SECURITY AS A COMPETITIVE TOOL

SECURITY AS A COMPETITIVE TOOL

On Dec. 8, 1993, passage of the Customs Modernization Act dramatically changed the way the trade industry did business with Customs. It gave importers new responsibilities for ensuring that their imports were accurately declared and managed. On Sept. 11, 2001, the attacks against our country by the forces of terrorism will have no less an impact. Security, which just weeks ago was viewed in the comparatively benign context of cargo theft or drug contraband, now will drive an array of changes that will alter forever the way in which we look at the world and conduct our international trade. A compromised container filled with heroin suddenly pales in comparison with the incomprehensible thought of one filled with a biological, radiological or nuclear device.

At U.S. Customs' recent 2001 Trade Symposium, my thoughts on how trade security would be addressed seemed to be confirmed as speech after speech focused on the importer, citing the rationale that no one knows the cargo better than the person ordering it. Under the Mod Act, this concept spawned the new tenets of Reasonable Care and Informed Compliance, which held the Importer of Record to be ultimately responsible for ensuring trade compliance.For the same reasons, I can easily envision Supply Chain Anti-Terrorism Trade Security, or 'SCATTS' as I've begun to hear it called, as simply becoming an additional tenet of Reasonable Care. The argument to industry for complying with the Mod Act was twofold: because it is the law, and because reasonable care provides companies with a competitive advantage through improvements in compliance, cost and cycle time. Again, the same benefits would parallel the adherence to sound security policies and procedures.

SCATTS would require new supporting regulations, just as the Mod Act did. Of course, there will be opposition to more regulations and the increased burden on the importing community. But if the ultimate responsibility does not lie with the importer, then who is responsible -- the foreign manufacturer? I envision the day when any business associated with the international supply chain will seek to be 'SCATTS-certified' just as companies now seek the business benefits of ISO, Business Anti-Smuggling Coalition and other quality programs.

And what if your overseas supplier is unwilling to obtain that certification? Let's just say that as an American whose first business dinner in New York City was at the Windows on the World atop the Twin Towers, I would have little sympathy toward any company that could not understand or heed our country's call for such a program.

What about the incentive to the importer? The carrot currently being discussed would be the designation of a 'fast lane' -- expedited entry to importers who qualify as low-risk. But I would caution Customs that the benefit here must be real and tangible. The enticement of fewer container exams to a company that already holds a low exam rate will generate little excitement. Nor will the threat of non-compliance penalties be enough. Although compliance to any law should always be the first consideration, let's face it -- nothing talks like real, bottom-line savings. I found it interesting that even Treasury Secretary Paul O'Neil's luncheon remarks at the Customs Symposium never mentioned compliance. Instead, he recalled his days as the CEO at Alcoa and his own frustrations with the costs associated with supply-chain cycle times.

Among the many challenges that supply-chain security will create for both Customs and the trade, none will be more compelling than the development of uniform standards for 'SCATTS' requirements and certification, encompassing people, processes and technology. An interesting example of supporting technology could be the use of two-dimensional bar codes that could be scanned by lightweight and cost-effective hand-held computers carried by Customs personnel in the field. In addition to accessing traditional shipment manifest information, the

2-D bar-code can provide an actual photo of the truck driver and goods, along with other security data. The process would be a natural extension of procedures already in use, but would provide Customs with superior information. These bar-code chips could even be integrated within container seals and could provide the scanner with an entire history of security checks and milestones that the container has been through.

Customs Commissioner Robert C. Bonner has made it explicitly clear: Supply-chain security is Customs' top priority. My advice to importers is to take the initiative. Be proactive in conducting your own security risk assessments. Do you really know who has access to your goods or containers? What security precautions do your existing vendors and 3PL partners currently take? Do you really understand where all of the 'touch points' and potential security gaps exist in your international supply chain?

Jerry Peck is a licensed customs broker and director of global trade management at Experio Solutions in Chicago. He can be reached at (312) 704-8581, or jpeck@experio.com.