No easy answers

No easy answers

Creating a security system for ocean container transport has not been easy. Two and a half years into the new world order, it's not getting any easier. That much is clear from the struggle now under way at Customs and Border Protection to achieve visibility into the very early stages of the supply chain - specifically, the location where the goods that end up inside a U.S.-bound container were manufactured, and the identity of the manufacturer.

How to get hold of that information so that it can be used in security targeting is the question before Customs, and all indications are that the agency is struggling mightily to find an answer. Unfortunately, its initial stab, in the form of implementing regulations released in December for the 2002 Trade Act, fail to solve the problem. There may be a solution, but it can't be implemented overnight and won't be uncontroversial.

The background is essentially this: Under the 24-hour rule for advance filing of manifests, Customs demanded information contained on the vessel manifest, which is compiled from individual bills of lading, a day before the cargo is loaded on a ship at the foreign port. That information gave the agency enough of an insight into what's coming into the country to conduct a decent, though by no means comprehensive, security assessment.

The 24-hour rule allowed the government to erect virtually overnight a system of screening for ocean containers, thereby helping to plug a gaping hole in the nation's security. But it was clear from the outset, both to Customs and the trade community, that the information window created by the 24-hour rule lacked critical pieces of data - such as the origin of the goods. The bill of lading is a transportation contract, and the parties that enter into it often don't include the manufacturer. In today's world of supply-chain management, an importer often takes possession of goods at the foreign manufacturer's door and arranges the transportation with assistance from a third-party logistics provider. Nowhere in the transportation documentation does the manufacturer's name appear.

But that has not stopped Customs from trying to obtain that information, which it rightfully feels it needs to conduct a thorough security assessment. The agency has provoked a firestorm of criticism among trade groups by defining the shipper in the transport contract as the "foreign vendor, supplier, manufacturer, or other similar party," and specifically not a freight forwarder or other logistics provider. As Bob Edmonson reported in the cover story in last week's Journal of Commerce, Customs is in effect attempting to alter commercial practice by requiring that an entity that is not party to a contract as a result of commercial reality become party to that contract.

And it wasn't as if Customs didn't have a heads-up as to the negative ramifications. Last March, a subcommittee of Customs' Commercial Operations Advisory Committee, known as COAC, studied the issue of how to obtain earlier supply-chain information. It concluded that obtaining the information from ocean carriers through the manifest system was problematic. Customs instead should "explore the possibility of getting that information from the importer," said Carol Fuchs, government relations counsel for KMZ Rosenman in Washington, who chaired the subcommittee.

The extent of the controversy surrounding the idea of getting the information from the importer became clear when the full COAC turned down that recommendation. Some on the committee felt importers would be inconvenienced or worse if they had to provide that information in advance of shipment through the traditional customs entry process. According to a recent letter from the Department of Homeland Security to Congress, "There is strong disagreement among trade members over the ability to provide entry or similar data earlier in the shipping process, and whether such data should be provided earlier in the process."

What is clear is that in obtaining early supply-chain data, Customs may be putting into place an element of the cargo-security system that will remain in place for years, so it should not act hastily. In devising this system, it should look down the road and consider all options, among them the gradually emerging Automated Commercial Environment, the vast new computer system in development for processing imports.

"It may be impracticable for this information to be provided in advance until we have new and different systems in place, such as ACE," Fuchs said. "Perhaps Customs can't get it from anyone at this point. We don't have a good mechanism in place to get them this information in advance."

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.