U.S. and European Union customs officials have finalized an agreement to treat qualified shippers in their respective supply chain security programs as equivalent to their own, but a wide range of technical details must still be worked out before low-risk companies can enjoy reduced fees and inspection levels for ocean freight.
Under the agreement signed last Friday, Customs and Border Protection will recognize voluntary participants in the EU's Authorized Economic Operator (AEO) program and EU states will recognize U.S. companies that belong to the Customs-Trade Partnership Against Terrorism, eliminating the need to apply to both programs, follow different criteria for securing international cargo and be validated by two sets of regulators.
"Today's agreement is a major step forward in the EU-U.S. trade relationship," EU Taxation and Customs Union Commissioner Algirdas Šemeta said in a written statement. "At a time when businesses need all the support they can get, this will make life easier and cheaper for many transatlantic traders. It will also help to ensure that security checks on traded goods are more focused and effective, further improving the protection that customs provides for each and every citizen."
C-TPAT is a government-industry partnership program aimed at expediting security clearances for vetted importers that meet high security standards for their international supply chains so that Customs officers can concentrate on examining high-risk, or unknown, shipments. Service providers are not eligible for trade facilitation benefits, but many join the program to meet the security requirements of customers.
More than 10,200 companies belong to C-TPAT.
The AEO is a risk-based security program too that extends to exports as well as imports. Companies can also apply to a separate part of the program that rewards them with fewer customs procedures for meeting trade compliance, record-keeping, financial solvency and safety standards. Those that achieve AEO status in one EU country are granted similar status in other EU member countries, although specific trade benefits can vary by state.
There are about 5,000 companies with AEO status within the EU.
The bilateral arrangement is eventually expected to lead to cost savings and more predictable transatlantic shipment patterns for trusted companies by reducing redundant procedures, an important development for a relationship that accounts for $651 billion in annual trade, officials said.
A targeted approach that lets certified shippers bypass most cargo exams without compromising security is part of a broader agenda to avoid "unnecessary" trade barriers between the United States and Europe and reduce administrative burdens, Heinz Zourek, director-general of the EU Taxation and Customs Union Directorate (TAXUD), said during the signing ceremony. Mutual recognition was pursued under the umbrella of the Transatlantic Economic Council, a joint forum for regular discussions on ways to harmonize regulations and smooth commerce between the partners.
CBP also will save money because it can conduct fewer on-site audits of European facilities engaged with the U.S. importer by accepting the results of its European counterparts.
Zourek said he hoped the benefits of aligning C-TPAT and the AEO would attract more companies to the programs.
In late November, CBP and TAXUD reached preliminary agreement to mutually recognize each other's trusted trader programs and spent the intervening months designing the parameters of the exchange effort. An EU statement said the joint effort will begin in July with EU AEO members receiving a lower risk score for their shipments arriving in the United States. Phase two will begin in January with C-TPAT members receiving a lower risk score for their shipments to the European Union, according to CBP spokesman Ian Phillips.
Among the steps that have to be resolved are how to securely and efficiently transfer data about importers and exporters between customs authorities.
Acting CBP Commissioner David Aguilar told reporters he and his EU counterparts met Friday morning with business representatives to request help creating a system that meets their needs for smooth cargo flows.
It took U.S. and EU officials almost five years to reach a reciprocity deal for trusted traders, primarily because CBP was not convinced that EU site reviews and control measures were stringent enough. Another major sticking point was that EU customs authorities don't travel to foreign countries the way C-TPAT specialists do to validate companies, and expected the United States to check exporters' shipment security practices and share the results with them.
The only problem? C-TPAT isn't oriented toward exports.
It wasn't until CBP was able to conduct joint validations in Europe and the United States during the past year that the agency gained confidence in the AEO programs in Europe, Daniel Baldwin, executive director of cargo and conveyance security, said.
CBP specialists went to each member state to visit AEO and C-TPAT companies to see how they managed their security and how the regulatory agencies worked to evaluate them.
"We saw 27 different instances of high-performing supply chain security management. And I think that generated a lot of momentum," he said.
All EU countries are covered by the agreement, meaning the United States doesn't have to go back and reach bilateral arrangements with each member state, officials said.
American Association of Exporters and Importers Executive Director Marianne Rowden, who attended the CBP briefing, and others welcomed the signing of the EU trade security agreement, but said information provided so far is too general to determine what impact the new plan will have on daily operations in the field. She urged customs authorities to refer to recommendations from an industry panel, organized under the auspices of the World Customs Organization, describing how countries should harmonize their AEO programs.
Still not clear is how mutual recognition is possible without an export
component to C-TPAT so that low-risk U.S. companies can be certified on the home front and receive expedited security clearance and simplified procedures in the European Union. Industry officials contemplate C-TPAT members being able to apply the same principles and techniques to securing outbound cargo as they do for inbound shipments.
After years of industry requests, CBP officials have recently expressed interest in expanding C-TPAT beyond security to address exports and a host of trade compliance risks in the mold of full AEO programs in Europe and elsewhere. At the December meeting of the agency's Commercial Operations Advisory Committee (COAC), C-TPAT chief Sean Beddows said CBP is laying the groundwork for a future pilot program that would give C-TPAT status to exporters and that several countries have agreed to participate in such a program.
Industry officials who regularly meet with CBP say they have not received any updates on the status of an export pilot since then.
"This decision does not take into consideration future modifications of each program and expansion of their respective territorial application," the document says. "Customs authorities understand that any such program modifications or expansion of territorial application may necessitate the successful completion of additional joint validations to the satisfaction of both customs authorities."
CBP currently has mutual recognition agreements in place with Japan, South Korea, Canada, New Zealand and Jordan. All told, 834 foreign companies are receiving streamlined clearance in the United States because their security profile has been shared with U.S. authorities, Phillips said. The agency expects to reach two or three more AEO-alignment agreements during the next couple years, according to the minutes from the COAC meeting.
The EU mutually recognizes the security certifications of Switzerland, Norway, and Japan. It is also negotiating a similar approach with China. - Eric Kulisch