective (and expensive) security, anti-theft and anti-smuggling procedures capable of meeting the new security challenges. In many instances, companies may only need more education about the indicia of terrorist concerns, and a hot communication link to the government. The government should put forth guidelines, not rules, requirements or recommendations.

3. Strategic Approach. The security initiatives should adopt a strategic approach modeled after the anti-smuggling initiatives of Customs with importers (BASC), carriers (Carrier and Super Carrier Programs) and brokers (Frontline). The security effort should not be added to existing audit programs, such as Compliance Assessments, Focused Assessments or Importer Compliance Measurement. These audit programs best handle post-entry commercial compliance rather than preventing an immediate terrorist threat, and are considered longer term review and report programs rather than the immediate operational actions needed to combat terrorist threats. 

4. Automated Systems. Any improved security measures should maximize the use of advanced, automated information systems. It is impossible to physically inspect every shipment entering the United States, as it is impossible to examine every piece of paper pertaining to these shipments. Customs' automated systems must meet the new security challenge and be capable of advanced, automated functionality. Accordingly, Treasury should seek immediate and additional funding of ACE [the Automated Commercial Environment, the long awaited new Customs entry system] to support these security measures. 

5. Role of Technology. The government must take advantage of advances in technology to check cargo at ports of exportation as well as importation, and should recognize when companies and ports using acceptable technology have verified cargo. While enhanced automated information systems and communications with the trade are important, actual testing and checking of cargo, containers and vehicles are more definitive measures. Customs will never have the personnel or resources sufficient to inspect everything, and the things to be checked for are often only identifiable through technology. Therefore, security efforts should maximize the benefits of technology. 

6. Outreach to All Companies. The security initiative should also be sensitive to cost considerations. Companies should be able to capitalize on existing systems rather than invest in new solutions which may overlap or duplicate their existing investments in security. Moreover, most of the 400,000plus importers bringing goods into the United States are small companies without the ability to make large investments in security systems. They should be able to work cooperatively with the government and private sector without incurring substantial costs they simply cannot afford. 

7. Other Federal Agencies. The security initiative must involve all other federal agencies concerned with the movement of goods, conveyances and people. All federal government agencies are looking to meet the new security challenge, and many of those agencies are focused on international trade and transportation. [COAC has] formally met with Treasury and Customs personnel. However, in carrying forward this program, Customs and Treasury officials must coordinate and harmonize their efforts with all the other agencies to avoid creation of a new regime that deserves these security measures by damaging our competitiveness and disrupting and confusing the U.S. anti-terrorist efforts. 

8. International Cooperation. Treasury and other federal agencies have recognized the benefits of international intelligence cooperation resulting from last September's events. The international alliances formed to oppose terrorism should now provide the basis for unprecedented international integration of information exchange, data transmission, on the ground inspection resources, and technology use. We encourage Treasury and Customs to work closely with foreign customs and law enforcement counterparts, since those agencies may already be formulating similar requirements for U.S. exporters or their foreign subsidiaries. Early harmonization of international requirements and their oversight should be intrinsic to the security initiative. 

The COAC report goes on to identify best practices which already exist and also makes specific recommendations for each element in the supply chain as to ways in which security can be improved. Some of those efforts obviously will require further action by the U.S., such as coordination among the agencies, or with our trading partners to arrange examination of cargo at loading rather than destination. However, there are things companies can do right now which heighten the security of their goods. Some were listed in January's article. A few additional examples: 

Is the area where goods are stored under controlled access or can anyone get in? 
Can all staff access the warehouse or only selected employees? 
Are visitors to the facility escorted? 
Is inventory control accomplished electronically but the data input performed by a person different from the person physically tallying goods? 

The COAC's importer and carrier-related recommendations were quite similar in format and content to what Customs has now added to its Web site. In response to the need for heightened cargo security, Customs has formed the Customs Trade Partnership Against Terrorism (CTPAT). These newly- posted materials include recommendations divided by the role of the party importer, broker, manufacturer, warehouse, and type of carrier, whether air, sea and land. In each case, the recommendations are divided into the same basic categories: procedural security, physical security, access controls, personnel security, education and training awareness, manifest procedures and conveyance security. 

The thrust of these recommendations is to assist companies to find ways in which to make sure the cargo under their control is made as safe as possible from being compromised through tampering, or other nefarious efforts. Importers are being asked to "develop" and "implement" a "verifiable" and "documented program to enhance security procedures throughout [the] supply chain." Further, recognizing that importers often do not control all the elements in their supply chain, Customs is asking importers to communicate the CTPAT recommendations and procedures to suppliers and others in the supply chain. Where "practical," Customs also wants importers to condition their ongoing relationships with their supply chain partners on those partners agreeing to accept and implement the CTPAT guidelines. 

General information about the CTPAT program was previously posted to Customs' Web site. Customs is first and foremost an enforcement agency. Its mandate is to make sure the import and export laws are enforced and the proper revenue is collected. Therefore, the agency is severely hampered in what it can offer the trade as benefits for joining CTPAT. Customs defines the benefits: 

A reduced number of inspections (reduced border times). 

An assigned account manager (if one is not already assigned). 

For current Low-Risk Importers, an opportunity to expand "low risk" treatment to all divisions within the company. 

Access to the CTPAT membership list.

Eligibility for account-based processes (bimonthly/ monthly payments, e. g.). 

An emphasis on self-policing, not Customs verifications. 

Frankly, little on this list will appeal to most importers. The real motivating factor for most companies to join is plain and simple companies want to get their goods where they are going as inexpensively and quickly as possible. Part of that goal means the goods arrive when they are expected without damage or loss. In other words, the program should appeal to every company's bottom line. The more secure the process, the less likelihood of damage or shortage. While Customs is to be applauded for being the first agency to take affirmative and positive action on a broad scale, U.S. companies will probably focus on their inherent patriotism and interest in helping protect American shores, at the same time they enjoy the tangible benefits to the bottom line which result from securing their supply chain.