U.S. Customs and Border Protection (CBP) has implemented a number of changes in recent months that could have a significant impact on the importing community. The Accountability for Every Port Act of 2006 (or Safe Port Act) signed last October, in particular, contains directives that will change the way importers communicate and interact with customs. As many savvy importers will remember, the Safe Port Act implemented changes to container security procedures, requirements for advanced data elements, and C-TPAT program participation guidelines and benefits.

Amid all this regulatory shifting, the act of obtaining and verifying information in order to shore up a risk-based security environment appears to be the order of the day. To achieve this stability, shippers need to stay engaged with CBP to ensure that the proper balance is maintained between keeping the channels of trade flowing and playing their role in keeping our borders secure. For starters, here are a few of the recent changes brought on by the signing of the Safe Port Act that every importer will need to understand and eventually manage.

As a result of the signing of the Safe Port Act, CBP addressed a number of deficiencies in Customs-Trade Partnership Against Terrorism (C-TPAT) program. The Act codified the C-TPAT program to help clearly spell out the benefits importers receive for each tier of participation. The importer community has long debated whether the benefits realized by entering the program have been worth the cost of implementing measures required to meet C-TPAT security criteria. Now, these benefits and requirements are spelled out for each tier.

The Safe Port Act also puts time limits on CBP for certifying Tier 1 applications and for conducting validations. Validation by a CBP Supply Chain Security Specialist (SCSS) is required in order to achieve Tier 2 status. Under the new guidelines, CBP must complete the review of C-TPAT applications within 90 days of receiving the application via the C-TPAT portal. If an application is found to meet the minimum security standards, the application is certified and Tier 1 benefits may be realized.

Once certified, a C-TPAT member must undergo a validation process in order to achieve Tier 2 status and the added benefits of further reductions in security risk scores and reduced container exams. Validation is not an audit but a joint verification by CBP and the C-TPAT participant that the security procedures documented in the C-TPAT profile are accurate and effective.

Unfortunately, because of the large volume of applications processed and limited resources within CBP, the validation process has not kept pace. According to a GAO report issued in May of 2006, only 11 percent of the over 10,000 C-TPAT participants have been validated.

In turn, many importers who wished to take advantage of the enhanced benefits of Tier 2 languished in Tier 1. The Safe Port Act addresses this problem in that it requires CBP to hire at least 50 new SCSSs through 2009, requires CBP to perform Tier 2 validations within one year of certification, and calls on the agency to create a pilot program utilizing third-party validators. This voluntary third party program will require the importer to bear the cost of the validation, but will enable importers, particularly those who source most if not all of their imports from China, to achieve Tier 2 levels.

At this stage, however, China has resisted allowing CBP specialists access to performing validations within China. If the pilot is successful, shippers can expect to see the use of third parties made permanent. The question will be whether or not CBP will pay for the service.

So, the good news is that not only are the benefits of tightening up your supply chain clearly spelled out in legislation, but shippers may actually have the chance to move up the tiers of the benefit ladder a little faster.

Another result of the signing of the Safe Port Act is the enhancement of the Automated Targeting System (ATS). ATS is an electronic tool used by the Department of Homeland Security’s National Targeting Center (NTC) to identify high risk cargo and passengers bound for the U.S. before it leaves the departure port.

Section 203 of the Act requires CBP to “identify and seek the submission of data related to the movement of a shipment of cargo through the international supply chain…to identify high-risk cargo for inspection.” This will require the reporting of additional data elements to CBP by the importer prior to vessel sailing from the foreign port. Of all the provisions of the Act, this requirement has caused the biggest stir among the importing community.

The draft proposal identifies additional data elements from the shipper as well as the carrier. From the importer or their agents, new data needed includes:

• manufacturer name and address;
• seller name and address;
• container stuffing location;
• consolidator name and address;
• buyer name and address;
• ship to name and address;
• importer of record number;
• consignee number;
• country of origin of the goods;
• and commodity classification (6 digit tariff schedule number).

From the carrier, new data needed includes:

• container status messages (five data elements);
• and vessel stow plan (nine data elements).

The two new data elements from the carrier are in addition to the security data they already provide to CBP as a result of the 24 hour rule implemented in 2002.

However, the agency states that the goal of the requirement is to provide CBP with enhanced pre-alert information to enable the CBP to more effectively target high-risk import shipments before they leave the loading port.

The sticking point is that some of this information is not necessarily readily available to the importer. For example, if an importer purchases from a trading company, the identity of the original manufacturer may not be known; while the container stuffing location may not be provided to the

importer under certain circumstances. Where the data elements required under the 24 hour rule and under e-manifest were derived from existing processes, the new 10+2 elements must be gathered from many different sources. The burden on importers from both a cost and administrative perspective could be substantial.

A further concern is that there is inconsistency with the recently established World Customs Organization (WCO) data standards requiring additional fields not agreed upon in the standard, such as manufacturer, reseller and buyer name and address, as well as container stuffing location and consolidator.

The purpose of the WCO standard is to facilitate trade and to protect against the threats of terrorism internationally by formalizing the way information is shared among the world’s Customs organizations. In a January 2007 letter to CBP from American Association of Exporters and Importers (AAEI), President Hallock Northcott wrote: “We are very concerned that…the “10+2” data elements will not be compatible with the 37 data elements currently being developed within the WCO and will spark uncertainty and unintegrated or non-mutually recognized international efforts.…The lack of uniformity will place many U.S. companies in the difficult and potentially economically untenable position of complying internationally with multiple sets of data elements.”

CBP, after an initial comment period that ended February 5, 2007, is now in the process of hammering out the details for a Notice of Proposed Rule Making which is expected in the next few months. It will be interesting to see if industry comments will affect the requirements of the final rule.

Shippers should keep an eye peeled on the Federal Register notices for this important new requirement and start preparing their organization and suppliers now on how to deal with the additional burden.

Clearly, the international trade community will be struggling for some time to adjust their systems and communications links to meet these varying requirements.

Shippers importing by land from Canada or Mexico should already be aware of changes in the clearance process at land borders. The Trade Act of 2002 requires advanced electronic cargo information be provided to CBP. For land border crossings, this information must be provided via e-manifest one hour prior to arrival at the first port of arrival into the U.S.

CBP announced the first crossing points to require e-Manifest filings on October 27, 2006. The requirement to file e-manifest data through CBP’s ACE Secure Data Portal is being phased in by “location clusters” throughout 2007. There are currently 94 land border ports that have implemented ACE e-Manifest.

CBP will be phasing in enforcement as well. During Phase 1, for 60 days after initial implementation, CBP officers will hand out informed compliance notices to drivers who do not meet e-Manifest requirements. Phase 2 will deny permits to proceed into the U.S. to any carrier who has not submitted or tried to submit an e-Manifest if required (the ACE e-Manifest coversheet may be accepted as proof). Phase 3 will deny entry if an e-Manifest has not successfully been transmitted. Monetary penalties may be issued: $5,000 for first offense and $10,000 for subsequent offenses. CBP says it may add future enforcement phases requiring timeliness and accuracy of data submitted.

One of the benefits of e-Manifest was purported to be reduced processing times for trucks transiting the border. Because of system glitches during initial implementation, such as problems sending messages back to filers confirming successful transmission, CBP delayed enforcement in some ports. Since March of 2007, brokers, carriers, importers, and other agents have been able to file e-Manifests on behalf of carriers through an ACE Secure Data Portal account.

If you are currently importing by land, you may want to investigate with your carriers which of these filing options is the most efficient.

The wheels set in motion in 2002 that established security as the primary force behind Customs policy are continuing to drive the trade regulatory agenda. Importers must learn to adapt to increasing demands for information, self-policing, and become compliant.

Business practices may need to change and supply chains lengthen in order to meet these evolving requirements. Hidden costs may be buried in the details, so don’t get caught by surprise. Watch the Federal Register for CBP activity, and watch logisticsmgmt.com for upcoming articles on compliance related issues.