To C-TPAT or NOT to C-TPAT…Is That (Really) a Question?

By Margaret M. Gatti, Esquire

The Customs-Trade Partnership Against Terrorism (hereinafter referred to as “C-TPAT”) was created by U.S. Customs and Border Protection (hereafter referred to as CBP but formerly known as the U.S. Customs Service) in direct response to the terrorist attacks that were launched against the U.S. on  September 11, 2001.  CBP established C-TPAT for the express purpose of securing and safeguarding the integrity of U.S. borders against future attacks by terrorists who might attempt to further their terrorist activities in the U.S. by high-jacking containers entering the United States and using such containers to smuggle into the country troops, conventional arms and/or chemical-biological weapons.  In seeking to secure and safeguard U.S. borders against future terrorist attacks, C-TPAT focuses on enlisting the cooperation and participation of the entire global supply chain (i.e., foreign vendors, foreign forwarders, freight consolidators, NVOCC’s, carriers, port authorities, terminal operators, warehouse operators, Customs’ brokers and U.S. importers).

In a nutshell, C-TPAT is a “voluntary” CBP program under which all members of the global supply chain are asked by CBP to “manage” the security on shipments imported into the U.S. and to protect such shipments against exploitation by terrorists by: (1) developing, maintaining and enhancing cargo security processes and procedures that are both effective and foolproof; (2) acquainting themselves with the security processes and procedures that are employed by each participant in their individual supply chains; (3) insuring themselves as to the adequacy and appropriateness of the security processes and procedures that the participants in their respective supply chains employ vis a vis shipments imported into the U.S.; and (4) controlling every aspect of their respective supply chains to the degree necessary to insure that shipments imported into the U.S. can be safely and securely entered through U.S. borders. 

CBP recognized very early on that the global supply chain can only be as strong as its weakest link.   Consequently, from the very inception of C-TPAT, CBP structured C-TPAT as an anti-terrorism program that seeks to encourage each and every participant in the global supply chain to develop and maintain guidelines that adequately address border security issues. 

To entice (i.e., forcefully persuade) all global supply chain participants to join C-TPAT, CBP further recognized that it needed to appeal to and work through U.S. importers, the supply chain constituent over which CBP exerts the greatest authority.   Accordingly, CBP adopted three distinct and rather clever U.S. importer-oriented approaches to “encourage” C-TPAT participation.  The first and second approaches target U.S. importers exclusively, while the third approach targets participants in U.S. importers’ supply chains but works by means of peer pressure applied by U.S. importers.  The three approaches that were adopted by CBP to “encourage” C-TPAT participation are detailed below and encompass the following: a “carrot or stick” approach, C-TPAT partnership as a mandatory pre-requisite for participation in certain CBP programs and peer pressure applied by U.S. importers. 

Carrot or Stick

With regard to CBP’s “carrot or stick” approach for enticing U.S. importers to become C-TPAT members and to adequately address border security issues as a result, CBP offers C-TPAT partners an impressive array of sign-up benefits.  C-TPAT partners enjoy quicker clearance into the U.S. of their imports because their names appear with a “banner” in Customs’ computer database that alerts Customs to the C-TPAT partner’s “preferred” importer status.  Additionally, as “certified partners,” C-TPAT participants enjoy:  (1) fewer border searches; (2) reduced Customs inspections of imported goods; (3) fewer Customs’ inquiries regarding imported goods; (4) less auditing of import records; (5) immunity from so-called Focused Assessments, i.e., Customs audits from Hell; (6) the assignment of a dedicated account manager at CBP; and (7) periodic training by CBP auditors. 

This palette of advantages brings into question the “optional” nature of the C-TPAT.  First of all, if C -TPAT partners will receive expedited processing of goods imported into the United States, isn’t the reverse true that companies, which are not C-TPAT partners, are likely to experience significant delays in Customs’ processing of import entries?  Additionally, if C-TPAT partners are to benefit from fewer border searches, reduced Customs’ inspections, fewer Customs’ inquiries and less auditing of import records, isn’t it likely that non-C-TPAT companies will be subject to a higher level of cargo scrutiny in the form of more border searches, more Customs’ inspections, more Customs’ inquiries, and more auditing of import records?  Lastly, if C-TPAT partners are to be spared from Customs’ Focused Assessments, isn’t it logical that these tortuous audits will be forced upon companies that aren’t C-TPAT partners?  While the answers to these questions are not yet clear, the threat of a “Yes” answer to any one of these questions, surely equates to the stick in CBP’s carrot or stick approach.

C-TPAT as Pre-Requisite for Other CBP Programs

Regarding CBP’s approach in making C-TPAT partnership a pre-requisite for participation in other CBP programs, CBP explicitly links C-TPAT partnership to a U.S. importer’s right to participate in: (1) CBP’s Importer Self-Assessment program, which authorizes U.S. importers to “self police” (i.e., conduct self-assessments of) the Customs’ compliance of their import activities without interference from CBP agents; (2) CBP’s Free and Secure Trade Program (FAST Program), which is a paperless cargo release mechanism that permits U.S. importers to obtain expedited release of compliant cargo on shipments from Canada and Mexico; (3) a yet-to-be-unveiled CBP program that will permit periodic payment of import duties as opposed to the current process which requires duty payment on an import by import basis; and (4) other future account-based CBP processes. 

The fact that C-TPAT partnership has been made a mandatory pre-requisite for participation in these CBP programs, as well as the fact that these programs offer significant advantages and great appeal to U.S. importers, also brings into question the “optional” nature of C-TPAT.  Given that these programs are off-limits to U.S. importers without C-TPAT participation, then surely U.S. importers will feel compelled to sign up for C-TPAT membership. 

Heavy Dose of Peer Pressure

With regard to the heavy dose of peer pressure approach, the C-TPAT program requires C-TPAT partners to replace with other C-TPAT partners, all “weak links” in their individual supply chains (i.e., any non-C-TPAT participants).  CBP has agreed to assist C-TPAT partners in ferreting out which companies are C-TPAT partners versus which companies are not C-TPAT partners by providing C-TPAT partners access to CBP’s C-TPAT membership lists. Additionally, however, C-TPAT partners are required under C-TPAT to query each participant in their supply chain with regard to such participant’s C-TPAT status. 

This is where the rubber meets the road for C-TPAT and supply chain participants who have thus far refrained from C-TPAT participation.  Supply chain participants are now routinely receiving questionnaires from U.S. importers who are C-TPAT partners, inquiring as to such supply chain participants’ C-TPAT compliance and as to the specifics of such supply chain participants’ security processes and security procedures.  Additionally, some U.S. importers are requesting that their supply chain participants sign C-TPAT compliance statements.  Faced with such inquiries and requests from U.S. importers, non-C-TPAT participants in the U.S. importers’ supply chains feel the peer pressure that is being exerted by the U.S. importers and soon come to the realization that their non-C-TPAT status exposes them to the loss of business to C-TPAT partners, until such non-CTPAT companies join the C-TPAT program. 

It is this threat of lost business that surely will act to compel non-C-TPAT participants in the supply chain of a U.S. importer, who is a C-TPAT member, to sign up for C-TPAT membership. 

Mandatory Program Disguised as an Optional Program 

The approaches adopted by CBP to encourage C-TPAT participation among all global supply chain participants are indeed very compelling and easily lead a casual observer to the conclusion that C-TPAT is a mandatory CBP program in all but fact.  Hence, to C-TPAT or not to C-TPAT is not really a question, but a conclusion!