Initiatives reduce compliance burdens, increase benefits for C-TPAT partners.
By Eric Kulisch
US. companies that have been certified as operating secure supply chains could soon achieve faster processing of their international cargo by taking advantage of three new measures recently unveiled by border management officials.
On Nov. 27, U.S. Customs and Border Protection announced the addition of six new import processing centers — or virtual ports of entry — organized around specific industries, the expansion of the import-focused Customs-Trade Partnership Against Terrorism into the export realm and the signing of an agreement with Taiwan Customs for each country to accept the security status of approved companies in each other’s trusted shipper programs.
“Our goal is very clear: Regardless of where your company is based we want to make it easier for you to do more business in the United States. We are committed to this concept,” Homeland Security Secretary Janet Napolitano said in a speech kicking off CBP’s 12th annual Trade Symposium outside Washington.
CBP Deputy Commissioner David Aguilar, who has actually headed the agency for the past year in the absence of a permanent political appointee, said Customs would begin operating the following industry integration centers in fiscal year 2013:
- Agriculture and Prepared Products - Miami.
- Apparel, Footwear and Textiles - San Francisco.
- Base Metals - Chicago.
- Consumer Products and Mass Merchandising - Atlanta.
- Industrial and Manufacturing Materials - Buffalo, N.Y.
- Machinery - Laredo, Texas.
The six so-called Centers of Excellence and Expertise, or CEEs, are in addition to existing ones established in the past year for pharmaceuticals, health and chemicals in New York; electronics in Los Angeles; automotive and aerospace in Detroit; and petroleum, natural gas and minerals in Houston.
The CEEs are part of CBP’s enterprise-wide effort to transform trade facilitation and enforcement programs so they match modern business practices, with the goal of reducing transaction costs and enabling companies to respond to fast-changing market conditions.
The centers serve as a single point of processing for importers in CBP’s trusted trader programs: C-TPAT and the Importer Self-Assessment, which enable companies with proven internal controls to self-police compliance with trade regulations in exchange for fewer audits.
The integrated industry centers handle the entry summaries and perform other activities such as validations, and post-entry amendment and correction reviews, and protests, instead of each relevant port making decisions on a company’s entries. Import documents are routed to the CEEs, but revenue collection and security checks continue to take place at the actual ports of entry. A major benefit of the CEEs is that they manage an importer’s entries on an account basis rather than making determinations, collecting duties and pushing paper back and forth for each cross-border transaction.
Industry and Customs officials say that giving each center a nationwide reach enables shipments to receive the same, consistent treatment regarding product classification or other regulatory requirements no matter which physical port they go through and reduces redundancy. Import experts are trained to understand the normal shipping practices of each industry. The centers are allowed to review entries and make cargo release recommendations to officers at the ports for determining which shipments to inspect and which to leave alone because they don’t pose a risk.
A CEE, for example, was able to resolve a situation in which port officers held cargo because they felt manifest data from the carrier was insufficient. The CEE stepped in, determined the manifest contained the necessary information and prevented similar shipments from being detained, according to a program description on the CBP Website.
“The key is that the center can focus on that industry and have a universal view of the data and communication from that industry to identify anomalies, trends and systematic issues. And they can direct processing and facilitation for that industry from a single management structure,” Robert Reeser, assistant director of trade in the New Orleans field operations office, said during a panel discussion.
CBP has gone a step further and temporarily suspended regulations giving port directors legal authority to make certain decisions on inbound cargo, including requests for more information, to test whether those decisions are best made by the four initial CEE directors. The waivers only apply to companies voluntarily participating in the three-year test. In an August Federal Register
notice, the agency said it believes that providing broad decision-making authority to the CEEs for entry-processing issues will better enable them to facilitate trade and compliance.
Training is designed to flow both ways, with CBP specialists learning from industry groups and businesses learning about how CBP operates. Julia Hughes, president of the U.S. Association of Importers of Textiles and Apparel, asked officials during the panel discussion to schedule training with industry experts on complicated trade-preference programs so that both sides understand the programs the same way.
By fostering knowledge and close relationships with companies and trade associations the information hubs have also become a source of trade intelligence for violations of import laws.
All importers, as well as other government agencies, can use the centers as a resource to get clear answers on CBP requirements and best practices for compliance related to a particular industry.
CBP officials a year ago indicated the rollout of new CEEs would take place over a three-year period, but the popularity within the trade community for these import-processing hubs led the agency to adopt a more aggressive schedule.
The CEE locations were chosen with the help of industry working groups and the agency’s private-sector based Commercial Operations Advisory Committee. Selection criteria included port areas with high volumes of commodity types associated with a specific industry, availability of Customs personnel, and high concentrations of industry stakeholders in the region, John Leonard, acting executive director for trade policy and programs, said.
Industry representatives recommended that CBP co-locate the retail and apparel/footwear/textile centers because those industries overlap and companies may have products assigned to San Francisco and Atlanta. But the centers are matrix organizations that tap expertise across the agency and operate in a virtual environment, which means not all the staff has to work from the same location, Customs officials say. Hughes suggested that the CEEs will need to interact daily to ensure smooth trade processing.
CBP officials didn’t rule out the possibility of adding more CEEs in the future if circumstances and lessons from the existing centers demonstrate a need. Thomas Winkowski, the agency’s chief operating officer and second-in-command, floated the idea of having a CEE dedicated to trade agreements because the rules governing cargo subject to duty preferences are so complex and multidimensional that import specialists may not have the necessary skills to adequately review all entries. Greater training and specialization could improve their ability to root out fraud and process legitimate shipments more quickly.
“I see the role of the import specialist changing tremendously,” he said.
Officials continue to refine procedures for how the centers operate with the help of industry advisers. Valerie Neuhart, director of industry and account management, said the agency plans to update the August test guidelines for how the CEEs and importers should interact with each other. Customs also wants to integrate brokers into the CEEs because they have a view into the entire import supply chain and could serve as a voice for small and midsized enterprises that lack designated import or quality assurance departments for overseeing compliance, she added.
CBP officials and the trade community envision a day when the CEEs will also help streamline customs clearance for all government agencies with jurisdiction over imports. A nascent effort is underway to create a unified government process for managing the border that incorporates the integrated industry centers, but such multi-agency cooperation requires a lot of work to break down turf barriers and coordinate processes.
Winkowski set a goal of establishing concrete measures of effectiveness for the CEEs and reporting initial results by next year’s Trade Symposium because “this is a cornerstone of our transformation.”
The news that CBP will begin to build out an export piece for C-TPAT is another item that has been on traders’ wish list for a long time. In December, Customs began assessing how well companies in the voluntary program implement their approved security plans for outbound shipments from the United States, starting with exports to Japan, officials said.
Member companies are categorized as lower risk and eligible for fewer security exams, and some other benefits, in exchange for demonstrating that they and their suppliers have effective plans for vetting personnel, protecting information technology systems, controlling access to facilities, properly securing containers from infiltrators, selecting approved carriers and taking other precautions.
Mutual recognition agreements require countries to agree to a core group of international customs security standards for corporate validations and overall customs controls, and then achieve that level so that both sides can trust the other to do the job on their behalf. The goal is to increase efficiency by reducing redundant cargo exams and the need for shippers to follow different sets of supply chain requirements around the world.
CBP has an existing agreement with Japan Customs to mutually recognize companies validated as meeting the standards of C-TPAT and Japan’s Authorized Economic Operator program. Until now, the program has been one way, with Japan Customs grading domestic companies and passing the reports to CBP so the shipments receive expedited treatment without CBP having to send teams to review Japanese suppliers. CBP could not reciprocate, as envisioned by the AEO standards of the World Customs Organization, because C-TPAT was only an import security program.
In 2011, the United States exported $66 billion worth of goods to Japan, representing about 4 percent of total U.S. exports.
The perception that C-TPAT’s growth has plateaued at about 10,000 companies led officials to consider a more holistic approach that incorporates export and trade-compliance components, in addition to security, to align it with other AEO programs around the world and make it more attractive to international traders.
“We expect that this enhanced export process will lead to significant savings for some of our members. We hope by expediting part of the export process we’ll be having a direct impact on your bottom line,” Aguilar told an audience of about 700 trade professionals and another 200 watching online.
He said CBP intends to expand the C-TPAT export process to other international partners with AEO programs and is pressing countries, especially in Latin America, to stand up similar trusted shipper programs of their own. In addition to Japan, the United States currently has mutual recognition agreements with Canada, New Zealand, South Korea, Jordan and the European Union. On Nov. 26, CBP and Taiwan Customs recognized the compatibility of their respective cargo security programs under the AEO framework, according to CBP.
Aguilar said the goal is for six of the top 10 export destinations for U.S. products to soon be covered by similar mutual recognition agreements. The United States is also close to setting up some multilateral trusted shipper agreements, which would advance the goal of international harmonization, Daniel Baldwin, CBP’s executive director of cargo and conveyance security, said.
“By opening the C-TPAT process to exports and having validations performed here in the United States by our own C-TPAT specialists we’ve opened markets to exporters,” he said.
Documenting export security practices of C-TPAT members should not be difficult for U.S. Customs because most quality companies use very similar procedures for inbound and outbound shipments, Ronald May, the head of the C-TPAT field office in Buffalo, and John Joerger, director of global transportation and international trade compliance for Garmin, said. CBP already captures most of the information about a company’s export supply chain during visits to a company’s headquarters and main warehouse, but now will set up a formal process to report that information.
“We don’t think it should be a heavy lift. It’s something we should be able to incorporate rather quickly,” May said during a separate panel discussion.
CBP tested the export validation process with Garmin and Boeing.
Companies should not experience much additional cost because they likely don’t have to do anything beyond what they normally do to secure their premises, personnel and conveyances, according to May and Joerger. The only difference, May said, may involve some additional paperwork.
Joerger said Garmin has to put in security steps for loading trucks at its warehouse instead of unloading containers, but simply borrowed the C-TPAT inspection procedures it requires of its overseas vendors that load containers for export to the United States. Exporters also have to be mindful of export control regulations such as third-party screening and license determinations to protect U.S. technology from falling into the wrong hands, but competent exporters already follow those U.S. government regulations anyway, he said.
CBP doesn’t envision doing full-scale validations for existing C-TPAT members who choose to add an export certification, but rather will do export reviews as part of the regular revalidation process conducted every few years, May said.
The agency also plans to develop protocols for companies predominantly engaged in export activity that only want to join C-TPAT for the export benefits, he added.
Joerger recommended that government agencies collaborate to combine import and export, security and trade compliance programs into a single structure.
CBP is already proposing through the interagency process “that we’d want to explore sort of a mutual recognition approach even amongst U.S. government agencies because, at the end of the day, we realize we can’t possibly do all of this by ourselves. We have to rely on our most trusted partners with some common sense standards,” Baldwin said.
Customs calls the interoperability initiative “One U.S. Government at the Border.”