Global Logistics Regulation: Time’s up!
The clock has been ticking for several years, and now shippers must acknowledge that the time for embracing regulatory standards has arrived. Who’s ready for the onslaught of regulatory change? Good question…
By Patrick Burnson, Executive Editor -- Logistics Management, 2/1/2009
While “change” may be the operative word when it comes to regulatory compliance this year, shippers realize that “or else” is the unstated maxim. Industry analysts have been suggesting for years that by conforming early to government mandates, shippers may actually be gaining something beyond improved security—a sharpened competitive edge. Well, your friends at Department of Homeland Security (DHS), Customs and Border Patrol (CBP), and The Transportation Security Administration (TSA) certainly think so, as do many supply chain specialists who maintain that security equals efficiency.
At this moment, the much-maligned 10+2 rule is being fine tuned during its “interim period” for ocean shippers, and air shippers are trying to cope with 50 percent screening of inbound and outbound cargo. Here’s where things stand on the regulatory front—and where things may be going if there’s enough resistance.
Air cargo: Ready for take-off?
The TSA has told shippers that 2009 will be a year of accountability. “Or it equals at least a significant measure of transparency,” says Brandon Fried, president of the Air Forwarders Association in Washington, DC. “We wholeheartedly embrace the cargo screening initiative, but we want to have it implemented in an organized and measured manner.”
Other prominent forwarders, however, are saying that TSA—which announced that it would begin security certification process for targeted freight forwarders late last year—was not providing enough compliance information to those not involved in the pilot programs. These programs were conducted only at the “mega” load centers in Los Angeles, Seattle, and San Francisco.
“We have invited TSA officials to speak with us at WESCCON [Western Cargo Conference], but they declined,” says John Leitner, an executive with forwarder WJ Byrnes & Co. in South San Francisco. “They said that they would only meet in a closed-door session, and we found that unacceptable.”
Meanwhile, spokesmen for TSA in Washington maintain that the agency is moving ahead with tests of high-tech systems designed to inspect cargo loaded aboard passenger airlines. The agency’s mandate is to screen at least half of all cargo by the first of this month. It will rise to 100 percent in August 2010 as part of the DHS mission to provide a level of security for cargo commensurate to that for passenger baggage. According to TSA, these deadlines are congressionally imposed and not subject to change.
Security analysts point out, however, that while this is an achievable goal, not all shippers will be able to fully participate. “The system, as it stands now, really favors the big global players,” says Albert Saphir, principal with ABS Consulting in Marietta, Ga. “And it leaves the guys who ship four or five times a day out of a place like Tampa out in the rain. An airport of that scale simply doesn’t have the money to purchase the equipment.”
Saphir, a veteran industry analyst who consults with Fortune 500 companies, says that some shippers will be able to compete if the airlines themselves buy the screening stations. “But air shippers are still facing more stringent security measures than those using any other mode,” he says. “This TSA program contains details that are SSI [sensitive security information] and are not released to the shipping public.”
This also means, adds Saphir, that there’s a virtual “Catch-22” that will take time to iron out. Meanwhile, he advises shippers to work with forwarders who have a track record and are prepared for the new regulations.
Tom Mathers, communications director for the National Customs Brokers and Freight Forwarders Association (NCBFAA), agrees, observing that association members are working hard to keep cargo in the air.
“Many of our members function as IACs [Independent Air Carriers] and are required to have special numbers registered with Customs before they can book cargo,” says Mathers. “To qualify for a number is a super-secret process, but we understand why it’s so hard. Planes move a lot faster than ships, and are harder to stop if one gets away with a dangerous payload.”
Ocean: 10 + 2 = migraine
So much for high-value and expedited cargo. But as any shipper knows, real volume moves by sea, and a whole different set of standards and imperatives are being put in place for ocean carriage. Analysts note that 2009 will bring in unprecedented changes for inbound logistics, as the new Importer Security Filing (ISF) is imposed by CBP in June.
This is a refinement of the current 10+2, which is still in its interim stage, and subject to change after shipper comments are received. Analysts say that the compliance is really not that hard to understand—but shippers need to be prepared.
“In a nutshell, all ocean importers will need to provide 10 (or possibly more) specific data elements electronically to CBP 24 hours prior to their shipments loading at the foreign port of departure,” says Saphir. “Failure to do so will result in penalties of $5,000 per shipment levied by CBP against the importer.”
Again, preparation is key, stresses Saphir. While some importers have adjusted to the 10+2 rule and are ready to step up, there may be as many as 800,000 shippers still struggling with compliance, says Saphir. “It will take a lot of hard work to get this accomplished,” he adds. “Luckily, CBP has provided for a 12-month phase-in period, which hopefully will not lead to procrastination by importers in getting this done.”
Mathers maintains that NCBFAA members are ahead of the curve in this regard, partly due to the lagging economy. “Business for our members has been very steady, although volumes are down. This has given them time to adjust to the new regulations and to be prepared for the rebound,” he says.
And for importers in the Customs-Trade Partnership Against Terrorism (C-TPAT) program, it may be somewhat easier to accomplish ISF compliance, as they have already completed an extensive supply chain review.
On the home front
So, you’re a shipper who doesn’t bother with overseas transactions at all. In fact, one might include you in the vanguard of visionaries who opt for “nearshoring” by keeping to one’s hemisphere.
But if you think you’re free and clear from mounting regulation—think again. Security analysts adamantly object, saying that you are hardly out of harm’s way just yet, and there are more compliance details coming down the pike.
Enter Janet Napolitano, the first Democrat to lead the DHS. “From a prevention and protection stand point, surface transportation inside the U.S. is a work in progress,” Napolitano says. “We haven’t done as much there as we have done on the aviation side.” She is especially concerned with rail and border security. “Let’s go where the gaps are,” she says, referring to the vulnerability of truck and DC stops.
While no new specific domestic security requirements are scheduled for trucking companies or their domestic customers, security analysts say that C-TPAT is a “must” for shippers doing business in the North America Free Trade Agreement (NAFTA) arena. “Compliance with C-TPAT and maintaining C-TPAT status will continue to be the biggest challenge for trucking companies and importers as we have such large trading volumes via truck with Canada and Mexico,” says Saphir.
This is confirmed, he says, when considering the CBP-published C-TPAT statistics. In fact, the category with the highest suspension or removal rate from the C-TPAT program is highway carriers. “This is especially true for truckers dealing with Mexico,” he adds. “They are highly exposed to the ongoing risks of drug smuggling and human trafficking into the U.S.
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