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Customs Checking Supply Chain Security
Which ones affect your supply chain operation directly, secondarily or not at all?
Bill Ansley, vice president of UPS Trade Management Service Inc., provided some answers at a recent meeting of the Western Michigan CLM Roundtable.
Ansley said importers have a number of challenges, of which cargo security is first and foremost behind the government push.
Before Sept. 11, Customs was focused primarily on trade compliance and drug smuggling and only limitedly focused on cargo security, Ansley said. Customs’ trade compliance and security functions were not coordinated, and security functions lacked resources, as well.
But Customs has made it clear that its highest priority now is terrorism and the battle against it. Its No. 1 weapon is securing more information on cargo earlier in the shipping process.
“When we look back at all they’ve done since 9/11 you can see this theme carried through in all the actions they’ve taken,” he said. “It’s a different world and it’s because the threats are different. Their goal is to keep seaports, airports and land border crossings safe while allowing goods to move across to sustain trade.”
Customs went out and identified world ports that were major suppliers to the United States and found there were 24 that controlled more than 70 percent of the cargo coming into the country.
Customs officials then solicited the cooperation of those ports and countries to allow prescreening of cargo loaded onto vessels and the placement of Customs inspectors in overseas ports to do the reviews, Ansley explained.
The pressure on the government to do everything possible to diminish the risk the public faces is “incredible,” he said, and Washington is very sensitive to that pressure.
“A second message that Customs is trying to get out is that if you cooperate with them and take steps to secure your cargo, they’re going to try to give you a fast lane for expedited treatment across the border. If you participate and try to improve the security of your supply chain, they want there to be a tangible benefit in what you receive in services from Customs.”
To that end, the government has developed the Customs-Trade Partnership Against Terrorism (C-TPAT), a government-business initiative that zeros in on waterborne commerce by seeking the voluntary cooperation of importers, exporters, carriers, brokers, warehouse operators and manufacturers.
Ansley underscored the fact that C-TPAT is voluntary. Customs has no statutory authority to force businesses to participate in the program, but there are no restrictions as to what incentives or disincentives Customs can provide to encourage participation. He noted that Customs is “very effective at incentivizing parties to do what they want them to do.”
Incentives include faster and fewer examinations, while disincentives include longer lines, more delays, more examinations — and more cost to the business.
“A lot of companies are coming to the realization that this voluntary program is something they have to do. Some of the early participants, some of the biggest companies in the automotive industry, have actually gone so far as to mandate their suppliers to join C-TPAT.
“Anything that’s favorable to you as an importer probably requires C-TPAT.”
Basically, Customs is saying it wants everyone to establish security as a priority in their business and communicate that priority, along with their security guidelines, to all their supply chain partners.
Joining C-TPAT requires a simple letter to Customs stating that a business wants to participate. The memorandum of understanding should be signed by a person who has sufficient authority within the organization to enforce security procedures.
Customs then asks participants to submit a questionnaire profiling the company’s security practices.
“Our recommendation is that you reverse. Go through the profile and questionnaire, understand what you’re being asked to commit to and understand the effort that will be involved in your organization to comply with these procedures before you sign on the dotted line, because they do want you to be serious about this.”
What a company needs to do first is map out its supply chain and all parties involved, Ansley said. The point is to make sure the cargo is secured from its production or manufacture all the way in to its final resting place or consumption point. The program also requires a company to get documentation of their supply chain partners’ procedures.
A lot of companies have asked their overseas manufacturers to provide that information and are meeting with resistance, Ansley said.
“That’s natural. Customs understands there are going to be gaps. This is a work in progress and what they’re looking to do is close those gaps and continue to do a better job at securing the supply chain.”
What’s becoming increasingly important in keeping a supply chain moving is picking the right supply chain partners, Ansley said. Supply chain partners need to demonstrate they have the ability to put the management controls in place that will ensure the responsibilities on their end.
For some companies, supply chain restructuring may prove the more economical way to go.
Companies can expect more security initiatives and more pressure from the government to participate in C-TPAT. In fact, in the last month Customs has been sending out Form 28s (request for information) to non-C-TPAT companies and are going after them on an individual, transactional basis, Ansley noted.
As the program gets rolling, shippers, forwarders and carriers that fail to comply will risk having their cargo detained or denied loading privileges. C-TPAT participation also is required in order to be assessed as a low risk importer.
The Trade Act of 2002 sets new security provisions that impact all modes of transportation and requires advance notification of shipments. Effective last December, carriers must submit a cargo declaration 24 hours before cargo is laden aboard a vessel at a foreign port. Ansley said companies can expect dramatic changes in the supply chain as a result and that shippers will probably have to maintain increased levels of safety stock.
Among other new security regulations and programs are:
- Port Maritime Security Act, legislation that increases the Coast Guard’s responsibilities and places specific requirements on port authorities.
- Container Security Initiative, an initiative designed to prevent containerized cargo from being exploited by terrorists.
- Operation Safe Commerce, a program providing funding for innovative security methods that incorporate new technologies to better secure cargo containers.
- Importers Self Assessment, a strictly structured program that preempts importers from the U.S. Customs audit pool.
- Smart Border, a joint effort with other countries to use common procedures and practices to protect common borders.
- Free And Secure Trade (FAST), a program that allows importers on the U.S./Canada border to obtain expedited release for qualifying commercial shipments.
- Operation Green Quest, a program to stop the flow of funds to terrorists.