The changing color of C-TPAT

The changing color of C-TPAT

I don't think it's unfair to suggest that despite all that has happened in regard to supply-chain security in the nearly year and a half since Sept. 11, the system remains full of holes. Perhaps more important, should another terror attack occur and be linked in some way to the logistics system, the government will not at this point be able to make a convincing case to the American people that its security regime is viable and that trade corridors should be reopened without major new security checks.

I think U.S. Customs knows this. And I think it explains what is happening with its Customs-Trade Partnership Against Terrorism. In a word, the voluntary aspect of this program appears to be quickly disappearing.

C-TPAT, you may recall, was the first cargo-security initiative unveiled by Customs in the fall of 2001. In keeping with the strong relationship built up over the years between Customs and the importing community, Customs did not force the program on anybody. Instead it made the program voluntary, asking importers, 3PLs, consolidators and carriers to agree on their own to intensify security throughout their operations. It took the carrot approach, describing the program in a positive light in which companies would be rewarded with fewer inspections and other entanglements that could slow their cargo.

But in taking this approach, Customs and its commissioner, Robert Bonner, are walking a fine line. Still in the popular imagination is the infamous 2 percent of cargo that gets physically inspected, a point that Democrats raise over and over. It shows their ignorance, because of course the screening process is a lot more complicated than that. But it also reveals an underlying uneasiness with the state of the cargo-security system, a fact the Democrats appear ready to exploit as the 2004 presidential campaign gets under way.

So it should not be a surprise, therefore, that the once benign C-TPAT may now be morphing into something that appears to be a bit more reflective of the political environment in which Customs is operating. Specifically, recent actions by Customs appear to cast doubt on the voluntary, cooperative nature of the program. Case in point: Companies that have not signed a memorandum of understanding to join C-TPAT have been recently receiving official Request For Information forms pursuant to specific entries. These are the "CF-28" forms the agency issues when it questions an entry. "In most instances it's issued because Customs either has decided there is something left out of the entry document, or there is an issue that Customs disagrees with," said Carl Soller, a partner in the New York firm of HodgsonRuss, who represents the JFK Airport Customs Brokers and Freight Forwarders Association. "If the importer does not comply, it will often result in an increase in duty or some other negative act toward the importer."

In the form, Customs asks the non-C-TPAT company two questions. One of them reads, "Regarding this specific entry, did you, as the importer, take specific steps (such as making security safeguards a condition of business) to ensure that the following service providers (broker, manufacturer-supplier, warehouse, carrier-shipper) have established procedures in place that are comparable to the recommendations in the attached guidelines?" The attached guidelines describe security steps such as access controls, perimeter security, background screening and ongoing education. It's a NO answer that has importers concerned with where C-TPAT is going. Soller wrote this month to Robert C. Meekins, acting JFK area customs director, saying that the letters are "perceived as an instrument of intimidation rather than a request to participate in the cooperative efforts detailed in the C-TPAT program."

Others agree. "This was never how CF-28s were supposed to be used. I am aware of no precedent where these forms were used to force people into a program," said Larry Hanson, a customs attorney in Houston. "The consequences are pretty clear: Customs has not said this, so this is conjecture on my part, but they are gathering a list of people that are not members of C-TPAT, and those that are not participating may have reason to fear that they will have more intensive exams."

"From a legal perspective, there are no regulations on this. They call it voluntary and they avoid the whole regulatory process. From a procedural, legal standpoint that is a disturbing thing for an attorney." If cargo security is headed in the direction of enforcement, this may be an early sign.

Peter Tirschwell is editor of The Journal of Commerce. He can be reached at (973) 848-7158, or via e-mail at ptirschwell@joc.com.