Later this month, the federal government will begin the process of setting up the Department of Homeland Security, a cabinet-level agency designed to coordinate efforts at home in the war against terrorism. President Bush late last year signed a bill creating the new department, which will, among other duties, oversee the implementation of new security rules affecting transportation.

Under that law, 22 federal agencies will be rolled into the new department. One agency of crucial interest to international shippers, the U.S. Customs Service, will become part of the new department, although the Treasury Department will continue to oversee the collection of duties and fees.

Other agencies affecting shippers that will be included in the new department are the Coast Guard, the Transportation Security Administration, and the import inspection services of the Food and Drug Administration.

Homeland Security advisor Gov. Tom Ridge is expected to take over as head of the new department once Congress approves his appointment. Asa Hutchinson, a former Arkansas representative and current head of the Drug Enforcement Administration, has been nominated by the White House as under secretary for border and transportation security. Among his duties will be administering Customs law and securing the borders, territorial waters, ports, and waterways as well as air, land and sea transportation systems.

Because the Department of Homeland Security's actions will impact day-to-day transportation and warehousing activities, a number of industry groups will be watching how developments unfold. They are particularly concerned about how Customs will carry out its duties once it's integrated into Homeland Security on March 1.

"All Customs stakeholders are scratching their heads," declares Erik Autor, a vice president and international trade counsel with the National Retail Federation (NRF) in Washington, D.C. "Once the spooks take over, there's concern that trade facilitation goes out the window."

"We're already detecting a decline in the attention given to regulatory matters by Customs," adds John Simpson, president of the American Association of Exporters and Importers (AAEI) in Washington, D.C., and a former U.S. Treasury Department official. "The emphasis on commercial and regulatory matters will be of secondary importance to Customs," he says. "[The Department of Homeland Security is] a department that has a primary mission in shutting down the border ... and the agency will be tempted to seal the border."

Patrick O'Connor, a partner in the Washington, D.C., lobbying firm of Kent & O'Connor, which represents such logistics industry organizations as the International Warehouse Logistics Association, frets that shippers may find themselves caught in a turf tussle between the Transportation Security Administration and Customs over which agency makes the final decisions regarding cargo security. "You'll see some internal tension as to who makes the decisions about containers coming into U.S. ports," O'Connor predicts.

Scott Montrey, a spokesman for the Washington, D.C.-based National Association of Manufacturers, says that his trade group would like to see the department establish pre-clearance programs and express lanes at the nation's borders to expedite entry of shipments that meet security standards.

Until Homeland Security sets up shop and begins its work, though, many shipper groups are taking a wait-and-see approach as to how the new department balances trade and security. "To tell you the truth," says Simpson, "we're just hoping for the best."

Editor's Note: For details on how the Department of Homeland Security will be organized, go to www.whitehouse.gov/news/releases/2002/11/reorganization_plan.pdf.