A change in the weather

A change in the weather

Bob Dylan has famously said that you don't need a weatherman to know which way the wind blows. But with the winds gusting in different directions in the world of international trade, it is difficult to know what is on the horizon.

The winds shifted in early April when Deputy Customs Commissioner Jayson Ahern testified before the House Appropriations Subcommittee on Homeland Security. He noted that as Customs has worked to gain "control of our ports and borders," it also must continue to perform its "traditional missions," which include "regulating and facilitating international trade, collecting import duties and enforcing United States trade laws." It would appear that Mr. Ahern was signaling a return in focus of Customs operations on aspects of its trade mission that have been secondary since the Sept. 11 attacks.

This was borne out at the May 9 meeting of COAC, the Departmental Advisory Committee on Commercial Operations of Customs, where Commissioner W. Ralph Basham said Customs would expend more energy on trade enforcement and facilitation.

The new strategy has four main goals: to facilitate legitimate trade and ensure compliance, to enforce trade law and collect revenue, to advance economic security, and to intensify trade processes. With product safety issues looming large in Congress, it will be interesting to see if the C-TPAT model of seeking compliance outside of the formal regulatory process will be brought to bear in the new trade compliance strategy.

In his testimony, Mr. Ahern also noted what appears to be a significant policy change for Customs in the area of supply-chain security. While the Customs-Trade Partnership Against Terrorism has been a mainstay since late 2001, Mr. Ahern indicated that the threat of an attack against the U.S. via the instruments of international trade may have been overstated.

"While the maritime environment does contain some element of risk for a weapon of mass effect to be transported in a maritime container," he testified, "the logistics movements which involve multiple hand-offs among various parties throughout the supply chain may in fact be a deterrent to a terrorist considering using a maritime container."

Customs apparently has come to the realization that terrorists could not risk shipping special nuclear material or an assembled weapon of mass destruction through traditional means, and that other means of entering the U.S. pose higher security risks. That raises the question of why Customs is moving ahead with the Importer Security Filing, or 10+2, regulations.

Mr. Ahern testified that Customs must direct its resources to areas that represent the greatest threat. Where does that leave C-TPAT? While C-TPAT's 8,000 members have received benefits from their membership in terms of reduced Customs examinations, most companies considered the major benefits to be the opportunity to move quickly through "green lanes" upon arrival of their cargo at a port, and to receive priority release of their cargo in the aftermath of a terrorist-caused disruption to port operations. With these concepts undeveloped, and if Customs reduces the organizational energy devoted to supply-chain security, what incentive will exist for additional firms to consider C-TPAT membership?

The winds also have changed on another front: In April, Congress refused to vote on the Colombia free-trade agreement submitted by President Bush. The "fast-track" trade negotiation authority was created to allow the executive branch to negotiate trade agreements, provided that Congress authorized the negotiations in advance and that trade negotiators regularly briefed the oversight committees.

The refusal of congressional leadership to schedule a vote on the Colombia agreement is not a mere change in wind direction, but a gale force with dangerous consequences. With the sidetracking of the agreement, the process and underlying rules governing the negotiation of trade agreements have been abrogated, leaving no effective means for the U.S. government to negotiate trade agreements.

Agreements with Panama and South Korea are effectively off the table, and prospects for early conclusion to trade negotiations under the World Trade Organization's Doha Round have been shattered. U.S. trade relationships with the rest of the world are frozen, while the EU can pursue agreements with India and other growing economies, and other regional agreements are negotiated.

Changes in Customs policies at the operational level, together with the dismantling of the long-standing system of negotiating trade agreements, will pose challenges to the effective management of international supply chains at a time when economic growth is dependent on effective systems of international trade. We do need a weatherman to know which way the wind is blowing.

Philip Spayd is director of Global Trade Systems Inc. in Scituate, Mass. He can be contacted at 781-545-4462, or at philip.spayd@globaltradesystems.com.