Has C-TPAT run its course?

Has C-TPAT run its course?

The world is full of tradeoffs, infusing every aspect of life, a kind of omnipresent law of equilibrium. If you have a sweet tooth and eat too many hot fudge sundaes, you'll grow fat and unhealthy. If you make a dash across a busy street, you will save time but risk being killed. If you invest in a risky stock, you could earn a hefty profit but also end up with a big loss. So it is with the Customs-Trade Partnership Against Terrorism, the flagship program created after Sept. 11 to secure international supply chains. There are tradeoffs, which say a lot about where this program stands as we begin 2004 and where it should be headed.

For companies that import goods, C-TPAT is easy and cheap to participate in. Companies don't have to participate at all, since it's voluntary, though many of course do. As of last week, 5,357 firms were in some stage of C-TPAT enrollment. Joining involves filling out a questionnaire by pulling together internal information about a company's security-related assets and procedures. I have heard of no firm that has had to make a substantial out-of-pocket investment to become

C-TPAT-certified. For a small percentage, 130 as of last week, two-person audit teams from Customs and Border Protection have validated their security plans after on-site visits. All evidence suggests that these are friendly consulting sessions rather than anything resembling a formal audit. That makes sense, because at its core C-TPAT is a "partnership" rather than compliance in the traditional sense.

Remember that C-TPAT came to life and remains today a program unattached to any regulation. Its legal standing derives from Customs' basic statutory authority and nothing more. "The basis for the C-TPAT authority is the general authority of the Customs Service to regulate the importation of merchandise. There is no statute or regulation that specifically mentions C-TPAT," said Lawrence W. Hanson, a Houston trade attorney.

Therein lies the downside. Painless as it is to enroll and thereby secure green-light treatment at the border, C-TPAT has a mutable, wishy-washy quality unlike regulations, which are tangible and definitive. The problem is that while a company can be virtually certain it's in compliance with a regulation, good standing within C-TPAT is elusive. Participants were reminded of that when Customs and Border Protection Commissioner Robert Bonner announced in October that participating firms will eventually have to deploy "smart" containers to maintain their good standing in C-TPAT. Never mind that most of the critical details haven't been released - details such as how, when and where the information contained in smart containers will be transferred into computer information systems, not to mention the technology that firms are supposed to use. Such details are today unknown - certainly outside but more than likely inside Customs as well.

Let's be clear. There is much that

C-TPAT has achieved. By bypassing the months- or years-long regulatory rule-making process, Customs was able to respond swiftly to the sudden change in national priorities that followed Sept. 11. It has helped instill a security-conscious culture throughout the major organizations - shippers, carriers, intermediaries - that control the supply chains that feed goods into the U.S. There may still be significant gaps in trade security, but through C-TPAT the government has in a sense deputized thousands of law-abiding professionals to be on the watch for questionable anomalies. Whether it's steamship lines that inquire about shippers they don't know or importers that make security a condition of doing business, the system is much more secure today than it was on Sept. 11.

But now may be the time to think about moving on. As a first step toward building a meaningful security regime, C-TPAT has admirably served its purpose. But as time goes on, the program will increasingly struggle to adapt as security issues heretofore not dealt with are teed up for action. Container seals for in-transit security, radio-frequency identification, secure loading facilities, next-generation information systems - there is a long list of issues that will need to be dealt with sooner or later. Smart containers are a perfect example. It makes little sense to "require" use of smart containers through a voluntary program, when there's no guarantee firms will adopt them. If it's something that makes sense for security and the costs don't create a new trade barrier, they should be required.

"Shouldn't we now be working toward formalizing regulations governing C-TPAT?" Hanson said. "People want to follow the law, and right now with this voluntary program they don't have clear guidance of what is expected of them."

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.